<TABLE>
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED MARCH 11, 1999
$575,695,205
(APPROXIMATE)
CIT RV TRUST 1999-A
$189,940,000 CLASS A-1 5.33% ASSET-BACKED NOTES
$104,360,000 CLASS A-2 5.78% ASSET-BACKED NOTES
$109,680,000 CLASS A-3 5.96% ASSET-BACKED NOTES
$86,480,000 CLASS A-4 6.16% ASSET-BACKED NOTES
$45,220,000 CLASS A-5 6.24% ASSET-BACKED NOTES
$28,500,000 CLASS B 6.44% ASSET-BACKED NOTES
$11,515,205 7.21% ASSET-BACKED CERTIFICATES
THE CIT GROUP SECURITIZATION CORPORATION II
SELLER
THE CIT GROUP/SALES FINANCING, INC.
SERVICER
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON
PAGE S-9 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 securities. The trust will generally
make distributions on the securities on the 15th day of
each month. The first Distribution Date is June 15, 1999.
The assets of the trust will include retail recreation
vehicle contracts.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION 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.
<CAPTION>
Underwriting Proceeds to Final Scheduled
Price to Public(1) Discount the Seller Distribution Date
--------------------------- ------------------------ ----------------------------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A-1 Notes $189,932,782.28 99.9962% $ 417,868.00 0.220% $189,514,914.28 99.7762% December 2005
Class A-2 Notes $104,341,110.84 99.9819% $ 286,990.00 0.275% $104,054,120.84 99.7069% July 2008
Class A-3 Notes $109,649,399.28 99.9721% $ 329,040.00 0.300% $109,320,359.28 99.6721% April 2011
Class A-4 Notes $ 86,469,968.32 99.9884% $ 302,680.00 0.350% $ 86,167,288.32 99.6384% June 2013
Class A-5 Notes $ 45,208,740.22 99.9751% $ 180,880.00 0.400% $ 45,027,860.22 99.5751% August 2015
Class B Notes $ 28,498,917.00 99.9962% $ 128,250.00 0.450% $ 28,370,667.00 99.5462% March 2017
Certificates(2) $ 11,396,055.60 99.9654% $ 68,400.00 0.600% $ 11,327,655.60 99.3654% November 2019
Total $575,496,973.54 $1,714,108.00 $573,782,865.54(3)
(1) Plus accrued interest, if any, at the respective Interest Rate or the Pass-Through Rate, as appropriate, from the Closing Date.
(2) A portion of the certificates will be retained by an affiliate of the Seller.
(3) Total proceeds to the Seller are before deduction of expenses payable by the Seller (estimated at $650,000).
Delivery of the notes, in book-entry form only, will be made through The Depository Trust Company, Cedelbank, societe anonyme, or
The Euroclear System and delivery of the certificates will be made in fully registered, certificated form in New York, New York on
or about May 19, 1999, against payment in immediately available funds.
CREDIT SUISSE FIRST BOSTON
BANC ONE CAPITAL MARKETS, INC.
BARCLAYS CAPITAL
SALOMON SMITH BARNEY
PROSPECTUS SUPPLEMENT DATED MAY 12, 1999
</TABLE>
<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 Principal
Terms" beginning on page S-58 in this prospectus supplement and under the
caption "Index to Principal Terms" beginning on page 73 in the prospectus.
Until August 10, 1999 all dealers that effect transactions in the
securities, whether or not participating in this offering, may be required to
deliver a prospectus supplement and prospectus. This requirement is in addition
to the dealer's obligation to deliver a prospectus supplement and prospectus
when acting as underwriters with respect to their unsold allotments or
subscriptions.
----------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
----
Summary of Terms..................................S-3
Risk Factors......................................S-9
Structure of the Transaction.....................S-12
The Trust Property...............................S-14
The Contract Pool................................S-14
Maturity and Prepayment Considerations...........S-18
Yield and Prepayment Considerations..............S-25
Pool Factors.....................................S-26
Use of Proceeds..................................S-26
The CIT Group/Sales Financing, Inc., Servicer....S-27
The Notes........................................S-29
The Certificates.................................S-34
Enhancement......................................S-36
The Purchase Agreements and the Trust Documents..S-39
Material Federal Income Tax Consequences.........S-45
Material State Tax Consequences..................S-49
ERISA Considerations.............................S-50
Plan of Distribution.............................S-51
Ratings..........................................S-53
Legal Matters....................................S-53
Annex I..........................................S-54
Index of Principal Terms.........................S-58
PROSPECTUS
PAGE
----
Available Information...............................3
Prospectus Supplement...............................3
Reports to Securityholders..........................3
Documents Incorporated by Reference.................4
Summary.............................................6
Risk Factors.......................................22
The Trusts.........................................26
The Trust Property.................................27
The Contract Pool..................................28
Yield and Prepayment Considerations................30
Pool Factors.......................................30
Use of Proceeds....................................30
The CIT Group, Inc.................................31
The CIT Group Securitization
Corporation II, Seller........................32
The CIT Group/Sales Financing, Inc., Servicer......32
The Certificates...................................34
The Notes..........................................36
Enhancement........................................41
Certain Information Regarding the Securities.......43
The Purchase Agreements and
the Trust Documents...........................49
Certain Legal Aspects of the Contracts.............62
Certain Federal Income Tax Consequences............68
Certain State Tax Consequences.....................69
ERISA Considerations...............................70
Plan of Distribution...............................71
Financial Information..............................71
Ratings............................................71
Legal Matters......................................71
Experts............................................72
Index of Principal Terms...........................73
S-2
<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 RV Trust 1999-A will issue the following securities, offered to you pursuant
to this prospectus supplement and the prospectus:
o Class A-1 5.33% Asset-Backed Notes (the "Class A-1 Notes") in the
aggregate principal amount of $189,940,000;
o Class A-2 5.78% Asset-Backed Notes (the "Class A-2 Notes") in the
aggregate principal amount of $104,360,000;
o Class A-3 5.96% Asset-Backed Notes (the "Class A-3 Notes") in the
aggregate principal amount of $109,680,000;
o Class A-4 6.16% Asset-Backed Notes (the "Class A-4 Notes") in the
aggregate principal amount of $86,480,000;
o Class A-5 6.24% Asset-Backed Notes (the "Class A-5 Notes") in the
aggregate principal amount of $45,220,000;
o Class B 6.44% Asset-Backed Notes (the "Class B Notes") in the aggregate
principal amount of $28,500,000;
o 7.21% Asset-Backed Certificates in the aggregate face amount of
$11,515,205.
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.
CLOSING DATE
On or about May 19, 1999.
CUT-OFF DATE
May 1, 1999.
INDENTURE TRUSTEE
FMB Bank.
OWNER TRUSTEE
The Bank of New York.
SELLER
The CIT Group Securitization Corporation II (the "Company" or the "Seller").
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 June 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 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
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S-3
<PAGE>
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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 (or, in the case of the first Distribution
Date, from and including the Closing 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 principal balance of the certificates. The trust will not make
interest payments to holders of Class B Notes on any Distribution Date until all
interest due to the holders of Class A Notes on that Distribution Date has been
paid in full. The trust will not make interest payments to certificateholders on
any Distribution Date until all interest and principal (other than additional
principal distributions) due to the noteholders on that Distribution Date have
been paid in full.
PRINCIPAL PAYMENTS
On each Distribution Date the trust will pay principal collections on the
Contracts to the securityholders in an amount generally equal to the decrease in
the Pool Balance during the related Due Period.
Each "Due Period" is the calendar month that ends prior to a Distribution Date.
The initial Due Period will be May 1999.
Principal collections on the Contracts will be paid sequentially as follows:
o to the Class A-1 Notes until the outstanding principal balance of the
Class A-1 Notes has been paid in full;
o then, to the Class A-2 Notes until the outstanding principal balance of
the Class A-2 Notes has been paid in full;
o then, to the Class A-3 Notes until the outstanding principal balance of
the Class A-3 Notes has been paid in full;
o then, to the Class A-4 Notes until the outstanding principal balance of
the Class A-4 Notes has been paid in full;
o then, to the Class A-5 Notes until the outstanding principal balance of
the Class A-5 Notes has been paid in full;
o then, to the Class B Notes until the outstanding principal balance of the
Class B Notes has been paid in full; and
o then, to the certificates until the outstanding principal balance of the
certificates has been paid in full.
On the Closing Date, the aggregate outstanding principal amount of the
securities will equal 101.8% of the Initial Pool Balance. In order to reduce
this securities premium, the trust will pay additional principal on each
Distribution Date to the securityholders to the extent of the remaining funds,
if any, available for distribution after all other payments due on that
Distribution Date have been paid and until the outstanding principal amount of
the securities is less than or equal to the Pool Balance on the last day of the
related Due Period. 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.
The additional principal distribution from the remaining available funds
described above will be distributed to the noteholders in sequential order until
the notes have been paid in full and then to the certificates until the
certificates have been paid in full.
For additional details on some of the calculations described above and for
special priority rules that would apply in a default situation see "The
Notes--Payments of Principal," "The Certificates--Distributions of Principal"
herein, and "The Purchase Agreements and the Trust Documents--Distributions" in
this prospectus supplement and in the prospectus.
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S-4
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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: December 2005 (the "Class A-1 Note Final Scheduled
Distribution Date").
o Class A-2 Notes: July 2008 (the "Class A-2 Note Final Scheduled
Distribution Date").
o Class A-3 Notes: April 2011 (the "Class A-3 Note Final Scheduled
Distribution Date").
o Class A-4 Notes: June 2013 (the "Class A-4 Note Final Scheduled
Distribution Date").
o Class A-5 Notes: August 2015 (the "Class A-5 Note Final Scheduled
Distribution Date").
o Class B Notes: March 2017 (the "Class B 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 above based on a variety of factors,
including those described under "Maturity and Prepayment
Considerations--Weighted Average Life of the Securities."
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 the Class A Notes are outstanding, only the holders of the
Class A Notes will have the right to declare an Event of Default under the
Indenture and to accelerate the notes or to require the sale of the Contracts.
So long as the notes are outstanding, the certificateholders will have no right
to require the sale of the Contracts. In the case of the declaration of an Event
of Default, the securities will be immediately due and payable.
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). 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" in this prospectus
supplement and "The Purchase Agreements and the Trust Documents--Termination" in
this prospectus supplement and in the prospectus.
AUCTION CALL
The Indenture Trustee must solicit bids from third parties for the purchase of
the Contracts which remain in the trust after the first Distribution Date that
the Pool Balance is less than 5% of the Initial Pool Balance. 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. 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.
If the Auction Call results in a sale, the Indenture Trustee must pay from the
sale proceeds the Servicer Payment 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" in this prospectus supplement
and in the prospectus.
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S-5
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TRUST PROPERTY
The trust will primarily include the following property:
o a pool of simple interest recreation vehicle retail installment sale
contracts and direct loans (the "Contracts") secured by the motor homes,
fifth wheels, travel trailers, horse trailers and other types of
recreation vehicles which are financed thereby (the "Financed Vehicles");
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 Vehicles;
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;
o the right to proceeds from claims under certain insurance policies which
insure individual Financed Vehicles or the related obligors; and
o certain rights under the Purchase Agreement and the Sale and Servicing
Agreement.
THE CONTRACTS
On the Closing Date, the trust will acquire from the Seller Contracts with an
aggregate principal balance of approximately $565,515,624. As of the Cut-off
Date, the Contracts had the following characteristics:
Range of Contract Rates 7.50% to 21.24%
Weighted Average Contract Rate 9.30%
Range of Original Principal Balances $1,952 to $346,889
Average Original Principal Balance $41,639
Range of Remaining Principal Balances $1,277 to $342,675
Average Remaining Principal Balance $40,876
Range of Original Terms to Maturity 24 to 242 months
Weighted Average Original Term to 179 months
Maturity
Range of Remaining Terms to Maturity 13 to 240 months
Weighted Average Remaining Term to 174 months
Maturity
Percentage of New/Used 64.77% / 35.23%
Recreation Vehicles by Pool Balance
as of the Cut-off Date
The obligors may generally prepay their Contracts at any time without premium or
penalty.
CREDIT ENHANCEMENT
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. If funds in the Collection Account are insufficient to make
required payments of interest and payments of principal due on the securities
(other than additional principal distributions), 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 affiliates of the Company (the "Lender")
will make a loan (the "Loan") to the trust in the amount of $9,670,317.
o Periodically after the Closing Date the Servicer will deposit Excess
Collections, if any, in the Reserve Account so that it equals the
Specified Reserve Amount for the next Distribution Date.
The Servicer will deposit the amounts collected on the Contracts each month into
the Collection Account. "Excess Collections" are generally the amounts that
remain in the Collection Account on any Distribution Date after the trust has
paid amounts owing to securityholders and the Servicer and has deposited certain
amounts into the Reserve Account with respect to interest on the Loan.
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 and interest due on the Loan or will release the remaining excess
funds to the Affiliated Owner.
The "Specified Reserve Amount" with respect to any Distribution Date is
generally equal to:
o the lesser of (a) $9,670,317 and (b) 2.00% of the principal amount of the
Contracts as of the first day of the related Due Period;
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S-6
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o provided that, the Specified Reserve Amount will be $9,670,317 prior to
the first Distribution Date on which the outstanding principal amount of
the securities is less than or equal to the Pool Balance as of the last
day of the related Due Period and thereafter will be no less than
$5,655,156.
SUBORDINATION
The Class B Notes will be subordinated to the Class A Notes as follows:
o the trust will not pay interest on the Class B Notes on any Distribution
Date until all interest owed on the Class A Notes through that Distribution
Date has been paid in full; and
o the trust will not pay principal on the Class B Notes on any Distribution
Date until the Class A Notes have been paid in full.
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 principal and interest owed on the notes through that
Distribution Date has been paid in full; and
o the trust will not pay principal on the certificates on any Distribution
Date until the notes have been paid in full.
SERVICER 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--Servicer Advances" in this
prospectus supplement and "The Purchase Agreements and The Trust
Documents--Monthly Advances" in the prospectus.
In certain circumstances the Servicer will make additional advances (each a
"Certificate Interest Advance") if the amount available for distribution to
certificateholders is insufficient to pay the full amount of interest due on the
certificates on any Distribution Date. The Servicer will not be obligated to
make Certificate Interest Advances to the extent that the unreimbursed aggregate
outstanding amount of such advances at any time would exceed $200,000 or if the
Servicer determines that such an advance would not be recoverable from future
Excess Collections.
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:
(1) (a) reimburse the Servicer for amounts then due for Monthly Advances made
on the Contracts, (b) reimburse the Servicer for amounts then due for
Certificate Interest Advances (but only to the extent that, without such
reimbursement, Excess Collections on that Distribution Date would have
been at least equal to the reimbursed amount)
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S-7
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and (c) if the Servicer is not an affiliate of CIT, pay the Servicing Fee
for the related Due Period and all accrued and unpaid Servicing Fees owed
from prior Due Periods;
(2) pay interest on the Class A Notes;
(3) pay interest on the Class B Notes;
(4) pay principal on the Class A Notes equal to the decrease in the Pool
Balance during the related Due Period sequentially to the holders of each
class of the Class A Notes until paid in full;
(5) after the Class A Notes have been paid in full, pay principal on the Class
B Notes equal to the decrease in the Pool Balance during the related Due
Period until paid in full;
(6) pay interest on the certificates;
(7) after the notes have been paid in full, pay principal on the certificates
equal to the decrease in the Pool Balance during the related Due Period
until the certificates have been paid in full;
(8) if the Servicer is an affiliate of CIT, pay the Servicing Fee for the
related Due Period and all accrued and unpaid Servicing Fees owed from
prior Due Periods;
(9) deposit into the Reserve Account an amount generally equal to one-twelfth
of 1.0% of the average outstanding principal amount of the Loan;
(10) pay principal, to the extent of any remaining funds available,
sequentially to the holders of each class of the Class A Notes, then to
the Class B Notes and then to the certificates until each is paid in full
or until the outstanding principal amount of the securities is less than
or equal to the Pool Balance on the last day of the related Due Period;
and
(11) deposit Excess Collections, if any, into the Reserve Account.
See "The Notes--Payments of Principal" and "The Certificates--Distributions of
Principal" for additional details regarding principal payments on the
securities.
See "The Purchase Agreements and the Trust Documents--Distributions" 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
trust 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 "Material
Federal Income Tax Consequences" in this prospectus supplement and "Certain
Federal Income Tax Consequences" 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 they receive at least the
following ratings by Standard & Poor's Rating Services, a division of The
McGraw-Hill Companies, Inc. ("S&P") and Moody's Investors Service ("Moody's"):
Rating
------
S&P Moody's
--- -------
Class A Notes AAA Aaa
Class B Notes A A2
Certificates BBB Baa3
A statistical 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."
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S-8
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RISK FACTORS
You should consider the following risk factors and the risk factors on
page 22 in the prospectus in deciding whether to purchase the securities:
POSSIBLE EFFECTS OF Changes in economic conditions may limit or
ECONOMIC AND OTHER FACTORS 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 sell the collateral which
secures the Contracts since the trust
may not have first priority rights or
any rights to obtain the collateral; and
o decline in the market value of
collateral which secures the Contracts.
See "Certain Legal Aspects of the Contracts" in
the prospectus.
PREPAYMENT OF CONTRACTS The actual length of time each class of securities
MAY AFFECT YIELD 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 repayment 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" in this prospectus supplement and
"The Purchase Agreements and the Trust
Documents--Sale and Assignment 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
current collections may not be sufficient to make
such payments to you.
The trust is only required to repay your principal
to the extent that there are sufficient funds in
the Collection Account and Reserve Account to make
payments of principal. Nonpayment of principal to
you will only become a default, creating potential
legal rights, after the occurrence of 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.
S-9
<PAGE>
SOURCE OF FUNDING FOR The Reserve Account will initially be funded by a
RESERVE ACCOUNT LIMITED loan from one or more affiliates of the Company.
Any additional deposits to the Reserve Account
will be funded solely from the Excess Collections
and amounts deposited into the Reserve Account
with respect to interest on the Loan. The Excess
Collections and amounts deposited into the Reserve
Account with respect to interest on the Loan 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 collections 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.
o Disproportionate prepayments of
Contracts with higher Contract Rates
will reduce or eliminate the amount of
Excess Collections that would otherwise
have been available.
SUBORDINATION; PRIORITY OF Payments of principal and interest on the
PAYMENT ON EVENT OF certificates will be subordinated in priority to
DEFAULT payments of principal and interest on the notes,
as described herein. Payments of interest on the
Class B Notes on any Distribution Date will be
subordinated in priority to payment of all
interest due on the Class A Notes on that
Distribution Date, as described herein. Payments
of principal on the Class B Notes will be
subordinated in priority to payment in full of all
principal on the Class A 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. Actions
taken by the holders of the Class A Notes upon an
Event of Default may increase losses to holders of
the Class B Notes and the certificates.
PRINCIPAL AMOUNT OF The outstanding principal amount of securities as
SECURITIES INITIALLY of the Closing Date will exceed the outstanding
EXCEEDS PRINCIPAL BALANCE principal balance of the Contracts. The
OF CONTRACTS outstanding principal amount of the securities as
of the Closing Date will be equal to approximately
101.8% of the Initial Pool Balance. As a result,
you will rely on the receipt by the trust of
interest on the Contracts in excess of the
interest paid on the securities to reduce the
outstanding principal amount of the securities to
parity with the outstanding Pool Balance.
S-10
<PAGE>
Prepayments on Contracts, defaults on Contracts or
an Event of Default under the Indenture could
result in losses on your investment in the
securities. In the event that Contracts are
prepaid or obligors default in payment under the
Contracts, the amount of excess interest available
to reduce the securities premium could be reduced
or eliminated. If an Event of Default under the
Indenture occurs and the Contracts are liquidated,
the liquidation proceeds may be insufficient to
repay the outstanding principal balance of the
securities.
GEOGRAPHIC CONCENTRATION Lack of geographically diverse obligors may cause
OF OBLIGORS 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
obligor's mailing addresses, of 5% or more of the
Initial Pool Balance:
% of Initial
State Pool Balance
----- ------------
Texas 15.22%
California 15.05%
Florida 7.90%
EVENTS OF DEFAULT UNDER The senior outstanding class of noteholders will
THE INDENTURE MAY have certain powers over the trust and its
ACCELERATE LIQUIDATION property, including the power to declare an Event
OF THE CONTRACTS; RIGHTS OF of Default and to accelerate payment of the
HOLDERS OF NOTES AND securities. See "The Notes--Redemption;
CERTIFICATES Acceleration" and "--Rights of Noteholders;
Indenture." 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." The Class B
Noteholders will not have any rights to direct the
trust with respect to any actions so long as the
Class A Notes are outstanding.
SUBSEQUENT MARKET VALUE If the Rating Agencies lower their ratings of the
OF THE SECURITIES securities, the market value of the securities
DEPENDENT ON RATINGS will decrease since no person or entity will
OF SECURITIES provide additional credit enhancement for the
securities.
LIMITED ABILITY TO The underwriters may assist in resales of the
RESELL NOTES securities, but they are not required to do so. A
secondary market for the securities may not
develop. If a secondary market does develop, it
might not continue or it might not be sufficiently
liquid to allow you to resell any of your
securities.
YEAR 2000 ISSUES Year 2000 compliance issues arise out of the
inability of computers, software and other
equipment using microprocessors to recognize and
properly process date fields containing a two
digit year. Because the Servicer, the Indenture
Trustee and the Owner Trustee are dependent upon
the proper functioning of computer systems,
failure of either their systems or vendor systems
to be Year 2000 compliant could have a material
adverse effect on you. Significant Year 2000
failures in the Servicer's, the Indenture
Trustee's or the Owner Trustee's systems or in the
systems of third parties (or third parties upon
whom they depend) 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;
S-11
<PAGE>
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, the Indenture Trustee or
the Owner Trustee, 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 Year 2000 issues.
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. The non-readiness of third parties
could have a material adverse effect on you.
SPECIAL NOTE REGARDING Certain statements contained or incorporated in
FORWARD-LOOKING STATEMENTS this prospectus supplement are forward-looking
statements concerning operations, economic
performance and financial condition of the trust.
Forward-looking statements are included, for
example, in the discussions about:
o prepayment of Contracts and yield on
securities
o effects of economic and other factors
o Year 2000 issues
These statements involve risks and uncertainties
and actual results may differ materially from
those expressed or implied in those statements.
STRUCTURE OF THE TRANSACTION
The Issuer, CIT RV 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"), dated as of May 1, 1999 among the Seller, The Bank of New York,
acting thereunder not in its individual capacity but solely as owner trustee of
the Trust (the "Owner Trustee") and The Bank of New York (Delaware), acting
thereunder not in its individual capacity but solely as Delaware trustee of the
Trust (the "Delaware 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 (1) acquiring, holding and managing the Contracts and the
other assets of the Trust and proceeds therefrom, (2) issuing the notes and the
certificates, (3) making payments on the notes and the certificates and (4)
engaging in other activities that are necessary, suitable or convenient to
accomplish the foregoing or are incidental thereto or connected therewith.
Each certificate will represent a fractional undivided interest in, and
each note will represent an obligation of, the Trust.
The Trust will initially be capitalized with equity equal to
approximately $11,515,205 (the "Original Certificate Balance"). Certificates
with an aggregate original face amount of approximately $115,205 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
S-12
<PAGE>
or their affiliates. The equity in the Trust, together with the proceeds of the
initial sale of the notes, will be used by the Trust to purchase the Contracts
from the Seller pursuant to the Sale and Servicing Agreement.
The Servicer will service the Contracts held by the Trust and will
receive fees for such services. CITSF will be appointed as custodian on behalf
of the Trust, and will hold the original recreation vehicle retail installment
sale contract or promissory note as well as the originals or copies of documents
and instruments relating to each Contract and evidencing the security interest
in the Financed Vehicle securing each Contract (the "Contract Files").
The Trust's principal offices are in Newark, Delaware, in care of The
Bank of New York (Delaware), as Delaware Trustee, at the address listed in
"--The Owner Trustee" below.
CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the Trust as of
the Cut-off Date, as if the issuance and sale of the notes and the certificates
offered hereby had taken place on such date:
Class A-1 5.33% Asset-Backed Notes................ $189,940,000
Class A-2 5.78% Asset-Backed Notes................ $104,360,000
Class A-3 5.96% Asset-Backed Notes................ $109,680,000
Class A-4 6.16% Asset-Backed Notes................ $ 86,480,000
Class A-5 6.24% Asset-Backed Notes................ $ 45,220,000
Class B 6.44% Asset-Backed Notes.................. $ 28,500,000
7.21% Asset-Backed Certificates................... $ 11,515,205
------------
Total............................................. $575,695,205
============
THE OWNER TRUSTEE
The Bank of New York is the Owner Trustee under the Trust Agreement.
The Bank of New York is a New York banking corporation. The principal offices of
The Bank of New York are located at 101 Barclay Street, New York, New York 10286
and are where certificates may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Owner Trustee may be
served. The Owner Trustee will perform 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 or the Delaware 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 or the Delaware Trustee, as the case
may be, if the Owner Trustee or the Delaware Trustee ceases to be eligible to
continue as Owner Trustee or Delaware Trustee, as the case may be, under the
Sale and Servicing Agreement or if the Owner Trustee or the Delaware Trustee
becomes insolvent. In such circumstances, the Servicer will be obligated to
appoint a successor trustee or trustees. Any resignation or removal of the Owner
Trustee or the Delaware Trustee and appointment of a successor trustee will not
become effective until acceptance of the appointment by the successor trustee or
trustees, as the case may be.
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 and the Delaware 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 the
Owner Trustee's or Delaware Trustee's respective willful misfeasance, bad faith
or negligence (other than by reason of a breach of any of its representations or
warranties set forth in the Sale and Servicing Agreement).
S-13
<PAGE>
THE TRUST PROPERTY
The notes are an obligation of the Trust and will be secured by assets
of the Trust (other than the Certificate Distribution Account). Each certificate
represents a fractional undivided interest in the Trust. The Trust property will
include, among other things:
(1) a pool (the "Contract Pool") of simple interest retail
installment sale contracts and direct loans secured by the
new and used recreation vehicles financed thereby,
consisting of the Contracts;
(2) 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;
(3) such amounts as from time to time may be held in one or more
accounts established and maintained by the Servicer pursuant
to the Sale and Servicing Agreement (including all
investments in such accounts and all income from the funds
therein and all proceeds thereof);
(4) all monies on deposit in the Reserve Account (including all
investments in such accounts and all proceeds thereof);
(5) assignments of the security interests in the Financed
Vehicles and any accessions thereto;
(6) the right to proceeds from physical damage, credit life and
disability insurance policies, if any, covering individual
Financed Vehicles or Obligors, as the case may be;
(7) the rights of the Trust under the Purchase Agreement and the
Sale and Servicing Agreement; and
(8) any and all proceeds of the foregoing.
THE CONTRACT POOL
GENERAL
CITSF will sell the Contracts to the Company pursuant to a Purchase
Agreement to be dated as of May 1, 1999 (the "Purchase Agreement") and the
Company will sell the Contracts to the Trust pursuant to the Sale and Servicing
Agreement to be dated as of May 1, 1999 (the "Sale and Servicing Agreement"),
among the Seller, the Servicer and the Trust.
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).
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 June 1998 and April 1999. All
Contracts are retail installment sale contracts or direct loans each of which is
secured by recreation vehicles 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 approximately $565,515,624. 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.
S-14
<PAGE>
The Contracts were selected from CITSF's portfolio of recreation
vehicle retail installment sale contracts and direct loans based on several
criteria, including the following:
(1) each Contract was originated in the United States of
America;
(2) each Contract has a Contract Rate equal to or greater than
7.50%;
(3) each Contract provides for level monthly payments which
include interest at the related Contract Rate and, if paid
in accordance with its schedule, fully amortizes the amount
financed over an original term of no greater than 242
months;
(4) as of the Cut-off Date, the most recent scheduled payment of
principal and interest, if any, on each Contract was made by
or on behalf of the related Obligor or was not delinquent
more than 29 days;
(5) no Financed Vehicle has been repossessed without
reinstatement as of the Cut-off Date;
(6) as of the Cut-off Date, no Obligor on any Contract was the
subject of a bankruptcy proceeding;
(7) as of the Cut-off Date, each Contract has a remaining
principal balance of not less than $1,000 and not more than
$350,000; and
(8) as of the Cut-off Date, none of the Paid Ahead Simple
Interest Contracts in the Contract Pool were paid ahead more
than six monthly scheduled payments.
As of the Cut-off Date, the Contract Pool had the following
characteristics:
Range of Contract Rates 7.50% to 21.24%
Weighted average Contract Rate 9.30%
Range of original principal balances $1,952 to $346,889
Average original principal balance $41,639
Range of remaining principal balances $1,277 to 342,675
Average remaining principal balance $40,876
Range of original terms to maturity 24 to 242 months
Weighted average original term to maturity 179 months
Range of remaining terms to maturity 13 to 240 months
Weighted average remaining term to maturity 174 months
Percentage of new/used Recreation 64.77%/35.23%
Vehicles at time of origination
(by principal balance)
S-15
<PAGE>
Set forth below is a description of certain characteristics of the
Contracts.
<TABLE>
<CAPTION>
GEOGRAPHICAL DISTRIBUTION OF CONTRACTS (1)
AGGREGATE % OF CONTRACT
NUMBER OF % OF CONTRACT PRINCIPAL POOL BY PRINCIPAL
CONTRACTS AS POOL BY NUMBER BALANCE BALANCE
OF OF CONTRACTS AS OF OUTSTANDING OUTSTANDING
STATE CUT-OFF DATE CUT-OFF DATE AS OF CUT-OFF DATE AS OF CUT-OFF DATE
- ----- ------------ ------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Alabama......................... 195 1.41% $ 11,084,040 1.96%
Alaska.......................... 22 0.16 1,966,042 0.35
Arizona......................... 649 4.69 25,003,670 4.42
Arkansas........................ 304 2.20 10,499,531 1.86
California...................... 2,138 15.45 85,098,984 15.05
Colorado........................ 365 2.64 17,370,993 3.07
Connecticut..................... 141 1.02 4,413,749 0.78
Delaware........................ 19 0.14 1,373,773 0.24
District of Columbia............ 3 0.02 170,451 0.03
Florida......................... 884 6.39 44,683,790 7.90
Georgia......................... 283 2.05 10,609,301 1.88
Hawaii.......................... 3 0.02 133,941 0.02
Idaho........................... 47 0.34 2,649,458 0.47
Illinois........................ 336 2.43 14,707,003 2.60
Indiana......................... 170 1.23 6,769,830 1.20
Iowa............................ 50 0.36 2,252,325 0.40
Kansas.......................... 287 2.07 8,178,164 1.45
Kentucky........................ 53 0.38 2,415,679 0.43
Louisiana....................... 132 0.95 6,392,505 1.13
Maine........................... 82 0.59 3,083,867 0.55
Maryland........................ 197 1.42 7,281,859 1.29
Massachusetts................... 233 1.68 6,671,164 1.18
Michigan........................ 79 0.57 5,187,399 0.92
Minnesota....................... 95 0.69 5,342,727 0.94
Mississippi..................... 90 0.65 2,706,156 0.48
Missouri........................ 673 4.86 19,335,189 3.42
Montana......................... 40 0.29 1,976,240 0.35
Nebraska........................ 41 0.30 1,334,055 0.24
Nevada.......................... 250 1.81 9,865,500 1.74
New Hampshire................... 108 0.78 3,327,899 0.59
New Jersey...................... 201 1.45 7,407,440 1.31
New Mexico...................... 103 0.74 4,695,446 0.83
New York........................ 434 3.14 19,230,636 3.40
North Carolina.................. 281 2.03 9,781,359 1.73
North Dakota.................... 8 0.06 330,015 0.06
Ohio............................ 139 1.00 9,515,620 1.68
Oklahoma........................ 633 4.58 17,960,711 3.18
Oregon.......................... 399 2.88 21,802,498 3.86
Pennsylvania.................... 228 1.65 10,914,725 1.93
Rhode Island.................... 60 0.43 1,567,388 0.28
South Carolina.................. 114 0.82 4,264,159 0.75
South Dakota.................... 19 0.14 1,067,991 0.19
Tennessee....................... 189 1.37 7,358,650 1.30
Texas........................... 2,165 15.65 86,090,305 15.22
Utah............................ 48 0.35 2,760,404 0.49
Vermont......................... 23 0.17 1,240,781 0.22
Virginia........................ 129 0.93 6,499,922 1.15
Washington...................... 559 4.04 26,158,895 4.63
West Virginia................... 35 0.25 1,155,669 0.20
Wisconsin....................... 75 0.54 3,020,703 0.53
Wyoming......................... 24 0.17 807,021 0.14
------ ---------- ------------- --------
Total........................ 13,835 100.00%(2) $565,515,624 100.00%(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-16
<PAGE>
<TABLE>
<CAPTION>
RANGE OF CONTRACT RATES
NUMBER OF % OF CONTRACT AGGREGATE % OF CONTRACT
CONTRACTS AS POOL BY NUMBER PRINCIPAL POOL BY PRINCIPAL
RANGE OF OF OF CONTRACTS AS OF BALANCE OUTSTANDING BALANCE OUTSTANDING
CONTRACT RATES CUT-OFF DATE CUT-OFF DATE AS OF CUT-OFF DATE AS OF CUT-OFF DATE
-------------- ------------ ------------ ------------------ ------------------
<S> <C> <C> <C> <C>
7.50%-7.99%.............................. 734 5.31% $ 81,384,015 14.39%
8.00%-8.99%.............................. 3,153 22.79 244,461,443 43.23
9.00%-9.99%.............................. 3,273 23.66 121,768,067 21.53
10.00%-10.99%............................ 2,389 17.27 56,799,964 10.04
11.00%-11.99%............................ 1,571 11.36 27,900,749 4.93
12.00%-12.99%............................ 1,156 8.36 16,511,565 2.92
13.00%-13.99%............................ 771 5.57 8,759,001 1.55
14.00%-14.99%............................ 415 3.00 4,292,556 0.76
15.00%-15.99%............................ 187 1.35 1,738,008 0.31
16.00%-16.99%............................ 92 0.66 869,606 0.15
17.00%-17.99%............................ 54 0.39 597,718 0.11
18.00%-18.99%............................ 29 0.21 372,290 0.07
19.00%-19.99%............................ 3 0.02 22,141 0.00
20.00%-20.99%............................ 6 0.04 31,665 0.01
21.00%-21.99%............................ 2 0.01 6,838 0.00
------- ---------- ------------- --------
Total................................. 13,835 100.00%(1) $565,515,624 100.00%(1)
</TABLE>
- ------------
(1) May not equal 100% due to rounding.
<TABLE>
<CAPTION>
RANGE OF REMAINING MATURITIES
NUMBER OF % OF CONTRACT AGGREGATE % OF CONTRACT
CONTRACTS AS POOL BY NUMBER PRINCIPAL POOL BY PRINCIPAL
RANGE OF REMAINING OF OF CONTRACTS AS OF BALANCE OUTSTANDING BALANCE OUTSTANDING
MATURITY IN MONTHS CUT-OFF DATE CUT-OFF DATE AS OF CUT-OFF DATE AS OF CUT-OFF DATE
------------------ ------------ ------------ ------------------ ------------------
<S> <C> <C> <C> <C>
12-24.................................... 78 0.56% $ 256,873 0.05%
25-36.................................... 196 1.42 920,836 0.16
37-48.................................... 257 1.86 1,807,825 0.32
49-60.................................... 647 4.68 5,971,186 1.06
61-72.................................... 251 1.81 2,356,992 0.42
73-84.................................... 796 5.75 8,486,044 1.50
85-96.................................... 500 3.61 5,371,647 0.95
97-108................................... 73 0.53 1,526,625 0.27
109-120.................................. 2,237 16.17 41,279,616 7.30
121-132.................................. 60 0.43 1,912,723 0.34
133-144.................................. 2,844 20.56 61,772,105 10.92
145-156.................................. 37 0.27 2,718,347 0.48
157-168.................................. 103 0.74 6,925,346 1.22
169-180.................................. 4,781 34.56 299,440,951 52.95
181-192.................................. 9 0.07 672,527 0.12
193-204.................................. 36 0.26 2,792,407 0.49
205-216.................................. 7 0.05 657,687 0.12
217-228.................................. 15 0.11 2,291,428 0.41
229-240.................................. 908 6.56 118,354,459 20.93
------- ----------- ------------- ---------
Total................................. 13,835 100.00%(1) $565,515,624 100.00%(1)
</TABLE>
- ------------
(1) May not equal 100% due to rounding.
S-17
<PAGE>
COLLATERAL TYPE DISTRIBUTION
<TABLE>
<CAPTION>
NUMBER OF % OF CONTRACT AGGREGATE % OF CONTRACT
CONTRACTS AS POOL BY NUMBER PRINCIPAL POOL BY PRINCIPAL
OF OF CONTRACTS AS OF BALANCE OUTSTANDING BALANCE OUTSTANDING
COLLATERAL TYPE CUT-OFF DATE CUT-OFF DATE AS OF CUT-OFF DATE AS OF CUT-OFF DATE
------------------ ------------ ------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Motor Homes 7,433 53.73% $456,291,245 80.69%
Fifth Wheels 2,400 17.35 57,663,174 10.20
Travel Trailers 3,123 22.57 42,394,895 7.50
Other 879 6.35 9,166,310 1.62
------- ---------- ------------- --------
Total 13,835 100.00%(1) $565,515,624 100.00%(1)
</TABLE>
- ------------
(1) May not equal 100% due to rounding.
MATURITY AND PREPAYMENT CONSIDERATIONS
Each Contract 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. The
rate of prepayments on the Contracts may be influenced by a variety of economic,
social and other factors. 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 (1) the exercise of the
option of CITSF to purchase all of the Contracts remaining in the Trust when the
aggregate principal balance of the Contracts is 10% or less of the Initial Pool
Balance, (2) 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 (3) 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
recreation vehicle retail installment sale contracts and direct loans may be
influenced by a variety of economic, geographic, social and other factors. In
general, if prevailing interest rates were to fall significantly below the
Contract Rates on the Contracts, the Contracts could be subject to higher
prepayment rates than if prevailing interest rates were to remain at or above
the Contract Rates on the Contracts. Conversely, if prevailing interest rates
were to rise significantly, the rate of prepayments on the Contracts would
generally be expected to decrease. No assurance can be given as to the influence
of these factors on the actual prepayment experience of the Contracts.
CITSF is not aware of any publicly available industry statistics that
set forth principal prepayment experience for recreation vehicle retail
installment sale contracts and direct loans similar to the Contracts over an
extended period of time, and its experience with respect to recreation vehicle
receivables included in its portfolio is insufficient to draw any specific
conclusions with respect to the expected prepayment rates on the Contracts.
CERTAIN PAYMENT DATA
Certain statistical information relating to the payment behavior of
recreation vehicle retail installment sale contracts and direct loans originated
by CITSF directly or through Dealers is set forth below. In evaluating the
information contained in this table and its relationship to the expected
prepayment behavior of the Contracts, 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
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on behalf of the obligors on the contracts in advance of the date on which such
principal payment was scheduled to be made. The information set forth below also
reflects charge-offs of the contracts during a given year. In addition, the
Company has not performed any statistical analysis to determine whether the
contracts to which the table relates constitute a statistically significant
sample of recreation vehicle retail installment sale contracts and direct loans
for purposes of determining expected payment behavior. Payment rates on the
contracts are influenced by a number of economic, social and other factors.
Certain of the contracts included in the table below were originated with
underwriting criteria that differ from the underwriting criteria under which the
Contracts were originated. Furthermore, no assurance can be given that the
prepayment experience of the Contracts will exhibit payment behavior similar to
the behavior summarized in the following table. In addition to the foregoing,
prospective securityholders should consider that the table set forth below is
limited to the period covered therein and thus cannot reflect the effects, if
any, of aging on the payment behavior of recreation vehicle retail installment
sale contracts and direct loans beyond such periods. As a result, investors
should not draw any conclusions regarding the prepayment rate of the Contracts
from the information presented in the table below. Each investor must make its
own assumptions regarding the prepayment rate of the Contracts.
The following table sets forth, with respect to all of the recreation
vehicle retail installment sale contracts and direct loans originated by CITSF
directly or through Dealers (excluding contracts purchased in bulk) in each year
since 1993, the aggregate initial principal balance of the contracts originated
in such year, the approximate aggregate principal balance outstanding on the
contracts originated in such year as of the last day of such year and the
approximate aggregate principal balance outstanding on the contracts originated
in such year as of the end of each subsequent year.
INFORMATION REGARDING PRINCIPAL REDUCTION ON RECREATION VEHICLE RETAIL
INSTALLMENT SALE CONTRACTS AND DIRECT LOANS ORIGINATED BY CITSF
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
YEAR OF ORIGINATION
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Approximate Volume (1)(2) ................. $405.9 $294.5 $417.3 $452.7 $672.1 $792.6
Approximate Aggregate Principal Balance(3):
December 31, 1993 ......................... 354.4
December 31, 1994 ......................... 274.0 260.7
December 31, 1995 ......................... 213.2 208.2 371.9
December 31, 1996 ......................... 162.3 156.8 271.9 406.1
December 31, 1997 ......................... 120.1 118.6 194.2 306.3 609.7
December 31, 1998 ......................... 87.8 87.1 137.7 221.5 449.1 711.4
</TABLE>
- ------------
(1) Volume represents aggregate initial principal balance of each contract
originated in a particular year.
(2) Includes contracts sold by CITSF in previous securitizations which CITSF is
servicing.
(3) Approximate aggregate principal balance as of any date represents the
approximate aggregate principal balance outstanding at the end of the indicated
year on each contract originated in a particular year.
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
S-19
<PAGE>
Contract will exist during each Due Period occurring during the Paid-Ahead
Period and the Servicer may be required to make a Monthly Advance in respect of
such Payment Shortfall, as described under "The Purchase Agreements and The
Trust Documents--Monthly Advances" in the Prospectus; however, no Monthly
Advances will be made in respect of principal in respect of a Paid-Ahead Simple
Interest Contract. See "Yield and Prepayment Considerations."
When the Obligor resumes his required payments following the Paid-Ahead
Period, the payments so paid may be insufficient to cover the interest that has
accrued since the last payment by the Obligor. Notwithstanding such
insufficiency, the Obligor's Contract would be considered current. This
situation will continue until the regularly scheduled payments are once again
sufficient to cover all accrued interest and to reduce the principal balance of
the Contract. Depending on the principal balance and Contract Rate of the
related Contract, and on the number of payments that were paid-ahead, there may
be extended periods of time during which Contracts that are current are not
amortizing. During such periods, no distributions in respect of principal will
be made to the securityholders with respect to such Contracts.
Paid-Ahead Simple Interest Contracts will affect the weighted average
life of the securities. The distribution of the paid-ahead amount on the
Distribution Date following the Due Period in which such amount was received
will generally shorten the weighted average life of the securities. However,
depending on the length of time during which a Paid-Ahead Simple Interest
Contract is not amortizing as described above, the weighted average life of the
securities may be extended. In addition, to the extent the Servicer makes
Monthly Advances with respect to a Paid-Ahead Simple Interest Contract which
subsequently goes into default, because Liquidation Proceeds with respect to
such Contract will be applied first to reimburse the Servicer for such Monthly
Advances, the loss with respect to such Contract may be larger than would have
been the case had such Monthly Advances not been made.
As of the Cut-off Date, approximately 12.45% of the number of Contracts
in the Contract Pool were Paid-Ahead Simple Interest Contracts, with at least
one paid-ahead scheduled monthly payment. CITSF's portfolio of recreation
vehicle retail installment sale contracts and direct loans has historically
included contracts which have been paid-ahead by one or more scheduled monthly
payments. There can be no assurance as to the number of Contracts which may
become Paid-Ahead Simple Interest Contracts or the number or the principal
amount of the scheduled payments which may be paid-ahead.
WEIGHTED AVERAGE LIFE OF THE SECURITIES
Prepayments on recreation vehicle retail installment sale contracts and
direct loans can be measured relative to a prepayment standard or model. The
model used in this Prospectus Supplement, the Absolute Prepayment Model ("ABS"),
represents an assumed rate of prepayment each month relative to the original
number of contracts in a pool of contracts. ABS further assumes that all the
Contracts are the same size and amortize at the same rate and that each Contract
in each month of its life will either be paid as scheduled or be prepaid in
full. For example, in a pool of contracts originally containing 10,000
contracts, a 1.0% ABS rate means that 100 contracts prepay each month. ABS does
not purport to be a historical description of prepayment experience or a
prediction of the anticipated rate of prepayment of any pool of contracts
including the Contracts.
As the rate of payments of principal of the notes and in respect of the
Certificate Balance will depend on the rate of payment (including prepayments)
of the principal balance of the Contracts and the rate at which Contracts become
Liquidated Contracts, final payment of each class of the notes could occur
significantly earlier than their respective Note Final Scheduled Distribution
Dates. The final distribution in respect of the certificates also could occur
prior to the Certificate Final Scheduled Distribution Date. Reinvestment risk
associated with early payment of the securities will be borne exclusively by the
securityholders.
The tables captioned "Percent of Initial Note Principal Balance at
Various ABS Percentages" and "Percent of Original Certificate Balance at Various
ABS Percentages" (the "ABS Table") have been prepared on the basis of certain
characteristics of the Contracts. The ABS Table was prepared assuming that (1)
the Contracts prepay in full at the specified constant percentage of ABS
monthly, with no defaults, losses or repurchases, (2) each scheduled
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<PAGE>
monthly payment on the Contracts is made on the last day of each month and each
Contract accrues to 30 days each month, (3) 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), (4) the
Closing Date occurs on May 19, 1999 and (5) CITSF exercises its option to
purchase the Contracts as specified under "The Purchase Agreements and The Trust
Documents--Termination" herein and in the Prospectus. The ABS Table indicates
the projected weighted average life of each class of the notes and the
certificates and sets forth the percent of the initial principal amount of each
class of the notes and the percent of the Original Certificate Balance that is
projected to be outstanding after each of the Distribution Dates shown at
various constant ABS percentages.
The ABS Table also assumes that the Contracts have been aggregated into
four hypothetical pools with all of the Contracts within each such pool having
the following characteristics and that the level scheduled monthly payment for
each of the pools (which is based on its aggregate principal balance, weighted
average APR, weighted average original term to maturity and weighted average
remaining term to maturity as of the Cut-off Date) will be such that each pool
will be fully amortized by the end of its remaining term to maturity.
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
ORIGINAL TERM WEIGHTED AVERAGE
AGGREGATE WEIGHTED AVERAGE TO MATURITY SEASONING
PRINCIPAL BALANCE CONTRACT RATE (MONTHS) (MONTHS)
----------------- ------------- -------- --------
<S> <C> <C> <C> <C>
Pool 1..................... $67,977,643.41 11.12% 103 6
Pool 2..................... $63,684,828.33 10.41% 144 5
Pool 3..................... $309,084,644.05 9.04% 180 6
Pool 4..................... $124,768,508.19 8.40% 239 5
</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 ABS Table.
The assumptions used are hypothetical and have been provided only to give a
general sense of how the principal cash flows might behave under varying
prepayment scenarios. For example, it is very unlikely that the Contracts will
prepay at a constant level of ABS until maturity or that all of the Contracts
will prepay at the same level of ABS. Moreover, the diverse terms of Contracts
within each of the hypothetical pools could produce slower or faster principal
distributions than indicated in the ABS Table at the various constant
percentages of ABS specified, even if the original and remaining terms to
maturity of the Contracts are as assumed. Any difference between such
assumptions and actual characteristics and performance of the Contracts or
actual prepayment experience will affect the percentages of initial balances
outstanding over time and weighted average lives of the notes and the
certificates.
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<PAGE>
PERCENT OF INITIAL NOTE PRINCIPAL BALANCE AT VARIOUS ABS PERCENTAGES (1)
<TABLE>
<CAPTION>
CLASS A-1 NOTES
Distribution Date 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- --------------------------------- -----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage 100% 100% 100% 100% 100% 100% 100% 100%
5/15/00 83% 65% 47% 39% 31% 23% 14% 6%
5/15/01 70% 37% 1% 0% 0% 0% 0% 0%
5/15/02 56% 8% 0% 0% 0% 0% 0% 0%
5/15/03 41% 0% 0% 0% 0% 0% 0% 0%
5/15/04 24% 0% 0% 0% 0% 0% 0% 0%
5/15/05 5% 0% 0% 0% 0% 0% 0% 0%
5/15/06 0% 0% 0% 0% 0% 0% 0% 0%
5/15/07 0% 0% 0% 0% 0% 0% 0% 0%
5/15/08 0% 0% 0% 0% 0% 0% 0% 0%
5/15/09 0% 0% 0% 0% 0% 0% 0% 0%
5/15/10 0% 0% 0% 0% 0% 0% 0% 0%
5/15/11 0% 0% 0% 0% 0% 0% 0% 0%
5/15/12 0% 0% 0% 0% 0% 0% 0% 0%
5/15/13 0% 0% 0% 0% 0% 0% 0% 0%
5/15/14 0% 0% 0% 0% 0% 0% 0% 0%
-----------------------------------------------------
Weighted Average Life (years)(2) 3.30 1.59 0.99 0.85 0.75 0.67 0.60 0.55
<CAPTION>
CLASS A-2 NOTES
Distribution Date 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- --------------------------------- -----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage 100% 100% 100% 100% 100% 100% 100% 100%
5/15/00 100% 100% 100% 100% 100% 100% 100% 100%
5/15/01 100% 100% 100% 74% 46% 18% 0% 0%
5/15/02 100% 100% 22% 0% 0% 0% 0% 0%
5/15/03 100% 65% 0% 0% 0% 0% 0% 0%
5/15/04 100% 16% 0% 0% 0% 0% 0% 0%
5/15/05 100% 0% 0% 0% 0% 0% 0% 0%
5/15/06 72% 0% 0% 0% 0% 0% 0% 0%
5/15/07 30% 0% 0% 0% 0% 0% 0% 0%
5/15/08 0% 0% 0% 0% 0% 0% 0% 0%
5/15/09 0% 0% 0% 0% 0% 0% 0% 0%
5/15/10 0% 0% 0% 0% 0% 0% 0% 0%
5/15/11 0% 0% 0% 0% 0% 0% 0% 0%
5/15/12 0% 0% 0% 0% 0% 0% 0% 0%
5/15/13 0% 0% 0% 0% 0% 0% 0% 0%
5/15/14 0% 0% 0% 0% 0% 0% 0% 0%
-----------------------------------------------------
Weighted Average Life (years)(2) 7.57 4.33 2.68 2.29 2.00 1.77 1.58 1.42
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
CLASS A-3 NOTES
Distribution Date 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- --------------------------------- -----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage 100% 100% 100% 100% 100% 100% 100% 100%
5/15/00 100% 100% 100% 100% 100% 100% 100% 100%
5/15/01 100% 100% 100% 100% 100% 100% 89% 61%
5/15/02 100% 100% 100% 84% 47% 8% 0% 0%
5/15/03 100% 100% 51% 5% 0% 0% 0% 0%
5/15/04 100% 100% 0% 0% 0% 0% 0% 0%
5/15/05 100% 70% 0% 0% 0% 0% 0% 0%
5/15/06 100% 28% 0% 0% 0% 0% 0% 0%
5/15/07 100% 0% 0% 0% 0% 0% 0% 0%
5/15/08 97% 0% 0% 0% 0% 0% 0% 0%
5/15/09 62% 0% 0% 0% 0% 0% 0% 0%
5/15/10 25% 0% 0% 0% 0% 0% 0% 0%
5/15/11 0% 0% 0% 0% 0% 0% 0% 0%
5/15/12 0% 0% 0% 0% 0% 0% 0% 0%
5/15/13 0% 0% 0% 0% 0% 0% 0% 0%
5/15/14 0% 0% 0% 0% 0% 0% 0% 0%
-----------------------------------------------------
Weighted Average Life (years)(2) 10.34 6.52 4.05 3.46 3.00 2.64 2.35 2.11
<CAPTION>
CLASS A-4 NOTES
Distribution Date 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- --------------------------------- -----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage 100% 100% 100% 100% 100% 100% 100% 100%
5/15/00 100% 100% 100% 100% 100% 100% 100% 100%
5/15/01 100% 100% 100% 100% 100% 100% 100% 100%
5/15/02 100% 100% 100% 100% 100% 100% 60% 9%
5/15/03 100% 100% 100% 100% 46% 0% 0% 0%
5/15/04 100% 100% 83% 15% 0% 0% 0% 0%
5/15/05 100% 100% 10% 0% 0% 0% 0% 0%
5/15/06 100% 100% 0% 0% 0% 0% 0% 0%
5/15/07 100% 85% 0% 0% 0% 0% 0% 0%
5/15/08 100% 44% 0% 0% 0% 0% 0% 0%
5/15/09 100% 8% 0% 0% 0% 0% 0% 0%
5/15/10 100% 0% 0% 0% 0% 0% 0% 0%
5/15/11 84% 0% 0% 0% 0% 0% 0% 0%
5/15/12 39% 0% 0% 0% 0% 0% 0% 0%
5/15/13 0% 0% 0% 0% 0% 0% 0% 0%
5/15/14 0% 0% 0% 0% 0% 0% 0% 0%
-----------------------------------------------------
Weighted Average Life (years)(2) 12.77 8.91 5.47 4.64 4.00 3.50 3.10 2.78
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
CLASS A-5 NOTES
Distribution Date 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- --------------------------------- -----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage 100% 100% 100% 100% 100% 100% 100% 100%
5/15/00 100% 100% 100% 100% 100% 100% 100% 100%
5/15/01 100% 100% 100% 100% 100% 100% 100% 100%
5/15/02 100% 100% 100% 100% 100% 100% 100% 100%
5/15/03 100% 100% 100% 100% 100% 71% 0% 0%
5/15/04 100% 100% 100% 100% 0% 0% 0% 0%
5/15/05 100% 100% 100% 0% 0% 0% 0% 0%
5/15/06 100% 100% 0% 0% 0% 0% 0% 0%
5/15/07 100% 100% 0% 0% 0% 0% 0% 0%
5/15/08 100% 100% 0% 0% 0% 0% 0% 0%
5/15/09 100% 100% 0% 0% 0% 0% 0% 0%
5/15/10 100% 53% 0% 0% 0% 0% 0% 0%
5/15/11 100% 0% 0% 0% 0% 0% 0% 0%
5/15/12 100% 0% 0% 0% 0% 0% 0% 0%
5/15/13 79% 0% 0% 0% 0% 0% 0% 0%
5/15/14 0% 0% 0% 0% 0% 0% 0% 0%
-----------------------------------------------------
Weighted Average Life (years)(2) 14.27 10.97 6.51 5.47 4.71 4.08 3.60 3.24
<CAPTION>
CLASS B NOTES
Distribution Date 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- --------------------------------- -----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage 100% 100% 100% 100% 100% 100% 100% 100%
5/15/00 100% 100% 100% 100% 100% 100% 100% 100%
5/15/01 100% 100% 100% 100% 100% 100% 100% 100%
5/15/02 100% 100% 100% 100% 100% 100% 100% 100%
5/15/03 100% 100% 100% 100% 100% 100% 0% 0%
5/15/04 100% 100% 100% 100% 0% 0% 0% 0%
5/15/05 100% 100% 100% 0% 0% 0% 0% 0%
5/15/06 100% 100% 0% 0% 0% 0% 0% 0%
5/15/07 100% 100% 0% 0% 0% 0% 0% 0%
5/15/08 100% 100% 0% 0% 0% 0% 0% 0%
5/15/09 100% 100% 0% 0% 0% 0% 0% 0%
5/15/10 100% 100% 0% 0% 0% 0% 0% 0%
5/15/11 100% 0% 0% 0% 0% 0% 0% 0%
5/15/12 100% 0% 0% 0% 0% 0% 0% 0%
5/15/13 100% 0% 0% 0% 0% 0% 0% 0%
5/15/14 0% 0% 0% 0% 0% 0% 0% 0%
-----------------------------------------------------
Weighted Average Life (years)(2) 14.49 11.32 6.66 5.57 4.82 4.16 3.66 3.32
</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 (a) 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, (b)
adding the results and (c) dividing the sum by the related initial
principal amount of the note.
THE COMPANY PREPARED THE FOREGOING 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 THESE TABLES.
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<PAGE>
PERCENT OF ORIGINAL CERTIFICATE BALANCE AT VARIOUS ABS PERCENTAGES(1)
<TABLE>
<CAPTION>
CERTIFICATES
Distribution Date 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- --------------------------------- -----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage 100% 100% 100% 100% 100% 100% 100% 100%
5/15/00 100% 100% 100% 100% 100% 100% 100% 100%
5/15/01 100% 100% 100% 100% 100% 100% 100% 100%
5/15/02 100% 100% 100% 100% 100% 100% 100% 100%
5/15/03 100% 100% 100% 100% 100% 100% 0% 0%
5/15/04 100% 100% 100% 100% 0% 0% 0% 0%
5/15/05 100% 100% 100% 0% 0% 0% 0% 0%
5/15/06 100% 100% 0% 0% 0% 0% 0% 0%
5/15/07 100% 100% 0% 0% 0% 0% 0% 0%
5/15/08 100% 100% 0% 0% 0% 0% 0% 0%
5/15/09 100% 100% 0% 0% 0% 0% 0% 0%
5/15/10 100% 100% 0% 0% 0% 0% 0% 0%
5/15/11 100% 0% 0% 0% 0% 0% 0% 0%
5/15/12 100% 0% 0% 0% 0% 0% 0% 0%
5/15/13 100% 0% 0% 0% 0% 0% 0% 0%
5/15/14 0% 0% 0% 0% 0% 0% 0% 0%
-----------------------------------------------------
Weighted Average Life (years)(2) 14.49 11.32 6.66 5.57 4.82 4.16 3.66 3.32
</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 (a) multiplying
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, (b) adding the results and (c) dividing the sum by the
related initial face amount of the certificate.
THE COMPANY PREPARED THE FOREGOING 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). REMEMBER THESE ASSUMPTIONS WHEN YOU REVIEW THIS 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 balance of each class of the notes as of the preceding
Distribution Date (after giving effect to any distributions of principal to be
made on such preceding Distribution Date). See "The Notes--Payments of
Interest." Thirty days of interest will be passed through to certificateholders
on each Distribution Date (except the first Distribution Date) to the extent of
the remaining Available Amount and the remaining Available Reserve Amount, in an
amount equal to one-twelfth of the product of the Pass-Through Rate and the
Certificate Balance as of the preceding Distribution Date (after giving effect
to any distributions of principal to be made on such preceding Distribution
Date). The "Certificate Balance" means the Original Certificate Balance reduced
by all distributions allocable to principal actually made to certificateholders.
See "The Certificates--Distributions of Principal." Payment Shortfalls, to the
extent not covered by Monthly Advances and amounts on deposit in the Collection
Account, will adversely affect the yield on the securities.
If an Event of Default occurs and the notes are accelerated, payments
of interest on and principal of the Class B Notes will not be paid until the
Class A Notes have been paid in full.
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<PAGE>
Generally, the excess of the amount of interest at the Contract Rate
over the amount of interest payable under such Contract and allocable to pay
such Contract's share of interest on the securities, the Servicing Fee and the
Lender Fee would be available to reduce the amount, if any, by which the
outstanding principal amount of the securities exceeds the principal balance of
the Contracts, to cover losses on Liquidated Contracts or to fund the Reserve
Account. (On each Distribution Date, the Lender Fee will be deposited into the
Reserve Account and will be paid to the Lender only to the extent that funds on
deposit in the Reserve Account on such Distribution Date are sufficient to fund
the Specified Reserve Amount for the next Distribution Date). 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
Relief Act Reduction or a prepayment in full of a Contract. The Servicer will
not make Non-Reimbursable Payments. As a result of the foregoing circumstances,
there will be less interest available to the Trust to pay interest on the
securities, to reduce the amount, if any, by which the outstanding principal
amount of the securities exceeds the principal balance of the Contracts, to
cover losses on the Liquidated Contracts and to fund the Reserve Account.
POOL FACTORS
The "Note Pool Factor" with respect to a class of notes, is 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 (1) the original denomination of the noteholder's note and (2) the
applicable Note Pool Factor.
The "Certificate Pool Factor" is an eight-digit decimal which the
Servicer will compute each month indicating the remaining Certificate Balance as
of the Distribution Date, as a fraction of the Original Certificate Balance. The
Certificate Pool Factor will be 1.00000000 as of the Cut-off Date, and
thereafter will decline to reflect reductions in the outstanding principal
balance of the certificates. A certificateholder's portion of the aggregate
outstanding Certificate Balance is the product of (1) the original denomination
of the certificateholder's certificate and (2) the Certificate Pool Factor.
On each Distribution Date, the certificateholders and the noteholders
of record (which in the case of the notes in most cases will be Cede & Co.) will
receive monthly reports concerning the payments received on the Contracts, the
Pool Balance, the Note Pool Factor, 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 25 South Charles Street, 16th Floor, Baltimore, Maryland
21201. See "Certain Information Regarding the Securities--Statements to
Securityholders" in the Prospectus.
USE OF PROCEEDS
The Company will sell the Contracts to the Trust concurrently with the
sale of the securities and the net proceeds from the sale of the securities will
be applied by the Trust to the purchase of the Contracts and to the payment of
certain expenses connected with pooling the Contracts and issuing the
securities. Such net proceeds less the payment of such expenses represent the
cash purchase price paid by the Trust to the Company for the sale of the
Contracts to the Trust. Such amount will be determined as a result of the
pricing of the securities, through the offering described in this Prospectus
Supplement. The purchase price paid to CITSF for the Contracts will be added to
CITSF's general funds and will be available for general corporate purposes.
S-26
<PAGE>
THE CIT GROUP/SALES FINANCING, INC., SERVICER
GENERAL
As of December 31, 1998, CITSF serviced or subserviced for itself and
others approximately 285,000 contracts (consisting primarily of recreation
vehicle, home equity, recreational boat and manufactured housing contracts),
representing an outstanding balance of approximately $8.8 billion. Of this
portfolio, approximately 96,000 contracts (representing approximately $2.5
billion outstanding balance) consisted of recreation vehicle retail installment
sale contracts and direct loans. CITSF entered into agreements in 1996, 1997 and
1998 to service additional manufactured housing, recreation vehicle,
recreational boat and automobile finance 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 recreation vehicle retail installment sale contracts and
direct loans serviced or subserviced by CITSF on the dates indicated:
<TABLE>
<CAPTION>
THE CIT GROUP/SALES FINANCING, INC.
CONTRACTS BEING SERVICED BY PRODUCT LINE
(DOLLAR AMOUNTS IN MILLIONS)
(NUMBER OF ACCOUNTS IN THOUSANDS)
AT DECEMBER 31,
---------------------------------------------------------------------------------------------
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>
RV--Owned ........................... 39.5 $ 847.1 30.0 $ 662.5 22.2 $ 477.4 19.5 $ 416.1 23.6 $ 673.1
RV--Bulk Purchases .................. 3.5 50.9 2.6 36.1 2.8 32.7 3.5 82.8 7.7 71.0
RV--Servicing(1) .................... 4.8 118.3 19.5 445.7 32.6 746.8 71.6 1,910.0 65.0 1,711.7
----- ---------- ----- ---------- ----- ---------- ----- ---------- ----- ----------
Total RV ............................ 47.8 1,016.3 52.1 1,144.3 57.6 1,256.9 94.6 2,408.9 96.3 2,455.8
Total MH ............................ 39.6 878.2 69.3 1,368.5 96.0 1,748.4 89.3 1,836.5 81.2 1,936.9
Total RB ............................ -- -- 6.0 156.9 13.3 328.1 35.7 948.9 42.4 1,226.5
Home Equity ......................... 13.5 570.8 27.1 1,039.0 52.6 2,005.5 57.3 2,446.2 57.0 2,851.8
Other(2) ............................ 1.3 74.8 0.1 2.1 0.1 3.1 5.1 121.6 8.5 315.2
----- ---------- ----- ---------- ----- ---------- ----- ---------- ----- ----------
Total Contracts Serviced ............ 102.2 $ 2,540.1 154.6 $ 3,710.8 219.6 $ 5,342.0 282.0 $ 7,762.1 285.4 $ 8,786.2
</TABLE>
- ----------
RV= Recreation Vehicle
MH= Manufactured Housing
RB= Recreational Boat
(1) Includes contracts sold by CITSF in previous securitizations which CITSF is
servicing. The 1997 and 1998 amounts also include a third party servicing
arrangement entered into in 1997.
(2) Includes inventory financing receivables.
DELINQUENCY AND LOAN LOSS EXPERIENCE
The following table sets forth the delinquency experience at December
31 for the years 1994 to 1998 of the portfolio of recreation vehicle retail
installment sale contracts and direct loans originated and serviced by CITSF,
excluding contracts acquired by CITSF through portfolio purchases, contracts in
repossession and contracts serviced by CITSF but not originated by CITSF.
Delinquency and loan loss experience for the serviced portfolio was obtained
from the monthly servicer reports for prior securitization trusts.
S-27
<PAGE>
<TABLE>
<CAPTION>
DELINQUENCY EXPERIENCE
(DOLLARS IN MILLIONS)
AT DECEMBER 31,
--------------------------------------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Number of Contracts (in thousands) (1)............ 44.3 49.5 54.8 64.6 68.7
Principal Balance of Contracts Serviced (1)....... $965.4 $1,108.2 $1,224.2 $1,512.6 $ 1,816.0
Principal Balance of Delinquent Contracts (2):
30-59 Days........................................ $5.0 $9.2 $14.9 $22.2 $18.1
60-89 Days........................................ 2.0 3.1 4.3 8.6 7.4
90 Days or More................................... 2.8 4.5 6.2 12.3 20.1
------ -------- -------- -------- ---------
Total Principal Balance of Delinquent Contracts... $9.8 $16.8 $25.4 $43.1 $45.6
Delinquencies as a Percent of Principal Balances (3) 1.01% 1.51% 2.08% 2.85% 2.51%
</TABLE>
- ----------
(1) Includes recreation vehicle retail installment contracts and direct loans
sold by CITSF in previous securitizations which CITSF is servicing.
(2) 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.
(3) Based on dollar percent delinquent calculated by dividing Total Principal
Balance of Delinquent Contracts by Principal Balance of Contracts Serviced.
The following table sets forth the loan loss experience for the five
years ended December 31, 1998 of the portfolio of recreation vehicle retail
installment sale contracts and direct loans originated and serviced by CITSF,
excluding contracts acquired by CITSF through portfolio purchases and contracts
serviced by CITSF but not originated by CITSF. "Net Losses" are equal to the
aggregate balance of all contracts which are determined to be uncollectible in
the period less any recoveries and liquidation proceeds on contracts charged-off
in the period or any prior periods. Net Losses include outside collection,
repossession and liquidation expenses.
<TABLE>
<CAPTION>
LOAN LOSS/LIQUIDATION EXPERIENCE
(DOLLARS IN MILLIONS)
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
Average Principal Balance of Contracts
<S> <C> <C> <C> <C> <C>
Serviced(1),(2) .................. $990.3 $1,041.3 $1,166.3 $1,308.8 $1,663.1
Net Losses:
Dollars .............................. $ 4.9 $ 4.8 $ 9.9 $ 13.8 $ 14.3
Percentage(3) ........................ 0.49% 0.46% 0.85% 1.05% 0.86%
</TABLE>
- ----------
(1) Excludes contracts in repossession.
(2) Includes recreation vehicle retail installment sale contracts and direct
loans sold by CITSF in previous securitizations which CITSF is servicing.
(3) As a percentage of the Average Principal Balance of Contracts Serviced.
The data presented in the preceding tables are for illustrative
purposes only. Such data relate to the performance of CITSF's entire portfolio
of recreation vehicle retail installment sale contracts and direct 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. Additionally, the loss and delinquency experience presented in the
preceding tables with respect to recreation vehicle retail installment sale
contracts and direct loans securitized by CITSF prior to May 1996 is calculated
using the method required by the related transaction documents which differs
from the method used by CITSF to calculate losses and delinquencies on the
remainder of its owned or subsequently securitized contracts. The
securitizations prior to May 1996 require a contract to be reflected as a loss
in the month it becomes 120 days delinquent, unless it is in repossession. The
data presented in the preceding tables reflect this calculation method for these
securitizations. The loss data presented in the preceding tables with respect
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<PAGE>
to CITSF's remaining owned or previously securitized contracts reflects CITSF's
general practice of recording a loss when all amounts CITSF expects to recover
either by sale or disposition of the related financed vehicle or otherwise have
been received. As a result, the data in the preceding tables with respect to
contracts securitized prior to May 1996 reflects higher losses and lower 90 day
or more delinquencies than would have been reported had these contracts not been
securitized. The effect on the data presented in the preceding tables resulting
from the differences in the timing of losses for contracts securitized prior to
May 1996 will continue to diminish (as evidenced by the higher 90 day or more
delinquencies at December 31, 1998) as this portfolio continues to pay off.
As described in the prospectus, in August 1994, CITSF initiated an
underwriting program to provide for 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 continued runoff of contracts
originated prior to August 1994 and the seasoning of contracts originated under
the underwriting guidelines adopted in 1994 have contributed to the increased
loss and delinquency rates experienced during 1996 and 1997. In addition, the
delinquency and loss performance of the CITSF portfolio has been and will
continue to be influenced by overall economic and other trends including the
increasing propensity of consumers to fail to make timely payments on consumer
credit obligations and their increasing willingness to seek bankruptcy
protection. All of the Contracts were originated under the credit criteria
adopted by CITSF in August 1994. Accordingly, the data presented in the
preceding tables should not necessarily be considered as a basis for assessing
the likelihood, amount or severity of delinquencies or losses on the Contracts
and no assurance can be given that the delinquency and loan loss experience
presented in the preceding tables will be indicative of the experience on the
Contracts.
CITSF has not significantly changed its recreation vehicle underwriting
guidelines since 1994. However, starting in early 1997, marketing efforts have
been shifted toward higher credit quality obligors who tend to finance larger
ticket recreation vehicles. The originations in this target market have resulted
in decreased delinquencies on the overall portfolio as of December 31, 1998.
In August 1997, CITSF entered into an agreement to provide servicing
for approximately 42,000 additional recreation vehicle and recreational boat
contracts for another financial institution. CITSF is servicing these contracts
at its Asset Service Center, but these contracts are not included in the
preceding 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 increased delinquencies
experienced during 1997.
THE NOTES
DESCRIPTION OF THE NOTES
The notes will represent obligations of the Trust secured by assets of
the Trust (other than the Certificate Distribution Account). Payments in respect
of the Class B Notes will be subordinated to payments on the Class A Notes to
the extent described herein. The Trust will issue 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 FMB 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 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
S-29
<PAGE>
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 June 15, 1999. With respect to any Distribution
Date, the related "Due Period" will be the calendar month preceding the month of
such Distribution Date. The first Due Period will commence on and include the
Cut-off Date and will end on and include May 31, 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 or trust companies in
the state of New York, Delaware, Maryland 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, from and
including 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.
On each Distribution Date, the Indenture Trustee will distribute to the
noteholders of each class accrued interest at the applicable Interest Rate on
the outstanding principal amount of such class to the extent of the Available
Amount remaining after payment of the Servicer Payment. To the extent the
remaining Available Amount on a Distribution Date is insufficient to pay
noteholders the entire amount of interest due on such Distribution Date, such
shortfall will be funded from the Reserve Account, subject to the Available
Reserve Amount, under the circumstances described herein. Interest on the notes
of any class for any Distribution Date due but not paid on such Distribution
Date will be due on the next Distribution Date in addition to an amount equal to
interest on such amount at the applicable Interest Rate (to the extent lawful).
Interest payments to all classes of Class A Noteholders will have the
same priority. Under certain circumstances, the amount available for interest
payments could be less than the amount of interest payable on the Class A Notes
on any Distribution Date, in which case each class of Class A Noteholders will
receive their ratable share (based upon the aggregate amount of interest due to
such class of Class A Noteholders) of the aggregate amount available to be
distributed in respect of interest on the Class A Notes.
Interest on the Class B Notes will not be paid on any Distribution Date
until interest on the Class A Notes for such Distribution Date has been paid in
full. In addition, notwithstanding the foregoing, if an Event of Default has
occurred and the notes have been accelerated, payments of interest on and
principal of the Class B Notes will not be paid until the Class A Notes have
been paid in full.
PAYMENTS OF PRINCIPAL
Principal of the notes will be payable on each Distribution Date in an
amount equal to the Primary Principal Distribution Amount and the Additional
Principal Distribution Amount for such Distribution Date. Payments of the
Primary Principal Distribution Amount will be made to each class of the notes in
sequential order. Payments to the notes of the Primary Principal Distribution
Amount on each Distribution Date will be made from the Available Amount
remaining after payment of the Servicer Payment and interest due on the notes on
such Distribution Date. Payments of the Additional Principal Distribution Amount
will be made from the Available Amount after (a) payment of all amounts due to
securityholders with respect to interest and distribution of the
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<PAGE>
Primary Principal Distribution Amount, (b) payment of amounts due to the
Servicer and (c) deposit of the Lender Fee into the Reserve Account.
To the extent the remaining Available Amount on a Distribution Date is
insufficient to fund the entire Primary Principal Distribution Amount due on
such Distribution Date, such shortfall will be funded from the Reserve Account,
subject to the Available Reserve Amount remaining after any withdrawals from the
Reserve Account to make payments of interest due on the notes on such
Distribution Date, under the circumstances described herein.
On each Distribution Date, the Trust will pay each of the Primary
Principal Distribution Amount and the Additional Principal Distribution Amount
to the notes as follows:
(1) to the Class A-1 Notes until the Class A-1 Notes have been paid in full,
(2) to the Class A-2 Notes until the Class A-2 Notes have been paid in full,
(3) to the Class A-3 Notes until the Class A-3 Notes have been paid in full,
(4) to the Class A-4 Notes until the Class A-4 Notes have been paid in full,
(5) to the Class A-5 Notes until the Class A-5 Notes have been paid in full,
and
(6) to the Class B Notes until the Class B Notes have been paid in full.
Notwithstanding the foregoing, if an Event of Default has occurred and
the notes have been accelerated, principal payments will be made on each class
of Class A Notes pro rata on the basis of their respective unpaid principal
amounts.
The "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:
(1) all payments of principal (including all Principal Prepayments
applied during the related Due Period) made on each Contract
during the related Due Period;
(2) 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;
(3) the Stated Principal Balance of each Contract which became a
Liquidated Contract during the related Due Period; and
(4) the Principal Carryover Shortfall;
provided, however, that (x) payments of principal (including Principal
Prepayments) with respect to a Liquidated Contract or a Repurchased Contract
received after the last day of the Due Period in which the Contract became a
Liquidated Contract or a Repurchased Contract shall not be included in the
Primary Principal Distribution Amount for such Distribution Date, and (y) if a
Liquidated Contract is purchased by CITSF or the Servicer pursuant to the Sale
and Servicing Agreement on the Deposit Date immediately following the Due Period
in which it became a Liquidated Contract, no amount will be included with
respect to such Contract in the Primary Principal Distribution Amount for such
Distribution Date pursuant to clause (3) of the definition of Primary Principal
Distribution Amount.
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.
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<PAGE>
A "Liquidated Contract" is a defaulted Contract as to which the
Servicer has (a) recovered all amounts that it expects to recover by sale or
disposition of the related Financed Vehicle or (b) 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
Vehicle.
"Principal Prepayment" means a payment or other recovery of principal
on a Contract (including insurance proceeds and Net Liquidation Proceeds applied
to principal on a Contract) which is received in advance of its due date and
applied upon receipt to reduce the outstanding principal amount of such Contract
prior to the date or dates on which such principal amount is scheduled to be
paid.
"Net Liquidation Proceeds" means the monies collected (from whatever
source) during a Due Period on a Liquidated Contract (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.
"Liquidation Expenses" means all reasonable fees of third parties and
other expenses incurred by the Servicer in the course of converting any
defaulted Contract or Financed Vehicle into cash proceeds (including, without
limitation, expenses relating to recovery, repossession and sale of such
Financed Vehicle).
"Principal Carryover Shortfall" means, for any Distribution Date, the
excess 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 holders of the securities on such preceding Distribution Date
(other than any Additional Principal Distribution Amount distributed in respect
of principal).
"Additional Principal Distribution Amount" means, for any Distribution
Date, the lesser of (a) the remaining Available Amount after all payments are
made on such Distribution Date with respect to the Servicer Payment (including
the Servicing Fee), the interest on the securities and the Primary Principal
Distribution Amount and the deposit of the Lender Fee into the Reserve Account;
and (b) the excess, if any, of the outstanding principal amount of the
securities following the payment of the Primary Principal Distribution Amount on
such Distribution Date over the Pool Balance as of the last day of the related
Due Period.
The amount of principal required to be distributed to noteholders under
the Indenture is generally limited to amounts available to be deposited in the
Note Distribution Account for such purpose. Therefore, the failure to pay
principal on any class of notes will not result in the occurrence of an Event of
Default until the Note Final Scheduled Distribution Date applicable to such
class of the notes. The actual date on which the aggregate outstanding principal
amount of each class of notes is paid may be earlier than its respective Note
Final Scheduled Distribution Date based on a variety of factors including an
Optional Purchase or Auction Call.
REDEMPTION
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.
RIGHTS OF NOTEHOLDERS; INDENTURE
The Indenture Trustee will have the power to direct the Owner Trustee
to take certain actions in connection with the administration of the Trust
property until the notes have been paid in full and the Indenture has been
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<PAGE>
discharged in accordance with its terms. The Indenture will specifically
prohibit the Owner Trustee from taking any action that would impair the
Indenture Trustee's security interest in the Trust property and will require the
Owner Trustee to obtain the consent of the Indenture Trustee or noteholders
representing not less than a majority of the aggregate principal amount of the
notes then outstanding before modifying, amending, supplementing, waiving or
terminating any provision of the Sale and Servicing Agreement. Therefore, until
the notes have been paid in full, the ability to direct the Trust with respect
to certain actions permitted to be taken under the Sale and Servicing Agreement
rests with the Indenture Trustee and the noteholders.
If an Event of Default should occur and be continuing with respect to
the notes, the Indenture Trustee or holders of not less than 66 2/3% of the
aggregate outstanding principal amount of the Controlling Notes may declare the
principal of the notes to be immediately due and payable. Such declaration may,
under certain circumstances, be rescinded by the holders of not less than 66
2/3% of the aggregate outstanding principal amount of such Controlling Notes.
If an Event of Default under the Indenture occurs and the notes are
accelerated, the Indenture Trustee will have the right or will be required in
certain circumstances to exercise remedies as a secured party, including selling
the Contracts, in order to pay the principal of, and accrued interest on, the
notes. Upon the occurrence of an Event of Default, the Class B Noteholders will
not have any right to direct or to consent to any action by the Indenture
Trustee, including acceleration of the notes or the sale of Contracts, until the
Class A Noteholders have been paid in full. There is no assurance that the
proceeds of any sale of the Contracts would be equal to or greater than the
aggregate outstanding principal amount of the notes plus, in each case, accrued
interest thereon. Because neither interest nor principal is distributed to Class
B Noteholders following an Event of Default and acceleration of the notes until
the Class A Notes have been paid in full, the interests of the Class A
Noteholders and the Class B Noteholders may conflict, and the exercise by the
Indenture Trustee of its right to sell the Contracts or exercise other remedies
may cause the Class B Noteholders to suffer a loss of all or part of their
investment.
Upon the occurrence of an Event of Default under the Indenture, the
assets of the Trust may be sold upon giving prior written notice to the Rating
Agencies, which may result in early retirement of the notes. If the net proceeds
from the liquidation of the Contracts (after payment of the Servicer Payment)
and any amounts on deposit in the Note Distribution Account are not sufficient
to pay the principal amount of and accrued interest on the notes in full,
holders of the notes will incur a loss. Such net proceeds together with amounts
on deposit in the Note Distribution Account will be distributed to
securityholders (after payment of the fees and expenses of the Indenture Trustee
and the Servicer Payment) in the following order of priority: (1) to the Class A
Noteholders for amounts due and unpaid on the Class A Notes for interest,
ratably, without preference or priority of any kind, according to the amounts
due and payable on each class of the Class A Notes for interest, (2) to the
Class A Noteholders for amounts due and unpaid on the Class A Notes for
principal, ratably, without preference or priority of any kind, according to the
amounts due and payable on the Class A Notes for principal, until the principal
amount of the Class A Notes is reduced to zero, (3) to the Class B Noteholders
for amounts due and unpaid on the Class B Notes for interest, ratably, without
preference or priority of any kind, according to the amounts due and payable on
the Class B Notes for interest, (4) to the Class B Noteholders for amounts due
and unpaid on the Class B Notes for principal, ratably, without preference or
priority of any kind, according to the amounts due and payable on the Class B
Notes for principal, until the principal amount of the Class B Notes is reduced
to zero, (5) to the certificateholders for amounts due and unpaid on the
Certificates for interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the certificates for interest and
(6) to the certificateholders for amounts due and unpaid on the certificates for
the Certificate Balance, ratably, without preference or priority of any kind,
according to the amounts due and payable on the certificates for the Certificate
Balance.
Pursuant to the Trust Indenture Act of 1939, as amended, the Indenture
Trustee will be deemed to have a conflict of interest and be required to resign
as trustee for either the Class A Notes or the Class B Notes if an Event of
Default occurs under the Indenture. In these circumstances, the Indenture will
require that, within 90 days of ascertaining such Event of Default, the
Indenture Trustee will resign as Indenture Trustee for the Class A Notes or the
Class B Notes and provide for a successor indenture trustee to be appointed for
one or both of the Class A Notes and Class B Notes as applicable, in order that
there be separate trustees for each of the Class A Notes and Class B Notes. So
long as any amounts remain unpaid with respect to the Class A Notes, only the
indenture trustee for the
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Class A Noteholders will have the right to exercise remedies under the Indenture
(but the Class B Noteholders will be entitled to their share of any proceeds of
enforcement, subject to the subordination of the Class B Notes to the Class A
Notes as described herein), and only the Class A Noteholders will have the right
to direct or consent to any action to be taken, including sale of the Contracts,
until the Class A Noteholders are paid in full. Upon repayment of the Class A
Noteholders in full, all rights to exercise remedies under the Indenture will
transfer to the indenture trustee for the Class B Noteholders. Any resignation
of the original Indenture Trustee as described above with respect to any class
of Notes will become effective only upon the appointment of a successor trustee
for such a class of Notes and such successor's acceptance of such appointment.
In the event that an Event of Termination occurs, the Indenture Trustee
or Class A Noteholders representing not less than a majority of the aggregate
principal amount of the Class A Notes then outstanding may remove the Servicer
without the consent of any of the Class B Noteholders. Until the Class A
Noteholders have been paid in full, none of the Class B Noteholders will have
the ability to waive defaults by the Servicer, including defaults that could
materially adversely affect the Class B Noteholders.
THE CERTIFICATES
The certificates offered hereby will be issued pursuant to the Trust
Agreement, a form of which has been filed as an exhibit to the Registration
Statement of which this Prospectus Supplement is a part. The following summary
does not purport to be complete and is subject to, and qualified in its entirety
by reference to, the Trust Agreement.
DESCRIPTION OF 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 May 1, 1999 among the Seller, the Delaware Trustee 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 (the "Affiliated Owner") and a wholly owned subsidiary of CIT may be
issued at least 1% of the Original Certificate Balance. The certificates will be
issued in fully registered, certificated form ("Definitive Certificates") to
certificateholders or their nominees. See "Certain Information Regarding the
Securities--Definitive Securities" in the Prospectus. Purchasers of certificates
and their assignees (1) must represent that they are United States persons (as
defined in Section 7701(a) of the Code) and provide a certification of
non-foreign status under penalties of perjury and (2) must represent and certify
that they are not (a) an employee benefit plan (as defined in Section 3(3) of
ERISA) that is subject to the provisions of Title I of ERISA, (b) a plan
described in Section 4975(e)(1) of the Code, or (c) any entity whose underlying
assets include plan assets by reason of a plan's investment in the entity.
Payments of interest and principal on the certificates with respect to
each Due Period will be made on each Distribution Date, commencing June 15,
1999, to the extent of amounts available therefor. Payments on the certificates
on each Distribution Date will be made to the holders of record of the
certificates on the related Record Date.
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DISTRIBUTION OF INTEREST
The certificates will bear interest at the rate of 7.21% 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 on each Distribution Date pro rata to
certificateholders accrued interest at the Pass-Through Rate on the outstanding
Certificate Balance to the extent of the Available Amount remaining after
payment of the Servicer Payment, the Note Interest Distribution Amount and any
amount payable on the notes from the Primary Principal Distribution Amount. To
the extent the remaining Available Amount on a Distribution Date is insufficient
to pay certificateholders the entire amount of interest due on any Distribution
Date, such shortfall will be funded from the Reserve Account, subject to the
Available Reserve Amount remaining after any withdrawals from the Reserve
Account to make payments of interest and principal due on the notes on such
Distribution Date, or from Certificate Interest Advances, each under the
circumstances described herein. Interest on the certificates for any
Distribution Date due but not paid on such Distribution Date will be due on the
next Distribution Date in addition to an amount equal to interest on such amount
at the Pass-Through Rate (to the extent lawful).
The rights of certificateholders to receive distributions of interest
will be subordinated to the rights of the noteholders to receive payment in full
of all amounts of interest and principal that the noteholders are entitled to be
paid on any 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
On each Distribution Date prior to the payment in full of the notes,
the holders of certificates will not be entitled to any payments of principal.
On and after the payment in full of the notes, principal of the
certificates will be payable on each Distribution Date, subject to the remaining
Available Amount, in an amount equal to the Primary Principal Distribution
Amount and the Additional Principal Distribution Amount for such Distribution
Date. Payment of the Primary Principal Distribution Amount on each Distribution
Date to the certificateholders will be made from the Available Amount remaining
after payment of the Servicer Payment, the Note Interest Distribution Amount and
any amount payable on the notes from the Primary Principal Distribution Amount
and payment of the Certificate Interest Distribution Amount. Payments to
certificateholders of the Additional Principal Distribution Amount on each
Distribution Date will be made from the Available Amount remaining after (a)
payment of all amounts due to securityholders with respect to interest and
distribution of the Primary Principal Distribution Amount , (b) payment of
amounts due to the Servicer, (c) deposit of the Lender Fee into the Reserve
Account and (d) payment of any Additional Principal Distribution Amount to the
notes on such Distribution Date. Payments to certificateholders of the Primary
Principal Distribution Amount and the Additional Principal Distribution Amount
will only be made after the notes have been paid in full. See "The Purchase
Agreement and the Trust Documents--Distributions."
To the extent the remaining Available Amount on a Distribution Date is
insufficient to fund the entire Primary Principal Distribution Amount due to
certificateholders on such Distribution Date, such shortfall will be funded from
the Reserve Account, subject to the Available Reserve Amount remaining after any
withdrawals from the Reserve Account to make payments of interest and principal
due on the notes and interest due on the certificates on such Distribution Date,
under the circumstances described herein. The rights of certificateholders to
receive distributions of principal (following the payment of interest on the
certificates) will be subordinated to the rights of noteholders to receive
distributions of interest and principal to the extent described herein. In the
event that the certificates are outstanding on the Certificate Final Scheduled
Distribution Date (after taking into account distributions on such date), the
Indenture Trustee will withdraw (or cause to be withdrawn) from the Reserve
Account (to the extent funds are available therefor in the Reserve Account), and
will deposit in the Certificate Distribution Account for distribution to the
certificateholders to retire the certificates, an amount equal to the
Certificate Balance. The actual date on which the aggregate outstanding
principal amount of the certificates is paid
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may be earlier than the Certificate Final Scheduled Distribution Date based on a
variety of factors including an Optional Purchase or Auction Call.
If an Event of Default has occurred and the notes have been
accelerated, the certificateholders will not be entitled to receive any payments
of principal until the notes have been paid in full.
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.
LIMITED RIGHTS
If an Event of Default occurs under the Indenture, the
certificateholders will not have any right to direct or to consent to any
remedies therefor exercisable by the Indenture Trustee, including the sale of
the Contracts, until the notes have been paid in full. If an Event of
Termination occurs, the certificateholders will not have any right to direct or
consent to removal of the Servicer or to waive such Event of Termination until
the notes have been paid in full. See "Risk Factors--Rights of Noteholders and
Certificateholders" herein and "The Purchase Agreements and the Trust
Documents--Event of Termination," "--Rights Upon Event of Termination" and "--
Waiver of Past Defaults" in the Prospectus.
ENHANCEMENT
Subordination. To the extent described herein, the rights of the
certificateholders to receive distributions with respect to the Contracts will
be subordinated to the rights of the noteholders, and the rights of the Class B
Noteholders to receive distributions with respect to the Contracts will be
subordinated to the rights of the Class A Noteholders. This subordination is
intended to enhance the likelihood of timely receipt by the Class A Noteholders
(and to a lesser extent the Class B Noteholders) of the full amount of interest
and principal required to be paid to them, and to afford the Class A Noteholders
(and to a lesser extent the Class B Noteholders) limited protection against
losses in respect of the Contracts.
No distribution will be made to the certificateholders on any
Distribution Date in respect of (1) interest until the full amount of interest
and principal (other than the Additional Principal Distribution Amount) on the
notes payable on such Distribution Date has been distributed to the noteholders,
and (2) principal until the notes have been paid in full.
No distribution will be made to the Class B Noteholders on any
Distribution Date in respect of (1) interest until the full amount of interest
on the Class A Notes payable on such Distribution Date has been distributed to
the Class A Noteholders, and (2) principal until the Class A Notes have been
paid in full.
Reserve Account. On the Closing Date, an account (the "Reserve
Account") will be established pursuant to the Sale and Servicing Agreement. The
Indenture Trustee will have the right to withdraw (or cause to be withdrawn)
payments from the Reserve Account under certain circumstances specified below.
The Reserve Account will be funded on the Closing Date in the amount of
$9,670,317 (the "Initial Reserve Amount") from the proceeds of a loan (the
"Loan") to be made by the Lender. The Lender only has recourse against the Trust
for repayment of the Loan from the Reserve Account Surplus as set forth in the
Sale and Servicing Agreement and related documents.
The Reserve Account will be an Eligible Account. Funds on deposit in
the Reserve Account will be invested (at the direction of the Company or one or
more of its affiliates) in certain investments which satisfy the
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criteria established by each of the Ratings Agencies (which may include
obligations of CIT). The Reserve Account and any amounts therein shall be held
by or on behalf of the Indenture Trustee in accordance with the Sale and
Servicing Agreement for the benefit of the securityholders and the Trust, and as
provided in the Sale and Servicing Agreement and related documents.
The Reserve Account will be terminated following the earlier to occur
of (a) the date on which the Certificate Balance is paid in full or (b) the
Certificate Final Scheduled Distribution Date, and any funds remaining therein
will be paid to the Lender or to the Affiliated Owner.
On each Distribution Date, the amount available to be withdrawn from
the Reserve Account for the benefit of the securityholders (the "Available
Reserve Amount") will be equal to the lesser of (1) the Specified Reserve Amount
and (2) the amount on deposit in the Reserve Account, before giving effect to
any deposit to be made to the Reserve Account on such Distribution Date.
On each Determination Date, the Servicer will determine the amounts, if
any, required to be withdrawn from the Reserve Account on the related
Distribution Date for payment to the securityholders. If the Available Amount on
any Distribution Date is insufficient (after payment of the Servicer Payment) to
pay the interest and principal (other than the Additional Principal Distribution
Amount) required to be distributed on the securities on such Distribution Date,
the Indenture Trustee will withdraw (or cause to be withdrawn) from the Reserve
Account an amount equal to the lesser of the amount of such deficiency or the
Available Reserve Amount. The Indenture Trustee will withdraw (or cause to be
withdrawn) such amount from the Reserve Account and will deposit (or cause to be
deposited) such amount into the Note Distribution Account and/or Certificate
Distribution Account on the Business Day before the Distribution Date with
respect to which such withdrawal was made. Any amounts withdrawn from the
Reserve Account will be distributed to the securityholders in the same order of
priority as distributions of the Available Amount. If the Available Reserve
Amount is zero, securityholders will bear the risk of loss resulting from
default by Obligors and will have to look primarily to the value of the related
Financed Vehicles for recovery of the outstanding principal and unpaid interest
on the defaulted Contracts.
On each Distribution Date, the Servicer will deposit the Excess
Collections, if any, into the Reserve Account in an amount sufficient to
increase the amount on deposit in the Reserve Account to the Specified Reserve
Amount for the next Distribution Date. Any amounts on deposit in the Reserve
Account in excess of the Specified Reserve Amount for the next Distribution Date
will be used to pay interest and principal on the Loan or will 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
that remain in the Collection Account on such Distribution Date after taking
into account distributions to be made on the securities, payment of the Servicer
Payment 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, and deposit of the Lender Fee into the Reserve Account.
The "Lender Fee" for any Distribution Date will equal the sum of (x)
the product of (A) one-twelfth of 1.00% and (B) the average unpaid principal
amount of the Loan during the Interest Accrual Period and (y) if the average
unpaid principal amount of the Loan during such Interest Accrual Period is
greater than the average amount on deposit in the Reserve Account during such
Interest Accrual Period, the product of (A) the difference between the average
unpaid principal amount of the Loan during such Interest Accrual Period and the
average amount on deposit in the Reserve Account during such Interest Accrual
Period and (B) one-twelfth of one-month LIBOR + 2.00%.
The "Specified Reserve Amount" with respect to any Distribution Date
will equal the lesser of (1) $9,670,317 and (2) 2.00% of the Pool Balance as of
the first day of the related Due Period; provided that the Specified Reserve
Amount shall be $9,670,317 prior to the first Distribution Date on which the
outstanding principal amount of the securities after all distributions with
respect to principal on such Distribution Date is less than or equal to the Pool
Balance as of the last day of the related Due Period and thereafter shall not be
less than $5,655,156. If, with respect to any Distribution Date, (a) the average
of the principal balance of Contracts 60 days
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or more delinquent (including Contracts relating to Financed Vehicles that have
been repossessed) as a percentage of the Pool Balance for the three preceding
Due Periods exceeds the Maximum Average Delinquency Rate for such Distribution
Date or (b) the Cumulative Net Loss Rate for such Distribution Date exceeds the
Maximum Net Loss Rate for such Distribution Date, then the Specified Reserve
Amount with respect to the next Distribution Date shall be 4.00% of the Pool
Balance as of the first day of the related Due Period, but in no event less than
$5,655,156. The Specified Reserve Amount is determined on each Distribution
Date. Therefore, under certain circumstances, the Specified Reserve Amount may
increase on a Distribution Date to 4.00% of the Pool Balance as of the first day
of the related Due Period and decrease on a subsequent Distribution Date to
2.00% of the Pool Balance as of the first day of the related Due Period.
The Specified Reserve Amount shall never be greater than the sum of the
aggregate principal amount of the notes and the outstanding Certificate Balance.
The Specified Reserve Amount may be reduced from time to time to amounts less
than the Specified Reserve Amount as described herein if the Rating Agencies
shall have given prior written notice to the Seller, the Servicer and the Issuer
that such reduction will not result in a downgrade or withdrawal of the then
current rating of the notes or the certificates. In several circumstances the
Servicer must determine on a Distribution Date the Specified Reserve Amount for
the next Distribution Date; in order to make the calculations required, the
Servicer will use the data for the three Due Periods preceding the Due Period
related to such next Distribution Date.
"Cumulative Net Loss Rate" means, with respect to any Distribution
Date, the fraction, expressed as a percentage, the numerator of which is equal
to the aggregate Net Liquidation Losses since the Cut-off Date and the
denominator of which is equal to the Initial Pool Balance.
"Net Liquidation Losses" means the amount, if any, by which (a) the
principal balance of all Contracts which became Liquidated Contracts since the
Cut-off Date exceeds (b) the Net Liquidation Proceeds received since the Cut-off
Date in respect of all Liquidated Contracts.
The "Maximum Average Delinquency Rate" for any Distribution Date is as
set forth below:
Maximum Average
Distribution Date Delinquency Rate
----------------- ----------------
June 1999 - November 1999 1.25%
December 1999 - May 2000 2.00%
June 2000 - November 2000 2.50%
December 2000 - May 2001 3.00%
June 2001 - November 2001 3.50%
December 2001 and thereafter 4.00%
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The "Maximum Net Loss Rate" for any Distribution Date is as set forth
below:
Maximum Net
Distribution Date Loss Rate
----------------- ---------
June 1999 - May 2000 0.32%
June 2000 - August 2000 0.56%
September 2000 - November 2000 0.80%
December 2000 - February 2001 1.05%
March 2001 - May 2001 1.30%
June 2001 - August 2001 1.60%
September 2001 - November 2001 1.90%
December 2001 - February 2002 2.20%
March 2002 - May 2002 2.50%
June 2002 - August 2002 2.70%
September 2002 - November 2002 2.90%
December 2002 - February 2003 3.20%
March 2003 - May 2003 3.40%
June 2003 - August 2003 3.50%
September 2003 - November 2003 3.70%
December 2003 - February 2004 3.80%
March 2004 - May 2004 4.00%
June 2004 - August 2004 4.10%
September 2004 - November 2004 4.20%
December 2004 - February 2005 4.30%
March 2005 and thereafter 4.40%
On each Distribution Date, the Indenture Trustee will withdraw (or
cause to be withdrawn) from the Reserve Account an amount equal to the amount by
which the Available Reserve Amount (after taking into account any deposits to
and withdrawals from the Reserve Account pursuant to the Sale and Servicing
Agreement on such Distribution Date) exceeds the Specified Reserve Amount for
the next Distribution Date (the "Reserve Account Surplus") and pay such amount
to the Lender or to the Affiliated Owner. Any such amounts paid will not be
available for distribution to securityholders.
In the event that funds are withdrawn from the Reserve Account to make
payments on the securities or the Specified Reserve Amount is increased, the
sole source of funding of the Reserve Account after the Closing Date will be
Excess Collections. Neither the Seller, the Servicer nor any affiliate will be
obligated to deposit any of their own funds into the Reserve Account in the
event that Excess Collections are not sufficient to replenish the Reserve
Account.
THE PURCHASE AGREEMENTS AND THE TRUST DOCUMENTS
DISTRIBUTIONS
On each Determination Date, the Servicer will determine the amount in
the Collection Account available for distribution on the related Distribution
Date and inform the Indenture Trustee, who shall allocate such amounts between
the notes and the certificates and make distributions to securityholders, all as
described below.
On each Distribution Date, the Indenture Trustee will withdraw the
Available Amount from the Collection Account to make the following transfers and
payments (to the extent sufficient funds are available therefor) in the
following order:
(a) pay (to the extent not previously retained by the Servicer) the
Servicer Payment to the Servicer;
(b) on and prior to the Distribution Date on which the Class A Note
have been paid in full, deposit the Class A Note Interest Distribution Amount
into the Note Distribution Account, for payment to the Class A
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Noteholders for amounts due and unpaid on the Class A Notes for interest,
ratably, without preference or priority of any kind, according to the amounts
due and payable on each class of the Class A Notes for interest;
(c) on and prior to the Distribution Date on which the notes have been
paid in full, deposit the Class B Note Interest Distribution Amount into the
Note Distribution Account, for payment to the Class B Noteholders for amounts
due and unpaid on the Class B Notes for interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the Class B
Notes for interest;
(d) on and prior to the Distribution Date on which the notes have been
paid in full, deposit the Primary Principal Distribution Amount into the Note
Distribution Account, for payment of principal to the holders of the notes in
the following order of priority:
(1) the Class A-1 Notes until the principal balance of
the Class A-1 Notes is reduced to zero;
(2) the Class A-2 Notes until the principal balance of
the Class A-2 Notes is reduced to zero;
(3) the Class A-3 Notes until the principal balance of
the Class A-3 Notes is reduced to zero;
(4) the Class A-4 Notes until the principal balance of
the Class A-4 Notes is reduced to zero;
(5) the Class A-5 Notes until the principal balance of
the Class A-5 Notes is reduced to zero; and
(6) the Class B Notes until the principal balance of
the Class B Notes is reduced to zero;
(e) deposit the Certificate Interest Distribution Amount into the
Certificate Distribution Account, for payment to the certificateholders for
interest;
(f) on and after the Distribution Date on which the notes have been
paid in full, deposit any remaining Primary Principal Distribution Amount into
the Certificate Distribution Account, for payment of principal to the
certificateholders until the principal balance of the certificates is reduced to
zero;
(g) if CITSF or one of its affiliates is the Servicer, pay (to the
extent not previously paid to the Servicer) the Servicing Fee for the related
Due Period (including any accrued and unpaid Servicing Fees owed for prior Due
Periods) to the Servicer;
(h) deposit the Lender Fee into the Reserve Account;
(i) on and prior to the Distribution Date on which the notes have been
paid in full, deposit the Additional Principal Distribution Amount, if any, into
the Note Distribution Account, for payment of principal to the noteholders in
the following order of priority:
(1) to the Class A-1 Notes until the principal balance
of the Class A-1 Notes is reduced to zero;
(2) to the Class A-2 Notes until the principal balance
of the Class A-2 Notes is reduced to zero;
(3) to the Class A-3 Notes until the principal balance
of the Class A-3 Notes is reduced to zero;
(4) to the Class A-4 Notes until the principal balance
of the Class A-4 Notes is reduced to zero;
(5) to the Class A-5 Notes until the principal balance
of the Class A-5 Notes is reduced to zero; and
(6) to the Class B Notes until the principal balance
of the Class B Notes is reduced to zero;
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(j) on and after the Distribution Date on which the notes are paid in
full and on and prior to the Distribution Date on which the certificates have
been paid in full, deposit the Additional Principal Distribution Amount, if any,
into the Certificate Distribution Account, for payment of principal to the
certificateholders until the principal balance of the certificates is reduced to
zero; and
(k) deposit into the Reserve Account the balance.
On the Note Final Scheduled Distribution Date of each class of notes,
the principal required to be deposited in the Note Distribution Account will
include the amount necessary (after giving effect to other amounts to be
deposited in the Note Distribution Account on such Distribution Date and
allocable to principal) to reduce the outstanding principal balance of the
related class of notes to zero.
On the Certificate Final Scheduled Distribution Date, the amount
required to be deposited in the Certificate Distribution Account will be the
lesser of (a) any payments of principal due and remaining unpaid on each
Contract owned by the Trust as of the last day of the immediately preceding Due
Period plus the Available Reserve Amount, or (b) the amount that is necessary
(after giving effect to the other amounts to be deposited in the Certificate
Distribution Account on such Distribution Date and allocable to principal) to
reduce the Certificate Balance to zero.
For purposes hereof, the following terms shall have the following
meanings:
The "Available Amount" on any Distribution Date is equal to the excess
of (A) the sum of (1) 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 and (2) 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): (1) any repossession profits on Liquidated
Contracts, Liquidation Expenses incurred and taxes and insurance advanced by the
Servicer in respect of Financed Vehicles that are reimbursable to the Servicer
under the Sale and Servicing Agreement, (2) any amounts incorrectly deposited in
the Collection Account, (3) net investment earnings on the funds in the
Collection Account, and (4) 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.
The "Servicer Payment" for any Distribution Date will include (i)
reimbursement for Monthly Advances made on the Contracts, (ii) reimbursement for
any outstanding Certificate Interest Advance, but only to the extent that, in
the absence of such reimbursement, Excess Collections on such Distribution Date
would have been at least equal to the amount of such reimbursement, and (iii)
the Servicing Fee for the related Due Period and all accrued and unpaid
Servicing Fees owed for prior Due Periods; provided, however, that so long as
the Servicer is an affiliate of CIT, the Servicer Payment shall not include the
Servicing Fee.
"Certificate Interest Carryover Shortfall" means, for any Distribution
Date (other than the first 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, from and including such preceding Distribution Date to
but excluding the current Distribution Date, to the extent permitted by law, at
the Pass-Through Rate.
"Certificate Interest Distribution Amount" means for any Distribution
Date, the sum of (x) the Certificate Monthly Interest Amount and (y) the
Certificate Interest Carryover Shortfall for such Distribution Date.
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"Certificate Monthly Interest Amount" means, for any Distribution Date,
interest accrued during the related Interest Accrual Period at the Pass-Through
Rate on the Certificate Balance on such Distribution Date before giving effect
to any distributions of principal to the certificateholders on such Distribution
Date, calculated on the basis of a 360-day year consisting of twelve 30-day
months.
"Class A Note Interest Carryover Shortfall" means, for any Distribution
Date for each class of Class A Notes (other than the first Distribution Date),
the excess of (1) the Class A Note Interest Distribution Amount for the
preceding Distribution Date for such class of Class A Notes, over (2) the amount
in respect of interest that was actually deposited into the Note Distribution
Account in respect of such class of Class A Notes on such preceding Distribution
Date, plus interest on such excess from and including such preceding
Distribution Date to but excluding the current Distribution Date, to the extent
permitted by law, at the applicable Interest Rate borne by such class of Class A
Notes.
"Class A Note Interest Distribution Amount" means, for any Distribution
Date for any class of Class A Notes, the sum of (x) the Class A Note Monthly
Interest Amount for such Distribution Date for such class of Class A Notes and
(y) the Class A Note Interest Carryover Shortfall for such Distribution Date for
such class of Class A Notes.
"Class A Note Monthly Interest Amount" means, for any Distribution Date
for any class of Class A Notes, interest accrued during the related Interest
Accrual Period at the applicable Interest Rate on the outstanding principal
balance of such class of Class A Notes on such Distribution Date before giving
effect to any distributions of principal to the Class A Noteholders on such
Distribution Date, calculated on the basis of a 360-day year consisting of
twelve 30-day months.
"Class B Note Interest Carryover Shortfall" means, for any Distribution
Date for the Class B Notes (other than the first Distribution Date), the excess
of (1) the Class B Note Interest Distribution Amount for the preceding
Distribution Date for the Class B Notes, over (2) the amount in respect of
interest that was actually deposited into the Note Distribution Account in
respect of such Class B Notes on such preceding Distribution Date, plus interest
on such excess from and including such preceding Distribution Date to but
excluding the current Distribution Date, to the extent permitted by law, at the
Interest Rate applicable to the Class B Notes.
"Class B Note Interest Distribution Amount" means, for any Distribution
Date for the Class B Notes, the sum of (x) the Class B Note Monthly Interest
Amount for such Distribution Date and (y) the Class B Note Interest Carryover
Shortfall for such Distribution Date.
"Class B Note Monthly Interest Amount" means, for any Distribution Date
for the Class B Notes, interest accrued during the related Interest Accrual
Period at the Interest Rate applicable to the Class B Notes on the outstanding
principal balance of the Class B Notes on such Distribution Date before giving
effect to any distributions of principal to the holders of the Class B Notes on
such Distribution Date, calculated on the basis of a 360-day year consisting of
twelve 30-day months.
To the extent that the Available Amount is insufficient to pay the
Certificate Interest Distribution Amount, the Note Interest Distribution Amount
and/or the Primary Principal Distribution Amount on any Distribution Date, the
Indenture Trustee will withdraw (or cause to be withdrawn) from the Reserve
Account, to the extent available, the excess of the sum of the Certificate
Interest Distribution Amount, the Note Interest Distribution Amount and the
Primary Principal Distribution Amount over the Available Amount remaining after
payment of the Servicer Payment. Any amount so withdrawn from the Reserve
Account by or on behalf of the Indenture Trustee will be deposited first into
the Note Distribution Account for distribution to the noteholders in the same
order of priority as described above and second into the Certificate
Distribution Account for distribution to the certificateholders in the same
order of priority as described above.
The principal balance of the Class A-1 Notes, to the extent not
previously paid, will be due on the Class A-1 Note Final Scheduled Distribution
Date; the principal balance of the Class A-2 Notes, to the extent not previously
paid, will be due on the Class A-2 Note Final Scheduled Distribution Date; the
principal balance of the Class A-3
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Notes, to the extent not previously paid, will be due on the Class A-3 Note
Final Scheduled Distribution Date; the principal balance of the Class A-4 Notes,
to the extent not previously paid, will be due on the Class A-4 Note Final
Scheduled Distribution Date; the principal balance of the Class A-5 Notes, to
the extent not previously paid, will be due on the Class A-5 Note Final
Scheduled Distribution Date; the principal balance of the Class B Notes, to the
extent not previously paid, will be due on the Class B Note Final Scheduled
Distribution Date; the Certificate Balance of the certificates, to the extent
not previously paid, will be due on the Certificate Final Scheduled Distribution
Date. The actual date on which the aggregate outstanding principal amount of any
class of notes or the certificates is paid may be earlier than the respective
Note Final Scheduled Distribution Dates or Certificate Final Scheduled
Distribution Date set forth above based on a variety of factors, including those
described under "Maturity and Prepayment Considerations--Weighted Average Life
of the Securities" herein.
MODIFICATION OF CONTRACTS
Consistent with its customary servicing practices and procedures, the
Servicer may, in its discretion, arrange with an Obligor to defer, reschedule,
extend or modify the payment schedule of a Contract or otherwise to modify the
terms of a Contract provided that (1) the maturity of such Contract would not
extend beyond the 180th day prior to the Certificate Final Scheduled
Distribution Date and (2) the deferral, rescheduling, extension or other
modification of the terms of the Contract would not constitute a cancellation of
such Contract and the creation of a new installment sale contract or direct
loan. The Servicer may, in accordance with its customary servicing procedures,
in its good faith judgment, waive any Late Fees that may be due and payable
under any Contract. Notwithstanding the foregoing, in connection with the
settlement by the Servicer of a defaulted Contract, the Servicer may forgive a
portion of such Contract, if in its discretion it believes that the acceptance
of the settlement proceeds from the related Obligor would result in the Trust's
receiving a greater amount of collections than the Net Liquidation Proceeds that
would result from repossessing and liquidating the related Financed Vehicle.
SERVICER ADVANCES
With respect to each Contract as to which there has been a Payment
Shortfall during the related Due Period (other than a Payment Shortfall arising
from a Contract which has been prepaid in full or which has been subject to a
Relief Act reduction during the related Due Period), the Servicer shall advance
funds in the amount of such Payment Shortfall (each, a "Monthly Advance"), but
only to the extent that the Servicer, in its good faith judgment, expects to
recover such Monthly Advance from subsequent interest collections on such
Contract made by or on behalf of the Obligor thereunder, or from Net Liquidation
Proceeds or insurance proceeds with respect to such Contract. The Servicer shall
be reimbursed for any Monthly Advance from subsequent interest collections with
respect to such Contract. If the Servicer determines in its good faith judgment
that an unreimbursed Monthly Advance shall not ultimately be recoverable from
subsequent interest collections, the Servicer may reimburse itself for such
Monthly Advance from collections on all Contracts. In determining whether an
advance is or will be nonrecoverable, the Servicer need not take into account
that it might receive any amounts in a deficiency judgment against an Obligor.
The Servicer will not make a Monthly Advance in respect of (1) the principal
component of any scheduled payment or (2) 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.
In addition to the Servicer's obligation to make Monthly Advances, the
Servicer will make additional advances (each, a "Certificate Interest Advance")
by making a deposit into the Certificate Distribution Account on any
Distribution Date to the extent that the Available Amount for such Distribution
Date together with the Available Reserve Amount are insufficient to pay interest
due on the certificates on such Distribution Date after giving effect to all
prior distributions required to be made on such Distribution Date. The Servicer
will not be obligated to make Certificate Interest Advances to the extent that
the unreimbursed aggregate outstanding amount of such advances at any time would
exceed $200,000. If, however, the Servicer does not reasonably believe that a
Certificate Interest Advance would be reimbursed from future Excess Collections,
the Servicer will not be required to make such Certificate Interest Advance.
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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 (1) one-twelfth of the
product of 0.50% (the "Servicing Fee Rate") and the Pool Balance as of the first
day of the related Due Period (or, in the case of the first Distribution Date,
as of the Cut-off Date) and (2) any investment earnings (net of investment
expenses and losses) on amounts on deposit in the Collection Account, the Note
Distribution Account and the Certificate Distribution Account; provided,
however, if CITSF or an affiliate thereof is not the Servicer, the Servicing Fee
Rate shall be a rate determined at the time of the appointment of a successor
Servicer but not to exceed 1.00% per annum. So long as CITSF or one of its
affiliates is the Servicer, the Servicing Fee (including any unpaid Servicing
Fees for past Distribution Dates) shall not be included in the Servicer Payment
but instead shall be payable to the Servicer on each Distribution Date only from
the Available Amount, if any, remaining after the principal and interest payable
on the securities (excluding any Additional Principal Distribution Amount) on
such Distribution Date have been paid.
PAYMENT OF NOTES
Upon the payment in full of all outstanding notes and the satisfaction
and discharge of the Indenture, the Owner Trustee will succeed to all the rights
of the Indenture Trustee, and the certificateholders will succeed to all the
rights of the noteholders under the Sale and Servicing Agreement, except as
otherwise provided therein.
TERMINATION
In order to avoid excessive administrative expenses, CITSF will be
permitted at its option to purchase from the Trust, on any Distribution Date on
which the Pool Balance as of the last day of the related Due Period is 10% or
less of the Initial Pool Balance, all remaining Contracts at a price equal to
the aggregate Purchase Price for the Contracts (including defaulted Contracts
but excluding Liquidated Contracts), plus the appraised value of any other
property held by the Trust (less Liquidation Expenses) (the "Optional
Purchase"). Exercise of such right will effect early retirement of the
securities.
After the first Distribution Date on which the Pool Balance as of the
last day of the related Due Period is 5% or less of the Initial Pool Balance,
the Indenture Trustee (or, if the notes have been paid in full and the Indenture
has been discharged in accordance with its terms, the Owner Trustee) shall
solicit bids for the purchase of the Contracts remaining in the Trust (the
"Auction Call"). In the event that satisfactory bids are received as described
in the Prospectus, the net sale proceeds (after paying the Servicer Payment)
will be distributed to securityholders on the second Distribution Date
succeeding such Due Period. Any purchaser of the Contracts must agree to the
continuation of CITSF as Servicer on terms substantially similar to those in the
Trust Documents. Any such sale will effect early retirement of the securities.
See "The Certificates--Redemption," "The Notes--Redemption" and "The Purchase
Agreements and The Trust Documents--Termination" in the Prospectus.
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MATERIAL FEDERAL INCOME TAX CONSEQUENCES
MATERIAL 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, (1) the Trust will not be classified as an association
taxable as a corporation and (2) the Trust will not be treated as a publicly
traded partnership taxable as a corporation. If the IRS were to successfully
characterize the Trust as an entity taxable as a corporation for Federal income
tax purposes, the income from the Contracts (reduced by deductions, possibly
including interest on the notes) would be subject to Federal income tax at
corporate rates, which could reduce the amounts available to make payments on
the notes. Likewise, if the Trust were subject to state or local income or
franchise tax, the amount of cash available to make payment on the notes could
be reduced.
If, contrary to the opinion of Schulte Roth & Zabel LLP, the IRS
successfully asserted that the notes were not debt for Federal income tax
purposes, the notes might be treated as equity interests in the Trust. If so,
and if the Trust were taxable as a corporation with the adverse consequences
described above, the taxable corporation would not be able to deduct interest on
the notes. The remainder of this discussion assumes that the notes will be
treated as debt and that the Trust will not be taxable as a corporation.
Interest Income on the Notes. The stated interest on the notes will be
taxable to a noteholder as ordinary income when received or accrued in
accordance with such noteholder's method of tax accounting. Some or all of the
notes may be issued with "original issue discount" within the meaning of Section
1273 of the Code ("OID"). The amount of OID on the notes will equal the
difference between the issue price and the principal amount of the notes unless
the OID is less than a statutorily defined de minimis amount.
OID will accrue to the noteholders over the life of the notes, taking
account of a reasonable prepayment assumption, based on a constant yield to
maturity method, using semiannual compounding, and properly adjusted for actual
prepayments on the Contracts. The portion of OID that accrues during the time a
noteholder owns the notes (1) constitutes interest includable in the
noteholder's gross income for federal income tax purposes and (2) 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 (1)
is not actually or constructively a "10 percent shareholder" of the Trust (in
this case, a holder of 10% of
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the capital or profits of the Trust) nor a "controlled foreign corporation" with
respect to which the Trust or the Affiliated Owner is a "related person" within
the meaning of the Code and (2) provides the person otherwise required to
withhold U.S. tax with an appropriate statement, signed under penalties of
perjury, certifying that the beneficial owner of the note is a foreign person
and providing such foreign person's name and address. If the information
provided in the statement changes, the foreign person must so inform the person
otherwise required to withhold U.S. tax within 30 days of such change. The
statement generally must be provided in the year a payment occurs or in either
of the two preceding years. If a note is held through a securities clearing
organization or certain other financial institutions, the organization or
institution may provide a signed statement to the withholding agent. In the case
of payments made after December 31, 2000, 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.
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 (1) the gain is not
effectively connected with the conduct of a trade or business in the United
States by the foreign person and (2) 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
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.
MATERIAL 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
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certificateholders could be liable for any such tax that is unpaid by the
Trust). See also the discussion above under "--Material Federal Tax Consequences
with Respect to the Notes--Tax Characterization of the Notes and the Trust."
However, in the opinion of Schulte Roth & Zabel LLP, the Trust will not be
taxable as a corporation.
Nonetheless, because of the lack of cases or rulings on similar
transactions, a variety of alternative characterizations are possible in
addition to the position to be taken by certificateholders that the certificates
represent equity interests in a partnership. For example, because the
certificates have certain features characteristic of debt, the certificates
might be considered debt of the Trust or of the Seller. The remainder of this
summary assumes that the certificates represent equity interests in a
partnership that owns the Contracts.
Partnership Taxation. As a partnership, the Trust will not be subject
to Federal income tax, but each certificateholder will be required to separately
take into account such holder's allocated share of income, gains, losses,
deductions and credits of the Trust. In certain instances, however, the Trust
could have an obligation to make payments of withholding tax on behalf of a
certificateholder. See "--Backup Withholding." The Trust's income will consist
primarily of interest accrued on the Contracts (including appropriate
adjustments for market discount (as discussed below), and any original issue
discount and bond premium), investment income from investments in the Collection
Account, Note Distribution Account, Reserve Account and Certificate Distribution
Account and any gain upon collection or disposition of the Contracts. The
Trust's deductions will consist primarily of interest accruing with respect to
the notes, servicing and other fees and losses or deductions upon collection or
disposition of the Contracts.
The tax items of a partnership are allocable to the partners in
accordance with the Code, Treasury regulations and the partnership agreement
(here, the Trust Agreement and related documents). The Trust Agreement will
provide that the certificateholders will be allocated taxable income, if any, of
the Trust for each interest accrual period equal to the sum of (1) the amount of
any interest that accrues on the certificates for such interest accrual period
based on the Pass-Through Rate; (2) 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 (1) or this clause (2)); and (3) any Trust income
attributable to discount on the Contracts that corresponds to any excess of the
principal amount of the certificates over their initial issue price. All
remaining taxable income of the Trust will be allocated to the Affiliated Owner.
It is believed that this allocation will be valid under applicable Treasury
regulations, although no assurance can be given that the IRS would not require a
greater amount of income to be allocated to certificateholders. Moreover, under
the foregoing method of allocation, holders may be allocated income greater than
the amount of interest accruing on the certificates based on the Pass-Through
Rate or may be allocated income greater than the amount of cash distributed to
them.
An individual taxpayer may generally deduct miscellaneous itemized
deductions (which do not include interest expenses) only to the extent they
exceed two percent of the individual's adjusted gross income. Those limitations
would apply to an individual certificateholder's share of expenses of the Trust
(including fees paid to the Servicer) and might result in such holder having net
taxable income that exceeds the amount of cash actually distributed to such
holder over the life of the Trust. In addition, Section 68 of the Code provides
that the amount of certain itemized deductions otherwise allowable for the
taxable year of an individual whose adjusted gross income exceeds an
inflation-adjusted threshold amount specified in the Code ($126,600 for taxable
years beginning in 1999, in the case of a joint return) will be reduced by the
lesser of (1) 3% of the excess of adjusted gross income over the specified
threshold amount or (2) 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
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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. It is believed that the Contracts were not and
will not be issued with original issue discount and, therefore, the Trust should
not have original issue discount income.
Disposition of Certificates. Generally, capital gain or loss will be
recognized on a sale of a certificate in an amount equal to the difference
between the amount realized and the seller's tax basis in the certificate sold.
A certificateholder's tax basis in a certificate will generally equal his cost
increased by his share of Trust income that is includable in his gross income
and decreased by any distributions received with respect to such certificate. In
addition, both the tax basis in the certificate and the amount realized on a
sale of a certificate would include the holder's share of the notes and other
liabilities of the Trust. A holder acquiring certificates at different prices
may be required to maintain a single aggregate adjusted tax basis in such
certificates, and, upon sale or other disposition of some of the certificates,
allocate a pro rata portion of such aggregate tax basis to the certificates sold
(rather than maintaining a separate tax basis in each certificate for purposes
of computing gain or loss on a sale of that certificate).
Any gain on the sale of a certificate attributable to the holder's
share of unrecognized accrued market discount on the Contracts would generally
be treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The Trust does not expect to have any other assets that
would give rise to such special reporting requirements. Thus, to avoid these
special reporting requirements, the Trust will elect to include any such market
discount in income as it accrues.
If a certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed miscellaneous itemized
deductions described above) over the life of the certificates that exceeds the
aggregate cash distributions with respect thereto, such excess will generally
give rise to a capital loss upon the retirement of the certificates.
Allocations Between Transferor and Transferee. In general, the Trust's
taxable income and losses will be determined monthly and the tax items for a
particular calendar month will be apportioned among the certificateholders in
proportion to the principal amount of certificates owned by them as of the close
of the last day of such month. As a result, a holder purchasing certificates may
be allocated tax items (which will affect the tax liability and tax basis of the
holder) attributable to periods before the actual purchase takes place.
The use of such a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed (or is allowed only for
transfers of less than all of the partner's interest), taxable income or losses
of the Trust might be reallocated among the certificateholders. The Affiliated
Owner is authorized to revise the 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
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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 (1) the name, address and taxpayer identification number of
the nominee and (2) as to each beneficial owner (x) the name, address and
taxpayer identification number of such person, (y) whether such person is a
United States person, a tax-exempt entity or a foreign government, an
international organization, or any wholly owned agency or instrumentality of
either of the foregoing and (z) certain information concerning certificates that
were held, acquired or transferred on behalf of such person throughout the year.
In addition, brokers and financial institutions that hold certificates through a
nominee are required to furnish directly to the Trust information as to
themselves and their ownership of certificates. A clearing agency registered
under Section 17A of the Exchange Act that holds certificates as a nominee is
not required to furnish any such information statement to the Trust. The
information referred to above for any calendar year must be furnished to the
Trust on or before the following January 31. Nominees, brokers and financial
institutions that fail to provide the Trust with the information described above
may be subject to penalties. The Trust will provide the Schedule K-1 information
to nominees that fail to provide the Trust with the information described above
and such nominees will be required to forward such information to the beneficial
owners of the certificates.
The Affiliated Owner, as the "tax matters partner," will be responsible
for representing the certificateholders in any dispute with the IRS with respect
to partnership items. The Code provides for administrative examination of a
partnership as if the partnership were a separate and distinct taxpayer.
Generally, the statute of limitations for partnership items does not expire
before three years after the date on which the partnership information return is
filed. Any adverse determination following an audit of the return of the Trust
by the appropriate taxing authorities could result in an adjustment of the
returns of the certificateholders, and, under certain circumstances, a
certificateholder may be precluded from separately litigating a proposed
adjustment to the items of the Trust. An adjustment could also result in an
audit of a certificateholder's returns and adjustments of items not related to
the income and losses of the Trust.
Backup Withholding. Distributions made on the certificates and proceeds
from the sale of the certificates may be subject to a "backup" withholding tax
of 31% if, in general, the certificateholder fails to comply with certain
identification procedures, unless the holder is an exempt recipient under
applicable provisions of the Code.
MATERIAL 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
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not become subject to taxation in Oklahoma solely because of a holder's
ownership of notes. However, a noteholder already subject to Oklahoma's income
tax could be required to pay additional Oklahoma tax as a result of the holder's
ownership or disposition of Notes.
TAX CONSEQUENCES WITH RESPECT TO THE CERTIFICATES ISSUED BY A TRUST TREATED AS A
PARTNERSHIP
Oklahoma Tax Counsel will deliver its opinion that if the arrangement
created by the Trust Agreement is treated as a partnership (not taxable as a
corporation) for federal income tax purposes, the same treatment should also
apply for Oklahoma income tax purposes.
Under current law, certificateholders that are nonresidents of Oklahoma
and are not otherwise subject to Oklahoma income tax should not be subject to
Oklahoma income tax on the income from the Trust because it is unlikely that the
Trust has established a nonunitary business or commercial situs in Oklahoma. In
any event, classification of the arrangement as a "partnership" would not cause
a certificateholder not otherwise subject to taxation in Oklahoma to pay
Oklahoma income tax on income beyond that derived from the certificates.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Section 4975 of the Code prohibit a pension, profit
sharing or other employee benefit plan, as well as individual retirement
accounts and certain types of Keogh Plans (each, a "Benefit Plan"), from
engaging in certain transactions with persons that are "parties in interest"
under ERISA or "disqualified persons" under the Code with respect to such
Benefit Plan. A violation of these "prohibited transaction" rules may generate
excise tax and other liabilities under ERISA and the Code for such persons.
THE CERTIFICATES
An interest in the certificates may not be acquired by (1) an employee
benefit plan (as defined in Section 3(3) of ERISA) that is subject to the
provisions of Title I of ERISA, (2) a plan described in Section 4975(e)(1) of
the Code, or (3) 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.
S-50
<PAGE>
PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting
Agreement (the "Underwriting Agreement") among CIT, CITSF, the Company and
Credit Suisse First Boston Corporation as representative of Banc One Capital
Markets, Inc., Barclays Capital Inc. and Salomon Smith Barney (collectively, the
"Underwriters"), the Company has agreed to sell to the Underwriters, and the
Underwriters have severally agreed to purchase, the respective principal amount
of the certificates and the notes offered hereby, as set forth opposite their
respective names below:
<TABLE>
<CAPTION>
CLASS A-1 NOTES
PRINCIPAL AMOUNT
<S> <C>
Credit Suisse First Boston Corporation.................................. $47,485,000
Banc One Capital Markets, Inc........................................... $47,485,000
Barclays Capital Inc.................................................... $47,485,000
Salomon Smith Barney.................................................... $47,485,000
-----------
Total............................................................... $189,940,000
<CAPTION>
CLASS A-2 NOTES
PRINCIPAL AMOUNT
<S> <C>
Credit Suisse First Boston Corporation.................................. $26,090,000
Banc One Capital Markets, Inc........................................... $26,090,000
Barclays Capital Inc.................................................... $26,090,000
Salomon Smith Barney.................................................... $26,090,000
-----------
Total.................................................................. $104,360,000
<CAPTION>
CLASS A-3 NOTES
PRINCIPAL AMOUNT
<S> <C>
Credit Suisse First Boston Corporation.................................. $27,420,000
Banc One Capital Markets, Inc........................................... $27,420,000
Barclays Capital Inc.................................................... $27,420,000
Salomon Smith Barney.................................................... $27,420,000
-----------
Total.................................................................. $109,680,000
<CAPTION>
CLASS A-4 NOTES
PRINCIPAL AMOUNT
<S> <C>
Credit Suisse First Boston Corporation.................................. $21,620,000
Banc One Capital Markets, Inc........................................... $21,620,000
Barclays Capital Inc.................................................... $21,620,000
Salomon Smith Barney.................................................... $21,620,000
-----------
Total.................................................................. $86,480,000
</TABLE>
S-51
<PAGE>
<TABLE>
<CAPTION>
CLASS A-5 NOTES
PRINCIPAL AMOUNT
<S> <C>
Credit Suisse First Boston Corporation.................................. $11,305,000
Banc One Capital Markets, Inc........................................... $11,305,000
Barclays Capital Inc.................................................... $11,305,000
Salomon Smith Barney.................................................... $11,305,000
-----------
Total.................................................................. $45,220,000
<CAPTION>
CLASS B NOTES
PRINCIPAL AMOUNT
<S> <C>
Credit Suisse First Boston Corporation.................................. $7,125,000
Banc One Capital Markets, Inc........................................... $7,125,000
Barclays Capital Inc.................................................... $7,125,000
Salomon Smith Barney.................................................... $7,125,000
----------
Total. ................................................................ $28,500,000
<CAPTION>
CERTIFICATES
PRINCIPAL AMOUNT
<S> <C>
Credit Suisse First Boston Corporation.................................. $2,850,000
Banc One Capital Markets, Inc........................................... $2,850,000
Barclays Capital Inc.................................................... $2,850,000
Salomon Smith Barney.................................................... $2,850,000
----------
Total.................................................................. $11,400,000
</TABLE>
The Underwriting Agreement provides that the obligation of the
Underwriters to pay for and accept delivery of the certificates or notes is
subject to the approval of certain legal matters by their counsel and to certain
other conditions. The Underwriters are obligated to take and pay for all of the
certificates and notes if any are taken.
The Underwriters have advised the Company that they propose to offer
the certificates and notes directly to the public at the public offering price
set forth on the cover page hereof and to certain dealers at a price that
represents a concession not in excess of the percentage of the principal
balances of the certificates and each class of notes set forth below. The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of the percentage of the principal balances of the certificates and each class
of notes set forth below.
Selling Reallowance
Class Concession Discount
----- ---------- --------
A-1.......................... 0.140% 0.125%
A-2.......................... 0.165% 0.125%
A-3.......................... 0.180% 0.125%
A-4.......................... 0.210% 0.125%
A-5.......................... 0.240% 0.125%
B............................ 0.270% 0.125%
Certificates................. 0.360% 0.125%
After the initial public offering, the public offering price and
concessions and discounts to dealers may be changed by the Underwriters.
The notes and certificates are a new issue of securities with no
established trading market. The Trust has been advised by the Underwriters that
they intend to make a market in the securities, but the Underwriters are not
S-52
<PAGE>
obligated to make such a market and may discontinue market making at any time
without notice. No assurance can be given as to the liquidity of the trading
market for the securities.
CITSF has agreed to indemnify the Underwriters against certain
liabilities, including civil liabilities under the Securities Act or to
contribute to payments which the Underwriters may be required to make in respect
thereof.
The Trust may, from time to time, invest the funds of the Trust in
Eligible Investments acquired from the Underwriters.
The closing of the sale of the notes is conditioned on the closing of
the sale of the certificates, and the closing of the sale of the certificates is
conditioned on the closing of the sale of the notes.
RATINGS
The Trust will not issue the securities unless they receive at least
the following ratings by Standard & Poor's Rating Services, a division of The
McGraw-Hill Companies, Inc. ("S&P") and Moody's Investors Service ("Moody's")
(each, a "Rating Agency"):
S&P MOODY'S
--- -------
Class A Notes AAA Aaa
Class B Notes A A2
Certificates BBB Baa3
The ratings of the Class A Notes will be based primarily on the Contracts, the
Reserve Account, and the terms of the securities, including the subordination
provided by the Class B Notes and the certificates. The ratings of the Class B
Notes will be based primarily on the Contracts, the Reserve Account and the
terms of the securities, including the subordination provided by the
certificates. The ratings of the certificates will be based primarily on the
Contracts, the Reserve Account and the Servicer's ability to make Certificate
Interest Advances. 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 Call" or "Optional Purchase of the Contracts."
There can be no assurance that any rating will remain in effect for any
given period of time or that a rating will not be lowered or withdrawn by the
assigning Rating Agency if, in its judgment, circumstances so warrant. In the
event that the rating initially assigned to any of the securities is
subsequently lowered or withdrawn for any reason, no person or entity will be
obligated to provide any additional credit enhancement with respect to such
securities. There can be no assurance whether any other rating agency will rate
any of the securities, or if one does, what rating would be assigned by any such
other rating agency. A security rating is not a recommendation to buy, sell or
hold securities.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Schulte
Roth & Zabel LLP, New York, New York, for the Trust by Richards, Layton &
Finger, P.A., Wilmington, Delaware, and for the Underwriters by Stroock &
Stroock & Lavan LLP, New York, New York. The material federal income tax
consequences of the securities will be passed upon for the Company by Schulte
Roth & Zabel LLP. The material Oklahoma state income tax consequences of the
securities will be passed upon for the Company by Crowe & Dunlevy, P.C. Certain
legal matters will be passed upon for CITSF by its Senior Vice President and
General Counsel, Norman H. Rosen, Esq.
S-53
<PAGE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered notes of
CIT RV 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.
S-54
<PAGE>
Trading between Cedel and/or Euroclear Participants. Secondary market
trading between Cedel Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
Trading between DTC Seller and Cedel or Euroclear Purchaser. When
Global Securities are to be transferred from the account of a DTC Participant to
the account of a Cedel Participant or a Euroclear Participant, the purchaser
will send instructions to Cedel or Euroclear through a Cedel Participant or
Euroclear Participant at least one business day prior to settlement. Cedel or
Euroclear will instruct the respective Depository, as the case may be, to
receive the Global Securities against payment. Payment will include interest
accrued on the Global Securities from and including the last coupon payment date
to and 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
S-55
<PAGE>
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:
(1) 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;
(2) 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
(3) 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.
MATERIAL 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 (1) 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
(2) 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, 2000 (with certain transition rules) provide for the unification
and simplification of certain current certification procedures. Pursuant
S-56
<PAGE>
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-8 to the
withholding agent. Investors are urged to consult their own tax advisors with
respect to the application of these new regulations.
The term "U.S. Person" means (1) a citizen or resident of the United
States, (2) a corporation or partnership organized in or under the laws of the
United States or any political subdivision thereof, (3) a trust with respect to
which a U.S. court 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, or (4) an estate the income of which is includable in
gross income for United States tax purposes, regardless of its source. This
summary of documentation requirements does not deal with all aspects of U.S.
Federal income tax withholding that may be relevant to foreign holders of the
Global Securities. Investors are advised to consult their own tax advisors for
specific tax advice concerning their holding and disposing of the Global
Securities.
S-57
<PAGE>
<TABLE>
<CAPTION>
INDEX OF PRINCIPAL TERMS
<S> <C>
ABS..................................................................................................................S-20
ABS Table............................................................................................................S-20
Additional Principal Distribution Amount.............................................................................S-32
Affiliated Owner.....................................................................................................S-34
Auction Call....................................................................................................S-5, S-44
Available Amount.....................................................................................................S-41
Available Reserve Amount.............................................................................................S-37
Benefit Plan.........................................................................................................S-50
Business Day.........................................................................................................S-30
Certificate Balance..................................................................................................S-25
Certificate Final Scheduled Distribution Date.........................................................................S-5
Certificate Interest Advance....................................................................................S-7, S-43
Certificate Interest Carryover Shortfall.............................................................................S-41
Certificate Interest Distribution Amount.............................................................................S-41
Certificate Monthly Interest Amount..................................................................................S-42
Certificate Pool Factor..............................................................................................S-26
CITSF.................................................................................................................S-3
Class A Note Interest Carryover Shortfall............................................................................S-42
Class A Note Interest Distribution Amount............................................................................S-42
Class A Note Monthly Interest Amount.................................................................................S-42
Class A-1 Note Final Scheduled Distribution Date......................................................................S-5
Class A-1 Notes.......................................................................................................S-3
Class A-2 Note Final Scheduled Distribution Date......................................................................S-5
Class A-2 Notes.......................................................................................................S-3
Class A-3 Note Final Scheduled Distribution Date......................................................................S-5
Class A-3 Notes.......................................................................................................S-3
Class A-4 Note Final Scheduled Distribution Date......................................................................S-5
Class A-4 Notes.......................................................................................................S-3
Class A-5 Note Final Scheduled Distribution Date......................................................................S-5
Class A-5 Notes.......................................................................................................S-3
Class B Note Final Scheduled Distribution Date........................................................................S-5
Class B Note Interest Carryover Shortfall............................................................................S-42
Class B Note Interest Distribution Amount............................................................................S-42
Class B Note Monthly Interest Amount.................................................................................S-42
Class B Notes.........................................................................................................S-3
Collection Account....................................................................................................S-7
Company...............................................................................................................S-3
Contract Files.......................................................................................................S-13
Contract Pool........................................................................................................S-14
Contracts.............................................................................................................S-6
Cumulative Net Loss Rate.............................................................................................S-38
Definitive Certificates..............................................................................................S-34
Delaware Trustee.....................................................................................................S-12
Distribution Date...............................................................................................S-3, S-30
Due Period......................................................................................................S-4, S-30
ERISA................................................................................................................S-50
Excess Collections..............................................................................................S-6, S-37
Financed Vehicles.....................................................................................................S-6
Global Securities....................................................................................................S-54
Indenture............................................................................................................S-29
Indenture Trustee....................................................................................................S-29
</TABLE>
S-58
<PAGE>
<TABLE>
<S> <C> <C>
Initial Pool Balance............................................................................................S-4, S-32
Initial Reserve Amount...............................................................................................S-36
Interest Accrual Period..............................................................................................S-30
Issuer...............................................................................................................S-12
Lender................................................................................................................S-6
Lender Fee...........................................................................................................S-37
Liquidated Contract..................................................................................................S-32
Liquidation Expenses.................................................................................................S-32
Loan............................................................................................................S-6, S-36
Maximum Average Delinquency Rate.....................................................................................S-38
Maximum Net Loss Rate................................................................................................S-39
Monthly Advance.................................................................................................S-7, S-43
Moody's.........................................................................................................S-8, S-53
Net Liquidation Losses...............................................................................................S-38
Net Liquidation Proceeds.............................................................................................S-32
Net Losses...........................................................................................................S-28
Note Owner...........................................................................................................S-29
Note Pool Factor.....................................................................................................S-26
OID..................................................................................................................S-45
Oklahoma Tax Counsel.................................................................................................S-49
Optional Purchase...............................................................................................S-5, S-44
Original Certificate Balance.........................................................................................S-12
Owner Trustee........................................................................................................S-12
Paid-Ahead Period....................................................................................................S-19
Paid-Ahead Simple Interest Contract..................................................................................S-19
Pass-Through Rate....................................................................................................S-35
Payment Shortfall.....................................................................................................S-7
Pool Balance..........................................................................................................S-4
Primary Principal Distribution Amount................................................................................S-31
Principal Carryover Shortfall........................................................................................S-32
Principal Prepayment.................................................................................................S-32
PTCE.................................................................................................................S-50
Purchase Agreement...................................................................................................S-14
Purchase Price.......................................................................................................S-41
Rating Agency........................................................................................................S-53
Record Date...........................................................................................................S-4
Reserve Account.................................................................................................S-6, S-36
Reserve Account Surplus..............................................................................................S-39
S&P.............................................................................................................S-8, S-53
Sale and Servicing Agreement.........................................................................................S-14
Seller................................................................................................................S-3
Servicer..............................................................................................................S-3
Servicer Payment.....................................................................................................S-41
Servicing Fee........................................................................................................S-44
Servicing Fee Rate...................................................................................................S-44
Simple Interest Contract.............................................................................................S-14
Specified Reserve Amount........................................................................................S-6, S-37
Stated Principal Balance.............................................................................................S-31
Trust................................................................................................................S-12
Trust Agreement................................................................................................S-12, S-34
U.S. Person..........................................................................................................S-57
Underwriters.........................................................................................................S-51
Underwriting Agreement...............................................................................................S-51
</TABLE>
S-59
<PAGE>
PROSPECTUS
CIT RV TRUSTS
ASSET-BACKED NOTES
ASSET-BACKED CERTIFICATES
THE CIT GROUP SECURITIZATION CORPORATION II, SELLER
THE CIT GROUP/SALES FINANCING, INC., SERVICER
The Asset-Backed Certificates (the "Certificates") and the Asset-Backed
Notes (the "Notes" and, collectively with the Certificates, the "Securities")
described herein may be sold from time to time in one or more series, in
amounts, at prices and on the terms to be determined at the time of sale and to
be set forth in a supplement to this Prospectus (a "Prospectus Supplement").
Each series of Securities will include either (i) one or more classes of
Certificates, (ii) one or more classes of Notes, or (iii) one or more classes of
Certificates and one or more classes of Notes, as set forth in the related
Prospectus Supplement.
Each series of Securities will be issued by a trust (a "Trust") to be
formed with respect to such series by The CIT Group Securitization Corporation
II (the "Company" or the "Seller").
The assets of each Trust will primarily include a pool of retail
installment sale contracts and direct loans (the "Initial Contracts") secured by
the new and used recreation vehicles financed thereby (the "Initial Financed
Vehicles"), certain monies received under the Initial Contracts on and after the
Initial Cut-off Date specified in the related Prospectus Supplement (the
"Initial Cut-off Date"), an assignment of the security interests in the Initial
Financed Vehicles, the proceeds from claims under certain insurance policies in
respect of individual Initial Financed Vehicles or the related Obligors and
certain other property, as more fully described herein and in the related
Prospectus Supplement. In addition, if so specified in the related Prospectus
Supplement, the assets of each Trust will include specified credit or cash flow
enhancement and monies on deposit in one or more trust accounts, which may
include a Pre-Funding Account which would be used to purchase from time to time
additional retail installment sale contracts and direct loans (the "Subsequent
Contracts" and, together with the Initial Contracts, the "Contracts") secured by
the new and used recreation vehicles financed thereby (the "Subsequent Financed
Vehicles" and, together with the Initial Financed Vehicles, the "Financed
Vehicles"), certain monies received under the Subsequent Contracts on and after
the related subsequent cut-off dates (each, a "Subsequent Cut-off Date"), an
assignment of the security interests in the Subsequent Financed Vehicles and
proceeds from claims under certain insurance policies in respect of individual
Subsequent Financed Vehicles or the related Obligors, to the extent specified in
the related Prospectus Supplement.
(Continued on following page)
A DISCUSSION OF CERTAIN RISK FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE PURCHASERS OF THE SECURITIES OFFERED HEREBY CAN BE FOUND ON PAGE 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 March 11, 1999.
<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.
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AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") on behalf of each Trust a Registration Statement (together with
all amendments and exhibits thereto, the "Registration Statement"), of which
this Prospectus is a part, under the Securities Act of 1933, as amended, with
respect to the Securities offered pursuant to this Prospectus. This Prospectus
does not contain all of the information set forth in the Registration Statement,
certain parts of which have been omitted in accordance with the rules and
regulations of the Commission. For further information, reference is made to the
Registration Statement, including exhibits filed as part thereof, which is
available for inspection without charge at the public reference facilities of
the Commission at 450 Fifth Street, N.W., Room 1024, 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 class or classes of Certificates and the respective Interest Rate to be
paid to each such class of Notes and the 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 retail installment sale contracts and direct
loans included therein and, if applicable, the assignment of security interests
in the Financed Vehicles, 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 (as
defined herein); (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
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Servicer and sent on behalf of each Trust only to the Owner Trustee for the
Certificateholders, the Indenture Trustee for the Noteholders and Cede, as
nominee of DTC and registered holder of the Notes and the Certificates.
Securityholders may elect to hold their securities through any of DTC (in the
United States) and, in the case of Noteholders, Cedel or Euroclear (in Europe).
DTC will forward such reports to Participants, Indirect Participants, Cedel
Participants and Euroclear Participants. See "Certain Information Regarding the
Securities--Book-Entry Registration" and "--Statements to Securityholders."
Certificateholders and Noteholders are collectively referred to herein as the
"Securityholders." Certificate Owners or Note Owners may receive such reports,
upon written request, together with a certification that they are Certificate
Owners or Note Owners and payment of reproduction and postage expenses
associated with the distribution of such reports, from the Owner Trustee, with
respect to Certificate Owners, or the Indenture Trustee, with respect to Note
Owners, at the addresses specified in the related Prospectus Supplement. Such
reports will not constitute financial statements prepared in accordance with
generally accepted accounting principles. Neither the Seller, the Servicer nor
CIT intends to send any of its financial statements to Securityholders.
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;
(b) CIT's Quarterly Report on Form 10-Q for the quarters ended March
31, 1998, June 30, 1998 and September 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, August 27, 1998, October 15, 1998, December 2, 1998
and January 28, 1999.
All documents filed by CIT pursuant to Sections 13(a) and (c), 14, or
15(d) of the Exchange Act after the date hereof and prior to the termination of
the offering of the securities offered hereby shall be deemed to be incorporated
by reference herein and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute part of this Prospectus.
CIT WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS PROSPECTUS IS
DELIVERED, UPON REQUEST, A COPY OF ANY OR ALL OF THE FOREGOING DOCUMENTS
DESCRIBED ABOVE WHICH HAVE BEEN OR MAY BE INCORPORATED BY REFERENCE IN THIS
PROSPECTUS OTHER THAN EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH EXHIBITS ARE
SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS). SUCH REQUEST SHOULD
BE DIRECTED TO:
CORPORATE SECRETARY
THE CIT GROUP, INC.
1211 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
(212) 536-1950
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<PAGE>
All documents subsequently filed by or on behalf of the Trust referred to
in the accompanying Prospectus Supplement with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, after the date of this
Prospectus and prior to the termination of any offering of the Securities issued
by such Trust shall be deemed to be incorporated by reference in this Prospectus
and to be a part of this Prospectus from the date of the 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 all purposes of this Prospectus to the extent that a statement contained
herein (or in the accompanying Prospectus Supplement) or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference modifies or replaces such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Owner Trustee on behalf of any 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 reference into the information that
this Prospectus incorporates). Such requests should be directed to the corporate
trust office of the Owner 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.
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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 trustee specified in the related Prospectus
Supplement and certain other parties as specified in
the related Prospectus Supplement.
Seller.................. The CIT Group Securitization Corporation II (the
"Company" or the "Seller"), a wholly-owned, limited
purpose subsidiary of The CIT Group, Inc. ("CIT").
Except if and to the extent specified in the related
Prospectus Supplement, neither CIT nor any of its
affiliates, including the Company and The CIT
Group/Sales Financing, Inc. ("CITSF"), has
guaranteed, insured or is otherwise obligated with
respect to the Securities. See "Risk Factors--
Limited Obligations."
Servicer................ The CIT Group/Sales Financing, Inc. (in such
capacity referred to herein as the "Servicer"), a
wholly-owned subsidiary of CIT. The Servicer will be
responsible for managing, administering, servicing
and making collections on the Contracts held by each
Trust.
Owner Trustee........... The Trustee pursuant to a Pooling and Servicing
Agreement or the Owner Trustee pursuant to a Trust
Agreement, in each case as specified in the related
Prospectus Supplement. The Trustee or Owner Trustee
for any Trust will be referred to in this Prospectus
as the "Owner Trustee." See "The Trusts--The
Trustee(s)."
Indenture Trustee....... With respect to any series of Securities including
one or more classes of Notes, the Indenture Trustee
specified in the related Prospectus Supplement (the
"Indenture Trustee"). The Owner Trustee and the
Indenture Trustee for a series are referred to
herein collectively as the "Trustees."
Risk Factors............ Certain potential risks and other considerations are
particularly relevant to a decision to invest in any
securities sold hereunder. See "Risk Factors."
The Certificates........ Each series of Asset-Backed Certificates (the
"Certificates") will be issued pursuant to the
related Trust Documents. The Certificates will
represent
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fractional undivided interests in the related Trust
and/or the residual interest in the related Trust,
and will have the Original Certificate Balance, if
any, specified in the related Prospectus Supplement.
If specified in the related Prospectus Supplement,
the Company or one of its affiliates will own the
entire beneficial interest in the Trust. See "The
Certificates--General."
Payments in respect of the Certificates will be
subordinated to payments on the Notes of the same
series to the extent described in the related
Prospectus Supplement. See "The Certificates--
General."
The Certificates will be issued in the minimum
denominations and integral multiples in excess
thereof specified in the related Prospectus
Supplement; provided, however, that one Certificate
of each series may be issued in a denomination other
than such integral multiple such that the applicable
Affiliated Owner, if any, specified in the related
Prospectus Supplement (the "Affiliated Owner") may
be issued at least the portion of the Original
Certificate Balance specified in the related
Prospectus Supplement. Unless otherwise specified in
the related Prospectus Supplement, the Certificates
will be issued in book-entry form only. Unless
otherwise specified in the related Prospectus
Supplement, persons ("Certificate Owners") acquiring
beneficial interests in the Certificates will hold
their interests through The Depository Trust Company
("DTC"). Definitive Certificates will be issued only
under the limited circumstances described herein or
in the related Prospectus Supplement. Unless and
until Certificates of a class are issued in
definitive form, all references herein to
distributions, notices, reports and statements to
and to actions by and effects upon the related
Certificateholders will refer to the same actions
and effects with respect to DTC or Cede & Co.
("Cede"), as the case may be, for the benefit of the
related Certificate Owners in accordance with the
DTC procedures. See "Certain Information Regarding
the Securities--Book-Entry Registration" and
"--Definitive Securities."
Unless otherwise specified in the related Prospectus
Supplement, each class of Certificates will have a
stated Certificate Balance (as defined in the
related Prospectus Supplement) and will accrue
interest on such Certificate Balance at a specified
rate (with respect to each class of Certificates,
the "Pass-Through Rate"). Each class of Certificates
may have a different Pass-Through Rate, which may be
a fixed, variable or adjustable Pass-Through Rate,
or any combination of the foregoing. The related
Prospectus Supplement will specify the Pass-Through
Rate for each class of Certificates, or the
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initial Pass-Through Rate and the method for
determining subsequent changes to the Pass-Through
Rate.
A series may include two or more classes of
Certificates which differ as to timing of
distributions, sequential order, priority of
payment, seniority, allocation of losses,
Pass-Through Rate or amount of distributions in
respect of principal or interest, or as to which
distributions in respect of principal or interest on
any class may or may not be made upon the occurrence
of specified events or on the basis of collections
from designated portions of the Contract Pool. In
addition, a series may include one or more classes
of Certificates ("Stripped Certificates") entitled
to (i) distributions in respect of principal with
disproportionate, nominal or no interest
distributions, or (ii) interest distributions, with
disproportionate, nominal or no distributions in
respect of principal.
If CITSF exercises its option to purchase the
Contracts of a Trust or if the Contracts are sold by
the Indenture Trustee (or, if the series did not
include Notes or the Notes have been paid in full
and the Indenture has been discharged in accordance
with its terms, the Owner Trustee) on the terms and
conditions described under "The Purchase Agreements
and the Trust Documents--Termination," Certificate
Owners may receive an amount in respect of the
Certificates as specified in the related Prospectus
Supplement. In addition, if the related Prospectus
Supplement provides that the property of a Trust
will include a Pre-Funding Account (as such term is
defined in the related Prospectus Supplement, the
"Pre-Funding Account"), Certificate Owners may
receive a distribution in respect of principal on or
immediately following the end of the funding period
specified in the related Prospectus Supplement (the
"Funding Period") in an amount and manner specified
in the related Prospectus Supplement.
The Notes............... Each series of Asset-Backed Notes (the "Notes" and,
together with the Certificates, the "Securities")
will represent obligations of a Trust secured by
assets of such Trust (other than the accounts or
other property specified in the related Prospectus
Supplement). See "The Notes--General."
The Notes will be issued pursuant to an Indenture
between the Issuer and the Indenture Trustee (the
"Indenture"). See "The Notes--General."
The Notes will be issued in the minimum
denominations and integral multiples in excess
thereof specified in the related Prospectus
Supplement; provided, however, that
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one Note of each class of each series may be issued
in a denomination other than such integral multiple.
Unless otherwise specified in the related Prospectus
Supplement, the Notes will be issued in book-entry
form only. Unless otherwise specified in the related
Prospectus Supplement, persons ("Note Owners")
acquiring beneficial interests in the Notes will
hold their interests through DTC in the United
States or Cedel Bank, societe anonyme ("Cedel") or
the Euroclear System ("Euroclear") in Europe, and
Definitive Notes will be issued only under the
limited circumstances described herein or in the
related Prospectus Supplement. Unless and until
Notes of a class are issued in definitive form, all
references herein to distributions, notices, reports
and statements to and to actions by and effects upon
the related Noteholders will refer to the same
actions and effects with respect to DTC or Cede, as
the case may be, for the benefit of the related Note
Owners in accordance with the DTC procedures. See
"Certain Information Regarding the Securities--Book-
Entry Registration" and "--Definitive Securities."
Unless otherwise specified in the related Prospectus
Supplement, each class of Notes will have a stated
principal amount and will bear interest at a
specified rate or rates (with respect to each class
of Notes, the "Interest Rate"). Each class of Notes
may have a different Interest Rate, which may be a
fixed, variable or adjustable Interest Rate, or any
combination of the foregoing. The related Prospectus
Supplement will specify the Interest Rate and the
method for determining subsequent changes to the
Interest Rate.
A series may include two or more classes of Notes
which differ as to the timing and priority of
payment, seniority, allocations of loss, Interest
Rate or amount of payments of principal or interest,
or as to which payments of principal may or may not
be made upon the occurrence of specified events or
on the basis of collections from designated portions
of the Contract Pool. In addition, a series may
include one or more classes of Notes ("Stripped
Notes") entitled to (i) principal payments with
disproportionate, nominal or no interest payments or
(ii) interest payments with disproportionate,
nominal or no principal payments.
If CITSF exercises its option to purchase the
Contracts of a Trust or if the Contracts are sold by
the Indenture Trustee (or, if the series did not
include Notes or the Notes have been paid in full
and the Indenture has been discharged in accordance
with its terms, the Owner Trustee) on the terms and
conditions described under "The Purchase Agreements
and the Trust Documents--Termination," the
outstanding Notes, if any, of such
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series will be redeemed as set forth in the related
Prospectus Supplement. In addition, if the related
Prospectus Supplement provides that the property of
a Trust will include a Pre-Funding Account, all or
certain classes of the outstanding Notes, if any, of
such series will be subject to partial redemption on
or immediately following the end of the Funding
Period in an amount and manner specified in the
related Prospectus Supplement.
Property of a Trust..... The property of a Trust will primarily include (i) a
pool (the "Contract Pool") of retail installment
sale contracts and direct loans (the "Initial
Contracts") secured by the new and used recreation
vehicles financed thereby (the "Initial Financed
Vehicles"), (ii) certain monies received under the
Initial Contracts on and after the Initial Cut-off
Date specified in the related Prospectus Supplement
(the "Initial Cut-off Date"), (iii) an assignment of
the security interests in the Initial Financed
Vehicles, (iv) the Collection Account and the
Paid-Ahead Account, if any, including all
investments therein, all income from the investment
of funds therein and all proceeds thereof, certain
other accounts and the proceeds thereof and certain
other rights under the Trust Documents specified in
the related Prospectus Supplement, and (v) the
proceeds from claims under certain insurance
policies in respect of individual Initial Financed
Vehicles or the related Obligors. In addition, if so
specified in the related Prospectus Supplement, the
property of a Trust will include specified credit or
cash flow enhancement and monies on deposit in a
Pre-Funding Account to be established with the
Indenture Trustee or the Owner Trustee, which will
be used to purchase Subsequent Contracts from the
Seller from time to time during the Funding Period,
as well as any Subsequent Contracts so purchased.
See "The Trust Property."
If and to the extent provided in the related
Prospectus Supplement, a Trust will be obligated to
purchase from the Seller (subject to the
satisfaction of certain conditions described in the
applicable Trust Documents) from time to time during
the Funding Period, from monies on deposit in the
Pre-Funding Account, additional retail installment
sale contracts and direct loans (the "Subsequent
Contracts" and, together with the Initial Contracts,
the "Contracts") secured by the new and used
recreation vehicles financed thereby (the
"Subsequent Financed Vehicles" and, together with
the Initial Financed Vehicles, the "Financed
Vehicles"), certain monies received under the
Subsequent Contracts on and after the related
Subsequent Cut-off Dates (specified in the related
Prospectus Supplement), an assignment of the
security interests in the Subsequent Financed
Vehicles, and proceeds from claims under
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certain insurance policies in respect of individual
Subsequent Financed Vehicles or the related
Obligors. It is expected that the Subsequent
Contracts will have an aggregate principal balance
approximately equal to the Pre-Funded Amount on the
related Closing Date.
The Financed Vehicles consist of motor homes, travel
trailers and other types of recreation vehicles. See
"The Contract Pool."
CITSF will be obligated to repurchase Contracts (a
"Repurchased Contract") upon the occurrence of
certain breaches of representations and warranties
(a "Repurchase Event"). See "The Purchase Agreements
and the Trust Documents--Sale and Assignment of the
Contracts" and "--Servicing Procedures."
The Contracts........... The property of a Trust will consist primarily of
installment sale contracts for recreation vehicles
originated by recreation vehicle dealers ("Dealers")
and acquired by CITSF or The CIT Group/Consumer
Finance, Inc. (NY) ("CITCF-NY") or other affiliates
of CITSF, or if specified in the related Prospectus
Supplement, originated directly by CITSF or one of
its affiliates or acquired by CITSF or one of its
affiliates from unaffiliated third parties, and
direct loans. On or prior to the date of issuance of
a series of the Securities (the "Closing Date"),
CITCF-NY will sell certain contracts that will
constitute a portion of the Initial Contracts to
CITSF pursuant to a purchase agreement, and CITSF
will sell the Initial Contracts to the Company
pursuant to a purchase agreement (the "Purchase
Agreement"), and the Company will sell the Initial
Contracts to a Trust pursuant to the Trust
Documents. If and to the extent specified in the
related Prospectus Supplement, CITSF or the Seller
or one of their respective affiliates may retain the
right to receive a portion of the interest accruing
on some or all of the Contracts sold to a Trust. See
"The Purchase Agreements and the Trust Documents--
Sale and Assignment of the Contracts."
The Contracts will generally be prepayable at any
time without penalty to the purchaser of the related
Financed Vehicles or other person or persons who are
obligated to make payments under the Contract (each,
an "Obligor"). The related Prospectus Supplement
will contain certain information with respect to
each Contract Pool as of the Initial Cut-off Date or
such other date specified therein, including the
proportions of each type of Financed Vehicle, the
weighted average annual percentage rate and the
weighted average remaining maturity of Contracts in
the Contract Pool.
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If and to the extent specified in the related
Prospectus Supplement, from time to time during the
Funding Period, CITSF will be obligated to sell, and
the Company will be obligated to purchase, pursuant
to a purchase agreement (the "Subsequent Purchase
Agreement") subject to the satisfaction of certain
conditions described therein, Subsequent Contracts
at a purchase price which, unless otherwise
specified in the related Prospectus Supplement, will
be equal to the aggregate principal amounts thereof
as of the first day in the related month of transfer
designated by CITSF and the Company (each, a
"Subsequent Cut-off Date"). A portion of such
Subsequent Contracts may be acquired by CITSF from
CITCF-NY or other affiliates of CITSF. Pursuant to
one or more subsequent transfer agreements (each, a
"Subsequent Transfer Agreement") between the Company
and the related Trust, and subject to the
satisfaction of certain conditions described
therein, the Company will in turn sell the
Subsequent Contracts to such Trust at a purchase
price equal to the amount paid by the Company to
CITSF for such Subsequent Contracts, which purchase
price shall be paid from monies on deposit in the
Pre-Funding Account. Subsequent Contracts will be
transferred from CITSF to the Company and from the
Company to such Trust on the Business Day specified
by CITSF and the Company during the month in which
the related Subsequent Cut-off Date occurs (each, a
"Subsequent Transfer Date").
The Pre-Funding Account.. If the Prospectus Supplement for a series of the
Securities specifies that a portion of the proceeds
of the offering will be deposited in a Pre-Funding
Account, the Pre-Funding Account will be maintained
as an Eligible Account, which account may be
maintained with the Owner Trustee or the Indenture
Trustee, and the funds on deposit therein will be
invested solely in Permitted Investments (as defined
in the related Prospectus Supplement), that mature
not later than one Business Day prior to the next
succeeding Distribution Date, until such funds are
applied during the Funding Period to pay to the
Company the purchase price for Subsequent Contracts.
See "The Purchase Agreements and the Trust
Documents--Accounts." Monies on deposit in the
Pre-Funding Account will not be available to cover
losses on or in respect of the Contracts.
On the Closing Date, the Pre-Funding Account will be
created with an initial deposit, from the proceeds
of the Securities, in the amount, if any, specified
in the related Prospectus Supplement (the
"Pre-Funded Amount"). The Pre-Funded Amount will not
exceed one-third of the sum of the Original
Certificate Balance and the initial principal amount
of the Notes. Unless otherwise
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specified in the related Prospectus Supplement, the
"Funding Period" will be the period from the Closing
Date until the earliest to occur of (i) the date on
which the amount on deposit in the Pre-Funding
Account (exclusive of investment earnings) is less
than $100,000, (ii) the date on which an Event of
Default occurs under the Indenture (if any), (iii)
the date on which an Event of Termination occurs
under the Trust Documents, (iv) the insolvency of
the Company, CITSF, CITCF-NY or CIT, or (v) the
close of business on the date specified in the
related Prospectus Supplement (which date will occur
in the third calendar month after the month in which
the Closing Date occurred). During the Funding
Period, on one or more Subsequent Transfer Dates,
the Pre-Funded Amount will be applied to purchase
Subsequent Contracts from the Company. Unless
otherwise specified in the related Prospectus
Supplement, the Company expects that the Pre-Funded
Amount will be reduced to less than $100,000 by the
end of the Funding Period, although no assurance can
be given that this will in fact occur. Unless
otherwise specified in the related Prospectus
Supplement, any portion of the Pre-Funded Amount
remaining on deposit in the Pre-Funding Account at
the end of the Funding Period will be payable as
principal to Noteholders and Certificateholders in
accordance with the Pre-Funded Percentage on the
first Distribution Date thereafter or, if the end of
the Funding Period is on a Distribution Date, then
on such date.
Capitalized Interest
Account............... If the Prospectus Supplement for a series of the
Securities specifies that a portion of the proceeds
of the offering will be deposited in a Capitalized
Interest Account, on the Closing Date a portion of
the proceeds from the sale of the Securities (in an
amount specified in the related Prospectus
Supplement) will be deposited into an account (the
"Capitalized Interest Account") maintained as an
Eligible Account, which account may be maintained
with the Owner Trustee or the Indenture Trustee, and
the funds on deposit therein will be invested solely
in Permitted Investments that mature no later than
one Business Day prior to the next Distribution
Date. Amounts deposited in the Capitalized Interest
Account will be used on each Distribution Date to
pay interest on the Securities, in the amount or in
accordance with the formula specified in the related
Prospectus Supplement. Monies on deposit in the
Capitalized Interest Account will not be available
to cover losses on or in respect of the Contracts.
On each Distribution Date any amount remaining in
the Capitalized Interest Account in excess of the
Required Capitalized Interest Amount (as defined in
the related Prospectus Supplement) shall be released
to the
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Affiliated Owner, if any, or other person specified
in the related Prospectus Supplement. Unless
otherwise specified in the related Prospectus
Supplement, any amounts remaining in the Capitalized
Interest Account on the last day of the Funding
Period and not used for such purposes will be
deposited in the Collection Account and will be
available for distributions, as described herein or
in the related Prospectus Supplement, on the first
Distribution Date thereafter or, if the end of the
Funding Period is on a Distribution Date, then on
such date.
Distribution Dates...... Unless otherwise specified in the related Prospectus
Supplement, payments of interest and principal on
the Securities will be made on the fifteenth day of
each month or, if any such day is not a Business
Day, on the next succeeding Business Day (each, a
"Distribution Date"), commencing on the date
specified in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus
Supplement, payments on the Securities on each
Distribution Date will be made to the holders of
record of the related Securities at the close of
business on the Business Day immediately preceding
such Distribution Date or, in the event Definitive
Securities have been issued, at the close of
business on the last Business Day of the month
immediately preceding the month in which such
Distribution Date occurs (each, a "Record Date").
To the extent not previously paid in full prior to
such time, the outstanding principal amount of the
Notes and the Certificates will be payable on the
Distribution Date occurring in the month or months
specified in the related Prospectus Supplement (the
"Note Final Scheduled Distribution Date" and the
"Certificate Final Scheduled Distribution Date").
A "Business Day" is any day other than a Saturday,
Sunday or any day on which banking institutions or
trust companies in the states of New York, Oklahoma
and such other states (if any) specified in the
related Prospectus Supplement are authorized by law,
regulation or executive order to be closed.
Interest Accrual
Period................. Unless otherwise specified in the related Prospectus
Supplement, the period for which interest is payable
on a Distribution Date on the Securities shall be
the one-month period from the most recent
Distribution Date to but excluding the following
Distribution Date, or in the case of the initial
Distribution Date from the date specified in the
related Prospectus Supplement to but excluding the
initial Distribution Date (each, an "Interest
Accrual Period").
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Due Period.............. With respect to any Distribution Date, the "Due
Period" is the period during which principal,
interest and other amounts will be collected on the
Contracts for application towards the payment of
principal and interest to the Securityholders and
the payment of fees on such Distribution Date.
Unless otherwise specified in the related Prospectus
Supplement, the "Due Period" will be the calendar
month immediately preceding the Distribution Date.
Determination Date...... Unless otherwise specified in the related Prospectus
Supplement, the "Determination Date" is the third
Business Day prior to each Distribution Date. On
each Determination Date, the Servicer will determine
the Available Amount for distribution on the related
Distribution Date, allocate such amounts between the
Notes, the Certificates and the Servicer Payment,
and advise the Trustees (or the paying agent
appointed pursuant to the Trust Documents) of the
amounts of the payments to be made to
Securityholders, all as described under "The
Purchase Agreements and the Trust Documents--
Distributions." The "Servicer Payment" is equal on
each Distribution Date to the sum of the
reimbursement then due to the Servicer for
outstanding Monthly Advances and the Servicing Fee
(including any unpaid Servicing Fees for past
Distribution Dates).
Unless otherwise specified in the related Prospectus
Supplement, the "Available Amount" with respect to
each Trust on any Distribution Date is equal to the
excess of (A) the sum of (i) all amounts on deposit
in the Collection Account attributable to
collections or deposits made in respect of such
Contracts (including any late fees, prepayment
charges, extension fees or other administrative fees
or similar charges allowed by applicable law with
respect to the Contracts ("Late Fees") in the
related Due Period, and (ii) the Purchase Price for
any Contract repurchased by CITSF as a result of
breaches of certain representations and warranties
or purchased by the Servicer as a result of breaches
of certain covenants and any Monthly Advances and
any Non-Reimbursable Payments made by the Servicer,
if such Purchase Price, Monthly Advance or
Non-Reimbursable Payment is paid on the Deposit Date
immediately preceding such Distribution Date, over
(B) the sum of the following amounts (to the extent
that the Servicer has not already withheld such
amounts from collections on the Contracts): (i) any
repossession profits on liquidated Contracts,
Liquidation Expenses (as defined in the Trust
Documents) incurred and taxes and insurance advanced
by the Servicer in respect of Financed Vehicles that
are reimbursable to the Servicer under the Trust
Documents, (ii) any amounts incorrectly
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deposited in the Collection Account, (iii) any
amounts deposited in the Paid-Ahead Account, if any,
during the related Due Period, (iv) net investment
earnings on the funds in the Collection Account and
the Paid-Ahead Account, if any, and (v) any other
amounts permitted to be withdrawn from the
Collection Account and the Paid-Ahead Account, if
any, by the Servicer (or to be retained by the
Servicer from collections on the Contracts) pursuant
to the Trust Documents.
Subordination........... The rights of the Certificateholders to receive
distributions with respect to the Contracts will be
subordinated to the rights of the Noteholders of the
same series, to the extent described in the related
Prospectus Supplement. This subordination is
intended to enhance the likelihood of timely receipt
by Noteholders of the full amount of interest and
principal required to be paid to them, and to afford
the Noteholders limited protection against losses in
respect of the Contracts.
If and to the extent specified in the related
Prospectus Supplement, one or more classes of Notes
of a series may be subordinated to the rights of one
or more other classes of Notes of the same series.
The protection afforded to the Noteholders by the
subordination feature described above will be
effected by the preferential right of Noteholders to
receive, to the extent described in the related
Prospectus Supplement, current distributions from
collections on or in respect of the Contracts prior
to the application of such collections to payments
in respect of the Certificates or any subordinated
Notes.
Enhancement............. If and to the extent specified in the related
Prospectus Supplement with respect to a Trust, the
enhancement applicable to a class of Securities may
include any one or more of the following: a
financial guaranty insurance policy, a letter of
credit, a CIT Limited Guarantee, a reserve fund, a
third party guarantee, a cash collateral account, a
derivative product, a credit facility, a liquidity
facility, another form of credit enhancement, or any
combination thereof. The enhancement with respect to
any class of Securities may be structured to provide
protection against delinquencies and/or losses on
the Contracts, against changes in interest rates, or
other risks, or to supplement the interest rate on
specified Contracts, in each case to the extent and
under the conditions specified in the related
Prospectus Supplement. Unless otherwise specified in
the related Prospectus Supplement, any form of
enhancement will have certain limitations and
exclusions from coverage thereunder, which will be
described in the related Prospectus Supplement.
Further information regarding
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any provider of credit enhancement, including
financial information when material, will be
included (or incorporated by reference) in the
related Prospectus Supplement. See "The
Certificates--Enhancement."
Monthly Advances........ Unless otherwise specified in the related Prospectus
Supplement, with respect to each Contract as to
which there has been a Payment Shortfall during the
related Due Period, the Servicer shall advance funds
in the amount of such Payment Shortfall (each, a
"Monthly Advance"), but only to the extent that the
Servicer, in its good faith judgment, expects to
recover such Monthly Advance from subsequent
collections on such Contract made by or on behalf of
the Obligor thereunder (but only to the extent of
expected interest collections in the case of a
Simple Interest Contract) or from net liquidation
proceeds or insurance proceeds with respect to such
Contract. The Servicer shall be reimbursed for any
Monthly Advance from subsequent collections with
respect to such Contract. If the Servicer determines
in its good faith judgment that an unreimbursed
Monthly Advance shall not ultimately be recoverable
from subsequent collections, the Servicer shall be
reimbursed for such Monthly Advance from collections
on all Contracts. In determining whether an advance
is or will be nonrecoverable, the Servicer need not
take into account that it might receive any amounts
in a deficiency judgment against an Obligor. Unless
otherwise specified in the related Prospectus
Supplement, the Servicer will not make a Monthly
Advance in respect of (i) the principal component of
any scheduled payment on a Simple Interest Contract,
or (ii) a Payment Shortfall arising from a Contract
which has been prepaid in full or which has been
subject to a Relief Act Reduction during the related
Due Period. See "The Purchase Agreements and the
Trust Documents--Monthly Advances." Unless otherwise
specified in the related Prospectus Supplement,
"Payment Shortfall" means (i) with respect to any
Simple Interest Contract and any Distribution Date,
the excess of (A) the product of (1) one-twelfth of
the Contract Rate of such Contract and (2) the
outstanding principal amount of such Contract as of
the first day of the related 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
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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 which do not constitute
scheduled payments, full prepayments or certain
partial prepayments that result in a reduction of an
Obligor's periodic payment below the scheduled
payment as of the Initial Cut-off Date or Subsequent
Cut-off Date, as the case may be, will be deposited
into the Paid-Ahead Account until such time as the
paid-ahead amount becomes due. See "The Contract
Pool" and "The Purchase Agreements and the Trust
Documents--Paid Ahead Precomputed Contracts."
Servicing Fees.......... Unless otherwise specified in the related Prospectus
Supplement, with respect to each series of
Securities, the Servicer shall receive a monthly fee
(the "Servicing Fee"), payable on each Distribution
Date, equal to the sum of (i) one-twelfth of the
product of the percentage specified in the related
Prospectus Supplement as the "Servicing Fee Rate"
and the Pool Balance as of the first day of the
related Due Period (or, in the case of the first
Distribution Date, as of the Initial Cut-off Date)
and (ii) any investment earnings on amounts on
deposit in the Collection Account, the Paid-Ahead
Account, if any, the Certificate Distribution
Account, if any, and the Note Distribution Account,
if any; provided, however, that the Servicing Fee
Rate applicable to a Trust may be increased to a
rate (or maximum rate) specified in the related
Prospectus Supplement if CITSF or an affiliate
thereof is not the Servicer. See "The Purchase
Agreements and the Trust Documents--Servicing
Compensation."
Optional Purchase of
the Contracts......... Unless otherwise specified in the related Prospectus
Supplement, with respect to each series of
Securities, at
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its option, CITSF may purchase all the Contracts
in the related Trust on any Distribution Date on
which the aggregate principal balance of the
Contracts (the "Pool Balance") as of the last day
of the related Due Period is equal to or less than
a percentage specified in the related Prospectus
Supplement of the Initial Pool Balance, at a
purchase price determined as described under "The
Purchase Agreements and the Trust
Documents--Termination." Unless otherwise
specified in the related Prospectus Supplement,
the "Initial Pool Balance" equals the sum of (i)
the Pool Balance as of the Initial Cut-off Date
and (ii) the aggregate principal balance of all
Subsequent Contracts added to the related Trust as
of their respective Subsequent Cut-off Dates.
Auction Sale............ Unless otherwise specified in the related Prospectus
Supplement, with respect to each series of
Securities, within ten days after the first
Distribution Date on which the Pool Balance as of
the last day of the related Due Period is equal to
or less than a percentage specified in the related
Prospectus Supplement of the Initial Pool Balance,
the Indenture Trustee (or, if the series did not
include Notes or the Notes have been paid in full
and the Indenture has been discharged in accordance
with its terms, the Owner Trustee) shall solicit
bids for the purchase of the Contracts remaining in
the related Trust. In the event that satisfactory
bids are received as described in "The Purchase
Agreements and the Trust Documents--Termination,"
the net sale proceeds will be distributed to
Securityholders, in the same order of priority as
collections received in respect of the Contracts, on
the second Distribution Date succeeding such Due
Period. If satisfactory bids are not received, such
Trustee shall decline to sell the Contracts and
shall not be under any obligation to solicit any
further bids or otherwise negotiate any further sale
of the Contracts. See "The Purchase Agreements and
the Trust Documents--Termination."
Ratings................. As a condition of issuance, the Securities of each
series offered pursuant to this Prospectus will be
rated in one of the four highest rating categories
by at least one nationally recognized statistical
rating organization specified in the related
Prospectus Supplement (each, a "Rating Agency"). The
ratings of the Securities should be evaluated
independently from similar ratings on other types of
securities. The ratings do not address the
possibility that Securityholders may suffer a lower
than anticipated yield. The ratings do not address
the likelihood that the Securities will be retired
following the sale of the Contracts by a Trustee as
described above under "--Auction Sale" or
"--Optional Purchase of the Contracts." See
"Ratings" herein.
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There can be no assurance that any rating will
remain in effect for any given period of time or
that a rating will not be lowered or withdrawn by
the assigning Rating Agency if, in its judgment,
circumstances so warrant. In the event that the
rating initially assigned to any of the Securities
is subsequently lowered or withdrawn for any reason,
no person or entity will be obligated to provide any
additional credit enhancement with respect to such
Securities. There can be no assurance whether any
other rating agency will rate any of the Securities,
or if one does, what rating would be assigned by any
such other rating agency. A security rating is not a
recommendation to buy, sell or hold securities.
Certain Federal Income
Tax Considerations.... If the related Prospectus Supplement states that a
Trust is structured as an owner trust, in the
opinion of Counsel to the Seller, for Federal income
tax purposes: (1) the Notes will constitute
indebtedness; and (2) the Certificates will
constitute interests in a trust fund that will not
be treated as an association taxable as a
corporation. Each Noteholder, by acceptance of a
Note, will agree to treat the Notes as indebtedness,
and each Certificateholder, by the acceptance of a
Certificate, will agree to treat the Trust as a
partnership in which the Certificateholders are
partners for Federal income tax purposes.
Alternative characterizations of the Notes and the
Certificates are possible, but would not result in
materially adverse tax consequences to Noteholders
or Certificateholders. See "Certain Federal Income
Tax Consequences" herein.
ERISA Considerations.... Fiduciaries of employee benefit plans subject to the
Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or plans subject to Section 4975
of the Internal Revenue Code of 1986 (the "Code")
should carefully review with their legal advisors
whether the purchase or holding of the Certificates
offered hereby could give rise to a transaction
prohibited or not otherwise permissible under ERISA
or the Code. See "ERISA Considerations" herein.
The related Prospectus Supplement will provide
further information with respect to the eligibility
of a class of Certificates for purchase by employee
benefit plans. See "ERISA Considerations" herein and
in the related Prospectus Supplement.
Subject to certain considerations discussed under
"ERISA Considerations" herein and in the related
Prospectus Supplement, and unless otherwise
specified in the related Prospectus Supplement, the
Notes will be eligible for purchase by employee
benefit plans that are subject to ERISA.
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Legal Investment........ The appropriate characterization of the Certificates
and the Notes under various legal investment
restrictions applicable to the investment activities
of certain institutions, and thus the ability of
investors subject to these restrictions to purchase
the Certificates and the Notes, may be subject to
significant interpretive uncertainties. All
investors whose investment authority is subject to
legal restrictions should consult their own legal
advisors to determine whether, and to what extent,
the Certificates and the Notes will constitute legal
investments for them.
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RISK FACTORS
Prospective Securityholders should consider the following risk factors in
connection with the purchase of the Securities:
1. Limited Obligations. The Securities will not represent an interest in
or an obligation of The CIT Group, Inc. ("CIT"), The CIT Group Securitization
Corporation II (the "Company"), any Affiliated Owner specified in the related
Prospectus Supplement, or any Servicer (including The CIT Group/Sales Financing,
Inc. ("CITSF")) or any of their respective affiliates. Unless and to the extent
otherwise specified in the related Prospectus Supplement, the Securities will
not be insured or guaranteed by any government agency or instrumentality, CIT or
any of its affiliates (including the Company, any Affiliated Owner, and CITSF),
the Underwriters or any of their affiliates, or any other Servicer or any of its
affiliates.
2. Risk of Loss. An investment in the Securities may be affected by, among
other things, a downturn in regional or local economic conditions. These
regional or local economic conditions are often volatile and historically have
affected the delinquency, loan loss and liquidation experience of pools of
installment sale contracts and direct loans secured by recreation vehicles. The
credit criteria and underwriting guidelines under which CITSF originates
recreation vehicle installment sale contracts and direct loans were changed in
1994. The delinquency and loan loss experience for CITSF's portfolio will be
affected adversely by this change in credit criteria. See "The CIT Group/Sales
Financing, Inc., Servicer--Delinquency and Loan Loss Experience" herein and in
the related Prospectus Supplement. Since the market value of recreation vehicles
generally declines with age and since in certain states the Trustees may not
have a first perfected security interest in the Financed Vehicles, the Servicer
may not recover the entire amount owing under a defaulted Contract. See "Certain
Legal Aspects of the Contracts." In such a case, the Securityholders may suffer
a corresponding loss. The market value of the Financed Vehicles could be or
could become lower than the outstanding principal balances of the Contracts that
they secure. Sufficiently high liquidation losses on the Contracts will have the
effect of reducing, and could eliminate (a) the protection against loss afforded
to the Noteholders by the subordination of the Certificates, if any, or by the
Enhancement, if any, applicable to the Notes and (b) the protection against loss
afforded to the Certificateholders by the Enhancement (as specified in the
related Prospectus Supplement), if any. If the amount available under the
Enhancement, if any, is reduced to zero, holders of the Certificates will bear
the risk of loss resulting from default by Obligors and will have to look
primarily to the value of the related Financed Vehicles for recovery of the
outstanding principal and unpaid interest on the defaulted Contracts. If the
Certificate Balance is reduced to zero, the holders of the Notes will bear the
risk of loss resulting from default by Obligors and will have to look primarily
to the value of the related Financed Vehicles for recovery of the outstanding
principal and unpaid interest on the defaulted Contracts.
3. Security Interests and Certain Other Aspects of the Contracts. Each
Contract will be secured by a security interest in a Financed Vehicle.
Perfection of security interests in the Financed Vehicles and enforcement of
rights to realize upon the value of the Financed Vehicles as collateral for the
Contracts are subject to a number of state laws, including the Uniform
Commercial Code (the "UCC") as adopted in each state and certificate of title
statutes. The steps necessary to perfect a security interest in a Financed
Vehicle vary from state to state. Unless otherwise specified in the related
Prospectus Supplement, all Contracts in the Contract Pool were acquired by CITSF
or The CIT Group/Consumer Finance, Inc. (NY) ("CITCF-NY") from recreation
vehicle dealers ("Dealers") and name the Dealer as obligee and as secured party.
Most of the Contracts in the Contract Pool were assigned by the related Dealer
to CITSF or CITCF-NY. In each such case, CITSF or CITCF-NY is named as the
secured party on the certificate of title for the related Financed Vehicle. Due
to the expense and administrative inconvenience involved, CITSF will not amend
any certificate of title to name the Company or any Trustee as the lienholder
and the Company will not deliver any certificate of title to such Trustee or
note thereon such Trustee's interest. Consequently, in some states, in the
absence of such an amendment to the certificate of title to reflect the
successive assignments by CITCF-NY to CITSF, by CITSF to the Company, and by the
Company to the Trust, the security interest in the Financed Vehicle may not be
effective or such security interest may not be perfected, and the assignment of
the security interest in the Financed Vehicle to the Trust may not be effective
against other creditors of the related Obligor or a trustee in bankruptcy.
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In addition, numerous federal and state consumer protection laws impose
requirements on sellers under retail installment sale contracts, such as the
Contracts, and the failure by the seller of goods to comply with such
requirements could give rise to liabilities of assignees for amounts due or paid
under such agreements and the right to set-off against claims by such assignees.
These laws would apply to a Trust as assignee of the Contracts. From time to
time, CITSF has been involved in litigation under consumer or debtor protection
laws, some of which have been class actions. The Trust is subject to the risk of
similar litigation. With respect to each series of Securities, pursuant to the
Trust Documents, CITSF will represent and warrant as of the Initial Cut-off Date
with respect to each Initial Contract, and as of the related Subsequent Cut-off
Date with respect to each Subsequent Contract, that each Contract complies with
all requirements of law and CITSF will provide certain warranties relating to
the validity, perfection and priority of the security interest in each Financed
Vehicle securing a Contract. A breach by CITSF of any such warranty that
materially and adversely affects the related Trust's interest in any Contract
would require CITSF to repurchase such Contract unless such breach is cured. If
CITSF does not honor its purchase obligation in respect of a Contract and the
Obligor for such Contract were to default, recovery of amounts due on such
Contract would be primarily dependent on repossession and resale of the Financed
Vehicle securing such Contract. Certain other factors may limit the ability of
the Securityholders to realize upon the Financed Vehicles or may limit the
amount realized to less than the amount due. See "Certain Legal Aspects of the
Contracts."
Under California law and most state vehicle dealer licensing laws, sellers
of recreation vehicles are required to be licensed to sell vehicles at retail
sale. Numerous other federal and state consumer protection laws impose
requirements applicable to the origination and assignment of retail installment
sale contracts, including the Truth in Lending Act, the Federal Trade Commission
Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the Equal
Credit Opportunity Act, the Fair Debt Collection Practices Act and the Uniform
Consumer Credit Code. In the case of some of these laws, the failure to comply
with the provisions of these laws may affect the enforceability of the related
Contract. A Trust and the Company may not have obtained the licenses required
under any federal or state consumer laws or regulations, and the absence of such
licenses may impede the enforcement of certain rights or give rise to certain
defenses in actions seeking enforcement of such rights which may prevent a Trust
from collecting amounts due under the Contracts. In addition, with respect to
used vehicles, the Federal Trade Commission's Rule on Sale of Used Vehicles
requires that all sellers of used vehicles prepare, complete, and display a
"Buyer's Guide" which explains the warranty coverage for such vehicles.
Furthermore, Federal Odometer Regulations promulgated under the Motor Vehicle
Information and Cost Savings Act require that all sellers of used vehicles
furnish a written statement signed by the seller certifying the accuracy of the
odometer reading. If a seller is not properly licensed or if either a Buyer's
Guide or Odometer Disclosure Statement was not provided to the purchaser of a
Financed Vehicle, the obligor may be able to assert a defense against the seller
of the Financed Vehicle which defense may prevent a Trust from collecting
amounts due under the affected Contracts. See "Certain Legal Aspects of the
Contracts."
Any shortfall in payments on or in respect of Contracts, or any liability
of a Trust to Obligors, as a result of noncompliance with the laws summarized
above and under "Certain Legal Aspects of the Contracts" could result in losses
to the Securityholders.
4. Certain Matters Relating to Insolvency. CITCF-NY, CITSF and the Company
intend that transfers of Contracts from CITCF-NY to CITSF, from CITSF to the
Company and from the Company to the related Trust, constitute sales, rather than
pledges of the Contracts to secure indebtedness. However, if CITCF-NY, CITSF or
the Company were to become a debtor under Title 11 of the United States Code, 11
U.S.C.(ss.) 101 et seq. (the "Bankruptcy Code"), it is possible that a creditor,
receiver, other party in interest or trustee in bankruptcy of such debtor, or
such debtor as debtor-in-possession, may contend that the sales of the Contracts
by CITCF-NY to CITSF, by CITSF to the Company, or by the Company to the related
Trust, respectively, were pledges of the Contracts rather than sales and that,
accordingly, such Contracts should be part of such assigning entity's bankruptcy
estate. Such a position, if presented to a court, even if ultimately
unsuccessful, could result in a delay in or reduction of distributions to the
Securityholders. See "Certain Legal Aspects of the Contracts--Certain Matters
Relating to Insolvency."
5. Limited Liquidity. There is currently no market for the Securities of
any series. Although the Company expects that the underwriters of any particular
series will make a secondary market for such Securities, they will
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have no obligation to do so. There can be no assurance that a secondary market
will develop for the Securities of any series or, if it does develop, that it
will provide any of the Securityholders with liquidity of investment or that it
will continue for the term of any series of Securities. Unless otherwise
specified in the related Prospectus Supplement, the Securities will be issued in
book-entry, rather than physical, form which may adversely affect the liquidity
of the Securities in the secondary market and the ability of the Certificate
Owners and Note Owners to pledge the Securities.
6. The Subsequent Contracts and the Pre-Funding Account. If and to the
extent specified in the related Prospectus Supplement, the conveyance of
Subsequent Contracts by CITSF during the Funding Period will be subject to the
conditions described in the related Prospectus Supplement under "The Contract
Pool." If CITSF does not originate contracts satisfying such criteria during the
Funding Period, CITSF will have insufficient contracts to sell to the related
Trust on Subsequent Transfer Dates, thereby resulting in prepayments of
principal to Noteholders and Certificateholders as described below.
Unless otherwise specified in the related Prospectus Supplement, to the
extent that amounts on deposit in the Pre-Funding Account have not been fully
applied to the purchase of Subsequent Contracts by the related Trust by the end
of the Funding Period, Noteholders and Certificateholders will receive a
prepayment of principal in an amount equal to the Pre-Funded Percentage
allocable to the Noteholders and the Certificateholders, respectively, of the
Pre-Funded Amount remaining in the Pre-Funding Account at such time, which
prepayment will be made on the first Distribution Date following the end of the
Funding Period or, if the Funding Period ends on a Distribution Date, on such
date. Unless otherwise specified in the related Prospectus Supplement, the
"Pre-Funded Percentage" with respect to the Notes or the Certificates is the
percentage derived from the fraction, the numerator of which is the initial
principal balance of the Notes or the Original Certificate Balance, as the case
may be, and the denominator of which is the sum of the initial principal balance
of the Notes and the Original Certificate Balance. It is anticipated that the
principal amount of Subsequent Contracts purchased by the Trust will not be
exactly equal to the amount on deposit in the Pre-Funding Account and that
therefore there will be at least a nominal amount of principal prepaid to the
Noteholders and the Certificateholders at the end of the Funding Period.
Each Subsequent Contract must satisfy the eligibility criteria specified
in the related Prospectus Supplement and the Trust Documents at the time of its
sale to the Trust. Unless otherwise specified in the related Prospectus
Supplement, the Company (the seller of any Subsequent Contracts to the related
Trust) will certify that all such eligibility criteria have been satisfied and
CITSF (the seller of any Subsequent Contracts to the Company) will certify that
all conditions precedent to the sale of the Subsequent Contracts to the Trust
have been satisfied. Unless otherwise specified in the related Prospectus
Supplement, it is a condition to the sale of any Subsequent Contracts to the
Trust that each Rating Agency, after receiving prior notice of the proposed
transfer of Subsequent Contracts to the Trust, shall not have advised the Seller
or the Trustees that the conveyance of such Subsequent Contracts will result in
a qualification, modification or withdrawal of its then current rating of either
the Notes or the Certificates. Following the transfer of Subsequent Contracts to
the Contract Pool the aggregate characteristics of the Contracts then held in
the Contract Pool may vary from those of the Initial Contracts included therein.
The ability of a Trust to invest in Subsequent Contracts is entirely
dependent upon whether CITSF is able to originate recreation vehicle contracts
that meet the requirements for transfer on a Subsequent Transfer Date under the
Trust Documents. The ability of CITSF to originate such contracts may be
affected by a variety of economic and social factors. Moreover, such factors may
affect the ability of the Obligors thereunder to perform their obligations
thereunder, which may cause contracts originated by CITSF or its affiliates to
fail to meet the requirements for transfer under the Trust Documents. Economic
factors include interest rates, unemployment levels, the rate of inflation and
consumer perception of economic conditions generally. However, CITSF is unable
to determine and has no basis to predict whether or to what extent economic or
social factors will affect CITSF's ability to originate Subsequent Contracts.
7. Prepayment from the Pre-Funding Account. To the extent specified in the
related Prospectus Supplement, if the Pre-Funded Amount has not been fully
applied by the related Trust to purchase Subsequent Contracts by the end of the
Funding Period, then the Pre-Funded Amount will be payable as principal to
Noteholders and
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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.
8. Limited Assets. Unless otherwise specified in the related Prospectus
Supplement, each Trust will covenant to sell the Contracts (a) if directed to do
so by the related Indenture Trustee in accordance with the related Indenture
following an acceleration of a series of Notes upon an Event of Default, and (b)
in other circumstances specified in the related Prospectus Supplement. However,
there is no assurance that the market value of the related Contracts will at any
time be equal to or greater than the aggregate outstanding principal balance of
such Notes. Therefore, upon an Event of Default with respect to such Notes,
there can be no assurance that sufficient funds will be available to repay
Noteholders in full. In addition, the amount of principal required to be
distributed to Noteholders under the Indenture is generally limited to amounts
available to be deposited in the Note Distribution Account. Therefore, the
failure to pay principal on the Notes may not result in the occurrence of an
Event of Default until the Note Final Scheduled Distribution Date. Furthermore,
upon a sale by the Trust of the Contracts, the net proceeds from such sale
remaining after payment of all amounts due to the Servicer and the Noteholders
may not be sufficient to pay the Certificate Balance and interest accrued
thereon.
If and to the extent specified in the related Prospectus Supplement, one
or more Enhancements will be available to pay principal and/or interest on the
Notes and/or the Certificates on any Distribution Date. However, unless
otherwise specified in the related Prospectus Supplement, the amount of any
Enhancement will be limited and will be reduced as the Pool Balance is reduced.
If the amounts available under the applicable Enhancement are exhausted, a Trust
will depend solely on payments on or with respect to the Contracts, Monthly
Advances and Non-Reimbursable Payments to make distributions to the
Securityholders.
9. Ratings of the Securities. It is a condition to the issuance of a
series of Securities offered pursuant to this Prospectus that the Securities be
rated in one of the four highest rating categories by at least one Rating
Agency. The ratings do not address the likelihood that the Securities will be
retired following the sale of the Contracts by a Trustee as described under "The
Purchase Agreement and the Trust Documents--Termination." There can be no
assurance that any rating will remain in effect for any given period of time or
that a rating will not be lowered or withdrawn by the Rating Agency if, in its
judgment, circumstances so warrant. In the event that the rating initially
assigned to the Securities is subsequently lowered or withdrawn for any reason,
no person or entity will be obligated to provide any additional credit
enhancement with respect to such Securities. There can be no assurance that any
other rating agency will rate the Notes or the Certificates, or if one does,
what rating would be assigned by any such other rating agency. A security rating
is not a recommendation to buy, sell or hold securities.
10. Book Entry Registration. Unless otherwise specified in the related
Prospectus Supplement, the Securities will be offered for purchase in book-entry
form only and will be initially registered in the name of the nominee of The
Depository Trust Company ("DTC" and, together with any successor depository
selected by the Company, the "Depository"). No person acquiring an interest in
the Notes through the facilities of DTC (a "Note Owner") will be entitled to
receive a Definitive Note representing such person's interest in the Notes,
except as set forth under "Certain Information Regarding the Securities--
Definitive Securities," and such persons will hold their interests in the Notes
through DTC in the United States or Cedel Bank, societe anonyme ("Cedel") or
Euroclear in Europe. No person acquiring an interest in the Certificates through
the facilities of DTC (a "Certificate Owner") will be entitled to receive a
Definitive Certificate representing such person's interest in the Certificates,
except as set forth under "Certain Information Regarding the Securities--
Definitive Securities," and such persons will hold their interests in the
Certificates through DTC. Unless and until Definitive Securities are issued
under the limited circumstances described herein and in the related Prospectus
Supplement, all references to actions by Securityholders shall refer to actions
taken by DTC upon instructions from its Participants, and all references herein
to distributions, notices,
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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."
11. Risk of Commingling. At any time that the requirements as specified
under "The Purchase Agreements and the Trust Documents--Collections," are met,
the Servicer may deposit payments on or with respect to the Contracts and
proceeds of Contracts into the Collection Account or the Paid-Ahead Account, as
applicable, monthly on the Business Day immediately preceding the next
Distribution Date (the "Deposit Date"). Pending such a monthly deposit into the
Collection Account or the Paid-Ahead Account, as applicable, collections on the
Contracts may be invested by the Servicer at its own risk and for its own
benefit and will not be segregated from its own funds. If the Servicer were
unable to remit such funds or if the Servicer became insolvent, the holders of
the Securities could incur a loss with respect to collections not deposited in
the Collection Account or the Paid-Ahead Account.
THE TRUSTS
With respect to each series of Securities, the Seller will establish a
Trust pursuant to the related Trust Documents. Prior to the sale and assignment
of the related Contracts pursuant to the related Trust Documents, the Trust will
have no assets or obligations. After its formation, the related Trust will not
engage in any activity other than (i) acquiring, holding and managing the
Contracts and the other assets of such Trust and proceeds therefrom, (ii)
issuing the Securities of the related series, (iii) making payments on the
Securities of the related series, (iv) entering into agreements and transactions
in connection with the Enhancement, if any, for the related series of
Securities, and (v) engaging in other activities that are necessary, suitable or
convenient to accomplish the foregoing or are incidental thereto or connected
therewith.
Each Certificate, if any, will represent a fractional undivided interest
and/or residual interest in the related Trust. Each Note, if any, will represent
an obligation of, the related Trust.
If specified in the related Prospectus Supplement, the related Trust will
initially be capitalized with equity equal to the "Original Certificate Balance"
specified in the related Prospectus Supplement. If specified in the related
Prospectus Supplement, Certificates with an aggregate original principal balance
of at least the amount specified in the related Prospectus Supplement will be
owned by the Affiliated Owner specified in the related Prospectus Supplement
(the "Affiliated Owner") and Certificates representing the remainder of the
Original Certificate Balance will be sold to third party investors that are
expected to be unaffiliated with the Affiliated Owner, the Seller, the Servicer
or their affiliates. If specified in the related Prospectus Supplement, the
Company or one of its affiliates will own the entire beneficial interest in the
Trust. The equity in a Trust, together with the proceeds of the initial sale of
the Notes, if any, will be used by the Trust to purchase the Initial Contracts
from the Seller pursuant to the Trust Documents and, if specified in the related
Prospectus Supplement, to fund the deposit of the Pre-Funded Amount and the
deposit to the Capitalized Interest Account and for such other purposes as are
specified in the related Prospectus Supplement.
The Servicer will service the Contracts held by each Trust and will
receive fees for such services. See "The Purchase Agreement and the Trust
Documents--Servicing Compensation." Unless otherwise specified in the related
Prospectus Supplement, CITSF will be appointed as custodian on behalf of each
Trust, and will hold the original installment sales contract (or promissory
note) as well as copies of documents and instruments relating to each Contract
and evidencing the security interest in the Financed Vehicle securing each
Contract (the "Contract Files").
THE TRUSTEE(S)
The Trustee(s) for each Trust will be specified in the related Prospectus
Supplement. The Trustee(s) will perform limited administrative functions,
including making distributions from the Certificate Distribution Account and/or
the Note Distribution Account. A Trustee's liability in connection with the
issuance and sale of the Securities is limited solely to the express obligations
of such Trustee as set forth in the Trust Documents. A Trustee may appoint a
co-trustee to act as co-trustee pursuant to a co-trustee agreement with such
Trustee.
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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 such Trustee not resulting from its own
willful misfeasance, bad faith or gross negligence (other than by reason of a
breach of any of its representations or warranties set forth in the Trust
Documents).
THE TRUST PROPERTY
Each Certificate, if any, will represent a fractional undivided interest
and/or residual interest in the related Trust. Each Note, if any, will be an
obligation of the related Trust and will be secured by assets of the Trust
(other than the Certificate Distribution Account, if any, and other accounts or
property specified in the related Prospectus Supplement). The property of each
Trust will include, among other things, (i) a pool (the "Contract Pool") of
retail installment sale contracts secured by new and used recreation vehicles
between Dealers and Obligors, consisting of the Initial Contracts and the
Subsequent Contracts (if any); (ii) all monies received under the Initial
Contracts on or after the Initial Cut-off Date and the Subsequent Contracts (if
any) on or after the related Subsequent Cut-off Date; (iii) such amounts as from
time to time may be held in one or more accounts established and maintained by
the Servicer pursuant to the Trust Documents (including all investments in such
accounts and all income from the funds therein and all proceeds thereof, other
than investment earnings on any account so specified in the related Prospectus
Supplement) as described herein; (iv) if specified in the related Prospectus
Supplement, specified credit or cash flow enhancement and all monies on deposit
in the Pre-Funding Account, the Capitalized Interest Account and any other
account specified in the related Prospectus Supplement (including, unless
otherwise specified in the related Prospectus Supplement, all investments in
such accounts and all income from the funds therein and all proceeds thereof,
other than investment earnings on any account so specified in the related
Prospectus Supplement); (v) assignments of the security interests in the
Financed Vehicles and any accessions thereto; (vi) the right to proceeds from
physical damage, credit life and disability insurance policies, if any, covering
individual Financed Vehicles or Obligors, as the case may be; (vii) the rights
of the Trust under the Trust Documents; and (viii) any and all proceeds of the
foregoing.
Pursuant to agreements between CITSF and many of the Dealers, the Dealer
is obligated after origination to repurchase from CITSF recreation vehicle
contracts which do not meet certain representations and warranties made by such
Dealer. Such representations and warranties relate primarily to the origination
of the contracts and the perfection of the security interests in the related
recreation vehicles, and do not typically relate to the creditworthiness of the
related Obligors or the collectability of such Contracts. Unless otherwise
specified in the related Prospectus Supplement, any Dealer agreement with
respect to the Contracts will not be assigned by CITSF to the Company or by the
Company to the Trust. However, unless otherwise specified in the related
Prospectus Supplement, the Trust Documents will authorize CITSF to transfer a
Contract to a Dealer upon a repurchase by a Dealer pursuant to a Dealer
agreement and will require that any recovery of amounts with respect to a
Contract by CITSF pursuant to Dealer repurchase obligations be deposited in the
Collection Account for the related Trust in satisfaction of CITSF's repurchase
obligations under the Trust Documents to the extent, if any, that CITSF has not
already satisfied that obligation. In accordance with its customary servicing
practices and procedures, in determining whether to exercise any right of
recourse against a Dealer, CITSF considers the prior performance of the Dealer
and other business and commercial factors, including its own commercial
relationship with such Dealer. The assignments by the Dealers of Contracts to
CITSF do not generally provide for recourse to the Dealer for unpaid amounts in
the event of a default by an Obligor, other than in connection with the breach
of the Dealer's representations and warranties.
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THE CONTRACT POOL
Each pool of Contracts with respect to a Trust (a "Contract Pool") will
consist of retail installment sales contracts to finance the purchase of new and
used recreation vehicles and direct loans (collectively, the "Contracts"). The
Contracts will be originated or acquired by CITSF or its affiliates (including
CITCF-NY). Except as otherwise specified in the related Prospectus Supplement,
the Contracts will (i) be fully amortizing, (ii) bear interest at a fixed or
variable rate (the "Contract Rate"), and (iii) be Simple Interest Contracts or
Precomputed Contracts.
"Simple Interest Contracts" provide for the allocation of each payment
made thereunder to principal and interest in accordance with the "simple
interest" method. For Simple Interest Contracts, the principal balance of the
Contract is amortized over a series of equal monthly payments. Each monthly
interest payment is calculated by multiplying the outstanding principal balance
of the loan by the Contract Rate. Such product is then multiplied by a fraction,
the numerator of which is the number of days elapsed since the preceding payment
of interest was made and the denominator of which is either 365 or 360,
depending on applicable state law. Payments received on a Simple Interest
Contract are applied first to interest accrued to the date payment is received
and second to reduce the unpaid principal balance of the Contract. Accordingly,
if an Obligor makes a payment on the Contract less than 30 days after the
previous payment, the interest collected for the period since the preceding
payment was made will be less than 30 days' interest, and the amount of
principal repaid in such month will be correspondingly greater. Conversely, if
an Obligor makes a payment on the Contract more than 30 days after the previous
payment, the interest collected for the period since the preceding payment was
made will be greater than 30 days' interest, and the amount of principal repaid
in the month will be correspondingly reduced. As a result, based on the payment
characteristics of a particular Obligor, the principal due on the final due date
of a Simple Interest Contract may vary from the principal payment that would be
made if payments for such Contract were always made on their due dates.
If an Obligor pays more than one installment on a Simple Interest Contract
at a time, the regular installment will be treated as described above. However,
the entire amount of the additional installment or installments will be treated
as a principal payment and applied to reduce the principal balance of the
related Contract. The Obligor will not be required to make any payments on such
a Contract (a "Paid-Ahead Simple Interest Contract"), for the number of due
dates (the "Paid-Ahead Period") for which it has paid in advance the full
installment. However, during the Paid-Ahead Period interest will continue to
accrue on the principal balance of such Paid-Ahead Simple Interest Contract, as
reduced by the application of the early installment. As a result, when the
Paid-Ahead Period ends and the Obligor pays the next required installment, such
payment may be insufficient to cover the interest that has accrued since the
last payment by the Obligor. Notwithstanding such insufficiency, such Paid-Ahead
Simple Interest Contract would be considered to be current. This situation would
continue until the monthly installments are once again sufficient to cover all
accrued interest and to reduce the principal balance of the Contract. Depending
on the principal balance and Contract Rate of the related Contract and on the
number of installments paid in advance of their due dates, there may be extended
periods of time during which Simple Interest Contracts that are not amortizing
are considered current.
"Precomputed Contracts" provide for amortization of the loan over a series
of fixed level payment monthly installments. Each monthly installment, including
the monthly installment representing the final payment on the Contract, consists
of an amount of interest equal to 1/12th of the related Contract Rate multiplied
by the unpaid principal balance of the Contract, and an amount of principal
equal to the remainder of the monthly payment.
If an Obligor with respect to any Precomputed Contract, in addition to
making his or her regularly scheduled payment, makes one or more additional
scheduled payments in any Due Period (such Contract being a "Paid-Ahead
Precomputed Contract"), the additional scheduled payments made in such Due
Period will be deposited into the Paid-Ahead Account and applied on subsequent
Deposit Dates as described herein under "The Purchase Agreements and the Trust
Documents--Paid-Ahead Precomputed Contracts." Because paid-ahead amounts on
Paid-Ahead Precomputed Contracts are deposited into the Paid-Ahead Account, no
shortfalls of interest or principal will result therefrom.
Unless otherwise specified in the related Prospectus Supplement, each
Contract provides that an Obligor may prepay its Contract, in whole or in part,
at any time, without a prepayment premium.
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The Financed Vehicles will consist of motor homes, travel trailers and
other types of recreation vehicles. Motor homes are recreation camping and
travel vehicles built on or as an integral part of a self-propelled motor
vehicle chassis. A motor home may provide kitchen, sleeping and bathroom
facilities, is equipped with the ability to carry fresh water and sewage and may
be one of the following types:
Motor Home: The living unit has been constructed on a bare,
specially designed motor vehicle chassis.
Van Camper: A panel-type truck to which the manufacturer typically
adds any two of the following conveniences: sleeping, kitchen and toilet
facilities. The manufacturer also typically adds electrical hookup, water
storage, water hookup and top extension to provide more headroom.
Mini Motor Home: This unit is built on an automotive manufactured
van frame with an attached cab section typically having a gross vehicle
weight rating of 6,500 pounds or more, with an overall height of less than
eight feet. The manufacturer completes the body section containing the
living area and attaches it to the cab section.
Compact Motor Home: This unit is built on an automotive manufactured
cab and chassis typically having a gross vehicle weight rating of less
than 6,500 pounds. It may provide any or all of the features of the larger
units.
Travel trailers are trailers designed to be towed by a motorized vehicle
(e.g., automobile, van or pickup truck) and are of a size and weight that does
not require a special highway movement permit. A travel trailer is designed to
provide temporary living quarters for recreation, camping or travel use, does
not require permanent on-site hookup and may be one of the following types:
Conventional Travel Trailer: This unit ranges typically from 12 feet
to 35 feet in length, and is towed by means of a bumper or frame hitch
attached to the towing vehicle.
Park Trailer: These units are designed for seasonal or temporary
living. When set up, the unit may be connected to utilities necessary for
operation of installed fixtures and appliances. The unit is built on a
single chassis mounted on wheels. Park trailers are no more than 40 feet
in overall body length and no more than 12 feet in overall body width when
in the traveling mode. The unit is designed for set-up by persons without
special skills using only hand tools.
Fifth-Wheel Travel Trailer: This unit can be equipped in the same
way as the conventional travel trailer, but is constructed with a raised
forward section that allows a bi-level floor plan. This style is designed
to be towed by a vehicle equipped with a device known as a fifth-wheel
hitch.
Folding Camping Trailer: This is a portable unit mounted on wheels
and constructed with collapsible partial sidewalls which fold for towing
by another vehicle and unfold at the campsite to provide temporary living
quarters for recreation, camping or travel use.
Truck Camper: This is a portable unit designed to be loaded onto and
unloaded from the bed of a pickup truck, constructed to provide temporary
living quarters for recreation travel or camping use.
Certain detailed information regarding the Contract Pool as of the Initial
Cut-off Date or such other date specified therein for each Trust will be set
forth in the related Prospectus Supplement. If specific information with respect
to the Contract Pool is not known at the time the related series of Securities
initially is offered, more general information will be provided in the related
Prospectus Supplement, and specific information will be set forth in a report on
a Current Report on Form 8-K to be filed with the Commission within fifteen days
after the initial issuance of such Securities. A copy of the Trust Documents
with respect to each series of Securities will be attached to the Current Report
on Form 8-K and will be available for inspection at the corporate trust office
of the Owner Trustee specified in the related Prospectus Supplement. A schedule
of the Contract Pool relating to such series will be attached to the Trust
Documents delivered to the Owner Trustee upon delivery of the Securities.
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YIELD AND PREPAYMENT CONSIDERATIONS
Unless otherwise specified in the related Prospectus Supplement, each
Contract provides that it is prepayable, without premium, by the Obligor at any
time. Prepayments (or, for this purpose, equivalent payments to a Trust) also
may result from liquidations due to default, receipt of proceeds from insurance
policies, repurchases by CITSF due to breach of a representation or warranty or
breach of a covenant in the Trust Documents, or as a result of CITSF exercising
its option to purchase the Contract Pool. See "The Purchase Agreements and the
Trust Documents." The rate of prepayments on the Contracts may be influenced by
a variety of economic, social and other factors. No assurance can be given that
prepayments on the Contracts will conform to any estimated or actual historical
experience, and no prediction can be made as to the actual prepayment rates
which will be experienced on the Contracts. Certificateholders and Noteholders
will bear all reinvestment risk resulting from the timing of payments of
principal on the Certificates or the Notes, as the case may be.
POOL FACTORS
Unless otherwise specified in the related Prospectus Supplement, the
"Certificate Pool Factor" for each class of Certificates, if any, is a
seven-digit decimal which the Servicer will compute each month indicating the
remaining Certificate Balance as of the Distribution Date, as a fraction of the
Original Certificate Balance. The Certificate Pool Factor will be 1.0000000 as
of the Initial Cut-off Date, and thereafter will decline to reflect reductions
in the outstanding principal balance of the Certificates. A Certificateholder's
portion of the aggregate outstanding Certificate Balance is the product of (i)
the original denomination of the Certificateholder's Certificate and (ii) the
Certificate Pool Factor.
Unless otherwise specified in the related Prospectus Supplement, the "Note
Pool Factor" for each class of Notes, if any, is a seven-digit decimal which the
Servicer will compute each month indicating the remaining outstanding principal
balance of the Notes as of the Distribution Date, as a fraction of the initial
outstanding principal balance of the Notes. The Note Pool Factor will be
1.0000000 as of the Initial Cut-off Date, and thereafter will decline to reflect
reductions in the outstanding principal balance of the Notes. A Noteholder's
portion of the aggregate outstanding principal balance of the Notes is the
product of (i) the original denomination of the Noteholder's Note, and (ii) the
Note Pool Factor.
With respect to each Trust and pursuant to the related Trust Documents,
unless otherwise specified in the related Prospectus Supplement, on each
Distribution Date, the Securityholders will receive monthly reports concerning
the payments received on the Contracts, the Pool Balance, the Certificate Pool
Factor, if any, the Note Pool Factor, if any, and various other items of
information. Securityholders of record (which in most cases will be Cede) during
any calendar year will be furnished information for tax reporting purposes not
later than the latest date permitted by law. Certificate Owners, if any, and
Note Owners, if any, may receive such reports, upon written request, together
with a certification that they are Certificate Owners or Note Owners, as the
case may be, and payment of any expenses associated with the distribution of
such reports, from the Owner Trustee and the Indenture Trustee (if any) at the
addresses specified in the related Prospectus Supplement. See "Certain
Information Regarding the Securities--Statements to Securityholders."
USE OF PROCEEDS
Unless otherwise specified in the related Prospectus Supplement, the
Company will sell the Initial Contracts to a Trust concurrently with the sale of
the Securities and the net proceeds from the sale of the Securities will be
applied by such Trust to the purchase of the Initial Contracts, to the payment
of certain expenses connected with pooling the Contracts and issuing the
Securities, to the deposit of the Pre-Funded Amount in the Pre-Funding Account,
if any, to the deposit of the initial amount into the Capitalized Interest
Account, if any, and to the deposit of the initial amount, if any, into a
Reserve Fund, if any. Such net proceeds less the payment of such expenses, the
Pre-Funded Amount, if any, and the initial deposit into the Capitalized Interest
Account, if any, and the Reserve Fund, if any, represent the purchase price paid
by a Trust to the Company for the sale of the Initial Contracts to such
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Trust. Such amount will be determined as a result of the pricing of the
Securities, through the offering described in the related Prospectus Supplement.
The net proceeds to be received by the Company from the sale of the Initial
Contracts to a Trust will be paid by the Company to CITSF as the purchase price
for the Contracts and will be added to CITSF's general funds and will be
available for general corporate purposes, including the purchase of new
recreation vehicle installment sales contracts and the payment of the purchase
price to CITCF-NY for any Contracts acquired by CITSF from CITCF-NY.
THE CIT GROUP, INC.
CIT, a Delaware corporation, is a leading diversified finance organization
with over $26 billion of managed assets at December 31, 1998. 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 three business segments conducted through strategic
business units: (i) equipment financing and leasing, which is comprised of
Equipment Financing (equipment financing and leasing) and Capital Finance
(commercial aircraft and rail equipment financing and leasing), (ii) commercial
finance, which is comprised of Commercial Services (secured financing and
factoring), Business Credit (secured financing to middle-market and larger-sized
businesses) and Credit Finance (secured financing to smaller-sized and
middle-market businesses) and (iii) consumer, which is comprised of Consumer
Finance (home equity) and Sales Financing (recreation vehicle, manufactured
housing and recreational boat financing). These strategic business units offer
products and services designed to satisfy the financing needs of specific
customers, industries and markets.
On March 8, 1999, CIT announced that it would acquire Newcourt Credit
Group, Inc. ("Newcourt") in an exchange of common stock. Under the terms of the
transaction, which will be accounted for on a purchase basis, 0.92 shares of
CIT's common stock will be exchanged for each outstanding share of Newcourt
common stock. The transaction is expected to close during the third quarter of
1999, and is conditioned upon, among other things, regulatory and shareholder
approval. Newcourt is headquartered in Toronto, Canada and its stock is traded
on the New York and Toronto Stock Exchanges.
In November 1998, CIT's majority stockholder, The Dai-Ichi Kangyo Bank,
Limited ("DKB"), sold 55,000,000 shares of Class A Common Stock in a secondary
public offering (the "Secondary Offering") for which it received all the
proceeds. Prior to the sale, DKB converted all of its Class B Common Stock into
an identical number of shares of Class A Common Stock, which is now the only
class of common stock outstanding. DKB held 94.4% of the combined voting power
and 77.2% of the economic interest of all of CIT's outstanding common stock
prior to the sale. At December 31, 1998, DKB held 43.8% of the voting power and
economic interest of CIT's outstanding common stock.
In November 1997, CIT issued 36,225,000 shares of Class A Common Stock in
an initial public offering (the "IPO"). Prior to the IPO, DKB owned 80% of CIT's
issued and outstanding stock, and The Chase Manhattan Corporation ("Chase")
owned the remaining 20% common stock interest. DKB had an option expiring
December 15, 2000 to purchase the remaining 20% common stock interest from
Chase. In November 1997, CIT purchased DKB's option at its fair market value,
exercised the option to purchase the stock held by Chase and recapitalized by
converting the outstanding common stock to 157,500,000 shares of Class B Common
Stock. Twenty percent of the Class B Common Stock shares (which had five votes
per share) were converted to Class A Common Stock shares (which had one vote per
share) and, in addition to an underwriter's overallotment option, were issued in
the IPO. The issuance of Class A Common Stock pursuant to the underwriter's
overallotment resulted in an increase to stockholders' equity of $117.7 million.
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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."
Unless CIT has issued a Limited Guarantee with respect to any Series of
Securities, CIT will have no obligations or liabilities with respect to any
Series of Securities.
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 Contract Pool in a privately negotiated
transaction from CITSF.
Unless otherwise specified in the related Prospectus Supplement, neither
CIT nor any of its affiliates, including the Company and CITSF, will be
obligated with respect to the Securities. Accordingly, the Company has
determined that financial statements of CITSF and the Company are not material
to the offering of the Securities.
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 sales
contracts for recreation vehicles, manufactured housing, recreational boat
products and other consumer goods throughout the United States. CITSF has been a
lender to the recreation vehicle industry for more than 30 years. CITSF has a
centralized asset service facility (the "Asset Service Center") in Oklahoma
City, Oklahoma. Working through Dealers and manufacturers, CITSF offers retail
installment credit. In addition to purchasing recreation vehicle contracts from
Dealers on an individual basis, CITSF makes bulk purchases of recreation vehicle
contracts. These bulk purchases may be from the portfolios of other lending
institutions or finance companies, the portfolios of governmental agencies or
instrumentalities or the portfolios of other entities that purchase and hold
recreation vehicle contracts.
The Asset Service Center of CITSF services consumer credit transactions in
50 states and the District of Columbia. It provides servicing for recreation
vehicle, home equity, recreational boat and manufactured housing retail
installment contracts. The servicing portfolio includes both loans originated or
purchased by CITSF, as well as loans originated or purchased by CITSF and
subsequently securitized with servicing retained. The servicing portfolio also
includes loans owned by third parties that are serviced by CITSF for a fee on a
"contract" basis. The Asset Service Center is supplemented by outside collectors
and field remarketers located throughout the United States.
CITSF's general policies with regard to the origination of recreation
vehicle installment sale contracts are described under "--Contract Origination"
and "--CITSF's Underwriting Guidelines." See "--Servicing" for a description of
certain of CITSF's servicing policies.
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CONTRACT ORIGINATION
Although CITSF does purchase recreation vehicle installment sale contracts
in bulk from other lenders, unless otherwise specified in the related Prospectus
Supplement, all of the Contracts in the Contract Pool have been originated by
CITSF or CITCF-NY through the purchase of such Contracts from Dealers.
Through its Regional Business Centers, CITSF arranges to purchase
recreation vehicle contracts from recreation vehicle Dealers located throughout
the United States. New business development officers contact the Dealers located
in their territories and explain CITSF's available financing plans, terms,
prevailing rates and credit and financing policies. If the Dealer wishes to use
CITSF's available customer financing, the Dealer must make an application for
Dealer approval. Upon satisfactory results of CITSF's investigation of the
Dealer's creditworthiness and general business reputation, CITSF and the Dealer
execute a Dealer agreement. In addition, CITSF purchases portfolios of
recreation vehicle contracts from other lending institutions or finance
companies.
Contracts that CITSF purchases from Dealers (as opposed to portfolios of
contracts purchased from other lenders) are purchased on an individually
approved basis in accordance with CITSF's underwriting guidelines.
If CITSF believes that an obligor on a recreation vehicle contract
(including one of the Contracts) is likely to refinance the contract as a result
of interest rate changes or other reasons, CITSF may in its discretion attempt
to retain such obligor as a customer by soliciting the obligor to refinance the
contract with CITSF.
CITSF'S UNDERWRITING GUIDELINES
All recreation vehicle contracts that are purchased by CITSF from Dealers
are written on forms provided or approved by CITSF and are purchased on an
individually approved basis. With respect to each retail recreation vehicle
contract to be purchased from a Dealer, CITSF's general practice is to have the
Dealer submit the customer's credit application, manufacturer's invoice (if the
contract is for a new vehicle) and certain other information relating to the
contract to the applicable Regional Business Center.
All credit applications are entered into an application processing system.
All applications are reviewed to determine the creditworthiness of the customer
and to evaluate certain other aspects of the proposed transaction. During 1997,
CITSF installed a new application processing system designed to enhance
productivity and provide greater control over the quality of credits approved
through the use of "decision rules" that alert analysts to further investigate
certain conditions. The new system also requires the proper level of authority
to approve transactions over an individual's dollar limits. CITSF's underwriting
guidelines require, and have required, a credit officer at a Regional Business
Center with the appropriate level of credit authority to approve an applicant's
credit history, residence history, employment history and debt-to-income payment
ratio before credit is extended. Although, with respect to these criteria, CITSF
has, and has had, certain minimum requirements, as described below, CITSF's
management does not believe that these minimum requirements are themselves
generally sufficient to warrant credit approval of an applicant. Thus, there
were and are no requirements on the basis of which, if they are met, credit is
routinely approved without review by a credit officer. Based on credit score and
other risk factors, each applicant is either approved, declined or, if
necessary, referred to a credit officer with a higher credit authority.
The retail customer generally has had a stable residence, employment and
credit history, a minimum of two years in his or her present job, a debt ratio
(the ratio of total installment debt and housing expenses to gross monthly
income) of 40% or less, a down payment of at least 10% and an overall favorable
credit profile. Approval of retail customers that do not meet the
above-described retail customer profile is considered by the appropriate level
credit officer, on a case by case basis. Such approval, if granted, is based on
the applicant's length and likelihood of continued employment, ability to pay,
and a review of the applicants' paying habits. No guarantors, endorsers or
co-signers are considered in determining whether to accept or reject an
application. The maximum amount CITSF will advance to such targeted customers is
(i) generally in the case of a new financed vehicle, 100% of the unpaid cash
balance, not to exceed 110% of the manufacturer's invoice price (on an exception
basis, discretionary credit approval may permit advances up to 130% of
manufacturer's invoice price) plus taxes, fees and insurance, and (ii) in the
case of a used financed vehicle, 100% of the unpaid cash balance, not to exceed
110% of the wholesale value
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as determined by the Kelly blue book or the NADA Guide book. Funding of a
contract is authorized after verification of the conditions of approval of the
application and the Dealer warrants delivery of the related recreation vehicle.
In August 1994, CITSF's credit criteria were changed to permit greater
reliance on credit scores and overall evaluation instead of using specific
disqualifying criteria (e.g., a minimum of two years of employment). The
interest rate charged on each recreation vehicle contract originated since
August 1994 reflects CITSF's evaluation of the relative risk associated with an
individual's application.
The credit review and approval practices of each Regional Business Center
are subject to internal reviews and internal audits that, through sampling,
examine the nature of the verification of credit histories, residence histories,
employment histories, debt ratios of the applicants and evaluate the credit
risks associated with the contracts purchased through such regional office by
rating the obligors on such contracts according to their credit histories,
employment histories, debt ratios and housing ratios.
SERVICING
Through its Asset Service Center, CITSF services recreation vehicle,
manufactured housing, recreational boat, home equity, and other consumer loans.
CITSF services all of the recreation vehicle contracts it originates or
purchases, whether on an individual basis or in bulk (except those it has sold
to third parties on a servicing released basis). CITSF is actively seeking
arrangements pursuant to which it will service recreation vehicle contracts held
by other entities, including contracts which were not purchased by CITSF or sold
to such other entities by CITSF. Generally, such servicing responsibilities are,
and would be, also carried out through the Asset Service Center. Servicing
responsibilities include collecting principal and interest payments, taxes,
insurance premiums, where applicable, and other payments from obligors and,
where such contracts have been sold, remitting principal and interest payments
to the holders thereof, to the extent such holders are entitled thereto.
Collection procedures include repossession and resale of recreation vehicles
securing defaulted contracts and, if deemed advisable by CITSF, entering into
workout arrangements with obligors under certain defaulted contracts. Although
decisions as to whether to repossess any recreation vehicle are made on an
individual basis, CITSF's general policy is to institute repossession procedures
promptly after Asset Service Center personnel determine that it is unlikely that
a defaulted contract will be brought current, and thereafter to diligently
pursue the resale of such recreation vehicles if the market is favorable. The
Asset Service Center has developed a nationwide auction network to facilitate
resale efforts on such repossessions.
DELINQUENCY AND LOAN LOSS EXPERIENCE
Each Prospectus Supplement will include information on CITSF's loss and
delinquency experience with respect to its servicing portfolio of recreation
vehicle contracts. However, there can be no assurance that such experience will
be indicative of the performance of the Contracts included in a particular
Contract Pool. Unless otherwise specified in the related Prospectus Supplement,
the tables setting forth the delinquency experience for the portfolio of
recreation vehicle contracts originated and serviced by CITSF will exclude
contracts acquired by CITSF through portfolio purchases and contracts in
repossession.
THE CERTIFICATES
GENERAL
A series of Securities may include one or more classes of Asset-Backed
Certificates (the "Certificates") issued pursuant to the Trust Documents to be
entered into among the Seller, the Servicer, and the Owner Trustee, forms of
which have been filed as exhibits to the Registration Statement of which this
Prospectus forms a part. Payments in respect of the Certificates will be
subordinated to payments on the Notes, if any, to the extent described in the
related Prospectus Supplement. The following summary describes certain terms of
the Certificates and the Trust Documents. The summary does not purport to be
complete and is subject to, and is qualified in its entirety by
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reference to, all of the provisions of the Certificates and the Trust Documents,
and the following summary will be supplemented in whole or in part by the
related Prospectus Supplement. Where this summary refers to particular
provisions or terms used in the Trust Documents, the actual provisions
(including definitions of terms) are incorporated by reference as part of such
summary.
The Certificates will be issued in the minimum denominations and integral
multiples in excess thereof specified in the related Prospectus Supplement;
provided, however, that one Certificate of each series may be issued in a
denomination other than such integral multiple such that the applicable
Affiliated Owner specified in the related Prospectus Supplement, if any, may be
issued at least the portion of the Original Certificate Balance specified in the
related Prospectus Supplement. If specified in the related Prospectus
Supplement, the Company or one of its affiliates will own the entire beneficial
interest in the Trust. Unless otherwise specified in the related Prospectus
Supplement, the Certificates will be issued in book-entry form only. Unless
otherwise specified in the related Prospectus Supplement, each class of the
Certificates will initially be represented by a single Certificate registered in
the name of the nominee of DTC, except as provided below. Unless otherwise
specified in the related Prospectus Supplement, DTC's nominee will be Cede & Co.
("Cede"). No person acquiring an interest in the Certificates through the
facilities of DTC (a "Certificate Owner") will be entitled to receive a
Certificate representing such person's interest in the Certificates, except as
set forth under "Certain Information Regarding The Securities--Definitive
Securities." Unless and until Definitive Certificates are issued under the
limited circumstances described in the related Prospectus Supplement and herein,
all references to actions by Certificateholders shall refer to actions taken by
DTC upon instructions from its Participants, and all references herein to
distributions, notices, reports and statements to Certificateholders shall refer
to distributions, notices, reports and statements to DTC in accordance 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
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Date, the Due Period will be the calendar month preceding the month of such
Distribution Date. Unless otherwise specified in the related Prospectus
Supplement, payments on the Certificates on each Distribution Date will be made
to the holders of record of the related Certificates on the day immediately
preceding such Distribution Date or, in the event Definitive Certificates have
been issued, at the close of business of the last day of the month immediately
preceding the month in which such Distribution Date occurs (each, a "Record
Date"). A "Business Day" is any day other than a Saturday, Sunday or any day on
which banking institutions or trust companies in the states of New York,
Oklahoma and such other states (if any) specified in the related Prospectus
Supplement are authorized or required by law, regulation or executive order to
be closed.
THE NOTES
GENERAL
A series of Securities may include one or more classes of Asset-Backed
Notes (the "Notes" and, together with the Certificates, the "Securities") issued
pursuant to an Indenture (as amended and supplemented from time to time, the
"Indenture") between a Trust and an Indenture Trustee specified in the related
Prospectus Supplement (the "Indenture Trustee"), a form of which has been filed
as an exhibit to the Registration Statement of which this Prospectus forms a
part. The following summary does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, all of the provisions of the
Notes and the Indenture, and the following summary will be supplemented in whole
or in part by the related Prospectus Supplement. Where this summary refers to
particular provisions or terms used in the Indenture, the actual provisions
(including definitions of terms) are incorporated by reference as part of such
summary.
The Notes will be issued in the minimum denominations and integral
multiples in excess thereof specified in the related Prospectus Supplement;
provided, however, that one Note of each class of each series may be issued in a
denomination other than such integral multiple. Unless otherwise specified in
the related Prospectus Supplement, the Notes will be issued in book-entry form
only. Unless otherwise specified in the related Prospectus Supplement, each
class of Notes will initially be represented by a single Note registered in the
name of Cede, the nominee of DTC, except as provided below. No person acquiring
an interest in the Notes through the facilities of DTC (a "Note Owner" and,
together with a Certificate Owner, a "Security Owner") will be entitled to
receive a Note representing such person's interest in the Notes, except as set
forth under "Certain Information Regarding the Securities--Definitive
Securities" and such persons will hold their interests in the Notes through DTC
in the United States or Cedel or Euroclear in Europe. Unless and until
Definitive Notes are issued under the limited circumstances described in the
related Prospectus Supplement and herein, all references to actions by
Noteholders shall refer to actions taken by DTC upon instructions from its
Participants, and all references in the related Prospectus Supplement and herein
to distributions, notices, reports and statements to Noteholders shall refer to
distributions, notices, reports and statements to DTC in accordance with DTC
procedures. See "Certain Information Regarding the Securities--Definitive
Securities." If specified in the related Prospectus Supplement, one or more
classes of Notes will be issued and sold privately.
PAYMENT OF PRINCIPAL AND INTEREST ON THE NOTES
The timing and priority of payment, seniority, allocations of loss,
Interest Rate and amount of or method of determining payments of principal and
interest on each class of Notes will be described in the related Prospectus
Supplement. The right of holders of any class of Notes to receive payments of
principal and interest may be senior or subordinate to the rights of holders of
any class or classes of Notes of such series, or any class of Certificates, as
described in the related Prospectus Supplement. Unless otherwise provided in the
related Prospectus Supplement, payments of interest on the Notes will be made
prior to payments of principal thereon. A series may include one or more classes
of Stripped Notes entitled to (i) principal payments with disproportionate,
nominal or no interest payment, or (ii) interest payments with disproportionate,
nominal or no principal payments. Each class of Notes may have a different
Interest Rate, which may be a fixed, variable or adjustable Interest Rate (and
which may be zero for certain classes of Stripped Notes), or any combination of
the foregoing. The related Prospectus Supplement will specify the Interest Rate
for each class of Notes, or the initial Interest Rate and the method for
determining the
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Interest Rate. One or more classes of Notes of a series may be redeemable under
the circumstances specified herein and in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, payments
in respect of interest to Noteholders of all classes within a series will have
the same priority. Under certain circumstances, the amount available for such
payments could be less than the aggregate amount of interest payable on the
Notes on any of the dates specified for payments in the related Prospectus
Supplement, in which case each class of Noteholders will receive its ratable
share (based upon the aggregate amount of interest due to such class of
Noteholders) of the aggregate amount then available to be distributed in respect
of interest on the Notes. In the case of a series of Securities which includes
two or more classes of Notes, the sequential order and priority of payment in
respect of principal and interest, and any schedule or formula or other
provisions applicable to the determination thereof, of each such class will be
set forth in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, payments
of interest and principal on the Notes will be made on each Distribution Date,
commencing on the date specified in the related Prospectus Supplement. Unless
otherwise specified in the related Prospectus Supplement, with respect to any
Distribution Date, the Due Period will be the calendar month preceding the month
of such Distribution Date. Unless otherwise specified in the related Prospectus
Supplement, payments on the Notes on each Distribution Date will be made to the
holders of record of the related Notes on the related Record Date.
THE INDENTURE
A form of Indenture has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. CITSF will provide a copy of
the applicable Indenture (without exhibits) upon request to a holder of Notes
issued thereunder.
Modification of Indenture without Noteholder Consent. With respect to each
Trust, the Issuer and the related Indenture Trustee may, without consent of the
Noteholders, enter into one or more supplemental indentures for any of the
following purposes: (i) to correct or amplify the description of the collateral
or add additional collateral; (ii) to provide for the assumption of the Notes
and the Indenture obligations by a permitted successor to the Trust; (iii) to
add additional covenants for the benefit of the related Noteholders, or to
surrender any rights or power conferred upon the Trust; (iv) to convey,
transfer, assign, mortgage or pledge any property to or with the Indenture
Trustee; (v) to cure any ambiguity or correct or supplement any provision which
may be inconsistent with any other provision; (vi) to provide for the acceptance
of the appointment of a successor Indenture Trustee or to add to or change any
provision as shall be necessary and permitted to facilitate the administration
by more than one trustee; (vii) to modify, eliminate or add any provision in
order to comply with the Trust Indenture Act of 1939, as amended; or (viii) to
add, change in any manner, or eliminate any provision, or modify in any manner
the rights of Noteholders; provided that any action specified in this clause
(viii) shall not, as evidenced by an opinion of counsel, adversely affect in any
material respect the interests of any Noteholder unless Noteholder consent is
otherwise obtained as described in the Indenture. Any action specified in clause
(viii) shall be taken only upon satisfaction of the Rating Agency Condition.
"Rating Agency Condition" with respect to any action means the condition that
the Rating Agency or Agencies specified in the related Prospectus Supplement
shall have notified the Seller, the Servicer and the Issuer in writing that such
action will not result in the downgrade or withdrawal of the then current
ratings of the Securities.
Modification of Indenture with Noteholder Consent. With respect to each
Trust, with the consent of the holders of not less than a majority of the
aggregate outstanding principal amount of the Notes, and with prior notice to
the Rating Agencies, the Issuer and the Indenture Trustee may execute a
supplemental indenture to add provisions to, change in any manner or eliminate
any provisions of, the Indenture, or modify in any manner the rights of the
related Noteholders.
Without the consent of the holder of each outstanding related Note
affected thereby, however, no supplemental indenture may: (i) change the due
date of any installment of principal of or interest on any Note or reduce the
principal amount thereof, the interest rate specified thereon or the redemption
price with respect thereto or change
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any place of payment where or the coin or currency in which any Note or any
interest thereon is payable; (ii) impair the right to institute suit for the
enforcement of certain provisions of the Indenture regarding payment; (iii)
reduce the percentage of the aggregate principal amount of the outstanding Notes
the consent of the holders of which is required for any such supplemental
indenture or the consent of the holders of which is required for any waiver of
compliance with certain provisions of the Indenture or of certain defaults
thereunder and their consequences as provided for in the Indenture; (iv) modify
or alter the provisions of the Indenture regarding the voting of Notes held by
the related Trust, any other obligor on the Notes, the Seller or an affiliate of
any of them; (v) reduce the percentage of the aggregate outstanding amount of
the Notes the consent of the holders of which is required to direct the
Indenture Trustee to sell or liquidate the Contracts if the proceeds of such
sale would be insufficient to pay the principal amount and accrued but unpaid
interest on the outstanding Notes; (vi) decrease the percentage of the aggregate
principal amount of the Notes required to amend the sections of the Indenture
which specify the applicable percentage of aggregate principal amount of the
Notes necessary to amend the Indenture or certain other related agreements; or
(vii) permit the creation of any lien ranking prior to or on a parity with the
lien of the Indenture with respect to any of the collateral for the Notes or,
except as otherwise permitted or contemplated in the Indenture, terminate the
lien of the Indenture on any such collateral or deprive the holder of any Note
of the security afforded by the lien of the Indenture.
Events of Default; Rights Upon Event of Default. With respect to each
Trust, unless otherwise specified in the related Prospectus Supplement, "Events
of Default" under the Indenture will consist of: (i) any failure to pay interest
on any Note as and when the same becomes due and payable, which failure
continues unremedied for five days; (ii) except as set forth in (iv) below, any
failure to make any installment of the principal of any Note as and when the
same becomes due and payable which failure continues unremedied for thirty days
after the giving of written notice of such failure to the Issuer and the Seller
(or the Servicer, as applicable) by the Indenture Trustee or to the Issuer and
the Seller (or the Servicer, as applicable) and the Indenture Trustee by the
holders of not less than 25% of the aggregate outstanding principal amount of
the Controlling Notes; (iii) any default in the observance or performance in any
material respect of any other covenants or agreements in the Indenture, which
failure materially and adversely affects the rights of Noteholders, and which
failure continues unremedied for thirty days after the giving of written notice
of such failure to the Issuer and the Seller (or the Servicer, as applicable) by
the Indenture Trustee or to the Issuer and the Seller (or the Servicer, as
applicable) and the Indenture Trustee by the holders of not less than 25% of the
aggregate outstanding principal amount of the Controlling Notes; (iv) any
failure to pay in full the outstanding principal balance of any Notes on or
prior to the Note Final Scheduled Distribution Date; and (v) certain events of
insolvency, readjustment of debt, marshaling of assets and liabilities or
similar proceedings and certain actions by the Trust indicating its insolvency,
reorganization pursuant to bankruptcy proceedings or inability to pay its
obligations. However, unless otherwise specified in the related Prospectus
Supplement, the amount of principal required to be paid to Noteholders under the
Indenture will generally be limited to amounts available to be deposited in the
Note Distribution Account. Therefore, unless otherwise specified in the related
Prospectus Supplement, the failure to pay principal on a class of Notes
generally will not result in the occurrence of an Event of Default until the
Note Final Scheduled Distribution Date for such class of Notes.
Unless otherwise specified in the related Prospectus Supplement, if an
Event of Default should occur and be continuing with respect to the Notes of any
series, the related Indenture Trustee or holders of not less than a majority in
aggregate outstanding principal amount of the Controlling Notes may declare the
principal of the Notes to be immediately due and payable. Such declaration may,
under certain circumstances, be rescinded by the holders of not less than a
majority of the aggregate outstanding principal amount of such Controlling
Notes.
"Controlling Notes" means (i) if there is only one class of Notes, such
class of Notes and (ii) if there is more than one class of Notes (a) all classes
of the most senior class of Notes then outstanding voting together as a single
class until such class of Notes have been paid in full, and (b) from and after
the payment in full of such senior class of Notes then outstanding, all classes
of the next most senior class of Notes voting together as a single class until
such class of Notes have been paid in full.
Unless otherwise specified in the related Prospectus Supplement, if the
Notes of any series are due and payable following an Event of Default with
respect thereto, the related Indenture Trustee may institute proceedings to
collect amounts due or foreclose on Trust property, exercise remedies as a
secured party under the related Contracts, sell
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the related Contracts or elect to have the Trust maintain possession of such
Contracts and continue to apply collections on such Contracts as if there had
been no declaration of acceleration. Unless otherwise specified in the related
Prospectus Supplement, the Indenture Trustee, however, is prohibited from
selling the related Contracts following an Event of Default, unless (i) the
holders of all the outstanding related Notes consent to such sale, (ii) the
proceeds of such sale are sufficient to pay in full the principal of and the
accrued interest on such outstanding related Notes at the date of such sale, or
(iii) the Indenture Trustee determines that the proceeds of the Contracts would
not be sufficient on an ongoing basis to make all payments on the Notes as such
payments would have become due if such obligations had not been declared due and
payable, and the Indenture Trustee obtains the consent of the holders of not
less than 66 2/3% of the aggregate outstanding principal amount of the
Controlling Notes. Unless otherwise specified in the related Prospectus
Supplement, following a declaration upon an Event of Default that the Notes are
immediately due and payable, (i) Noteholders will be entitled to ratable
repayment of principal on the basis of their respective unpaid principal
balances, and (ii) repayment in full of the accrued interest on and unpaid
principal balances of the Notes will be made prior to any further payment of
interest on the Certificates or in respect of the Certificate Balance (other
than payments of the "Principal Liquidation Loss Amount" (as defined in the
related Prospectus Supplement) and other payments from the Enhancement (if any)
applicable to the Certificates).
Subject to the provisions of the Indenture relating to the duties of the
Indenture Trustee, if an Event of Default occurs and is continuing with respect
to a series of Notes, the Indenture Trustee will be under no obligation to
exercise any of the rights or powers under the Indenture at the request or
direction of any of the holders of such Notes, if the Indenture Trustee
reasonably believes it will not be adequately indemnified against the costs,
expenses and liabilities which might be incurred by it in complying with such
request. Subject to the provisions for indemnification and certain limitations
contained in the Indenture, the holders of not less than a majority in aggregate
outstanding principal amount of the Controlling Notes will have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Indenture Trustee and the holders of not less than a majority
in aggregate outstanding principal amount of such Controlling Notes may, in
certain cases, waive any past default with respect thereto, except a default (i)
in the payment of principal of or interest on any of the Notes or (ii) in
respect of a covenant or provision of the Indenture that cannot be modified or
amended without the consent of the holder of each Note.
No holder of a Note of any series will have the right to institute any
proceeding with respect to the related Indenture, unless (i) such holder
previously has given to the Indenture Trustee written notice of a continuing
Event of Default, (ii) the holders of not less than 25% in aggregate outstanding
principal amount of the Controlling Notes have made written request of the
Indenture Trustee to institute such proceeding, (iii) such holder or holders
have offered the Indenture Trustee reasonable indemnity, (iv) the Indenture
Trustee has for sixty days after its receipt of such notice, request and offer
of indemnity failed to institute such proceeding, and (v) no direction
inconsistent with such written request has been given to the Indenture Trustee
during such sixty-day period by the holders of not less than a majority in
aggregate outstanding principal amount of such Controlling Notes.
If an Event of Default occurs and is continuing and if it is known to the
Indenture Trustee, the Indenture Trustee will mail to each Noteholder notice of
the Event of Default within ninety days after it occurs. Except in the case of a
failure to pay principal of or interest on any Note, the Indenture Trustee may
withhold the notice if and so long as it determines in good faith that
withholding the notice is in the interests of Noteholders.
In addition, each Indenture Trustee and the related Noteholders, by
accepting the related Notes, will covenant that they will not, for a period of
one year and one day after the termination of the Indenture, institute against
the Affiliated Owner, if any, the Company or the related Trust any bankruptcy,
reorganization or other proceeding under any federal or state bankruptcy or
similar law.
Neither the Indenture Trustee in its individual capacity nor the Owner
Trustee in its individual capacity, nor any holder of a Certificate including,
without limitation, the Affiliated Owner (if any) or the Company, nor any of
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 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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Reserve Fund or Reserve Account. If so specified in the related Prospectus
Supplement, an account (a "Reserve Fund" or "Reserve Account") may be
established and funded by any combination of cash, one or more irrevocable
letters of credit, Eligible Investments, one or more derivative products,
amounts otherwise distributable to one or more classes of Securityholders or to
the owners of any Retained Yield, or any other instrument satisfactory to the
Rating Agency or Agencies. A Reserve Fund may be funded from the Available
Amount remaining on each Distribution Date after all amounts then due have been
paid to the Securityholders, the Servicer, and any provider of Enhancement. In
addition, with respect to any series of Securities as to which Enhancement
includes a letter of credit or a derivative product, if so specified in the
related Prospectus Supplement, under certain circumstances the remaining amount
of the letter of credit may be drawn by the Owner Trustee or the termination
payment under a derivative product may be demanded by the Owner Trustee, and in
each case deposited in a Reserve Fund. Funds in a Reserve Fund will be applied,
invested and maintained in the manner and under the conditions specified in such
Prospectus Supplement. Amounts in a Reserve Fund may be distributed to
Securityholders, applied to reimburse the Servicer for outstanding advances, or
may be used for other purposes, in the manner and to the extent specified in the
related Prospectus Supplement. In the event that a Reserve Fund is funded
through the application of the Available Amount remaining on each Distribution
Date after all amounts then due have been paid to the Securityholders, the
Servicer and any provider of Enhancement, it may be referred to as a "Spread
Account" or "Reserve Account." In the event that a Reserve Fund is applied to
supplement the monthly interest payments on certain Contracts in the Contract
Pool, it may be referred to as a "Yield Supplement Account." In the event that
the Reserve Fund is funded through the proceeds of a loan to the Trust by a
third party lender, it may be referred to as a "Cash Collateral Account." The
related Prospectus Supplement will specify whether any Reserve Fund will be
established as part of the Trust or held outside the Trust by a collateral agent
or similar third party (who may be a Trustee acting in a different capacity).
The related Prospectus Supplement will describe the required levels of funding
of a Reserve Fund, the circumstances under which a Reserve Fund may be applied
to make distributions on a class of Securities, and the circumstances in which
funds in a Reserve Fund may be released to persons other than Securityholders. A
Trust may contain more than one Reserve Fund, each of which may apply only to a
specified class of Securities or to specified Contracts.
The Seller or the Affiliated Owner, if any, may at any time, without
consent of the Securityholders, sell, transfer, convey or assign in any manner
its rights to and interests in distributions from the Reserve Fund provided that
(i) the Rating Agency Condition is satisfied, (ii) the Seller or the Affiliated
Owner, as the case may be, provides to the Trustees an opinion from independent
counsel that such action will not cause the related Trust to be classified as an
association (or publicly traded partnership) taxable as a corporation for
federal income tax purposes, and (iii) such transferee or assignee agrees in
writing to take positions for federal income tax purposes consistent with the
federal income tax positions agreed to be taken by the Seller or the Affiliated
Owner, as the case may be.
Limited Guarantee. If specified in the related Prospectus Supplement,
certain payments on a class of the Securities of a series, certain deficiencies
in principal or interest payments on the Contracts, or certain liquidation
losses on the Contracts, may be covered by a limited guarantee or other similar
instrument (the "Limited Guarantee"), limited in scope and amount, issued by
CIT. If not so specified, the Securityholders will have no recourse to CIT for
any amounts due on the Securities. If so specified, CIT may be obligated to take
one or more of the following actions in the event the Company fails to do so:
make deposits to an account, make advances, or purchase defaulted Contracts. Any
such Limited Guarantee will be limited in amount and a portion of the coverage
of any such Limited Guarantee may be separately allocated to certain events. The
scope, amount and, if applicable, the allocation of any Limited Guarantee will
be described in the related Prospectus Supplement.
Credit Facility. With respect to a series of Securities, one or more
classes may be entitled to the benefit of one or more letters of credit,
guarantees, limited guarantees, surety bonds or similar credit facilities (each,
a "Credit Facility"). Each such Credit Facility may be in an amount greater
than, equal to or less than the Certificate Balance of the Certificates of each
class (or the principal balance of the Notes of each class) entitled to the
benefits thereof, and may be subject to reduction or be limited as to duration,
all as described in the related Prospectus Supplement. To the extent specified
in the related Prospectus Supplement, amounts realized under a Credit Facility
supporting any class of Securities may be used for the same purposes as amounts
on deposit in a Reserve Fund. A Credit Facility may be held by a Trustee as part
of the related Trust or may be held by a collateral agent or other third party
(who may be a Trustee acting in a different capacity). The related Prospectus
Supplement will contain a description
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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.
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").
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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
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.
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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.
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
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respective Participants at DTC will be debited and credited. Similarly, the
respective Participants will make debits or credits, as the case may be, on
their records on behalf of the selling and purchasing Securities Owners.
DTC has advised the Company that, unless and until Definitive Securities
are issued, DTC will take any action permitted to be taken by a Securityholder
under the Trust Documents only at the direction of one or more Participants to
whose DTC accounts the Securities are credited. Additionally, DTC has advised
the Company that it will take such actions with respect to specified percentages
of a class of the Securities only at the direction of Participants whose
holdings include principal amounts of the Securities that satisfy such
percentages. DTC may take conflicting actions with respect to other principal
amounts of the Securities to the extent that such actions are taken on behalf of
Participants whose holdings include such principal amounts.
NEITHER THE TRUST, THE SELLER, THE SERVICER, CIT, ANY AFFILIATED
PURCHASER, THE OWNER TRUSTEE, THE INDENTURE TRUSTEE, NOR ANY OF THE UNDERWRITERS
WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO ANY PARTICIPANTS, CEDEL
PARTICIPANTS OR EUROCLEAR PARTICIPANTS OR SECURITY OWNERS WITH RESPECT TO (1)
THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC, CEDEL, EUROCLEAR OR ANY
PARTICIPANT, (2) THE PAYMENT BY DTC, CEDEL, EUROCLEAR OR ANY PARTICIPANT OF ANY
AMOUNT DUE TO ANY SECURITY OWNER IN RESPECT OF THE PRINCIPAL AMOUNT OF, OR
INTEREST ON, THE SECURITIES, (3) THE DELIVERY BY ANY PARTICIPANT, CEDEL
PARTICIPANT OR EUROCLEAR PARTICIPANT OF ANY NOTICE TO ANY SECURITY OWNER WHICH
IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE INDENTURE OR THE TRUST DOCUMENTS
TO BE GIVEN TO SECURITYHOLDERS OR (4) ANY OTHER ACTION TAKEN BY DTC AS THE
SECURITYHOLDER.
DEFINITIVE SECURITIES
With respect to any series of Securities, unless otherwise specified in
the related Prospectus Supplement, the Notes and Certificates will be issued in
fully registered, certificated form ("Definitive Notes" and "Definitive
Certificates," respectively, and, together "Definitive Securities") to Security
Owners or their nominees, rather than to DTC or its nominee, only if (i) the
Servicer advises the Trustees in writing that DTC is no longer willing or able
to discharge properly its responsibilities as Depository with respect to the
Securities and the Servicer is unable to locate a qualified successor, (ii) the
Servicer, at its option, elects to terminate the book-entry system through DTC
or (iii) after the occurrence of an Event of Default or an Event of Termination,
Note Owners or Certificate Owners representing in the aggregate not less than a
majority of the outstanding principal balance of the Notes of a series or the
Certificate Balance of the Certificates of a series advise DTC through
Participants in writing that the continuation of a book-entry system through DTC
(or a successor thereto) is no longer in the best interest of such Note Owners
or Certificate Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the related Trustees are required to notify DTC of the
availability of Definitive Securities. Upon surrender by DTC of the global notes
and global certificates representing the Notes and Certificates of a series and
instructions for re-registration, the Trustees will issue the Notes of a series
as Definitive Notes and the Certificates of a series as Definitive Certificates,
and thereafter the Trustees will recognize the holders of such Definitive Notes
and Definitive Certificates as Noteholders and Certificateholders, respectively,
under the Trust Documents ("Noteholders" and "Certificateholders" respectively,
and together "Securityholders" or "Holders").
Unless otherwise specified in the related Prospectus Supplement,
distributions of principal of the Securities and interest on the Securities
thereafter will be made by the related Trustees directly to Holders in
accordance with the procedures set forth herein and in the Trust Documents.
Distributions of principal and interest on each Distribution Date will be made
to Holders in whose names the Definitive Securities were registered on the
Record Date. Such distributions will be made by check mailed to the address of
such Holder as it appears on the register maintained by such Trustees or other
person appointed pursuant to the Trust Documents. The final payment on any
Securities, however, will be made only upon presentation and surrender of such
Note or Certificate at the office or agency specified in the notice of final
distribution to Holders.
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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.
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;
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(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;
(xviii) during the Funding Period, if any, the amount of investment
earnings, net of losses and investment expenses, on amounts on deposit in
the Capitalized Interest Account, if any;
(xix) on the Distribution Date immediately following the end of the
Funding Period (or if the Funding Period ends on a Distribution Date on
such Distribution Date), if any, the aggregate principal amount and
percentage of each of the Notes, if any, and Certificates, if any, which
are being redeemed;
(xx) the aggregate principal balance of all Contracts which became
either "Defaulted Contracts" or "Liquidated Contracts" (as defined in the
related Prospectus Supplement) during the related Due Period (if the
related Prospectus Supplement includes definitions of such term or terms);
(xxi) the number and aggregate principal amount of Contracts which
were prepaid, in part or in whole, during the related Due Period;
(xxii) the aggregate outstanding principal balance of the Notes (if
applicable) as of such Distribution Date (after giving effect to any
distributions thereon and reductions thereto on such Distribution Date);
(xxiii) the Certificate Balance (if applicable) as of such
Distribution Date (after giving effect to any distributions on such
Distribution Date);
(xxiv) the amount, if any, by which the amount due to be distributed
to Noteholders (if applicable) and Certificateholders (if applicable)
exceeds the actual amount distributed on the related Distribution Date to
Noteholders (if applicable) and Certificateholders (if applicable),
respectively;
(xxv) if applicable, the amount of surplus to be distributed to the
Affiliated Owner, if any, after all payments have been made in respect of
the Securities, the Servicer Payment has been paid and all deposits to any
Reserve Fund and payments to a Credit Facility Provider have been made;
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(xxvi) if applicable, the balance of the Paid-Ahead Account; and
(xxvii) such other information as may be specified in the related
Prospectus Supplement.
If a Limited Guarantee is issued by CIT with respect to a series of
Securities, the monthly and annual reports will include a statement to the
following effect: CIT is subject to the requirements of the Securities Exchange
Act of 1934, as amended, and, in accordance therewith, files reports and other
information with the Securities and Exchange Commission. As a result of the
limited guarantee by CIT, information relating to CIT which is material will be
available through such reports and other information.
Within a reasonable period of time after the end of each calendar year,
but not later than the latest date permitted by law (where applicable law
specifies such date), the Servicer will mail to each person who at any time
during such calendar year shall have been a Securityholder, and received any
payment on its Security, a statement containing the relevant amounts described
above for such calendar year for the purposes of such Securityholder's
preparation of federal income tax returns. See "Certain Federal Income Tax
Consequences."
Unless and until Definitive Certificates or Definitive Notes are issued,
such reports with respect to a series of Securities will be sent on behalf of
the related Trust to the Trustees and Cede, as registered holder of the
Certificates and the Notes and the nominee of DTC. Certificate Owners and Note
Owners may receive copies of such reports upon written request, together with a
certification that they are Certificate Owners or Note Owners, as the case may
be, and payment of reproduction and postage expenses associated with the
distribution of such reports, from the Owner Trustee or the Indenture Trustee,
as applicable. See "--Statements to Securityholders" and "--Book-Entry
Registration" above.
THE PURCHASE AGREEMENTS AND THE TRUST DOCUMENTS
Unless otherwise specified in the related Prospectus Supplement, the
following summary describes certain terms of the Purchase Agreement and any
Subsequent Purchase Agreement (together, the "Purchase Agreements") and the Sale
and Servicing Agreement, any Subsequent Transfer Agreements and the Trust
Agreement or the Pooling and Servicing Agreement (collectively, the "Trust
Documents"). Forms of the Purchase Agreements and the Trust Documents have been
filed as exhibits to the Registration Statement of which this Prospectus forms a
part. CITSF will provide a copy of such agreements (without exhibits) upon
request to a holder of Securities described therein. This summary does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, all of the provisions of the Purchase Agreements and the Trust
Documents, and the following summary will be supplemented in whole or in part by
the related Prospectus Supplement. Where this summary refers to particular
provisions or terms used in the Purchase Agreements or Trust Documents, the
actual provisions (including definitions of terms) are incorporated by reference
as part of such summary.
SALE AND ASSIGNMENT OF THE CONTRACTS
On or prior to the Closing Date for a series of Securities and on each
Subsequent Transfer Date, if any, pursuant to the Purchase Agreement or a
Subsequent Purchase Agreement, as the case may be, between CITSF and the
Company, CITSF will sell and assign to the Company, without recourse, its entire
interest in and to the Initial Contracts and Subsequent Contracts, respectively,
including its security interests in the related Financed Vehicles. On the
Closing Date and each Subsequent Transfer Date, the Company will sell and assign
to the Trust, without recourse, all of its right, title and interest in and to
such Contracts, including its security interests in the Financed Vehicles.
Unless otherwise specified in the related Prospectus Supplement, certain of the
Contracts will be purchased by CITSF from CITCF-NY before they are sold to the
Company. Each Contract will be identified in a schedule appearing as an exhibit
to the relevant Purchase Agreement and the Trust Documents (the "List of
Contracts") which includes, among other things, the Contract Rate, Initial
Cut-off Date Principal Balance and date of the last scheduled payment for each
Contract. The Owner Trustee or its designated agent will, concurrently with the
sale and assignment of the Initial Contracts to the Trust, execute, authenticate
and deliver the Securities, to the
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Company in exchange for the Initial Contracts. The Company will sell all or a
portion of the Securities to the Underwriters.
CITSF will make certain representations and warranties in the Trust
Documents with respect to each Initial Contract as of the Closing Date,
including, unless otherwise specified in the related Prospectus Supplement, that
(i) as of the Initial Cut-off Date, the most recent scheduled payment of
principal and interest was made by or on behalf of the related Obligor or was
not delinquent more than thirty days; (ii) no provision of a Contract has been
waived, altered or modified in any respect, except by instruments or documents
contained in the Contract File; (iii) each Contract is a legal, valid and
binding obligation of the related Obligor and is enforceable in accordance with
its terms (except as may be limited by laws affecting creditors' rights
generally); (iv) no Contract is or will be subject to any right of rescission,
set-off, counterclaim or defense, including the defense of usury, and, to the
knowledge of CITSF, no such right has been asserted with respect to any
Contract; (v) the Obligor on each Contract is required to maintain physical
damage insurance covering the related Financed Vehicle in accordance with
CITSF's normal requirements or, if the related Financed Vehicle is not so
covered by an Obligor's insurance, it is covered by a blanket insurance policy
maintained by CITSF or the Servicer; (vi) neither CITSF nor the Servicer has
obtained Force-Placed Insurance with respect to any Contract; (vii) no Contract
was originated in or is subject to the laws of any jurisdiction whose laws would
prohibit (A) the transfer of the Contract to the Company under the Purchase
Agreements, (B) the transfer of the Contract to the Trust pursuant to the Trust
Documents, or (C) the ownership of the Contracts by the Trust; (viii) each
Contract complies with all requirements of law in all material respects; (ix) no
Contract has been satisfied, subordinated in whole or in part or rescinded, and
no Financed Vehicle has been released from the security interest of the related
Contract in whole or in part; (x) each Contract creates a valid and enforceable
first priority security interest in favor of CITSF, CITCF-NY or the related
Dealer in the Financed Vehicle covered thereby (which security interest, if in
favor of the related Dealer or CITCF-NY, has been assigned to CITSF), such
security interest has been assigned by CITSF to the Company and by the Company
to the Trust, and all necessary action with respect to such Contract has been
taken to perfect the security interest in the related Financed Vehicle in favor
of CITSF or CITCF-NY; (xi) all parties to each Contract had capacity to execute
such Contract; (xii) no Contract has been sold, assigned or pledged by CITSF to
any person other than the Company (or by the Company to any person other than
the Trust) and, prior to the transfer of the Contracts by CITSF to the Company
and the transfer of the Contracts by the Company to the Trust, CITSF or the
Company, respectively, had good and marketable title to each Contract, free and
clear of any lien, encumbrance, equity, loan, pledge, charge, claim or security
interest, and was the sole owner and had full right to transfer such Contract to
the Company and the Trust, respectively; (xiii) as of the Initial Cut-off Date,
there was no default, breach, violation or event permitting acceleration under
any Contract, and no event which with notice and/or the expiration of any grace
or cure period would constitute a default, breach, violation or event permitting
acceleration under such Contract (except for payment delinquencies permitted by
clause (i) above), and CITSF has not waived any of the foregoing (except for
payment delinquencies permitted by clause (i) above); (xiv) there are no liens
or claims which have been filed for work, labor or materials affecting a
Financed Vehicle securing a Contract, which are or may be liens prior to or
equal or coordinate with the security interest of the Contract; (xv) each
Contract is a fully-amortizing loan with interest at the stated Contract Rate
and provides for level payments over the term of such Contract; (xvi) each
Contract contains customary and enforceable provisions such as to render the
rights and remedies of the holder thereof adequate for realization against the
collateral of the benefits of the security (except as may be limited by
creditors' rights generally); (xvii) the description of each Contract set forth
in the List of Contracts is true and correct as of its date; (xviii) no Obligor
is the United States of America or any state or any agency, department,
instrumentality or political subdivision thereof; (xix) if the Obligor is in the
military (including an Obligor who is a member of the National Guard or is in
the reserves) and the Contract is subject to the Soldiers' and Sailors' Civil
Relief Act of 1940, as amended (the "Soldiers' and Sailors' Civil Relief Act"),
or the California Military Reservist Relief Act of 1991 (the "Military Reservist
Relief Act"), such Obligor has not made a claim to CITSF that (A) the amount of
interest on the Contract should be limited to 6% pursuant to the Soldiers' and
Sailors' Civil Relief Act during the period of such Obligor's active duty
status, or (B) payments on the Contract should be delayed pursuant to the
Military Reservist Relief Act, in either case unless a court has ordered
otherwise upon application of CITSF; (xx) there is only one original executed
copy of each Contract, which, immediately prior to the execution of the Trust
Documents, was in the possession of CITSF; (xxi) the Contract is "chattel paper"
as defined in the New Jersey UCC; (xxii) the Contract satisfies the selection
criteria set forth in the related Prospectus Supplement; (xxiii) all of the
right, title and interest of CITSF, the Company and, if applicable, CITCF-NY in
the Contract has been validly
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sold, transferred and assigned to the Trust and all filings necessary to
evidence such sale, transfer and conveyance have been made in all appropriate
jurisdictions; and (xxiv) no adverse selection procedure was utilized in
selecting the Contracts for sale by CITSF to the Company.
Unless otherwise specified in the related Prospectus Supplement, the Trust
Documents will require CITSF to make on each Subsequent Transfer Date the same
representations and warranties with respect to each individual Subsequent
Contract as it is required to make with respect to each Initial Contract sold to
the Trust except that each such representation and warranty shall be made as of
the Subsequent Cut-off Date relating to such Subsequent Contract. In addition,
no Subsequent Contract will be sold to the Trust on a Subsequent Transfer Date
unless such Subsequent Contract satisfies the criteria described in the related
Prospectus Supplement. Unless otherwise specified in the related Prospectus
Supplement, the Subsequent Financed Vehicles will consist of motor homes, travel
trailers and other types of recreation vehicles.
Unless otherwise specified in the related Prospectus Supplement, under the
terms of the Trust Documents and subject to certain conditions specified in the
Trust Documents, CITSF will be obligated to repurchase from the Trust for the
Purchase Price (as defined below) any Contract (a "Repurchased Contract") not
later than ninety days after CITSF becomes aware, or eighty-five days after
CITSF's receipt of written notice from a Trustee or the Servicer, of a breach of
any representation or warranty by CITSF in the Trust Documents that materially
and adversely affects the Trust's interest in such Contract if such breach has
not been cured. CITSF shall effect such repurchase from the Trust by depositing
the Purchase Price for such Contract in the Collection Account on the Deposit
Date immediately following the determination that such Purchase Price is owed.
Unless otherwise specified in the related Prospectus Supplement, the "Purchase
Price" for any Contract will be the remaining principal amount outstanding on
such Contract on the date of repurchase, plus thirty days' interest thereon in
an amount equal to the sum of (i) the product of (A) one-twelfth of the weighted
average of the Pass-Through Rate and the Interest Rate and (B) the remaining
principal amount outstanding (without giving effect to any reductions thereof
for unrecoverable Monthly Advances) on the Contract, and (ii) accrued and unpaid
Servicing Fees thereon at the Servicing Fee Rate to the date of such repurchase.
Upon such repurchase, the Trust shall transfer all right, title and interest in
the Contract to CITSF, free and clear of the lien of the applicable Trust
Documents. Unless otherwise specified in the related Prospectus Supplement, this
repurchase obligation constitutes the sole remedy available to the Trust and the
Securityholders for a breach of a representation and warranty under the Trust
Documents with respect to the Contracts (but not with respect to any other
breach by CITSF of its obligations under the Trust Documents).
Unless otherwise specified in the related Prospectus Supplement, CITSF,
the Company and the Trust will treat each of the transfers of the Contracts from
CITSF to the Company and from the Company to the Trust as a sale. As a result of
the sale of the Contracts by CITSF to the Company and by the Company to the
Trust, the Contracts should not be part of the assets of either CITSF or the
Company and should not be available to their respective creditors. However, in
the event of the insolvency of CITSF or the Company, it is possible that a
trustee in bankruptcy, conservator or receiver for, or a creditor of, CITSF or
the Company, as the case may be, may assert that the transaction between CITSF
and the Company or between the Company and the Trust, as the case may be, was a
pledge of the Contracts to secure a loan, rather than a true sale. This
position, if asserted, could prevent timely receipt by the Trust of payments of
amounts due on the Contracts and, if accepted by a court, may result in delays
or reductions in distributions of principal and interest on the Securities.
Since the Contracts will remain in CITSF's possession and will not be stamped or
otherwise marked to reflect the sale and assignment to the Trust, the Trust's
interest in the Contracts could be defeated if a subsequent purchaser were to
take physical possession of the Contracts without knowledge of the sale and
assignment. See "Certain Legal Aspects of the Contracts."
If specified in the related Prospectus Supplement, the terms of the sale
of some or all of the Contracts from CITSF or the Seller or both to the related
Trust may provide for the retention by CITSF or the Seller or both, as the case
may be, of the right to receive a portion of the interest accruing thereon (the
"Retained Yield").
CUSTODY OF CONTRACT FILES
Unless otherwise specified in the related Prospectus Supplement, to reduce
administrative costs, each Trust will appoint CITSF as initial custodian of the
Contracts. Prior to the appointment of any custodian other than CITSF, the
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Trust and such proposed successor custodian specified in the related Prospectus
Supplement shall enter into a custodian agreement pursuant to which such
successor custodian will agree to hold the Contract Files on behalf of the
related Trust. Any such custodian agreement may be terminated by the Trust on
thirty days' notice to such successor custodian.
Unless otherwise specified in the related Prospectus Supplement, to
facilitate servicing and reduce administrative costs, the documents will not be
physically segregated from other similar documents which are in CITSF's
possession. UCC financing statements will be filed in New Jersey and Oklahoma
reflecting the sale and assignment of the Contracts to the Owner Trustee, and
CITSF's accounting records and computer systems will also reflect such sale and
assignment. The Contracts will not be stamped or otherwise marked to reflect the
transfer of the Contracts by CITSF to the Company and by the Company to the
Trust, and will not be segregated from the other installment sale contracts of
CITSF. The Obligors under the Contracts will not be notified of the transfer of
the Contracts to the Company or to the Trust. If, through inadvertence or
otherwise, any of the Contracts were sold to another party (or a security
interest therein were granted to another party) that purchased (or took such
security interest in) any of such Contracts in the ordinary course of its
business and took possession of such Contracts, the purchaser (or secured party)
would acquire an interest in the Contracts superior to the interest of the
related Trust if the purchaser (or secured party) acquired (or took a security
interest in) the Contracts for new value and without actual knowledge of such
Trust's interest. See "Certain Legal Aspects of the Contracts."
ACCOUNTS
For each Trust, the Servicer will establish and maintain with a Trustee
one or more accounts, in the name of such Trustee on behalf of the
Securityholders (the "Collection Account"), into which all payments made (after
the Initial Cut-off Date or the Subsequent Cut-off Date, as applicable) on or
with respect to the Contracts in the related Contract Pool will be deposited by
the Servicer. See "--Collections." The Servicer will establish and maintain with
a Trustee (or its designated agent) an account in the name of such Trustee on
behalf of the Certificateholders, if any, into which amounts released from the
Collection Account and any Enhancement for payment to the Certificateholders
will be deposited and from which distributions to the Certificateholders will be
made (the "Certificate Distribution Account"). The Servicer will establish and
maintain with the Indenture Trustee (or its designated agent) an account in the
name of the Indenture Trustee on behalf of the Noteholders, if any, into which
amounts released from the Collection Account and from any Enhancement for
payment to the Noteholders will be deposited and from which distributions to the
Noteholders will be made (the "Note Distribution Account"). If the related
Prospectus Supplement provides that the Contract Pool contains Precomputed
Contracts, the Servicer will establish and maintain with a Trustee (or its
designated agent) an account in the name of such Trustee on behalf of the
Securityholders, into which early payments by or on behalf of Obligors on
Precomputed Contracts which do not constitute scheduled payments, full
prepayments or certain partial prepayments that result in a reduction of an
Obligor's periodic payment below the scheduled payment as of the Initial Cut-off
Date or Subsequent Cut-off Date, as the case may be, will be deposited (the
"Paid-Ahead Account").
Amounts held in the Certificate Distribution Account and in such other
accounts as may be specified in the related Prospectus Supplement will not be
available to make payments of amounts due on the Notes, if any, and will not be
pledged to the Indenture Trustee as collateral security for the Notes.
Each Account will be an Eligible Account maintained with the Owner
Trustee, the Indenture Trustee and/or other depository institutions. "Eligible
Account" means any account which is (i) an account maintained with an Eligible
Institution; (ii) an account or accounts the deposits in which are fully insured
by either the Bank Insurance Fund or the Savings Association Insurance Fund of
the FDIC; (iii) a "segregated trust account" maintained with the corporate trust
department of a federal or state chartered depository institution or trust
company with trust powers and acting in its fiduciary capacity for the benefit
of a Trustee, which depository institution or trust company has capital and
surplus (or, if such depository institution or trust company is a subsidiary of
a bank holding company system, the capital and surplus of the bank holding
company) of not less than $50,000,000 and the securities of such depository
institution (or, if such depository institution is a subsidiary of a bank
holding company system and such depository institution's securities are not
rated, the securities of the bank holding company) have a credit rating from
each Rating Agency in one of its generic credit rating categories which
signifies investment grade; or (iv) an
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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 recreation vehicle installment sale contracts that it
services for itself and others. See "Certain Legal Aspects of the Contracts."
The Servicer may sell the related Financed Vehicle securing a defaulted Contract
at a public or private sale, or take any other action permitted by applicable
law. See "Certain Legal Aspects of the Contracts." The proceeds of such
realization (net of expenses) will be deposited in the Collection Account.
Unless otherwise specified in the related Prospectus Supplement, the
Servicer shall keep in force throughout the term of the Trust Documents (i) a
policy or policies of insurance covering errors and omissions for failure to
maintain insurance as required by the Trust Documents and (ii) a fidelity bond.
Such policy or policies and such fidelity bond shall have such deductibles, and
be in such form and amount as is generally customary among persons which service
a portfolio of recreation vehicle contracts having an aggregate principal amount
of $100,000,000 or more and which are generally regarded as servicers acceptable
to institutional investors.
PURCHASE BY THE SERVICER
A breach of certain covenants made by the Servicer in the Trust Documents
that materially and adversely affects the Trust's interest in any Contract, will
require the Servicer to purchase such Contract for the Purchase Price, unless
such breach is cured within the period specified in the Trust Documents. Unless
otherwise specified in the related Prospectus Supplement, such covenants will
obligate the Servicer not to, except as permitted by the Trust Documents and in
accordance with the terms of such Contract and applicable law, (i) release the
Financed Vehicle securing such Contract from the security interest granted by
such Contract, (ii) impair the rights of the Trust in such Contract or take any
action inconsistent with the Trust's ownership of such Contract, (iii) increase
the number of payments under such Contract, nor increase the principal amount of
such Contract which is used to finance the purchase price of the related
Financed Vehicles, nor extend or forgive payments on such Contract, (iv) fail to
comply with the provisions of any insurance policy covering such Contract, if
the failure to comply would impair the protection or benefit to be afforded by
such insurance policy, and (v) fail to obtain and maintain any license, permit
or other approval required by any federal or state law in order for the Trust to
own any Contract or to exercise the rights under any Contract or the Trust
Documents.
OPTIONAL 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,
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as to four consecutive monthly installments or any Contract as to which
enforcement proceedings have been brought 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 latest Final Scheduled Distribution
Date of any Security and (ii) the deferral, rescheduling, extension or other
modification of the terms of the Contract would not constitute a cancellation of
such Contract and the creation of a new installment sales contract.
REMOVAL OF CONTRACTS
Except as otherwise specified herein or in the related Prospectus
Supplement, neither the Seller nor the Servicer will have the right to remove
any Contracts from the Contract Pool after the Closing Date. In certain
circumstances CITSF or the Servicer may have the obligation to repurchase, or
CITSF may have the option to purchase, a Contract from the Trust, but all such
repurchases or purchases will be made at the Purchase Price.
PAID-AHEAD PRECOMPUTED CONTRACTS
Early payments by or on behalf of Obligors on Paid-Ahead Precomputed
Contracts which do not constitute scheduled payments, full prepayments, or
certain partial prepayments that result in a reduction of the Obligor's 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 first day of the related Due Period (or, in the case of the first
Distribution Date, as of the Initial Cut-off Date) and (ii) any investment
earnings (net of investment expenses and losses) on amounts on deposit in the
Collection Account, the Paid-Ahead Account, if any, the Note Distribution
Account, if any, and the Certificate Distribution Account, if any; provided,
however, that the Servicing Fee Rate applicable to a Trust may be increased to a
rate (or maximum rate) specified in the related Prospectus Supplement if CITSF
or an affiliate thereof is not the Servicer. Payments to the Servicer of such
amounts will compensate the Servicer for performing the functions of a third
party servicer of recreation vehicle contracts as an agent for the Trust,
including collecting and posting all payments, responding to inquiries of
Obligors, investigating delinquencies, reporting federal income tax information
to Obligors, monitoring the collateral in cases of Obligor default and handling
the foreclosure or other liquidation of the Financed Vehicle in appropriate
instances (subject to reimbursement of its expenses incurred in connection with
such foreclosure, liquidation or other realization on the Contracts).
The Servicing Fee also will compensate the Servicer for administering the
Contracts, including reimbursing the Servicer for accounting for collections,
furnishing monthly and annual statements to the Owner Trustee with respect to
distributions and generating federal income tax information. The Servicing Fee
also will compensate the Servicer
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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 (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 (if it is a Rating Agency for the series of Securities) (the
"Required Servicer Ratings"), or (ii) the Servicer obtains a letter of credit,
surety bond or insurance policy (the "Servicer Letter of Credit") as will be
provided for in the related Trust Documents, under which demands for payment may
be made to secure timely remittance of monthly collections to the Collection
Account or the Paid-Ahead Account, as applicable, and, in the case of clause
(ii) above, the Trustees are provided with a letter from each Rating Agency to
the effect that the utilization of such alternative remittance schedule will not
result in a qualification, reduction or withdrawal of its then-current rating of
the Securities. As of the date of this Prospectus, CITSF, as Servicer, will be
permitted to remit collections to the Collection Account and the Paid-Ahead
Account, as applicable, on a monthly basis by virtue of clause (i) above. In the
event that the Servicer is permitted to make remittances of collections to the
Collection Account and the Paid-Ahead Account, if any, on a monthly basis
pursuant to satisfaction of clause (ii) above, the Trust Documents will be
modified, to the extent necessary, without the consent of any Securityholder.
Pending such a monthly deposit into the Collection Account and the Paid-Ahead
Account, if any, collections on the Contracts may be invested by the Servicer at
its own risk and for its own benefit and will not be segregated from its own
funds. See "Risk Factors--Risk of Commingling."
CITSF or the Servicer, as the case may be, will remit the aggregate
Purchase Price of any Contracts to be purchased from the Trust into the
Collection Account on or before the next succeeding Deposit Date.
Unless otherwise specified in the related Prospectus Supplement, the
Servicer will not be required to deposit in the Collection Account or the
Paid-Ahead Account, as applicable, amounts relating to the Contracts
attributable to the following: (a) amounts received with respect to each
Contract (or property acquired in respect thereof) which has been purchased by
CITSF or the Servicer pursuant to the Trust Documents, (b) net investment
earnings on funds deposited in the Collection Account, the Paid-Ahead Account,
if any, the Note Distribution Account, if any, and the Certificate Distribution
Account, if any, (c) amounts to be reimbursed to the Servicer in respect of
nonrecoverable Monthly Advances, (d) amounts received in respect of the amounts,
if any, of insurance premiums added to the principal balance of a Contract after
the Initial Cut-off Date for each such Initial Contract, or after the related
Subsequent Cut-off Date for each such Subsequent Contract, (e) amounts received
as liquidation proceeds, to the extent the Servicer is entitled to reimbursement
of liquidation expenses related thereto, and (f) repossession profits on
liquidated Contracts.
MONTHLY ADVANCES
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Contract as to which there has been a Payment Shortfall during
the related Due Period, the Servicer shall advance funds in the amount of such
Payment Shortfall (each, a "Monthly Advance"), but only to the extent that the
Servicer, in its good faith judgment, expects to recover such Monthly Advance
from subsequent collections on such Contract made by or on behalf of the obligor
thereunder (the "Obligor") (but only to the extent of expected interest
collections in the case of a Simple Interest Contract), or from net liquidation
proceeds or insurance proceeds with respect to such Contract. The Servicer shall
be reimbursed for any Monthly Advance from subsequent collections with respect
to such Contract. If the Servicer determines in its good faith judgment that an
unreimbursed Monthly Advance shall not ultimately be recoverable from such
collections, the Servicer shall be reimbursed for such Monthly Advance from
collections on all Contracts. In determining whether an advance is or will be
nonrecoverable, the Servicer need not
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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 first day of the related Due Period (or, in the case of the
first Due Period ending after the Contract was acquired by the related Trust, as
of the Initial Cut-off Date or the Subsequent Cut-off Date, as the case may be)
over (B) the amount of interest, if any, collected on such Contract during the
related Due Period and (ii) with respect to any Precomputed Contract and any
Distribution Date, the excess of (A) the scheduled payment due on such Contract
during the related Due Period, over (B) the amount collected on such Contract
(including any amounts allocated from the Paid-Ahead Account with respect to
such Due Period) during the related Due Period.
Unless otherwise specified in the related Prospectus Supplement, the
Servicer will remit any Monthly Advance with respect to each Due Period into the
Collection Account not later than the Deposit Date following the Due Period.
NON-REIMBURSABLE PAYMENT
When a payment of principal is made on or in respect of a Simple Interest
Contract, interest is paid on the unpaid principal balance of such Contract only
to the date of such payment. If and to the extent specified in the related
Prospectus Supplement, with respect to each Contract as to which there has been
a Payment Shortfall with respect to interest in the related Due Period arising
from either a prepayment in full of such Contract or a Relief Act Reduction in
respect of such Contract during such Due Period, the Trust Documents will
require the Servicer to deposit into the Collection Account on the Business Day
immediately preceding the following Distribution Date, without the right of
subsequent reimbursement, an amount equal to such Payment Shortfall (a
"Non-Reimbursable Payment"). If the related Prospectus Supplement does not
specify that the Servicer will make Non-Reimbursable Payments, the Servicer will
not be obligated to make such payments with respect to the Trust.
DISTRIBUTIONS
With respect to each Trust, on or before each Determination Date, the
Servicer will make a determination and inform the Trustees of the following
amounts with respect to the preceding Due Period: (i) the aggregate amount of
collections on the Contracts; (ii) the aggregate amount of Monthly Advances to
be remitted by the Servicer (if any); (iii) the aggregate Purchase Price of
Contracts to be purchased by CITSF or the Servicer (if any); (iv) if applicable,
the aggregate amount to be distributed as principal and interest on the Notes on
the related Distribution Date; (v) if applicable, the aggregate amount to be
distributed as principal and interest on the Certificates on the related
Distribution Date; (vi) the Servicing Fee; (vii) the aggregate amount of
Non-Reimbursable Payments (if any); (viii) the amounts required to be withdrawn
from the Enhancement (if any) for such Distribution Date; (ix) the amount which
is payable to the provider of the Enhancement (if any) or the Affiliated Owner
(if any); (x) the amounts to be deposited into the accounts established pursuant
to the Trust Documents; and (xi) the aggregate amount of unreimbursed Monthly
Advances to be reimbursed to the Servicer (if any).
Unless otherwise specified in the related Prospectus Supplement, the
"Available Amount" with respect to each Trust on any Distribution Date is equal
to the excess of (A) the sum of (i) all amounts on deposit in the Collection
Account attributable to collections or deposits made in respect of such
Contracts (including any late fees, prepayment charges, extension fees or other
administrative fees or similar charges allowed by applicable law with respect to
the Contracts ("Late Fees")) during the Due Period preceding the Distribution
Date, and (ii) the Purchase Price for any Contract repurchased by CITSF as a
result of breaches of certain representations and warranties or purchased by the
Servicer as a result of breaches of certain covenants and any Monthly Advances
and any Non-Reimbursable Payments made by the Servicer, if such Purchase Price,
Monthly Advance or Non-Reimbursable
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Payment is paid on the Deposit Date immediately preceding such Distribution
Date, over (B) the sum of the following amounts (to the extent that the Servicer
has not already withheld such amounts from collections on the Contracts): (i)
any repossession profits on liquidated Contracts, Liquidation Expenses (as
defined in the Trust Documents) incurred and taxes and insurance advanced by the
Servicer in respect of Financed Vehicles that are reimbursable to the Servicer
under the Trust Documents; (ii) any amounts incorrectly deposited in the
Collection Account; (iii) any amounts deposited in the Paid-Ahead Account, if
any, during the related Due Period; (iv) net investment earnings on the funds in
the Collection Account and the Paid-Ahead Account, if any; and (v) any other
amounts permitted to be withdrawn from the Collection Account and the Paid-Ahead
Account, if any, by the Servicer (or to be retained by the Servicer from
collections on the Contracts) pursuant to the Trust Documents.
With respect to each Trust, beginning on the Distribution Date specified
in the related Prospectus Supplement, distributions of principal and interest
(or, where applicable, of principal or interest only) on each class of
Securities entitled thereto will be made by the Owner Trustee or the Indenture
Trustee, as applicable, to the Certificateholders, if any, and the Noteholders,
if any, from the Available Amount. Unless otherwise specified in the related
Prospectus Supplement, the Servicing Fee and any additional servicing
compensation will be paid from the Available Amount prior to distributions to
the Securityholders. The timing, calculation, allocation, order, source,
priorities of and requirements for all distributions to each class of
Certificateholders, if any, and all payments to each class of Noteholders, if
any, will be set forth in the related Prospectus Supplement.
NET DEPOSITS
Unless otherwise specified in the related Prospectus Supplement, as an
administrative convenience, the Servicer 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. The Trust Documents will require that such examination and
report of independent public accountants be prepared in accordance with the
requirements set forth in the Uniform Single Attestation Program for Mortgage
Bankers.
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.
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CERTAIN MATTERS REGARDING THE SERVICER
Unless otherwise specified in the related Prospectus Supplement, the Trust
Documents will provide that the Servicer may not resign from its obligations and
duties as Servicer thereunder, except upon a determination that the Servicer's
performance of such duties is no longer permissible under applicable law. Such
resignation will not become effective until the Owner Trustee or a successor
Servicer has assumed the Servicer's servicing obligations and duties under the
Trust Documents.
Unless otherwise specified in the related Prospectus Supplement, the Trust
Documents will further provide that neither the Servicer nor the Company nor any
of their shareholders, affiliates, directors, officers, employees and agents
shall be under any liability to the Trustees, the Trust or the Securityholders
for taking any action or for refraining from taking any action pursuant to the
Trust Documents or for errors in judgment; provided, however, that neither the
Servicer nor any such person will be protected against any liability which
otherwise would be imposed by reason of willful misfeasance, bad faith or
negligence in the performance of duties or by reason of reckless disregard of
obligations and duties thereunder. In addition, unless otherwise specified in
the related Prospectus Supplement, the Trust Documents will provide that the
Servicer is under no obligation to appear in, prosecute or defend any legal
action which arises under the Trust Documents and that, in its opinion, may
cause it to incur any expense or liability. The Servicer may, however, undertake
any reasonable action that it may deem necessary or desirable in respect of the
Trust Documents and the rights and duties of the parties thereto and the
interests of the Securityholders thereunder. In the event that the Servicer or
the Company, in its discretion, undertakes any action which it deems necessary
or desirable in connection with its rights and duties under the Trust Documents
or the interests of the Securityholders thereunder, the legal expenses and costs
of such action and any liability resulting therefrom will be expenses, costs and
liabilities of the Trust, and the Servicer and the Company will be entitled to
be reimbursed therefor out of the Collection Account.
Unless otherwise specified in the related Prospectus Supplement, any
corporation or other entity into which the Servicer may be merged or
consolidated, or any corporation or other entity resulting from any merger,
conversion or consolidation to which the Servicer is a party, or any corporation
or other entity succeeding to the business of the Servicer, which corporation or
other entity assumes the obligations of the Servicer, will be the successor of
the Servicer under the Trust Documents.
The Servicer may sell, transfer, assign or convey its rights as Servicer
to any entity qualified to act as servicer under the Trust Documents, upon
written notice to the Trustees and the Rating Agencies, without the consent of
the Securityholders, provided that the Rating Agency Condition is satisfied.
PHYSICAL DAMAGE INSURANCE
Unless otherwise specified in the related Prospectus Supplement, the Trust
Documents will provide that the Servicer, in accordance with its customary
servicing practices and procedures, shall use its best efforts to require that
each Obligor shall have obtained and shall maintain physical damage insurance
covering the Financed Vehicle, provided that such insurance shall be in an
amount no greater than the outstanding principal balance of the related Contract
or, if such insurance covers the interest of the related Obligor in the Financed
Vehicle, no greater than the greater of the outstanding principal balance of the
related Contract and the value of the Financed Vehicle, or such lesser amount
permitted by applicable law. Unless otherwise specified in the related
Prospectus Supplement, the Servicer may, but will not be obligated to, enforce
rights under the Contracts to require the Obligors to maintain physical damage
insurance, in accordance with the Servicer's customary practices and procedures
with respect to comparable new or used recreation vehicles financed by
installment sale contracts that it services for itself or others. Unless
otherwise specified in the related Prospectus Supplement, if an Obligor fails to
maintain such insurance, the Servicer will not be obligated to obtain such
physical damage insurance and advance such premiums for such insurance on behalf
of such Obligor. If the Servicer obtains such physical damage insurance and
advances such premiums for such insurance on behalf of such Obligor, such
insurance policy will name the Servicer as an additional insured and loss payee
and will be issued by an insurer having a rating of "A" or better by A.M. Best
(such insurance being referred to herein as "Force-Placed Insurance"). Such
Force-Placed Insurance and any commissions or finance charges collected by the
Servicer in connection therewith shall be, to the extent permitted
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by law, in an amount in accordance with customary servicing practices and
procedures, but in no event in an amount greater than the outstanding principal
balance of the related Contract or, if such insurance also covers the interest
of the related Obligor in the Financed Vehicle, no greater than the greater of
the outstanding principal balance of the related Contract and the value of the
Financed Vehicle, or such lesser amount permitted by applicable law. The
Servicer shall be required to disclose to the related Obligor all information
with respect to such Force-Placed Insurance, commissions and finance charges as
required by applicable law.
The Servicer does not, under its customary servicing practices and
procedures, obtain Force-Placed Insurance when the principal balance of the
related Contract falls below the level or levels periodically established in
accordance with such customary servicing practices and procedures. In accordance
with such customary servicing practices and procedures, the Servicer may
periodically readjust such levels, suspend Force-Placed Insurance or arrange
other methods of protection of the Financed Vehicles that it deems necessary or
advisable, provided that the Servicer determines that such actions do not
materially and adversely affect the interests of the Securityholders.
The Servicer may make advances ("Insurance Advances") to an Obligor to
finance insurance premiums related to the Financed Vehicle. Any such Insurance
Advances may be secured by the related Financed Vehicle.
Any portion of the principal balance of a Contract attributable to
Insurance Advances or premiums for Force-Placed Insurance acquired after the
Initial Cut-off Date, or the Subsequent Cut-off Date, as the case may be, will
not be owned by the Trust, and amounts allocable thereto will not be available
for distribution in respect of the Securities. Unless otherwise designated by
the Obligor, the Servicer will not allocate payments by the Obligor to pay
Insurance Advances or Force-Placed Insurance premiums added to the Contracts
after the Initial Cut-off Date or Subsequent Cut-off Date, as the case may be,
if any amount of principal or interest is due but unpaid on the Contracts. The
Servicer shall not deposit payments posted with respect to such Insurance
Advances or Force-Placed Insurance in the Collection Account and shall instead
promptly pay such amounts to an account of the Servicer maintained for that
purpose. In the event that an Obligor under a Contract with respect to which the
Servicer has made Insurance Advances or obtained Force-Placed Insurance makes
scheduled payments under the Contract, but fails to make scheduled payments of
such Insurance Advances or Force-Placed Insurance as due, and the Servicer has
determined that eventual payment of such amount is unlikely, the Servicer may,
but shall not be required to, take any action available to it, including
determining that the related Contract is a defaulted Contract; provided,
however, that any net liquidation proceeds with respect to such Contract shall
be applied first to the accrued and unpaid interest at the Contract Rate, then
to the principal amount outstanding, and the remainder, if any, to repayment of
any such Insurance Advances or Force-Placed Insurance premiums added to the
Initial Contracts after the Initial Cut-off Date or to any Subsequent Contracts
after the related Subsequent Cut-off Date.
Unless otherwise specified in the related Prospectus Supplement, the Trust
Documents will permit the Servicer or any affiliate of the Servicer, to the
extent permitted by law, to (i) enter into agreements with one or more insurers
or other persons pursuant to which the Servicer or such affiliate will earn
commissions and fees in connection with any insurance policy purchased by an
Obligor including, without limitation, any physical damage insurance policy
(whether or not such physical damage insurance policy is force-placed pursuant
to the provisions of any Contract), or any other insurance policy whatsoever,
and (ii) in connection with the foregoing, to solicit, or permit and assist any
insurer or any agent thereof to solicit (including, without limitation,
providing such insurer or agent a list of Obligors including name, address or
other information) any Obligor.
EVENT OF TERMINATION
Unless otherwise specified in the related Prospectus Supplement, an "Event
of Termination" under the Trust Documents will consist of (i) any failure by the
Servicer to make any deposit into an account required to be made under the Trust
Documents which failure continues unremedied for five (5) Business Days after
the Servicer becomes aware that such deposit was required; (ii) any failure by
the Servicer duly to observe or perform in any material respect any other of its
covenants or agreements in the Trust Documents (other than those described in
clause (i)) which materially and adversely affects the rights of the
Securityholders and which continues unremedied for 60 days after the giving of
written notice of such failure; (iii) any assignment or delegation by the
Servicer of its duties or rights under the Trust Documents, except as
specifically permitted under the Trust Documents, or any
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attempt to make such an assignment or delegation; (iv) certain events of
insolvency, readjustment of debt, marshaling of assets and liabilities or
similar proceedings regarding the Servicer; or (v) any disqualification of the
Servicer as an Eligible Servicer (as defined in the Trust Documents). "Notice"
as used herein means notice to the Servicer by the Trustees or the Company, or
to the Company, the Servicer and the Trustees by the Noteholders holding not
less than 25% of the aggregate outstanding principal amount of the Controlling
Notes issued by such Trust (or, if no Notes of such series are outstanding, the
Certificateholders holding not less than 25% of the outstanding Certificate
Balance of such Trust).
RIGHTS UPON EVENT OF TERMINATION
Unless otherwise specified in the related Prospectus Supplement, as long
as an Event of Termination under the Trust Documents remains unremedied, the
Indenture Trustee (or, if no Notes of the series are outstanding, the Owner
Trustee) may, and at the written direction of the holders of related Notes
evidencing not less than a majority of the aggregate outstanding principal
amount of the Controlling Notes issued by such Trust (or, if no Notes of such
series are outstanding, the holders of related Certificates evidencing not less
than a majority of the Certificate Balance of such Trust), will, unless
prohibited by applicable law, terminate all (but no less than all) of the rights
and obligations of the Servicer with respect to a Trust under the Trust
Documents and in and to the Contracts, and the proceeds thereof, whereupon
(subject to applicable law) all authority and power of the Servicer under the
Trust Documents, whether with respect to the Contracts, the Contract Files or
otherwise, will pass to and be vested in the Indenture Trustee (or, if no Notes
of the series are outstanding, such authority will pass to and be vested in the
Owner Trustee); provided, however, that neither the Indenture Trustee (or, if no
Notes of the series are outstanding, 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
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correct or supplement any provision therein which may be inconsistent with any
other provision therein; (iii) to add or amend any provision as requested by the
Rating Agencies to maintain or improve the rating of the Securities; (iv) to add
to the covenants, restrictions or obligations of the Company, the Servicer or
the Owner Trustee or to provide for the delivery of or substitution for an
Enhancement or a Servicer Letter of Credit; (v) to evidence and provide for the
acceptance of the appointment of a successor trustee with respect to the
property owned by the related Trust and add to or change any provisions as shall
be necessary to facilitate the administration of the trusts under the Trust
Documents by more than one trustee; (vi) to add, change or amend any provision
to maintain the related Trust as an entity not subject to Federal income tax; or
(vii) to add, change or eliminate any other provisions, provided that an
amendment pursuant to this clause (vii) will not, in the opinion of counsel
(which may be internal counsel to the Company or the Servicer), adversely affect
in any material respect the interests of the Trust or the Securityholders.
Unless otherwise specified in the related Prospectus Supplement, the Trust
Documents may also be amended by the parties thereto, with the consent of the
holders of not less than a majority in principal amount of such then outstanding
Notes and the holders of such Certificates evidencing not less than a majority
of the Certificate Balance of such series for the purpose of adding any
provisions to or changing in any manner or eliminating any provisions of the
Trust Documents, or of modifying in any manner the rights of such Noteholders or
Certificateholders, respectively; except that no such amendment may except as
described above, increase or reduce in any manner the amount of, or accelerate
or delay the timing of, distributions that are required to be made on any
related Note or Certificate, the related Pass-Through Rate or the Interest Rate.
Any action specified in clauses (v) and (vii) shall be taken only upon
satisfaction of the Rating Agency Condition.
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.
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Unless otherwise specified in the related Prospectus Supplement, such
Trustee must receive at least two bids from prospective purchasers that are
considered at the time to be competitive participants in the market for
recreation vehicle retail installment sale contracts. The highest bid may not be
less than the fair market value of such Contracts and must equal the sum of (i)
the greater of (a) the aggregate Purchase Price for the Contracts (including
defaulted Contracts) plus the appraised value of any other property held by the
Trust (less liquidation expenses), or (b) an amount that when added to amounts
on deposit in the Collection Account available for distribution to
Securityholders for such second succeeding Distribution Date would result in
proceeds sufficient to distribute to Securityholders the amounts of interest due
to Securityholders for such Distribution Date and any unpaid interest payable to
the Securityholders with respect to one or more prior Distribution Dates and the
outstanding principal amount of the Notes, if any, and the Certificate Balance,
if any, and (ii) the sum of (a) an amount sufficient to reimburse the Servicer
for any unreimbursed Monthly Advances for which it is entitled to reimbursement,
and (b) the Servicing Fee payable on such final Distribution Date, including any
unpaid Servicing Fees with respect to one or more prior Due Periods. Such
Trustee may consult with financial advisors, including any Underwriter, to
determine if a bid is equal to or greater than the fair market value of such
Contracts. Upon the receipt of such bids, such Trustee shall sell and assign
such Contracts to the highest bidder and the Securities shall be retired on such
Distribution Date. If any of the foregoing conditions are not met, such Trustee
shall decline to consummate such sale and shall not be under any obligation to
solicit any further bids or otherwise negotiate any further sale of Contracts
remaining in the Trust. In such event, however, such Trustee may from time to
time solicit bids in the future for the purchase of such Contracts upon the same
terms described above.
Unless otherwise specified in the related Prospectus Supplement, such
Trustee will give written notice of termination to each Securityholder of
record. The final distribution to each Securityholder will be made only upon
surrender and cancellation of such holder's Securities at any office or agency
of such Trustee specified for such purpose. Any funds remaining in the Trust,
after such Trustee has taken certain measures to locate a Securityholder and
such measures have failed, will be distributed to the Affiliated Owner, if any,
or as specified in the related Prospectus Supplement.
CERTAIN LEGAL ASPECTS OF THE CONTRACTS
The following discussion contains summaries of certain legal aspects of
recreation vehicle contracts, which are general in nature. Since such legal
aspects are governed by applicable state law (which laws may differ
substantially), the summaries do not purport to be complete nor to reflect the
laws of any particular state, nor to encompass the laws of all states in which
the security for the Contracts is situated. The summaries are qualified in their
entirety by reference to the applicable federal and state laws governing the
Contracts.
GENERAL
As a result of the assignment of the Contracts to the Trust, each Trust
will succeed collectively to the rights (including the right to receive payment
on the Contracts), and will assume the obligations, of CITSF under the related
Contracts. Each Contract evidences both (a) the obligation of the obligor to
repay the loan evidenced thereby, and (b) the grant of a security interest in
the Financed Vehicle to secure repayment of such loan. Certain aspects of both
features of the Contracts are described more fully below.
The Contracts are "chattel paper" as defined in the Uniform Commercial
Code (the "UCC") as in effect in the various states of origination of the
Contracts. Pursuant to the UCC, the sale of chattel paper is treated in a manner
similar to perfection of a security interest in chattel paper. Under the Trust
Documents, the Servicer will retain possession of the Contracts as custodian for
the Owner Trustee, and will make an appropriate filing of a UCC financing
statement in New Jersey to perfect the sale of the Contracts by the Company to
the Owner Trustee. The Contracts and the related certificates of title will not
be stamped to reflect their assignment from CITCF-NY to CITSF, from CITSF to the
Company or from the Company to the Trust. The Contract Files will not be
physically segregated from the contract files for contracts owned by CITSF. If,
through inadvertence or otherwise, another party in good faith purchases (or
takes a security interest in) the Contracts for new value in the ordinary course
of its
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business, without actual knowledge of the Trust's interest, and takes possession
of the Contracts, such purchaser or secured party may acquire an interest in the
Contracts superior to the interest of the Trust.
Under the Trust Documents, the Servicer will be obligated from time to
time to take such actions as are necessary to continue the perfection of the
Trust's interest in the Contracts and the proceeds thereof. CITSF will warrant
in the Trust Documents, with respect to each Contract, as of the Closing Date
for each Initial Contract, and as of the related Subsequent Transfer Date, for
each Subsequent Contract, if any, that the Contract has not been sold, assigned
or pledged by CITSF to any person other than the Company, that immediately prior
to the transfer and assignment of the Contract to the Company, CITSF had good
and marketable title thereto, free and clear of any encumbrance, equity, loan,
pledge, charge, claim or security interest and, immediately upon the transfer
thereof, the Company will have good and marketable title to the Contract, free
and clear of any encumbrance, equity, loan, pledge, charge, claim or security
interest and that the transfer has been perfected under applicable law. In the
event of an uncured breach of any such warranty that materially adversely
affects the interest of the Trust in a Contract transferred by the Company to
the Trust, the only recourse of the Certificateholders, the Trustees, or the
Trust would be to require CITSF to repurchase such Contract.
SECURITY INTERESTS IN THE FINANCED VEHICLES
General. The Contracts are installment sale contracts that evidence the
credit sale of recreation vehicles by Obligors. The Contracts also constitute
personal property security agreements and include grants of security interests
in the related recreation vehicles under the UCC. Perfection rules relating to
security interests in recreation vehicles are generally governed under state
certificate of title statutes (Alabama, Connecticut, Georgia, Maine,
Massachusetts, Minnesota, Mississippi, New Hampshire, New York, Rhode Island and
Vermont have adopted the Uniform Motor Vehicle Certificate of Title and
Anti-Theft Act) or by the vehicle registration laws of the state in which each
recreation vehicle is located. In states which have adopted the Uniform Motor
Vehicle Certificate of Title and Anti-Theft Act, security interests in
recreation vehicles may be perfected either by notation of the secured party's
lien on the certificate of title or by delivery of the certificate of title and
payment of a fee to the state motor vehicle authority, depending on the
particular state law. In states in which perfection of a security interest in a
particular motor vehicle is not governed by a certificate of title statute,
perfection is usually accomplished by filing pursuant to the provisions of the
UCC. Notwithstanding the foregoing, in certain states, folding camping trailers
and/or slide-in campers are not subject to state titling and vehicle
registration laws and a security interest in such recreation vehicles is
perfected by filing pursuant to the provisions of the UCC. In most states, a
security interest in a recreation vehicle is perfected by notation of the
secured party's lien on the vehicle's certificate of title. Each Contract
prohibits the sale or transfer of the related Financed Vehicle without the
consent of CITSF.
Perfection of Sale. Pursuant to the Purchase Agreement, CITSF will sell
and assign its interests in the Contracts, including the security interests in
the Financed Vehicles granted thereunder, to the Company and, pursuant to the
Trust Documents, the Company will sell and assign its interest in the Contracts,
including the security interests in the Financed Vehicles granted thereunder, to
the Owner Trustee. UCC financing statements will be filed to perfect the sale of
(i) CITSF's interests in the Contracts to the Company and (ii) the Company's
interests in the Contracts to the Trust.
Perfection of CITSF's or CITCF-NY's Security Interest in the Financed
Vehicles. CITSF and CITCF-NY will take all actions necessary under the laws of
the state in which the related recreation vehicles are located at the time of
origination of the Contract to perfect their respective security interests in
such recreation vehicles, including, where applicable, having a notation of
their respective liens recorded on the related certificate of title or
delivering the required documents and fees, obtaining possession of the
certificate of title (if possible), or, where applicable, by perfecting its
security interest in the related recreation vehicles under the UCC. In the event
CITSF (or CITCF-NY) fails, due to clerical errors, to effect such notation or
delivery, or perfects the security interest under an inapplicable statute (for
example, under the UCC rather than under a motor vehicle title law), the Trust
may not have a first priority security interest in the Financed Vehicle securing
a Contract. In the Trust Documents, CITSF has represented as of the Closing Date
that each Contract creates a valid and enforceable first priority security
interest in favor of CITSF (or CITCF-NY) or the related Dealer in the Financed
Vehicle covered thereby (which security interest, if in favor of the related
Dealer (or CITCF-NY), has been assigned to CITSF) and such security interest has
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been assigned by CITSF to the Company, and all necessary action with respect to
such Contract has been taken to perfect the security interest in the related
Financed Vehicle in favor of CITSF (or CITCF-NY). A breach by CITSF of such
warranty that materially adversely affects the Trust's interest in any Contract
would require CITSF to purchase such Contract unless such breach is cured.
Possible Loss of Perfection or Priority of Trust's Security Interest in
Financed Vehicles or Proceeds Thereof. The certificate of title names CITSF (or
CITCF-NY) as the secured party. Because of the administrative burden and
expense, neither CITCF-NY, CITSF, the Company nor the Trust will amend any
certificate of title to note the lien of the Trust as the new secured party on
the certificate of title relating to the Financed Vehicles nor will any such
entity execute and file any transfer instruments (including, among other
instruments, UCC-3 assignments). In some states, in the absence of such an
amendment or execution, the assignment to the Trust of a security interest in
Financed Vehicles may not be perfected, such assignment of the security interest
to the Trust may not be effective against creditors or a trustee in bankruptcy
of CITSF or CITCF-NY, which continue to be specified as lienholder on any
certificates of title or as secured party of any UCC filing.
(i) California. A security interest in a motor vehicle registered in the
State of California (in which the greatest number of Financed Vehicles are
currently registered) may be perfected only by depositing with the Department of
Motor Vehicles a properly endorsed certificate of title for the vehicle showing
the secured party as "legal owner" thereon or if the vehicle has not been
previously registered, an application in usual form for an original registration
together with an application for registration of the secured party as "legal
owner." However, under the California Vehicle Code, a transferee of a security
interest in a motor vehicle is not required to reapply to the Department of
Motor Vehicles for a transfer of registration when the interest of the
transferee arises from the transfer of a security agreement by the "legal owner"
to secure payment or performance of an obligation. Accordingly, under California
law, an assignment such as that under each of the Purchase Agreement and the
Trust Documents is an effective conveyance of CITSF's and the Company's
perfected security interest, as the case may be, without such re-registration,
and under the Purchase Agreement the Company will succeed to CITSF's, and under
the Trust Documents the Trust will succeed to the Company's, rights as secured
party.
(ii) Other States. In most states, assignments such as those under the
Purchase Agreement and the Trust Documents are an effective conveyance of a
security interest without amendment of any lien noted on a vehicle's certificate
of title, and the assignee succeeds thereby to the assignor's rights as secured
party. However, in some states the Trust's security interest will be unperfected
because the Trust will not be noted as the secured party on the certificates of
title to the Financed Vehicles, and therefore the Trust's security interest
would be subordinate to, among others, subsequent purchasers of such Financed
Vehicles and holders of prior perfected security interests therein. However, in
the absence of fraud, forgery or administrative error, the notation of CITSF's
or CITCF-NY's lien on the certificates of title will be sufficient in most
states to protect the Trust against the rights of subsequent purchasers of a
Financed Vehicle, judgment creditors or other creditors who take a security
interest in a Financed Vehicle.
Continuity of Perfection. Under the laws of most states, a perfected
security interest in a recreation vehicle continues for four months after the
vehicle is moved to a new state (from the state in which a financing statement
was properly filed initially to perfect the security interest or in which the
certificate of title was issued) and thereafter until the owner re-registers
such recreation vehicle in the new state. A majority of states require surrender
of a certificate of title to obtain a new certificate of title for the vehicle.
In those states (including California) that call for return of the certificate
of title to the holder of the first security interest noted thereon, the secured
party would learn of the re-registration through the request from the obligor
under the related installment sales contract to surrender possession of the
certificate of title. In the case of vehicles registered in states providing for
perfection of a lien by notation of the lien on the certificate of title without
possession of the certificate of title by the secured party, the secured party
would receive notice of surrender from the state of re-registration if the
security interest were noted on the certificate of title. Thus, the secured
party would have the opportunity to re-perfect its security interest in the
vehicle in the state to which the vehicle is moved. However, these procedural
safeguards will not protect the secured party if through fraud, forgery or
administrative error, the debtor somehow procures a new certificate of title
that does not note the secured party's lien. Additionally, in states that do not
require a certificate of title for registration of a vehicle, re-registration
could defeat perfection.
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In the ordinary course of servicing the Contracts, CITSF will take steps
to effect re-perfection upon receipt of notice of re-registration or information
from the Obligor as to relocation. Similarly, when an Obligor sells a Financed
Vehicle, CITSF must surrender possession of the certificate of title or will
receive notice as a result of its lien noted thereon and accordingly will have
an opportunity to require satisfaction of the related Contract before release of
the lien. Under the Trust Documents, the Servicer will be obligated to take
appropriate steps, at its own expense, to maintain perfection of a security
interest in the Financed Vehicles.
In most states, CITSF, as Servicer, will hold certificates of title
relating to the Financed Vehicles in its possession as custodian for the Trust
pursuant to the Trust Documents. In some states, the certificate of title is
held by the Obligor, but only after it is endorsed by the state motor vehicle
department with a notation of CITSF's lien. In the Trust Documents, CITSF, as
Servicer, will covenant that it will not release its security interest in the
Financed Vehicle securing any Contract except as contemplated by the Trust
Documents. CITSF, as Servicer, will also covenant that it will not impair the
rights of the Trust in the Contacts or take any action inconsistent with the
Trust's ownership of the Contracts, except as permitted by the Trust Documents.
A breach of either such covenant that materially and adversely affects the
Trust's interest in any Contract, would require the Servicer to purchase such
Contract unless such breach is cured within the period specified in the Trust
Documents.
Priority of Certain Liens Arising by Operation of Law. Under the laws of
California and of most states, liens for repairs performed on a recreation
vehicle and liens for certain unpaid taxes take priority over even a first
perfected security interest in such vehicle. The Internal Revenue Code of 1986,
as amended, also grants priority to certain federal tax liens over the lien of a
secured party. The laws of certain states and federal law permit the
confiscation of motor vehicles by governmental authorities under certain
circumstances if used in unlawful activities, which may result in the loss of a
secured party's perfected security interest in a confiscated recreation vehicle.
CITSF will represent and warrant in the Trust Documents that, as of the Closing
Date, there were no liens or claims which have been filed for work, labor or
materials affecting a Financed Vehicle securing a Contract which are or may be
liens prior or equal to the lien of the Contract. However, liens for repairs or
taxes could arise at any time during the term of a Contract. No notice will be
given to the Trustees or Securityholders in the event such a lien or
confiscation arises and any such lien or confiscation arising after the date of
initial issuance of the Securities would not give rise to an obligation of CITSF
to purchase the Contract under the Trust Documents.
REPOSSESSION
In the event of default by an obligor, the holder of the related
installment sale contract has all the remedies of a secured party under the UCC,
except where specifically limited by other state laws. The UCC remedies of a
secured party include the right to repossession by self-help means, unless such
means would constitute a breach of the peace. Self-help repossession is the
method employed by the Servicer in most cases and is accomplished simply by
taking possession of the related recreation vehicle. In cases where the obligor
objects or raises a defense to repossession, or if otherwise required by
applicable state law, a court order must be obtained from the appropriate state
court, and the vehicle must then be recovered in accordance with that order. In
some jurisdictions (not including California), the secured party is required to
notify the debtor of the default and the intent to repossess the collateral and
the debtor must be given a time period within which to cure the default prior to
repossession. In most states (including California), under certain circumstances
after the vehicle has been repossessed, the obligor may reinstate the related
contract by paying the delinquent installments and other amounts due.
NOTICE OF SALE; REDEMPTION RIGHTS
In the event of default by the Obligor, some jurisdictions (not including
California) require that the Obligor be notified of the default and be given a
time period within which to cure the default prior to repossession. Generally,
this right of cure may only be exercised on a limited number of occasions during
the term of the related Contract.
The UCC and other state laws require the secured party to provide the
obligor with reasonable notice of the date, time and place of any public sale
and/or the date after which any private sale of the collateral may be held. The
obligor has the right to redeem the collateral prior to actual sale by paying
the secured party (i) the unpaid principal balance of the obligation, accrued
interest thereon plus reasonable expenses for repossessing, holding and
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preparing the collateral for disposition and arranging for its sale, plus, in
some jurisdictions, reasonable attorneys' fees or (ii) in some states, the
delinquent installments or the unpaid principal balance of the related
obligation.
DEFICIENCY JUDGEMENTS AND EXCESS PROCEEDS
The proceeds of resale of the Financed Vehicles generally will be applied
first to the expenses of resale and repossession and then to the satisfaction of
the related indebtedness. While some states impose prohibitions or limitations
on deficiency judgments if the net proceeds from resale do not cover the full
amount of the indebtedness, a deficiency judgment can be sought in California
and certain other states that do not prohibit or limit such judgments. In
addition to the notice requirement, the UCC requires that every aspect of the
sale or other disposition, including the method, manner, time, place and terms,
be "commercially reasonable." Some courts have held that when a sale is not
"commercially reasonable," the secured party loses its right to a deficiency
judgment and courts in some other states have held that when a sale is not
"commercially reasonable" there is a rebuttable presumption that there is no
deficiency. In addition, the UCC permits the debtor or other interested party to
recover for any loss caused by noncompliance with the provisions of the UCC.
Also, prior to a sale, the UCC permits the debtor or other interested person to
restrain the secured party from disposing of the collateral if it is established
that the secured party is not proceeding in accordance with the "default"
provisions under the UCC. A deficiency judgment is a judgment against the
obligor or guarantor for the shortfall; however, a defaulting obligor or
guarantor may have very little capital or sources of income available following
repossession. Therefore, in many cases, it may not be useful to seek a
deficiency judgment or, if one is obtained, it may be settled at a significant
discount or be uncollectible.
Occasionally, after resale of a recreation vehicle and payment of all
expenses and indebtedness, there is a surplus of funds. In that case, the UCC
requires the creditor to remit the surplus to any holder of a subordinate lien
with respect to such vehicle or, if no such lienholder exists, to the former
owner of the vehicle.
CERTAIN MATTERS RELATING TO INSOLVENCY
CITSF, CITCF-NY and the Company intend that the transfers of Contracts
from CITCF-NY to CITSF, from CITSF to the Company and from the Company to the
Trust constitute sales, rather than pledges of the Contracts to secure
indebtedness. However, if CITCF-NY, CITSF or the Company were to become a debtor
under Title 11 of the United States Code, 11 U.S.C. 101 et seq. (the "Bankruptcy
Code"), it is possible that a creditor, receiver, other party in interest or
trustee in bankruptcy of such debtor, or such debtor as debtor-in-possession,
may contend that the sales of the Contracts by CITCF-NY to CITSF, by CITSF to
the Company, or by the Company to the Trust, respectively, were pledges of the
Contracts rather than sales and that, accordingly, such Contracts should be part
of such assigning entity's bankruptcy estate. Such a position, if presented to a
court, even if ultimately unsuccessful, could result in a delay in or reduction
of distributions to the Securityholders.
The Company has taken steps in structuring the transactions described
herein that are intended to make it unlikely that the voluntary or involuntary
application for relief by or against CIT under the Bankruptcy Code or similar
applicable state laws (collectively, "Insolvency Laws") would result in
consolidation of the assets and liabilities of the Company with those of CIT.
These steps include the creation of the Company as a wholly-owned, limited
purpose subsidiary of CIT pursuant to a certificate of incorporation containing
certain limitations (including a requirement that the Company have at least one
"independent director" and restrictions on the nature of the Company's
business). Additionally, the Company's certificate of incorporation prohibits
merger, consolidation and the sale of all or substantially all of its assets in
certain circumstances or the commencement of a voluntary case or proceeding
under any insolvency law, without the prior affirmative unanimous vote of its
directors including any independent director. Notwithstanding the foregoing, in
the event that (i) a court concluded that the assets and liabilities of the
Company should be consolidated with those of CIT (or one of its affiliates) in
the event of the application of applicable insolvency laws to CIT (or one of its
affiliates) or following the bankruptcy or insolvency of CIT (or one of its
affiliates) the security interest in the Contracts granted by the Company to the
Trust should be avoided; (ii) a filing were made under any insolvency law by or
against the Company; or (iii) an attempt were made to litigate any of the
foregoing issues, delays in payments on the Securities and possible reductions
in the amount of such payments could occur.
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CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related
regulations impose substantial requirements upon creditors and servicers
involved in consumer finance. These laws include the Truth in Lending Act, the
Equal Credit Opportunity Act, the Federal Trade Commission Act, the Fair Credit
Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices
Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B
and Z, the Soldiers' and Sailors' Civil Relief Act, the Military Reservist
Relief Act, state adaptations of the National Consumer Act and of the Uniform
Consumer Credit Code, state motor vehicle retail installment sales acts, state
retail installment sales acts and other similar laws. Also, the laws of
California and of certain other states impose finance charge ceilings and other
restrictions on consumer transactions and require contract disclosures in
addition to those required under federal law. These requirements impose specific
statutory liabilities upon creditors which fail to comply with their provisions.
In some cases, this liability could affect the ability of an assignee such as
the Trust to enforce consumer finance contracts such as the Contracts.
The so-called "Holder-in-Due-Course Rule" of the Federal Trade Commission
(the "FTC Rule") has the effect of subjecting any assignee of the seller in a
consumer credit transaction to all claims and defenses which the obligor in the
transaction could assert against the seller of the goods. Liability under the
FTC Rule is limited to the amounts paid by the obligor under the contract, and
the holder of the contract may also be unable to collect any balance remaining
due thereunder from the obligor. The FTC Rule is generally duplicated by the
Uniform Consumer Credit Code, other state statutes or the common law in certain
states. Most of the Contracts will be subject to the requirements of the FTC
Rule. Accordingly, the Trust, as holder of the Contracts, will be subject to any
claims or defenses that the purchaser of the related Financed Vehicle may assert
against the seller of the Financed Vehicle. Such claims are limited to a maximum
liability equal to the amounts paid by the Obligor under the related Contracts.
Under California law and most state vehicle dealer licensing laws, sellers
of recreation vehicles are required to be licensed to sell vehicles at retail
sale. Numerous other federal and state consumer protection laws impose
requirements applicable to the origination and assignment of retail installment
sale contracts, including the Truth in Lending Act, the Federal Trade Commission
Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the Equal
Credit Opportunity Act, the Fair Debt Collection Practices Act and the Uniform
Consumer Credit Code. In the case of some of these laws, the failure to comply
with provisions of these laws may affect the enforceability of the related
Contract. The Trust and the Company may not have obtained all licenses required
under any federal or state consumer laws or regulations, and the absence of such
licenses may impede the enforcement of certain rights or give rise to certain
defenses in enforcement actions. In addition, with respect to used vehicles, the
Federal Trade Commission's Rule on Sale of Used Vehicles requires that all
sellers of used vehicles prepare, complete, and display a "Buyer's Guide" which
explains the warranty coverage for such vehicles. Furthermore, Federal Odometer
Regulations promulgated under the Motor Vehicle Information and Cost Savings Act
require that all sellers of used vehicles furnish a written statement signed by
the seller certifying the accuracy of the odometer reading. If a seller is not
properly licensed or if either a Buyer's Guide or Odometer Disclosure Statement
was not provided to the purchaser of a Financed Vehicle, the obligor may be able
to assert a defense against the seller of the Financed Vehicle, which defense
may prevent the Trust from collecting amounts due under the Contract.
Courts have applied general equitable principles to secured parties
pursuing repossession or litigation involving deficiency balances. These
equitable principles may have the effect of relieving an obligor from some or
all of the legal consequences of a default and be used as a defense to repayment
of the obligation.
In several cases, consumers have asserted that the self-help remedies of
secured parties under the UCC and related laws violate the due process
protections of the Fourteenth Amendment to the Constitution of the United States
of America. Courts have generally either upheld the notice provisions of the UCC
and related laws as reasonable or have found that the creditor's repossession
and resale do not involve sufficient state action to afford constitutional
protection to consumers.
CITSF will represent and warrant under the Trust Documents that each
Contract complies with all requirements of law in all material respects. A
breach of such representation and warranty that materially adversely affects the
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interests of the Trust in any Contract will create an obligation of CITSF to
purchase such Contract. See "The Purchase Agreements and the Trust
Documents--Sale and Assignment of the Contracts."
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a creditor to
realize upon collateral or enforce a deficiency judgment. For example, in a
Chapter 13 proceeding under the federal bankruptcy law, a court may prevent a
creditor from repossessing a recreation vehicle, and, as part of the
rehabilitation plan, reduce the amount of the secured indebtedness to the market
value of the recreation vehicle at the time of bankruptcy (as determined by the
court), leaving the party providing financing as a general unsecured creditor
for the remainder of the indebtedness. A bankruptcy court may also reduce the
monthly payments due under the related contract or change the rate of interest
and time of repayment of the indebtedness.
Under the terms of the Soldiers' and Sailors' Civil Relief Act, an Obligor
who enters the military service after the origination of such Obligor's Contract
(including an Obligor who is a member of the National Guard or is in reserve
status at the time of the origination of the Obligor's contract and is later
called to active duty) may not be charged interest above an annual rate of 6%
during the period of such Obligor's active duty status, unless a court orders
otherwise upon application of the lender. In addition, pursuant to the Military
Reservist Relief Act, under certain circumstances California residents called
into active duty with the reserves can delay payments on retail installment sale
contracts, including the Contracts, for a period, not to exceed 180 days,
beginning with the order to active duty and ending 30 days after release. It is
possible that the foregoing could have an effect on the ability of the Servicer
to collect full amounts of interest on certain of the Contracts. In addition,
the Relief Acts impose limitations which would impair the ability of the
Servicer to repossess a Financed Vehicle subject to an affected Contract during
the Obligor's period of active duty status. Thus, in the event that such a
Contract goes into default, there may be delays and losses caused by the
inability to realize upon the related Financed Vehicle in a timely fashion.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Set forth below and in the related Prospectus Supplement for each series
of the Securities is a summary of certain Federal income tax consequences of the
purchase, ownership and disposition of the Securities, applicable to initial
purchasers of the Securities. This summary does not deal with all aspects of
Federal income taxation applicable to all categories of holders of the
Securities, some of which may be subject to special rules or special treatment
under the Federal income tax laws. For example, it does not discuss the specific
tax treatment of Securityholders that are insurance companies, banks and certain
other financial institutions, regulated investment companies, individual
retirement accounts, tax-exempt organizations or dealers in securities.
Furthermore, this summary is based upon present provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the regulations promulgated
thereunder, and judicial or ruling authority, all of which are subject to
change, which change may be retroactive. Moreover, there are no cases or
Internal Revenue Service ("IRS") rulings on similar transactions involving a
trust that issues debt and equity interests with terms similar to those of the
Notes and the Certificates. As a result, the IRS may disagree with all or part
of the discussion below and in the related Prospectus Supplement.
Prospective investors are advised to consult their own tax advisors with
regard to the Federal income tax consequences of the purchase, ownership and
disposition of the Securities, as well as the tax consequences arising under the
laws of any state, foreign country or other jurisdiction. Each Trust will be
provided with an opinion of Schulte Roth & Zabel LLP, counsel for the Seller,
regarding certain of the Federal income tax matters discussed below and in the
related Prospectus Supplement. An opinion of counsel, however, is not binding on
the IRS, and no ruling on any of the issues discussed below will be sought from
the IRS. For purposes of the following summary, references to the Trust, the
Notes, the Certificates and related terms, parties and documents will be deemed
to refer, unless otherwise specified herein, to each Trust and the Notes,
Certificates and related terms, parties and documents applicable to such Trust.
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The Federal income tax consequences to Certificateholders will vary
depending on whether the Trust is intended to be treated as a partnership under
the Code or is intended to be given an alternative characterization for Federal
income tax purposes. The related Prospectus Supplement for each series of
Certificates will specify whether the Trust is intended to be treated as a
partnership for Federal income tax purposes and, if not, how the Trust is
intended to be treated.
SCOPE OF THE TAX OPINIONS
It is expected that Schulte Roth & Zabel LLP will, upon issuance of a
series of Securities, deliver its opinion that the applicable Trust will not be
classified as an association (or publicly traded partnership) taxable as a
corporation for Federal income tax purposes. Further, with respect to each
series of Notes, Schulte Roth & Zabel LLP expects to advise the Trust that the
Notes will be classified as debt for Federal income tax purposes.
In addition, Schulte Roth & Zabel LLP will render its opinion that it has
reviewed the statements herein and in the related Prospectus Supplement under
the heading "Certain Federal Income Tax Consequences," and is of the opinion
that such statements are correct in all material respects. Such statements are
intended as an explanatory discussion for the possible effects of the
classification of the Trust as a partnership, as a grantor trust or other
classification, as the case may be, for Federal income tax purposes on investors
generally and of related tax matters affecting investors generally, but do not
purport to furnish information in the level of detail or with the attention to
the investor's specific tax circumstances that would be provided by an
investor's own tax adviser. Accordingly, each investor is advised to consult its
own tax advisers with regard to the tax consequences to it of investing in the
Securities.
OTHER TAX CONSEQUENCES
No advice has been received as to local income, franchise, personal
property, or other taxation in any state or locality, or as to the tax effect of
ownership of the Securities in any state or locality. Securityholders are
advised to consult their own tax advisors with respect to any state or local
income, franchise, personal property, or other tax consequences arising out of
their ownership of the Securities.
ALTERNATIVE TAX TREATMENT
In the event that, as a result of a change in applicable laws or
regulations or the interpretation thereof, the Federal income tax
characteristics of the Notes or the Certificates are not anticipated to be as
described above, the related Prospectus Supplement will include a discussion of
the anticipated Federal income tax treatment of the Notes or Certificates.
CERTAIN STATE TAX CONSEQUENCES
The activities to be undertaken by the Servicer in servicing and
collecting the Contracts will take place in Oklahoma. The State of Oklahoma
imposes a state income tax on individuals, nonresident aliens (with respect to
Oklahoma taxable income), corporations, certain foreign corporations, and trusts
and estates with Oklahoma taxable income. No ruling on any of the issues
discussed below will be sought from the Oklahoma Tax Commission.
Because of the variation in each state's or locality's tax laws, it is
impossible to predict tax consequences to Securityholders in all of the other
state and local taxing jurisdictions. Securityholders are urged to consult their
own tax advisors with respect to state and local tax consequences arising out of
the purchase, ownership and disposition of Securities.
TAX CONSEQUENCES WITH RESPECT TO THE NOTES
Crowe and Dunlevy, P.C., Oklahoma tax counsel to the Sellers ("Oklahoma
Tax Counsel") will advise the Trust that, assuming the Notes will be treated as
debt for federal income tax purposes, the Notes will be treated as debt for
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Oklahoma income tax purposes, and the Noteholders not otherwise subject to
taxation in Oklahoma should not become subject to taxation in Oklahoma solely
because of a holder's ownership of Notes. However, a Noteholder already subject
to Oklahoma's income tax could be required to pay additional Oklahoma tax as a
result of the holder's ownership or disposition of Notes.
TAX CONSEQUENCES WITH RESPECT TO THE CERTIFICATES ISSUED BY A TRUST TREATED AS A
PARTNERSHIP
Oklahoma Tax Counsel will advise the Trust that if the arrangement created
by the Trust Agreement is treated as a partnership (not taxable as a
corporation) for U.S. federal income tax purposes, the same treatment should
also apply for Oklahoma income tax purposes; under current law,
Certificateholders that are nonresidents of Oklahoma and are not otherwise
subject to Oklahoma income tax should not be subject to Oklahoma income tax on
the income from the Trust because it is unlikely that the Trust has established
a nonunitary business or commercial situs in Oklahoma. In any event,
classification of the arrangement as a "partnership" would not cause a
Certificateholder not otherwise subject to taxation in Oklahoma to pay Oklahoma
income tax on income beyond that derived from the Certificates.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Section 4975 of the Code prohibit a pension, profit
sharing or other employee benefit plan, as well as individual retirement
accounts and certain types of Keogh Plans (each a "Benefit Plan"), from engaging
in certain transactions with persons that are "parties in interest" under ERISA
or "disqualified persons" under the Code with respect to such Benefit Plan. A
violation of these "prohibited transaction" rules may generate excise tax and
other liabilities under ERISA and the Code for such persons.
THE CERTIFICATES
An interest in the Certificates may not be acquired by (a) an employee
benefit plan (as defined in Section 3(3) of ERISA) that is subject to the
provisions of Title I of ERISA, (b) a plan described in Section 4975(e)(1) of
the Code, or (c) any entity whose underlying assets include plan assets by
reason of a plan's investment in the entity (other than an insurance company
purchasing the Certificates for its general accounts). By its acceptance of a
Certificate or its acquisition of an interest in a Certificate through a
Participant or DTC, each Certificateholder or Certificate Owner will be deemed
to have represented and warranted that it is not subject to the foregoing
limitation.
A plan fiduciary considering the purchase of the Notes should consult its
tax and/or legal advisors regarding whether the assets of the Trust would be
considered plan assets, the possibility of exemptive relief from the prohibited
transaction rules and other issues and their potential consequences.
THE NOTES
The acquisition or holding of Notes by or on behalf of a Benefit Plan
could be considered to give rise to a prohibited transaction if the Seller, the
Trust or any of their respective affiliates is or becomes a party in interest or
a disqualified person with respect to such Benefit Plan. Certain exemptions from
the prohibited transaction rules could be applicable to the purchase and holding
of Notes by a Benefit Plan depending on the type and circumstances of the plan
fiduciary making the decision to acquire such Notes. Included among these
exemptions are: Prohibited Transaction Class Exemption ("PTCE") 90-1, regarding
investments by insurance company pooled separate accounts; PTCE 91-38 regarding
investments by bank collective investment funds; 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.
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PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement (the
"Underwriting Agreement") with respect to each Trust, the Seller will agree to
sell to each of the underwriters (the "Underwriters") named therein and in the
related Prospectus Supplement, and each of such Underwriters will severally
agree to purchase from the Seller, the principal amount of each class of
Securities of the related series set forth therein and in the related Prospectus
Supplement.
In each Underwriting Agreement, the several Underwriters will agree,
subject to the terms and conditions set forth therein, to purchase all the
Securities described therein which are offered hereby and by the related
Prospectus Supplement if any of such Securities are purchased. In the event of a
default by any such underwriter, each Underwriting Agreement will provide that,
in certain circumstances, purchase commitments of the nondefaulting Underwriters
may be increased, or the Underwriting Agreement may be terminated.
Each Prospectus Supplement will either (i) set forth the price at which
each class of Securities being offered thereby will be offered to the public and
any concessions that may be offered to certain dealers participating in the
offering of such Securities or (ii) specify that the related Securities are to
be resold by the Underwriters in negotiated transactions at varying prices to be
determined at the time of such sale. After the initial public offering of any
Securities, the public offering price and such concessions may be changed.
Each Underwriting Agreement will provide that CITSF and/or the Company
will indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act.
A Trustee may, from time to time, invest the funds of the Trust in
Eligible Investments acquired from the Underwriters.
FINANCIAL INFORMATION
The Company has determined that its financial statements are not material
to the offering made hereby.
Each Trust will be formed to own the related Contracts and the other Trust
assets and to issue the related Securities. Each Trust will have had no assets
or obligations prior to the issuance of the Securities and will not engage in
any activities other than those described herein and in the related Prospectus
Supplement. Accordingly, no financial statements with respect to each Trust are
included in this Prospectus or in the related Prospectus Supplement.
RATINGS
It is a condition to the issuance of any class of Securities offered
pursuant to this Prospectus that the Securities be rated in one of the four
highest rating categories by at least one nationally recognized statistical
rating organization rating such series of Securities (each, a "Rating Agency").
The foregoing ratings do not address the likelihood that the Securities will be
retired following the sale of the Contracts by the Trust. A security rating is
not a recommendation to buy, sell or hold securities and may be subject to
revision or withdrawal at any time by the assigning rating agency. The security
ratings of the Securities should be evaluated independently of similar security
ratings assigned to other kinds of securities.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Schulte Roth
& Zabel LLP, New York, New York. The material federal income tax consequences of
the Securities will be passed upon for the Company by Schulte Roth & Zabel LLP.
Certain legal matters will be passed upon for CITSF, CITCF-NY and the Company by
Norman H. Rosen, Esq., Senior Vice President and General Counsel. If the
Enhancement for a class of Securities
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includes a CIT Limited Guarantee, certain legal matters will be passed upon for
CIT by its Executive Vice President and General Counsel, Ernest D. Stein, Esq.
If a Trust is formed pursuant to the laws of the State of Delaware, certain
legal matters will be passed upon for the Trust by its special Delaware counsel
named in the related Prospectus Supplement.
EXPERTS
The consolidated balance sheets of CIT as of December 31, 1997 and 1996
and the related consolidated statements of income, changes in stockholders'
equity and cash flows for each of the years in the three-year period ended
December 31, 1997 have been incorporated by reference herein and in the
Registration Statement in reliance upon the report of KPMG LLP, independent
certified public accountants, also incorporated by reference herein, and upon
the authority of said firm as experts in accounting and auditing.
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INDEX OF PRINCIPAL TERMS
Affiliated Owner...........................................................7, 26
Asset Service Center..........................................................32
Available Amount..........................................................15, 56
Bankruptcy Code...........................................................23, 66
Benefit Plan..................................................................70
Business Day..............................................................14, 36
Capitalized Interest Account..................................................13
Cash Collateral Account.......................................................42
Cede....................................................................2, 7, 35
Cedel...................................................................2, 9, 25
Cedel Participants............................................................45
Certificate Balance............................................................7
Certificate Distribution Account..............................................52
Certificate Final Scheduled Distribution Date.................................14
Certificate Owner.........................................................25, 35
Certificate Owners.............................................................7
Certificate Pool Factor.......................................................30
Certificateholders............................................................46
Certificates............................................................1, 6, 34
Chase.........................................................................31
CIT.....................................................................2, 6, 22
CITCF-NY..................................................................11, 22
CITSF......................................................................6, 22
Closing Date..................................................................11
Code......................................................................20, 68
Collection Account............................................................52
Commission.....................................................................3
Company.................................................................1, 6, 22
Contract Files................................................................26
Contract Pool.........................................................10, 27, 28
Contract Rate.................................................................28
Contracts..............................................................1, 10, 28
Controlling Notes.............................................................38
Cooperative...................................................................45
Credit Facility...............................................................42
Credit Facility Provider......................................................43
Dealers...................................................................11, 22
Defaulted Contracts...........................................................48
Definitive Certificates.......................................................46
Definitive Notes..............................................................46
Definitive Securities.........................................................46
Deposit Date..................................................................26
Depositories..................................................................43
Depository....................................................................25
Determination Date............................................................15
Distribution Date.........................................................14, 35
DKB...........................................................................31
DTC.....................................................................2, 7, 25
DTC Rules.....................................................................44
Due Period....................................................................15
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Eligible Account..............................................................52
Eligible Institution..........................................................53
Eligible Investments..........................................................53
Enhancement...................................................................41
ERISA.....................................................................20, 70
Euroclear...............................................................2, 9, 45
Euroclear Operator............................................................45
Euroclear Participants........................................................45
Event of Termination..........................................................59
Events of Default.............................................................38
Financed Vehicles..........................................................1, 10
Force-Placed Insurance........................................................58
FTC Rule......................................................................67
Funding Period.............................................................8, 13
Holder........................................................................44
Holders.......................................................................46
Indenture...............................................................2, 8, 36
Indenture Trustee.......................................................2, 6, 36
Indirect Participants.........................................................43
Initial Contracts..........................................................1, 10
Initial Cut-off Date.......................................................1, 10
Initial Financed Vehicles..................................................1, 10
Initial Pool Balance......................................................19, 61
Insolvency Laws...............................................................66
Insurance Advances............................................................59
Interest Accrual Period.......................................................14
Interest Rate..................................................................9
IPO...........................................................................31
IRS...........................................................................68
Issuer.........................................................................6
Late Fees.................................................................15, 56
Limited Guarantee.............................................................42
Liquidated Contracts..........................................................48
Liquidity Facility............................................................43
Liquidity Facility Provider...................................................43
List of Contracts.............................................................49
Military Reservist Relief Act.................................................50
Monthly Advance...........................................................17, 55
Newcourt .....................................................................31
Non-Reimbursable Payment..................................................18, 56
Note Distribution Account.....................................................52
Note Final Scheduled Distribution Date........................................14
Note Owner................................................................25, 36
Note Owners....................................................................9
Note Pool Factor..............................................................30
Noteholders...................................................................46
Notes...................................................................1, 8, 36
Notice .......................................................................60
Obligor...................................................................11, 55
Oklahoma Tax Counsel..........................................................69
Original Certificate Balance..................................................26
Owner Trustee...............................................................2, 6
Paid-Ahead Account............................................................52
Paid-Ahead Period.............................................................28
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Paid-Ahead Precomputed Contract...............................................28
Paid-Ahead Simple Interest Contract...........................................28
Participants..................................................................43
Pass-Through Rate..........................................................7, 35
Payment Shortfall.........................................................17, 56
Permitted Investments.........................................................12
Pool Balance..................................................................19
Pooling and Servicing Agreement................................................2
Precomputed Contracts.........................................................28
Pre-Funded Amount.............................................................12
Pre-Funded Percentage.........................................................24
Pre-Funding Account............................................................8
Principal Liquidation Loss Amount.............................................39
Prospectus Supplement..........................................................1
PTCE..........................................................................70
Purchase Agreement............................................................11
Purchase Agreements...........................................................49
Purchase Price................................................................51
Rating Agency.............................................................19, 71
Rating Agency Condition.......................................................37
Record Date...............................................................14, 36
Registration Statement.........................................................3
Related Documents.............................................................40
Repurchase Event..............................................................11
Repurchased Contract......................................................11, 51
Required Capitalized Interest Amount..........................................13
Required Servicer Ratings.....................................................55
Reserve Account...............................................................42
Reserve Fund..................................................................42
Retained Yield................................................................51
Sale and Servicing Agreement...................................................2
Secondary Offering............................................................31
Securities..............................................................1, 8, 36
Security Owner................................................................36
Securityholder................................................................44
Securityholders...............................................................46
Seller......................................................................1, 6
Servicer....................................................................2, 6
Servicer Letter of Credit.....................................................55
Servicer Payment..............................................................15
Servicing Fee.............................................................18, 54
Servicing Fee Rate........................................................18, 54
Simple Interest Contracts.....................................................28
Soldiers' and Sailors' Civil Relief Act.......................................50
Spread Account................................................................42
Stripped Certificates..........................................................8
Stripped Notes.................................................................9
Subsequent Contracts.......................................................1, 10
Subsequent Cut-off Date....................................................1, 12
Subsequent Financed Vehicles...............................................1, 10
Subsequent Purchase Agreement.................................................12
Subsequent Transfer Agreement.................................................12
Subsequent Transfer Date......................................................12
Terms and Conditions..........................................................45
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Trust.......................................................................1, 6
Trust Agreement................................................................2
Trust Documents...............................................................49
Trustee........................................................................2
Trustees.......................................................................6
UCC.......................................................................22, 62
Underwriters..................................................................71
Underwriting Agreement........................................................71
Yield Supplement Account......................................................42
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