<PAGE>
As filed with the Securities and Exchange Commission on May 24, 1999
Registration No. 333-74457
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
________________________
Distribution Financial Services Floorplan Master Trust
(Issuer with respect to the Certificates)
________________________
Deutsche Floorplan Receivables, L.P.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 655 Maryville Centre Drive 88-0355652
(State or other Jurisdiction of St. Louis, Missouri 63141 (I.R.S. Employer
Incorporation or Organization) (314) 523-3000 Identification Number)
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
________________________
</TABLE>
Naran Burchinow
Senior Vice President and General Counsel
Deutsche Financial Services Corporation
655 Maryville Centre Drive
St. Louis, Missouri 63141
(314) 523-3905
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
________________________
With copies to:
Marc L. Klyman Stuart M. Litwin
Mayer, Brown & Platt Mayer, Brown & Platt
190 S. LaSalle Street 190 S. LaSalle Street
Chicago, Illinois 60603 Chicago, Illinois 60603
(312) 701-8053 (312) 701-7373
Approximate date of commencement of proposed sale to the public: As soon as
practicable after Registration Statement becomes effective.
________________________
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If the delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
________________________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
================================================================================================================
Proposed Proposed Maximum Amount of
Title of Amount to Maximum Offering Aggregate Offering Registration
Securities to Be Registered Be Registered/(1)/ Price Per Unit/(2)/ Price/(2)/ Fee/(3)/
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asset Backed Certificates.... $1,000,000 100% $1,000,000 $278
================================================================================================================
</TABLE>
/(1)/ This Registration Statement relates to the initial offering from time to
time of the Asset Backed Certificates. This Registration Statement also
relates to any resales of Asset Backed certificates in market making
transactions by Deutsche Bank Securities Inc., an affiliate of the
Registrant, to the extent required.
/(2)/ Estimated solely for purposes of calculating the registration fee.
/(3)/ Previously paid.
________________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
The information in this prospectus supplement and the prospectus is not complete
and may be changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus supplement and the prospectus are not an offer to sell these
securities and they are not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted.
Prospectus Supplement to Prospectus dated [ ]
Distribution Financial Services Floorplan Master Trust
Issuer
$[ ] Asset Backed Certificates, Series [ ]
DEUTSCHE FLOORPLAN RECEIVABLES, L.P.
Seller
DEUTSCHE FINANCIAL SERVICES CORPORATION
Servicer
The certificates represent interests in the trust only and do not represent
obligations of or interests in, and are not guaranteed by, Deutsche Floorplan
Receivables, L.P., Deutsche Financial Services Corporation, Deutsche Bank AG or
any other person or entity. This prospectus supplement and the accompanying
prospectus together constitute the full prospectus for your series of
certificates.
Investing in the certificates involves certain risks. You should consider the
discussion under "Risk Factors" beginning on page S-10 of this prospectus
supplement and page 3 of the accompanying prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus supplement or the prospectus. Any
representation to the contrary is a criminal offense.
<TABLE>
<CAPTION>
Expected Underwriting Net
Principal Interest Final Price to Discounts and Proceeds to
Amount Rate Payment Date Public (1) Commissions Seller
---------- -------- ------------ ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Class A certificates............ (2)
Class B certificates............ (3)
Total
</TABLE>
(1) Plus accrued interest, if any, from [ ].
(2) [Lesser of (a) LIBOR plus __% per annum and (b) the net receivables rate.]
(3) [Lesser of (a) LIBOR plus __% per annum and (b) the net receivables rate.]
The certificates are offered on the condition of prior sale, when, as and if
issued to and accepted by the underwriters and limited by their right to reject
orders in whole or in part. It is expected that delivery of the certificates
will be made in book-entry form only through the facilities of The Depository
Trust Company, Cedel Bank, societe anonyme and Morgan Guaranty Trust Company of
New York, Brussels office, as operator of the Euroclear system, on or about
[ ].
[Name(s) of Underwriter(s)]
[DATE]
<PAGE>
Important notice about information presented in this
prospectus supplement and the accompanying prospectus
We tell you about the certificates in two separate documents that
progressively provide more detail: (a) the accompanying prospectus, which
provides general information, some of which may not apply to your certificates,
and (b) this prospectus supplement, which describes specific terms of your
series of certificates.
If the terms of the certificates of your series vary between this
prospectus supplement and the prospectus, you should rely on the information in
this prospectus supplement.
You should rely only on the information provided in this prospectus
supplement and the accompanying prospectus including the information
incorporated by reference. We have not authorized anyone to provide you with
other or different information. We are not offering the certificates in any
state where the offer is not permitted. We do not claim the accuracy of the
information in this prospectus supplement or the accompanying prospectus as of
any date other than the dates stated on their respective covers.
This prospectus supplement may be used to offer and sell the certificates
of your series only if accompanied by the prospectus.
We include cross-references in this prospectus supplement and in the
accompanying prospectus to captions in these materials where you can find
further related discussions. The following Table of Contents and the Table of
Contents included in the accompanying prospectus provide the pages on which
these captions are located.
You can find definitions of some terms used in this prospectus supplement
under the caption "Glossary" beginning on page S-50 in this prospectus
supplement.
S-2
<PAGE>
Table of Contents
[To Be Conformed]
<TABLE>
<CAPTION>
Page
<S> <C>
Summary..................................................................................... S-5
The Parties............................................................................ S-5
The Securities......................................................................... S-5
Credit Enhancement..................................................................... S-7
Servicing.............................................................................. S-8
Optional Repurchase.................................................................... S-8
Tax Matters............................................................................ S-8
ERISA Considerations................................................................... S-8
Offered Certificate Ratings............................................................ S-9
Risk Factors........................................................................... S-9
Absence of Market...................................................................... S-9
Risk Factors S-10
You May Be Unable to Sell Your Certificates............................................ S-10
You May Be Adversely Affected if Your Certificates are Repaid Faster or Slower
Than You Expect...................................................................... S-10
Possible Delays and Reductions in Payments Due to Georgraphic Concentration............ S-11
Potential Computer Problems Relating to the Year 2000 May Result in Delays and
Reductions in Payments on Certificates............................................... S-12
Possible Delays and Reductions in Payments on Certificates Due to Limited
Assets of the Trust.................................................................. S-12
Possible Delays and Reductions in Payments on Certificates Due to Basis Risk........... S-13
Possible Delays and Reductions in Payments on Certificates Due to Limited
Credit Enhancement................................................................... S-13
Possible Delays and Reductions in Payments on Class B Certificates Due to
Subordination of Class B Certificates................................................ S-14
Deposits of Funds in the Excess Funding Account Will Reduce the Amount
of Non-Principal Collections that are Available to the Trust......................... S-14
Ability to Change Discount Factor May Result in Delays or Reductions in
Payments on Certificates............................................................. S-14
Ratings are not Recommendations........................................................ S-15
The Accounts................................................................................ S-16
General................................................................................ S-16
Description of the Trust Portfolio..................................................... S-17
Yield Information...................................................................... S-20
Major Customers; Major Manufacturers................................................... S-20
Delinquency Experience................................................................. S-21
Loss Experience........................................................................ S-22
Aging Experience....................................................................... S-23
Deutsche Financial Services Corporation S-24
General................................................................................ S-24
Year 2000 Issues....................................................................... S-24
Deutsche Business Services Corporation...................................................... S-26
Deutsche Bank AG............................................................................ S-26
Maturity and Principal Payment Considerations............................................... S-26
Description of the Certificates............................................................. S-27
Interest............................................................................... S-27
Principal.............................................................................. S-28
Allocation Percentages................................................................. S-28
Discount Factor........................................................................ S-28
Distributions from the Collection Account; Reserve Fund................................ S-29
Interest Funding Account............................................................... S-31
Principal Funding Account.............................................................. S-32
Excess Funding Account................................................................. S-32
Distributions.......................................................................... S-33
</TABLE>
S-3
<PAGE>
<TABLE>
<S> <C>
Optional Repurchase.................................................................... S-35
Early Amortization Events.............................................................. S-35
Termination............................................................................ S-38
Servicing Compensation and Payment of Expenses......................................... S-39
Reports................................................................................ S-39
Federal Income Tax Considerations........................................................... S-40
Overview............................................................................... S-40
Characterization of the Certificates and the Trust..................................... S-41
Taxation of Interest Income of Certificateholders...................................... S-41
Sale of a Certificate.................................................................. S-42
Possible Classification as a Partnership or as an Association Taxable
as a Corporation.................................................................... S-42
FASIT Legislation...................................................................... S-43
Foreign Investors...................................................................... S-43
Backup Withholding..................................................................... S-44
State and Local Tax Consequences............................................................ S-45
ERISA Considerations........................................................................ S-46
General................................................................................ S-46
Plan Assets and the Availability of Exemptions for Certificates........................ S-46
Review by Benefit Plan Fiduciaries..................................................... S-48
Underwriting................................................................................ S-48
Legal Matters............................................................................... S-49
Glossary.................................................................................... S-50
Annex I: Other Series....................................................................... I-1
</TABLE>
S-4
<PAGE>
Summary
This summary highlights selected information from this document. This
summary does not contain all of the information that you need to consider in
making your investment decision and is qualified by the more complete
descriptions contained in this prospectus supplement and the accompanying
prospectus. To understand all of the terms of the certificates, you should
read carefully this entire prospectus supplement and the accompanying
prospectus, including the information under "Risk Factors" in this prospectus
supplement and the accompanying prospectus.
The Parties
Trust......................... Distribution Financial Services Floorplan
Master Trust.
The assets of the trust include receivables
generated from time to time under accounts
that have been assigned to the trust as well
as receivables generated under any accounts
added to the trust from time to time.
The assets of the trust also include all of
the seller's right, title and interest in:
. all security interests purporting to
secure payment of the receivables,
and all agreements or arrangements
supporting or securing payment of the
receivables;
. all documents, books and records
relating to the receivables; and
. monies due or to become due relating
to the foregoing.
The seller may remove accounts that
it transferred to the trust.
Seller ....................... Deutsche Floorplan Receivables, L.P. The
principal executive office of the seller is
located at 655 Maryville Centre Drive, St.
Louis, Missouri 63141, telephone number
(314) 523-3000.
Servicer ..................... Deutsche Financial Services Corporation.
Trustee ...................... __________________________.
The Securities The Certificates of Your Series
The trust will issue the following series of
certificates:
. $__________ [Floating] [Fixed] Rate
Asset Backed Certificates, series [ ],
Class A;
. $_________ [Floating] [Fixed] Rate Asset
Backed Certificates, series [ ], Class
B; and
. $________ [Floating] [Fixed] Rate Asset
Backed Certificates, series [ ], Class
C.
S-5
<PAGE>
The Class C certificates initially
will be issued to the seller although
the seller has the right to sell the
Class C certificates, in whole or
part. Only the Class A and Class B
certificates are being offered hereby.
Closing Date
The issuance of the certificates of your
series will take place on or about [ ].
Distribution Dates
The trust will make distributions on
the certificates of your series to
the extent of available funds
received during each calendar month.
The distribution date will be the
15th day of the following month --
or, if that day is not a business
day, the next business day --
commencing on [ ]. [If interest
is payable other than on each
distribution date, e.g., quarterly,
refer to the distribution dates as
interest payment dates.]
Interest Payments
. The interest rate for each class of
certificates of your series is
specified on the front cover page
of this prospectus supplement.
. Interest on the outstanding
principal balance of each class of
certificates of your series will
accrue at the applicable interest
rate during each period that we
call an interest period. Each
interest period will begin on a
distribution date -- or, in the
case of the first distribution
date, will begin on the closing
date -- and will end on the day
preceding the next distribution
date.
. Interest on the certificates of
your series will be calculated on
the basis of [a 360-day year of
twelve 30-day months][the actual
number of days in the related
interest period divided by 360].
. The trustee of the trust will
distribute accrued interest on the
outstanding principal amount of
each class of certificates of your
series on each distribution date to
the extent of available funds.
Payments of interest on the Class B
certificates and the Class C
certificates will be subordinated
in priority to payment in full of
accrued interest on the Class A
certificates. Payments of interest
on the Class C certificates will be
subordinated in priority to payment
in full of accrued interest on the
Class B certificates.
Scheduled Principal Payments and
Potential Later Payments
The trust expects to pay the entire
principal amount of your certificates in
one payment on the distribution date in
[specify month and year]. In order to
accumulate funds to pay your
certificates on the distribution date in
[specify month and year], the trust will
accumulate principal collections in a
deposit account that we call
S-6
<PAGE>
the principal funding account, during a
period that we call the accumulation
period.
If the Class A certificates are not
fully repaid on the distribution date in
[specify month and year], the Class A
certificates will begin to amortize by
means of monthly payments of principal
collections allocated to your series
until the Class A certificates are fully
repaid. After the Class A certificates
are fully repaid, the trust will use
principal collections allocated to your
series to repay the Class B
certificates.
If the Class B certificates are not
fully repaid on the distribution date in
[specify month and year], the Class B
certificates will begin to amortize,
after the Class A certificates have been
fullyrepaid, by means of monthly
payments of principal collections
allocated to your series.
Possible Early Principal Repayment of
Your Series
The Class A and Class B certificates
may be repaid earlier than expected
as a result of any of the following:
. the occurrence of an event that
we call an early amortization
event;
. the seller exercises its option
to repurchase the interest of
your series in the trust; or
. the seller is required to
repurchase the interest of your
series in the trust.
Other Series
Your series of certificates is one of
[ ] series issued by the trust which are
expected to be outstanding on the
closing date. Annex I to this prospectus
supplement summarizes some of the terms
of the other outstanding series.
Allocations
Your series represents the right only to
a portion of collections on the
receivables. Your series will also be
allocated a portion of the defaulted
receivables.
Credit Enhancement Credit enhancement of the
certificates of your series will
be provided by:
. the subordination of the seller's
interest in the trust to the
extent of an amount that we call
the available subordinated
amount;
S-7
<PAGE>
. amounts in a deposit account that
we call the reserve fund; and
. the subordination of the Class B
certificates and the Class C
certificates for the benefit of
each class of certificates of
your series with an earlier
alphabetical designation.
The amount of the credit enhancement
is limited and may not prevent you
from suffering a loss.
Servicing DFS is the initial servicer. The
servicer is responsible for servicing,
managing and making collections on the
receivables.
The servicer will receive a monthly
servicing fee and other amounts
described in this prospectus supplement
as servicing compensation from the
trust.
Optional Repurchase The seller has the option to repurchase
the interest of your series in the trust
once an amount that we refer to as the
invested amount of your series is
reduced to less than 10% of the initial
outstanding principal amount of your
series.
Tax Matters In the opinion of Mayer, Brown & Platt,
special tax counsel for the seller, the
Class A and Class B certificates will be
characterized as debt for federal income
tax purposes. In the opinion of Bryan
Cave LLP, Missouri counsel for the
seller, the Class A and Class B
certificates will be characterized as
debt for Missouri income tax purposes.
If you purchase a Class A or Class B
certificate, you agree to treat it as
debt for tax purposes.
For further information concerning
the application of federal and
Missouri tax laws, see "Federal
Income Tax Considerations" and "State
and Local Tax Consequences" in this
prospectus supplement.
ERISA Considerations The underwriters anticipate that the
Class A certificates will meet the
criteria for treatment as "publicly-
offered securities." If so, taking into
account important considerations
described under "ERISA Considerations"
in this prospectus supplement, the Class
A certificates will be eligible for
purchase by persons investing assets of
employee benefit plans.
Pension plans and other investors to
which ERISA applies cannot acquire Class
B certificates. Prohibited investors
include:
. any employee benefit plans to
which ERISA applies;
S-8
<PAGE>
. any plan or other arrangement to
which section 4975 of the U.S.
Internal Revenue Code applies;
and
. any entity whose underlying
assets may be deemed to include
"plan assets" under ERISA by
reason of any plan's investment
in the entity.
By purchasing any Class B certificates,
you certify that you are not within any of
those categories.
For further information regarding the
Offered Certificate Ratings application of
ERISA, see "ERISA Considerations" in this
prospectus supplement.
Offered Certificate Ratings The Class A certificates will be rated at
the time of issuance in the highest long-
term rating category by at least one
nationally recognized rating agency. The
Class B certificates will be rated at the
time of issuance in one of the three
highest rating categories by at least one
rating agency.
A security rating is not a recommendation
to buy, sell or hold securities and may be
revised or withdrawn at any time by the
assigning rating agency. Each rating
should be evaluated independently of any
other rating.
Risk Factors You should consider the factors set forth
under"Risk Factors" on pages S-10 through
S-15 of this prospectus supplement.
Absence of Market Your certificates will be a new issue of
securities with no established trading
market. [The trust does not expect to
apply for listing of your certificates on
any securities exchange or quote your
certificates in the automated quotation
system of a registered securities
association.]
S-9
<PAGE>
Risk Factors
In addition to the other information contained in this prospectus supplement
and the prospectus, you should consider the following risk factors--and the
"Risk Factors" set forth in the prospectus--in deciding whether to purchase
certificates. The disclosures below and the "Risk Factors" set forth in the
accompanying prospectus summarize material risks of investing in the
certificates. The summary does not purport to be complete; to fully understand
and evaluate it, you should also read the rest of this prospectus supplement and
the accompanying prospectus.
You May Be Unable to There is currently no secondary market for your
Resell Your Certificates certificates. The underwriters may assist in
resales of your certificates, but they are not
required to do so. 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 certificates.
You May Be Adversely You may receive repayment of your certificates
Affected if Your Certificates are Repaid earlier or later than
Certificates are Repaid expected.
Faster or Slower
Than You Expect . If your certificates are repaid faster than
you expect, you may be unable to reinvest
principal received on your certificates at a
yield that is equal to the yield on your
certificates. If you acquire certificates at
a premium, repayment of principal at a rate
that is faster than the rate anticipated
will result in a yield to you that is lower
than you anticipated.
. If your certificates are repaid later than
you expect, you will be unable to use the
principal amount of your investment at the
time that you expected, and you may miss
opportunities to reinvest the money in other
investments. Also, if you acquire your
certificates at a discount, the repayment of
principal of your certificates later than
you anticipated will result in a lower than
anticipated yield.
. Numerous factors may result in your
certificates being repaid faster or slower
than you expect; we cannot predict whether
your certificates will be repaid on any
particular date. Additional discussion of
these issues is set forth under "Maturity
and Principal Payment Considerations" in
this prospectus supplement.
S-10
<PAGE>
Possible Delays and You may suffer delays or reductions in
Reductions in Payments on payments on your certificates because of
Certificates Due to economic conditions in states where dealers
Geographic Concentration are located.
. As of [specify date], according to
their mailing addresses, dealers
owing receivables representing, by
principal balance, [ ]%, [ ]% and [
]% of the receivables in the trust,
were located in [identify states].
. An economic downturn in one or more
of states where concentrations of
dealers are located could adversely
affect the performance of the trust
as a whole, even if national economic
conditions remain unchanged or
improve, as dealers in such state or
states experience the effects of such
a downturn and face greater
difficulty in making payments on the
receivables.
. Economic factors such as
unemployment, interest rates and the
rate of inflation may affect the rate
of prepayment and defaults on the
receivables and could reduce or delay
payments to you.
S-11
<PAGE>
Potential Computer You may be adversely affected by the fact that many
Problems Relating to the existing computer applications and systems are
Year 2000 May Result in dependent upon calendar dates, including dates
Delays and Reductions in before, on and after January 1, 2000. These
Payments on Certificates applications and systems could fail or could
produce erroneous results during the transition
from the year 1999 to the year 2000 and afterwards.
. If the servicer does not have a computer
system that is year 2000 compliant in a
timely manner, the ability of the servicer
to service the receivables may be adversely
affected. Any adverse effect on the ability
of the servicer to service receivables
could result in delays and reductions in
payments on your certificates.
. If the trustee of the trust does not have a
computer system that is year 2000 compliant
in a timely manner, the ability of the
trustee of the trust to make distributions
on your certificates may be adversely
affected, which could result in delays and
reductions in payments to you.
. Year 2000 issues may also adversely affect
the ability of DTC to perform its services.
Any adverse effect on the ability of DTC to
perform its services could result in delays
and reductions in payments on your
certificates and could delay or impair your
ability to sell your certificates.
Possible Delays and You may experience delays or reductions in payments
Reductions in Payments on your certificates because the trust will not
on Certificates Due to have any significant assets or sources of funds
Limited Assets of the other than the receivables.
Trust
. Your certificates will be payable only from
the assets of the trust.
. You must rely for repayment upon payments
on the receivables and, if and to the
extent available, amounts on deposit in the
reserve fund. However, amounts to be
deposited in the reserve fund are limited
in amount. If the reserve fund is
exhausted, the trust will depend solely on
current collections on the receivables to
make payments on your certificates.
If losses or delinquencies occur with respect to
receivables which are not covered by payments on
other receivables or by the reserve fund, you may
experience delays and reductions in payments on
your certificates.
The certificates do not represent an interest in or
an obligation of, and are not insured or guaranteed
by, the seller, servicer, DFS, Deutsche Bank AG or
any other person or entity. You will have no
recourse to the seller, servicer, DFS, Deutsche
Bank AG or any other person or entity in the event
that proceeds of the assets of the trust are
insufficient or otherwise unavailable to make
payments on your certificates.
S-12
<PAGE>
Possible Delays and You could suffer delays or reductions in payments
Reductions in Payments on your certificates because of the way the
on Certificates Due to receivables bear or do not bear interest and the
Basis Risk way in which interest is calculated on your
certificates.
. The receivables generally bear interest at
rates announced by particular banks plus a
margin. DFS may reduce the interest rates
applicable to any of the receivables, so long
as DFS does not reasonably expect any such
reduction to result in an event that we call
an early amortization event. Some receivables
are originated at a discount and do not bear
interest for a specified period after their
origination.
. [The interest rate on your certificates is
calculated as the lesser of (a) LIBOR plus a
margin and (b) a rate that reflects the
weighted average interest rates on the
receivables. If LIBOR plus the margin used to
compute the interest rate for your
certificates exceeds the component of the
formula that reflects the interest rates on
the receivables, then interest will accrue on
your certificates during the applicable
interest period at a rate based on the
weighted average interest rates of the
receivables. A reduction in interest rates on
any receivables, or the inclusion of a
greater proportion of non-interest bearing
receivables in the trust, will increase the
likelihood that you will receive lower
interest payments, based on the interest rate
on the receivables, than you would if you
were receiving interest payments based on
LIBOR.]
. In addition to reducing the interest rate on
your certificates, a reduction in interest
rates on the receivables will also reduce the
amount of non-principal collections available
to fund payment of interest on your
certificates and to fund other items
contemplated by the supplement for your
series.
Possible Delays and Credit enhancement of the certificates of your series
Reductions In Payments will be provided by:
on Certificates Due to
Limited Credit . the subordination of the seller's interest to
Enhancement the extent of the available subordinated
amount as described in this prospectus
supplement;
. amounts in the reserve fund, if any; and
. the subordination of the Class B certificates
and the Class C certificates for the benefit
of each class of certificates of your series
with an earlier alphabetical designation.
The amount of the credit enhancement is limited and
will be reduced from time to time as described in
this prospectus supplement. If the amount of credit
enhancement is reduced to zero, you will likely
experience delays and reductions in payments on your
certificates. Credit enhancement for any other series
will not be available to your series.
S-13
<PAGE>
Possible Delays and Payment on the Class B certificates are subordinated
Reductions in Payments to the Class A certificates as described in this
on Class B Certificates prospectus supplement. Accordingly, if you acquire a
Due to Subordination of Class B certificate, you may suffer delays or
Class B Certificates reductions in payments on your certificates even
though payments are being made on the Class A
certificates.
Deposits of Funds in the Pursuant to the supplement for your series, the
Excess Funding Account servicer will establish a deposit account that we
Will Reduce the Amount call the excess funding account. Any funds deposited
of Non-Principal in the excess funding account will likely earn a rate
Collections that are of return lower than the yield on a comparable amount
Available to the Trust of receivables. Accordingly, any deposit of funds in
the excess funding account will reduce the amount of
non-principal collections available to the trust and
could result in a delay or reduction in payments to
you.
Ability to Change You may be adversely affected because the discount
Discount Factor May factor may be changed without your consent.
Result in Delays or
Reductions in Payments . This transaction uses the terms principal
on Certificates collections and non-principal collections
in a way that may not be familiar to you. For
purposes of calculating non-principal
collections, this transaction treats some
principal payments on the receivables as if
they were interest or other non-principal
charges relating to the receivables.
. Pursuant to the pooling and servicing
agreement, the product of the balance of each
receivable times a percentage that we call
the discount factor will be deemed to be non-
principal collections.
. As of [insert date], the discount factor was
0.40%. The discount factor may be adjusted
upwards or downwards, without your consent,
but may in no event exceed 1%.
. Any increase in the discount factor will
result in a higher amount of non-principal
collections and a lower amount of principal
collections than would otherwise occur.
Conversely, any decrease in the discount
factor would result in a lower amount of non-
principal collections and a higher amount of
principal collections than would otherwise
occur.
. Changes in the amount of principal
collections or non-principal collections
could result in a delay or reduction in
payments to you. For example, the supplement
for your series applies non-principal
collections to pay interest on your
certificates. However, the supplement does
not use principal collections to pay interest
on your certificates except to the extent
that principal collections allocable to the
seller are reallocated to pay interest. See
"Description of the Certificates --
Distributions from the Collection Account;
Reserve Fund."
S-14
<PAGE>
Ratings are Not Any rating of your certificates by a rating agency
Recommendations indicates the rating agency's view on the likelihood
of the ultimate payment of principal and the timely
payment of interest, at the applicable interest
rate, on your certificates.
Among the things a rating will not indicate are:
. the likelihood that principal will be paid on
a scheduled date;
. the likelihood that an early amortization
event will occur;
. the likelihood that any amount that we refer
to as a carry-over amount will be paid;
. whether or not the discussion under "Federal
Income Tax Considerations" or "State and
Local Tax Considerations" in this prospectus
supplement is adequate, or the likelihood
that a United States withholding tax will be
imposed on non-U.S. certificateholders;
. whether or not the discussion under "ERISA
Considerations" in this prospectus supplement
is adequate, or whether a "prohibited
transaction" will occur;
. the marketability of your certificates;
. the market price of your certificates; or
. whether your certificates are an appropriate
investment for any purchaser.
A rating is not a recommendation to buy, sell, or
hold your certificates. A rating may be lowered or
withdrawn at any time. You should evaluate each
rating independently of any other rating.
The seller will request at least two rating
agencies to rate the Class A certificates; it is a
condition to the issuance of the Class A
certificates that they be rated in the highest
long-term rating category by at least one rating
agency. The seller will request at least two rating
agencies to rate the Class B certificates; it is a
condition to the issuance of the Class B
certificates that they be rated in one of the three
highest rating categories by at least one rating
agency. A rating agency other than those requested
could assign a rating to your certificates, and its
rating could be lower than any rating assigned by a
rating agency chosen by the seller.
For definitions of some of the terms used in this prospectus supplement, see the
"Glossary" in this prospectus supplement.
S-15
<PAGE>
The Accounts
General
The receivables arise under revolving credit arrangements that we call the
accounts. Each of the revolving credit arrangements is between:
. a dealer, manufacturer or distributor of products; and
. Deutsche Financial Services Corporation ("DFS") or an affiliate of DFS.
[As of the date of this prospectus supplement, the only affiliate of DFS that
is party to an account in the trust is Deutsche Business Services Corporation
("Deutsche BSC").] For additional discussion of the origination of the
receivables, see "The Dealer Floorplan Financing Business of DFS" in the
prospectus.
For purposes of convenience, this prospectus supplement and the accompanying
prospectus:
. may refer to dealers, manufacturers and distributors collectively as
"Dealers" and individually as a "Dealer"; and
. may refer to Deutsche Financial Services Corporation and Deutsche Business
Services Corporation collectively, in their capacity as originators of the
receivables or as parties to the receivables contribution and sale
agreement, as "DFS."
Accounts may be added to or removed from the trust from time to time. See
"Description of the Certificates--Addition of Accounts" and "Removal of
Accounts; Transfers of Participations" in the prospectus. [On or before the
closing date, the seller expects that it will add to the trust accounts and
related receivables having an outstanding principal amount of $[ ], and that
it will remove from the trust accounts and related receivables having an
outstanding principal amount of $[ ].]
As of [ ], there was $[ ] million of receivables in the total
U.S. portfolio of DFS of which $[ ] million of receivables were included
in the trust as of that date. All references in the tables set forth below to
Receivables Balances refer to the amounts shown in the records of DFS as the
outstanding principal amount of the applicable receivables. The tables set
forth below under the heading "--Description of the Trust Portfolio" contain
information as of [ ] with respect to the receivables in the trust
[after giving effect to receivables in the accounts which will be added to or
removed from the trust on or before the closing date] (collectively, the "Trust
Portfolio").
The sum in any column in the tables set forth below may not equal the
indicated total due to rounding.
S-16
<PAGE>
Description of the Trust Portfolio
The following tables set forth the composition of the Trust Portfolio, as of [
], by business line and payment plan. Due to the variability and uncertainty
with respect to the rates at which receivables are created, paid or otherwise
reduced, the characteristics set forth below may vary significantly as of any
other date of determination.
Composition of Receivables in the Trust Portfolio by Business Line
[ ]
(dollars in Millions)
<TABLE>
<CAPTION>
Percentage of Number Percentage of
Receivables Receivables of Number of
Business Line Balance Balances Accounts Accounts
------------- ----------- ------------- ---------- -----------
<S> <C> <C> <C> <C>
Floorplan Receivables............... $________ ________ ________ ________
Accounts Receivable................. ________ ________ ________ ________
Asset Based Lending................. ________ ________ ________ ________
Unsecured........................... ________ ________ ________ ________
Total............................ $======== ======== ======== ========
</TABLE>
Composition of Receivables in the
Trust Portfolio by Payment PLan
[ ]
(Dollars in Millions)
<TABLE>
<CAPTION>
Percentage Percentage
of Number of
Receivables Receivables of Number of
Payment Plan Balance Balances Accounts Accounts
------------ ---------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Pay-as-Sold.............................. __________ ___________ ________ ___________
Scheduled Payment Plan................... __________ ___________ ________ ___________
Total................................. $_________ 100.0% ________ 100.0%
=========== ===========
</TABLE>
The following tables set forth the composition of the receivables in the Trust
Portfolio as of [ ] by account balance, product type and geographic
distribution of such receivables. Due to the variability and uncertainty with
respect to the rates at which receivables are created, paid or otherwise
reduced, the characteristics set forth below may vary significantly as of any
other date of determination.
S-17
<PAGE>
Composition of Receivables in the Trust Portfolio by Account Balance
as of [ ]
(Dollars in Millions)
<TABLE>
<CAPTION>
Percentage Percentage
of Number of
Receivables Receivables of Number of
Account Balance Range Balance Balances Accounts Accounts
- --------------------- ----------- ------------ -------- -----------
<S> <C> <C> <C>
$1 to $999,999.99...................... $
$1,000,000 to $2,499,999.99............
$2,500,000 to $4,999,999.99............
$5,000,000 to $9,999,999.99............
Over $10,000,000.00....................
Total............................... $ 100.0% 100.0%
======= =======
</TABLE>
Composition of Receivables in the Trust Portfolio by Product TYpe
as of [ ]
(Dollars in Millions)
<TABLE>
<CAPTION>
Percentage Percentage
of Number of
Receivables Receivables of NUmber of
Product Type Balance Balances Accounts Accounts
------------ ----------- ------------ -------- -----------
<S> <C> <C> <C> <C>
Computers and Computer Products........ $
Manufactured Housing...................
Accounts Receivable....................
Recreational Vehicles..................
Boats and Motors.......................
Industrial and Agricultural Equipment..
Motorcycles............................
Snowmobiles............................
Other..................................
Consumer Electronics and Appliances....
Keyboard and Other Musical.............
Instruments...........................
Total................................ $ 100.0% 100.0%
======== ========
</TABLE>
The "Accounts Receivable" category in the preceding table includes Asset Based
Receivables of $____ million. The "Other" category in the preceding table
includes, among other products, heating, ventilating, and air conditioning
equipment, and irrigation systems.
S-18
<PAGE>
Geographic Distribution of Receivables in the Trust Portfolio
as of [ ]
(Dollars in Millions)
<TABLE>
<CAPTION>
Percentage Percentage
of Number of
Receivables Receivables of Number of
State Balance Balances Accounts Accounts
----- ----------- ------------ -------- -----------
<S> <C> <C> <C> <C>
.............. $
..............
..............
..............
..............
..............
..............
..............
..............
..............
..............
..............
Other States..
Total...... $ 100.0% 100.0%
===== =====
</TABLE>
The percentage of the "Receivables Balance" represented by receivables in each
state not specifically listed in the preceding table is less than [ ]% of the
"Receivables Balance".
S-19
<PAGE>
Yield Information
The receivables bear interest in their accrual periods at rates generally
equal to a rate referred to in the related financing agreement plus a margin.
The rate in the financing agreements relating to the receivables usually refers
to the prime rate announced from time to time by a bank referred to therein.
Some receivables do not bear interest for a specified period after their
origination.
For [ ], the receivables in the U.S. portfolio of DFS had a yield of ___%
per annum, of which (a) approximately ___% was attributable to yield from the
payment of interest accruing on those receivables and (b) approximately ___% was
attributable to the payment of the discounted portion of the receivables
balances and other income. For the first [ ] months of [ ], the
receivables in the U.S. portfolio of DFS had a yield of ___% per annum, of which
(a) approximately ___% was attributable to yield from the payment of interest
accruing on those receivables and (b) approximately ___% was attributable to the
payment of the discounted portion of the receivables balances and other income.
The reduction of yield for the first [ ] months of [ ] compared to [
] reflects competitive pricing pressures as well as seasonality in the U.S.
portfolio of DFS.
The trust will receive the yield attributable to the payment of interest
accruing in the trust -- the type of yield referred to in each clause (a) in the
preceding paragraph -- but not the yield attributable to the payment of the
discounted portion of the receivable balance attributable to DFS's funding the
receivable at a discount at the origination of the receivable in the receivables
- -- the type of yield referred to in each clause (b) of the preceding sentence.
However, in order to create imputed interest, the trust has been and will be
purchasing all of the receivables from the seller at the discount factor (0.40%
as of the [specify date]) and will receive the interest payments on the
receivables in accordance with their terms.
If the receivables in the U.S. portfolio of DFS during [ ] were
originated at a discount equal to a discount factor of 0.40% and had a Monthly
Payment Rate of __% and the collection of such discount amounts were treated as
interest, during [ ] the yield on such receivables would have been ___%.
If the receivables in the U.S. portfolio of DFS during the first [__] months of
[ ] were originated at a discount equal to a discount factor of 0.40% and
had a Monthly Payment Rate of __% and the collection of such discount amounts
were treated as interest, during the first [ ] months of [ ] the yield
on such receivables would have been ___%. The trust's yield on its receivables
will be affected by the interest rates borne by receivables, the discount factor
and the rate at which the receivable balances are paid.
Major Customers; Major Manufacturers
At [ ] no one dealer accounted for more than __% of the aggregate
balance of the receivables in the trust. At [ ] no one
Manufacturer was obligated under Floorplan Agreements relating to receivables in
the trust aggregating more than ___% of the aggregate balance of such
receivables. No prediction can be made as to what percentage of the receivables
in the future may be obligations of a single dealer or be related to a single
Manufacturer under its Floorplan Agreements. See "The Dealer Floorplan
Financing Business of DFS--Floorplan Agreements with Manufacturers" in the
prospectus.
S-20
<PAGE>
Delinquency Experience
The following table sets forth the delinquency experience as of the dates
indicated for the entire U.S. portfolio of DFS. Because the accounts from which
the receivables in the trust will be generated constitute only a portion of the
U.S. portfolio of DFS, the actual delinquency experience with respect to the
accounts in the trust may be different than the experience set forth in the
table below. We cannot assure that the delinquency experience for the
receivables in the future will be similar to the experience shown below.
Delinquency Experience for Total U.S. Portfolio
Receivables Balances
(Dollars in Millions)
<TABLE>
<CAPTION>
As of [ ], 31 As of December 31,
[ ] [ ] [ ] [ ] [ ] [ ]
<S> <C> <C> <C> <C> <C> <C>
Aggregate Principal Balance...............
SAU/NSF 31 days or more...................
Scheduled Payment Plan past due 31 days
or more..................................
Total...................................
SAU/NSF 31 days or more/Aggregate
Principal Balance........................
Scheduled Payment Plan past due 31 days
or more/Aggregate Principal Balance......
Total/Aggregate Principal Balance.........
</TABLE>
A "SAU/NSF" account referred to in the preceding table is one that is deemed
delinquent when (i) in the case of a Pay-as-Sold receivable, there is an unpaid
receivable balance as to which the related product has been sold and such
receivable balance not paid by the related dealer or (ii) a check from the
related dealer has been returned because of insufficient funds. The "Scheduled
Payment Plan past due 30 days or more" category in the preceding table includes
an immaterial amount of Canadian receivables, which are not part of the U.S.
portfolio of DFS.
S-21
<PAGE>
Loss Experience
The following table sets forth the average principal receivables balance and
loss experience for each of the periods shown with respect to the U.S. portfolio
of DFS. Because the accounts in the trust will be only a portion of the U.S.
portfolio of DFS, actual loss experience with respect to the accounts in the
trust may be different than the experience set forth in the table below. We
cannot assure that the loss experience for the receivables in the future will be
similar to the historical experience set forth below with respect to the U.S.
portfolio of DFS. The historical experience set forth below includes the effect
of the financial obligations of Manufacturers in respect of repossessed products
as described in the prospectus under "The Dealer Floorplan Financing Business of
DFS--Floorplan Agreements with Manufacturers." If Manufacturers are not able to
perform those obligations in the future, the loss experience in respect of the
U.S. portfolio of DFS and the receivables may be adversely affected.
Loss Experience for the U.S. Portfolio
--------------------------------------
(Dollars in Millions)
---------------------
<TABLE>
<CAPTION>
[ ] Months
Ended [ ] Year Ended December 31,
------------- ------------------------------------------------------------------------
[ ] [ ] [ ] [ ] [ ] [ ]
<S> <C> <C> <C> <C> <C> <C> <C>
Average Principal Receivables Balance
Gross Losses...........................
Net Losses.............................
Net Losses/Liquidations................
Net Losses/Average Principal
Receivables Balance...................
</TABLE>
The "Average Principal Receivables Balance" referred to in the preceding table
is the average weekly principal balances for the twelve months ending on the
last day of the period. "Net Losses" in any period referred to in the preceding
table are gross losses less recoveries for such period. Recoveries include
recoveries from collateral security in addition to recoveries from the products.
The percentage indicated for the [ ] months ended [ ] in the preceding
table is not annualized.
S-22
<PAGE>
Aging Experience
The following table provides the age distribution of inventory for all dealers
in the U.S. portfolio of DFS, as a percentage of total principal outstanding at
the date indicated. The following table excludes Asset Based Receivables and
receivables secured by accounts receivable. Because the accounts in the trust
will only be a portion of the entire U.S. portfolio of DFS, actual age
distribution of the accounts in the trust may be different than the distribution
shown below.
Age Distribution for the U.S. Portfolio(1)
(Dollars in Millions)
---------------------
Receivable Balances
<TABLE>
<CAPTION>
Days As of [ ] 31, As of [ ] 31, As of December 31,
- ---- --------------- --------------- ----------------------------------------
[ ] [ ] [ ] [ ] [ ] [ ]
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
1-30.......
31-60......
61-90......
91-120.....
121-180....
181-270....
Over 270...
Total......
</TABLE>
<TABLE>
<CAPTION>
Percentage of Receivables Balance
Days As of [ ] 31, As of [ ] 31, As of December 31,
- ---- ------------------- ------------------ --------------------------------------
[ ] [ ] [ ] [ ] [ ] [ ]
------- ------- ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
1-30.......
31-60......
61-90......
91-120.....
121-180....
181-270....
Over 270...
Total...... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
======== ======= ======= ======= ======= =======
</TABLE>
S-23
<PAGE>
Deutsche Financial Services Corporation
General
Deutsche Financial Services Corporation was incorporated in Nevada in 1975.
It is an indirect, wholly-owned subsidiary of Deutsche Bank AG. Deutsche
Financial Services Corporation is a financial services company which provides
inventory financing, accounts receivable financing and asset based financing to
dealers, distributors and manufacturers of consumer and commercial durable
goods. Industries served by Deutsche Financial Services Corporation include,
but are not limited to:
. computers and computer products;
. manufactured housing;
. recreational vehicles;
. boats and motors;
. consumer electronics and appliances;
. keyboards and other musical instruments;
. industrial and agricultural equipment;
. office automation products;
. snowmobiles; and
. motorcycles.
Deutsche Financial Services Corporation is also in the business of providing
equipment loans and leases, franchisee loans, vendor finance programs and
private label retail finance programs. Deutsche Financial Services Corporation
also provides financing to recreational vehicle and boat customers nationwide,
directly and through its wholly-owned subsidiary, Ganis Credit Corporation.
As of [ ], none of the dealers were affiliates of Deutsche
Financial Services Corporation and none of the products being financed by the
receivables were made or distributed by affiliates of Deutsche Financial
Services Corporation.
As of [ ], Deutsche Financial Services Corporation was providing
inventory or accounts receivable financing to over 13,000 dealers in the United
States and its approved U.S. manufacturer/distributor list exceeded 1,100.
Deutsche Financial Services Corporation has offices in major metropolitan
areas of the United States. Its principal executive offices are located at 655
Maryville Centre Drive, St. Louis, Missouri 63141. The telephone number of such
office is (314) 523-3000.
YEAR 2000 Issues
Deutsche Financial Services Corporation is committed to taking the necessary
steps to enable both new and existing systems, applications and equipment to
effectively process transactions up to and beyond the Year 2000. To that end,
Deutsche Financial Services Corporation is well underway with its Year 2000
readiness program, having spent approximately $5 million to date. Deutsche
Financial Services Corporation estimates that the costs of its continuing Year
2000 readiness efforts ultimately will exceed $10 million. Because of such
ongoing readiness efforts, Year 2000 processing issues and risks are not
expected to have a material adverse impact on the ability of Deutsche Financial
Services Corporation to continue its general business operations, or on its
ability to perform its responsibilities as servicer.
S-24
<PAGE>
Currently, Deutsche Financial Services Corporation is actively engaged in
completing the following Year 2000 program initiatives:
. complete a comprehensive analysis of current functions which might be
impacted by Year 2000 issues, and document the results in a Year 2000
assessment report;
. develop and implement a detailed plan to address Year 2000 issues as
identified, particularly as they pertain to software and hardware
applications;
. establish a Year 2000 program management office, staffed by dedicated
and experienced project managers;
. survey outside vendors to determine the degree of preparedness for the
Year 2000, to uncover potential issues arising from those business
counterparties;
. raise organizational awareness not only with top management, but also at
the staff level, and involve relevant business group leaders in reaching
solutions; and
. implement an ongoing purchasing/procurement plan which is responsive to
Year 2000 concerns.
The risk of failures of computer applications, systems and networks due to
improper Year 2000 data processing are substantial, not only for users of
information technologies, but also for any entities and individuals which
interact with them. When aggregated, multiple individual malfunctions and
failures relating to Year 2000 issues can potentially cause broader, systemic
disruptions across industries and economies. The risks arising from Year 2000
issues which face many companies, including Deutsche Financial Services
Corporation, include, among other things:
. the potential diminished ability to respond to the needs and
expectations of customers in a timely manner; and
. the potential for inaccurate processing of information.
In addition, Deutsche Financial Services Corporation has begun developing
contingency plans to complement the Year 2000 readiness efforts already in
progress, including backup and offsite processing of certain information and
functions. Deutsche Financial Services Corporation anticipates that such
contingency plans will provide an additional level of security to its Year 2000
efforts already underway.
The foregoing discussion of Year 2000 issues is based on current estimates of
the management of Deutsche Financial Services Corporation as to the amount of
time and costs necessary to remediate and test the computer systems of Deutsche
Financial Services Corporation. Such estimates are based on the facts and
circumstances existing at this time, and were derived utilizing multiple
assumptions of future events, including, but not limited to, the continued
availability of certain resources, third-party modification plans and
implementation success, and other factors. However, there can be no guarantee
that these estimates will be achieved, and actual costs and results could differ
materially from the costs and results currently anticipated by Deutsche
Financial Services Corporation. Specific factors that might cause such material
differences include, but are not limited to:
. the availability and cost of personnel trained in this area;
. the ability to locate and correct all relevant computer code;
. the planning and modification results of business counterparties of
Deutsche Financial Services Corporation; and
. similar uncertainties.
S-25
<PAGE>
Deutsche Business Services Corporation
[to come]
Deutsche Bank AG
Deutsche Bank AG is the largest banking institution in the Federal Republic of
Germany, with total assets at [ ] in excess of $[ ] billion. The
Deutsche Bank group has operations in over 50 countries and employs over 70,000
people. With a presence in all of the world's major financial centers, the
Deutsche Bank group offers a full range of financial services including private
banking, commercial and institutional banking, and investment banking.
Deutsche Financial Services Corporation is an indirect, wholly-owned
subsidiary of Deutsche Bank AG. Deutsche Financial Services Corporation is the
limited partner of the seller and the parent of Deutsche FRI, the general
partner of the seller.
Maturity and Principal Payment Considerations
Principal with respect to the certificates of your series will not be payable
until the distribution date in [specify month and year] unless an Early
Amortization Event has occurred. Full amortization of the certificates of your
series by the distribution date in [specify month and year] depends on, among
other things, repayment by dealers of the receivables and may not occur if
dealers do not fully repay the receivables. Because the receivables are, in
large part, paid upon retail sale of the related product, the timing of payments
on the receivables is uncertain. In addition, we cannot assure you that DFS
will generate additional receivables under the accounts or that any particular
pattern of payments will occur. See "The Dealer Floorplan Financing Business of
DFS" in the prospectus.
The amount of new receivables generated in any month and monthly payment rates
on the receivables may vary because of, among other things:
. seasonal variations in product sales and inventory levels;
. retail incentive programs provided by product manufacturers; and
. various economic factors affecting product sales generally.
The following table sets forth the highest and lowest monthly payment rates
for the U.S. portfolio of DFS during any month in the periods shown and the
average of the monthly payment rates for all months during the periods shown, in
each case calculated as the percentage equivalent of a fraction:
. the numerator of which is the aggregate of all collections of principal
plus non-cash reductions in the principal balances of the receivables in
the U.S. portfolio of DFS during the applicable period; and
. the denominator of which is the average aggregate principal balances of
such receivables for the applicable period.
We cannot assure that the rate of principal collections will be similar to the
historical experience set forth below. Because the accounts in the trust will
be only a portion of the entire U.S. portfolio of DFS, actual monthly payment
rates with respect to the accounts in the trust may be different from those
shown below. DFS believes that the increase in payment rates since [ ] is
due in part to dealers maintaining lower levels of inventory as well as to an
increasing percentage in the U.S. portfolio of receivables which liquidate more
frequently.
S-26
<PAGE>
Monthly Payment Rates for the U.S. Portfolio
<TABLE>
<CAPTION>
[ ] Months
ended [ ], 31 Year Ended December 31,
--------------------- --------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
[ ] [ ] [ ] [ ] [ ] [ ] [ ]
Highest Month... % % % % % % %
Lowest Month.... % % % % % % %
Average of the
Months in the % % % % % % %
Period
</TABLE>
The final distribution of principal on your certificates may occur earlier
than expected because:
. an Early Amortization Event may occur which would initiate an Early
Amortization Period;
. the seller may exercise its option to repurchase the interest of your
series in the trust; or
. the seller may have to repurchase the interest of the outstanding
series in the trust because of the breach of certain representations
and warranties.
See "Description of the Certificates--Early Amortization Events" and "--
Optional Repurchase" in this prospectus supplement and "Description of the
Certificates--Representations and Warranties" in the prospectus.
You will bear the risk of being able to reinvest principal received on your
certificates at a yield at least equal to the yield on your certificates. If
you acquire a certificate at a discount, the repayment of principal of your
certificate later than you anticipated will result in a lower than anticipated
yield. In addition, if you acquire certificates at a premium, repayment of
principal at a rate that is faster than the rate you anticipated will result in
a yield that is lower than you anticipated.
Description of the Certificates
The following summary describes certain terms of the pooling and servicing
agreement and the supplement for your series, but it does not purport to be
complete and is qualified in its entirety by reference to the pooling and
servicing agreement and the supplement. See also "Description of the
Certificates" in the prospectus.
Interest
Interest on the outstanding principal balance of each class of certificates
of your series will be payable to the certificateholders of your series, to the
extent of available funds, on each [interest payment date]. However:
. during an Early Amortization Period, interest will be paid on each
distribution date; and
. unless an Early Amortization Period has occurred prior to the
distribution date in [ ] the first interest payment date will
be [ ].
Interest will be calculated on the basis of the actual number of days in
the related interest period divided by 360.
S-27
<PAGE>
Principal
We expect that no principal payments will be made on your certificates
until the distribution date in [specify month and year]. However, principal
payments on your certificates may be made earlier or later. See "Risk Factors"
and "Maturity and Principal Payment Considerations" in this prospectus
supplement and "Risk Factors" in the prospectus.
Allocations of Collections, Defaulted Amounts and Miscellaneous Payments
The servicer will allocate amounts to your series for each calendar month
as follows:
. non-principal collections and the Defaulted Amount will be allocated
to your series based on the Floating Allocation Percentage;
. during the Revolving Period, principal collections will be allocated
to your series based on the Floating Allocation Percentage, unless
otherwise provided in the next sentence;
. during the Accumulation Period and any Early Amortization Period,
principal collections will be allocated to your series based on the
Principal Allocation Percentage, unless otherwise provided in the next
sentence; and
. Miscellaneous Payments will at all times be allocated to your series
on the basis of the Series [ ] Allocation Percentage.
However, if the sum of:
. the sum of the floating allocation percentages, including the
Floating Allocation Percentage, if applicable, for each series in its
revolving period, and
. the principal allocation percentage, including the Principal
Allocation Percentage, if applicable, for each series in its
amortization, accumulation or early amortization period exceeds 100%,
then principal collections for the applicable calendar month will be allocated
among the series pari passu and pro rata on the basis of the floating allocation
percentages and principal allocation percentages. Amounts not allocated to your
series as described above will be allocated to the seller and the other
outstanding series of certificates, if any.
The Floating Allocation Percentage and the Principal Allocation Percentage
will be adjusted for any calendar month in which Additional Accounts are
designated to reflect the additional receivables added to the trust.
For any date on which collections are made, the servicer generally will
distribute directly to the seller an amount equal to the Excess Seller's
Percentage for the related calendar month of principal and non-principal
collections for that date.
In addition, during the Revolving Period, the servicer generally will
distribute directly to the seller an amount equal to the Available Seller's
Principal Collections.
Discount Factor
This transaction creates additional non-principal collections by treating a
portion of the principal balance of a receivable as a non-principal collection.
This is done by multiplying the principal balance of a receivable by a
percentage that we call the discount factor. As of [specify date], the discount
factor was ___%. The discount factor is subject to adjustment as described in
"Description of the Certificates-Discount Factor" in the prospectus.
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Distributions from the Collection Account; Reserve Fund
Non-Principal Collections. On each distribution date, the trustee of the
trust will apply non-principal collections allocated to your series and
Investment Proceeds, if any, deposited into the collection account for the
related calendar month to make the following distributions in the following
order of priority:
(1) the following amount relating to the Class A certificates will be
deposited in the interest funding account:
. Class A monthly interest for that distribution date; plus
. the amount of any Class A monthly interest for any prior
distribution dates not deposited in the interest funding account
or distributed on those prior distribution dates; plus
. to the extent permitted under applicable law, the amount of any
Class A Additional Interest for the immediately preceding interest
payment date that has not been deposited in the interest funding
account and, without duplication, any Class A Additional Interest
previously due but not deposited in the interest funding account
or distributed;
(2) the following amount relating to the Class B certificates will be
deposited in the interest funding account:
. Class B monthly interest for that distribution date; plus
. the amount of any Class B monthly interest for any prior
distribution dates not deposited in the interest funding account
or distributed on those prior distribution dates; plus
. to the extent permitted under applicable law, the amount of any
Class B Additional Interest for the immediately preceding interest
payment date that has not been deposited in the interest funding
account and, without duplication, any Class B Additional Interest
previously due but not deposited in the interest funding account
or distributed;
(3) the following amount relating to the Class Certificates will be
deposited in the interest funding account:
. Class C monthly interest for that distribution date; plus
. the amount of any Class C monthly interest for any prior
distribution dates not deposited in the interest funding account
or distributed on those prior distribution dates; plus
. to the extent permitted under applicable law, the amount of any
Class C Additional Interest for the immediately preceding interest
payment date that has not been deposited in the interest funding
account and, without duplication, any Class C Additional Interest
previously due but not deposited in the interest funding account
or distributed;
(4) an amount equal to the Monthly Servicing Fee for that distribution
date will be distributed to the servicer, unless that amount has been
netted against deposits to the collection account as described above or
waived as described below;
(5) an amount equal to the reserve fund deposit amount, if any, for
that distribution date will be deposited in the reserve fund;
(6) an amount equal to the Investor Default Amount, if any, for that
distribution date will be treated as a portion of Available
Certificateholder Principal Collections for that distribution date;
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(7) an amount required to reimburse unreimbursed Class A Investor
Charge-Offs, Class B Investor Charge-Offs and Class C Investor Charge-Offs
will be treated as a portion of principal collections for that distribution
date;
(8) any Class A Carry-over Amount, Class B Carry-over Amount or Class
C Carry-over Amount not previously distributed will be deposited to the
interest funding account; and
(9) the balance, if any, will constitute "Excess Servicing" for that
distribution date.
If non-principal collections allocated to your series and Investment
Proceeds are not sufficient to make the entire distributions required by clauses
(1), (2), (3), (4) and (6), the servicer will direct the trustee of the trust to
withdraw funds from the reserve fund and apply those funds, to the extent
available, to complete the distributions pursuant to those clauses in the
numerical order of those clauses.
If there is a Required Subordination Draw Amount for that distribution
date, the servicer will apply or direct the trustee of the trust to apply the
Available Seller's Collections on deposit in the collection account on that
distribution date, but only up to the amount of the Required Subordination Draw
Amount, to make up the shortfall in the distributions required by clauses (1) -
(4) and (6) above and that have not been made through the application of funds
from the reserve fund described above. Any of those Available Seller's
Collections remaining after the application pursuant to the preceding sentence
will be treated as a portion of Available Certificateholder Principal
Collections for the distribution date and applied as described under "--
Principal Collections" below, but only up to the amount of unpaid Adjustment
Payments allocated to your series.
If the Required Subordination Draw Amount exceeds Available Seller's
Collections for a distribution date, the Available Subordinated Amount will be
further reduced in accordance with the definition of Available Subordinated
Amount in an amount equal to those Available Seller's Collections.
If for a distribution date the sum of the Required Subordination Draw
Amount and the aggregate of the required subordination draw amounts for all
other series outstanding exceeds the Available Seller's Collections on deposit
in the collection account on the distribution date, then the Available Seller's
Collections will be allocated to your series and the other series pro rata on
the basis of the required subordination draw amounts, including the Required
Subordination Draw Amount.
Reserve Fund. An Eligible Deposit Account will be established and
maintained in the name of the trustee of the trust for the benefit of your
series (the "reserve fund"). On the closing date, the seller will cause to be
deposited with the trustee of the trust, and the trustee of the trust will
deposit in the reserve fund, funds in an amount equal to [ ]% of the aggregate
initial principal balance of the certificates of your series.
If, after giving effect to the allocations, distributions and deposits in
the reserve fund described above under "--Non-Principal Collections," the amount
in the reserve fund is less than the Reserve Fund Required Amount, the trustee
of the trust will deposit any remaining non-principal collections allocable to
your series and Investment Proceeds -- to the extent available pursuant to
clause (5) under "--Non-Principal Collections" above -- for the related calendar
month into the reserve fund until the amount in the reserve fund is equal to the
Reserve Fund Required Amount.
Funds in the reserve fund will be invested in the same manner in which
funds in the collection account may be invested. On each determination date,
the servicer will credit to the collection account any investment earnings, net
of losses and investment expenses, with respect to the reserve fund. After the
earlier of the payment in full of the outstanding principal balance of the
certificates and the Termination Date, any funds remaining on deposit in the
reserve fund will be paid to the seller.
Excess Servicing. On each distribution date, the servicer will allocate
Excess Servicing relating to the calendar month immediately preceding the
distribution date in the following order of priority:
(a) an amount equal to the aggregate outstanding amounts of the
Monthly Servicing Fee which have been previously waived as described under
"--Servicing Compensation and Payment of Expenses" will be distributed to
the servicer; and
(b) the balance, if any, will be distributed to the seller.
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Principal Collections. On each distribution date, the servicer will
allocate Available Certificateholder Principal Collections as follows.
For each distribution date relating to the Revolving Period, all
Available Certificateholder Principal Collections will be allocated:
. first, if
(1) the Pool Balance at the end of the preceding calendar month is
less than the Pool Balance at the end of the second preceding
calendar month, and
(2) the Pool Balance at the end of the preceding calendar month is
less than the Required Participation Amount for that distribution
date, calculated before giving effect to any deposits to the excess
funding account and any excess funding account for any other series
in their revolving periods to be made on that distribution date,
then the servicer will cause to be deposited into the excess
funding account an amount which will reduce the Invested Amount
such that, together with the deposits to the excess funding
accounts -- and the resulting reductions in the invested amounts--
for other outstanding series in their revolving periods for that
distribution date, the Pool Balance is equal to the Required
Participation Amount; and
.second, to Excess Principal Collections as described under
"Description of the Certificates--Allocations Among Series" in the
prospectus.
For each distribution date relating to the Accumulation Period or any
Early Amortization Period, if a responsible officer of the trustee of the
trust has actual knowledge thereof:
. an amount equal to Monthly Principal for the distribution date
will be deposited to the principal funding account; and
. during the Accumulation Period, the balance, if any, will be
allocated to Excess Principal Collections.
If the Invested Amount is greater than zero on the Termination Date, any
funds remaining in the reserve fund, after the application of funds in the
reserve fund as described above under "--Non-Principal Collections", will be
treated as a portion of Available Certificateholder Principal Collections for
the distribution date occurring on the Termination Date.
Interest Funding Account
The servicer will establish and maintain in the name of the trustee of
the trust, on behalf of the trust, an Eligible Deposit Account for the
benefit of your series (the "interest funding account"). On each
distribution date monthly interest will be deposited in the interest
funding account as provided above under "--Distributions from the
Collection Account; Reserve Fund."
All amounts on deposit in the interest funding account on any
distribution date, after giving effect to distributions to be made on that
distribution date (the "interest funding account balance"), will be
invested from the date of their deposit to a date on or prior to the next
succeeding distribution date by the trustee of the trust at the direction
of the servicer in Eligible Investments. On each distribution date, the
interest and other investment income on the interest funding account
balance will be paid to the collection account and distributed on that
distribution date.
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Principal Funding Account
The servicer will establish and maintain in the name of the trustee of
the trust, on behalf of the trust, an Eligible Deposit Account for the
benefit of your series (the "principal funding account"). On each
distribution date, funds will be deposited in the principal funding account
as provided above under "--Distributions from the Collection Account;
Reserve Fund"; provided that if an Early Amortization Event occurs during
the Accumulation Period -- unless, in limited circumstances relating to the
required addition of accounts, that Early Amortization Event will have been
cured -- the principal funding account balance will be paid to the
certificateholders of your series on the first distribution date
thereafter.
All amounts on deposit in the principal funding account on any
distribution date, after giving effect to distributions to be made on that
distribution date (the "principal funding account balance"), will be
invested from the date of their deposit to a date on or prior to the
succeeding distribution date by the trustee of the trust at the direction
of the servicer in Eligible Investments. On each distribution date, the
interest and other investment income on the principal funding account
balance will be applied as provided above under "--Distributions from the
Collection Account; Reserve Fund."
Excess Funding Account
The servicer will establish and maintain an Eligible Deposit Account
in the name of the trustee of the trust, on behalf of the trust, for the
benefit of your series (the "excess funding account").
On each distribution date during the Revolving Period, if:
. the Pool Balance at the end of the preceding calendar month is
less than the Pool Balance at the end of the second preceding
calendar month; and
. the Pool Balance at the end of the preceding calendar month is
less than the Required Participation Amount for that distribution
date --calculated before giving effect to any deposits to the
excess funding account and any excess funding account for any
other series in its revolving period to be made on that
distribution date,
then some Available Certificateholder Principal Collections will be deposited in
the excess funding account on the distribution date.
If:
. on any determination date during the Revolving Period there are
any funds in the excess funding account; and
. the Pool Balance at the end of the preceding calendar month is
greater than the Pool Balance at the end of the second preceding
calendar month,
then the Invested Amount and the invested amounts -- but, in each case, not more
than the initial principal amounts -- for all other outstanding series that
provide for an excess funding account or similar arrangement and are in their
revolving periods will be increased so that, after giving effect to the
increases, the Required Participation Amount is at least equal to the Pool
Balance.
On the determination date, the servicer will notify the trustee of the
trust of the amount, if any, of the increase in the Invested Amount and the
trustee of the trust will withdraw from the excess funding account and pay to
the seller or allocate to one or more other series, on the immediately
succeeding distribution date, an amount equal to the amount of the increase in
the Invested Amount.
If the Invested Amount is increased by any payment to the seller or any
allocation to one or more other series, the seller's interest or those other
series' invested amount, as applicable, will be reduced by the amount of that
payment.
In addition, the Invested Amount will not be increased unless after giving
effect to the increase the Pool Balance equals or exceeds the sum of:
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. the Required Participation Amount -- exclusive of the Trust
Available Subordinated Amount;
. the sum of the Available Subordinated Amount and the sum of the
required subordinated amounts for all other series -- or, if the
other series will have no required subordinated amounts, the
available subordinated amounts with respect to that series; and
. the sum of any subordinated amounts supporting any Enhancement for
all other series. Under some circumstances, deposits in and
withdrawals from the excess funding account may be made on a daily
basis.
The allocation of additional receivables to increase the Invested Amount
and the invested amounts of other series will be pro rata based on the
proportion that the amount on deposit in the excess funding account bears to the
aggregate amounts in all of the trust's excess funding accounts -- including the
excess funding account for your series -- and similar arrangements for
accommodating the fluctuation in the principal balances of the receivables.
The deposit of amounts into the excess funding account and the excess
funding accounts and such similar arrangements for other series will be based on
the proportion that the Invested Amount bears to the aggregate of the invested
amounts, including the Invested Amount, for all series.
Any funds on deposit in the excess funding account at the beginning of the
Early Amortization Period or the Accumulation Period will be deposited in the
principal funding account. In addition, no funds will be deposited in the
excess funding account during the Accumulation Period or any Early Amortization
Period.
Funds on deposit in the excess funding account will be invested by the
trustee of the trust at the direction of the servicer in investments rated in
the highest short-term category of each rating agency or in any other
investments that are acceptable to each rating agency. These investments are
required to mature by the next distribution date. On each distribution date,
all net investment income earned on amounts in the excess funding account since
the preceding distribution date will be paid to the collection account and
applied as described in this prospectus supplement. See "--Distributions from
the Collection Account; Reserve Fund" above.
Distributions
Payments to certificateholders of your series will be made from the
interest funding account, the principal funding account and the excess funding
account. The servicer will instruct the trustee of the trust to apply the funds
on deposit in the interest funding account, the principal funding account and
the excess funding account and will instruct the trustee of the trust to make,
without duplication, the following distributions:
(a) On each distribution date which is an interest payment date,
available amounts on deposit in the interest funding account will be
distributed in the following order of priority:
(1) to the Class A certificateholders, an amount equal to
(A) the sum of Class A monthly interest for the distribution
date, plus the Class A monthly interest for any prior
distribution date, if any, occurring after the immediately
preceding interest payment date -- or in the case of the
first interest payment date, after the closing date for your
series, plus
(B) any amount determined on any prior interest payment date
pursuant to clause (A) that was not distributed on any prior
interest payment date, plus
(C) to the extent permitted under applicable law, the amount
of any Class A Additional Interest for the current interest
payment date and, without duplication, any Class A
Additional Interest previously due but not distributed;
(2) to the Class B certificateholders, an amount equal to
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(A) the sum of Class B monthly interest for the distribution
date, plus the Class B monthly interest for any prior
distribution date, if any, occurring after the immediately
preceding interest payment date -- or in the case of the
first interest payment date, after the closing date for your
series, plus
(B) any amount determined on any prior interest payment date
pursuant to clause (A) that was not distributed on any prior
interest payment date, plus
(C) to the extent permitted under applicable law, the amount
of any Class B Additional Interest for the current interest
payment date and, without duplication, any Class B
Additional Interest previously due but not distributed;
(3) to the Class C certificateholders, an amount equal to
(A) the sum of Class C monthly interest for the distribution
date, plus the Class C monthly interest for any prior
distribution date, if any, occurring after the immediately
preceding interest payment date -- or in the case of the
first interest payment date, after the closing date for your
series, plus
(B) any amount determined on any prior interest payment date
pursuant to clause (A) that was not distributed on any prior
interest payment date, plus
(C) to the extent permitted under applicable law, the amount
of any Class C Additional Interest for the current interest
payment date and, without duplication, any Class C
Additional Interest previously due but not distributed;
(4) to the Class A certificateholders, the sum of
(A) any Class A Carry-over Amount for the interest payment
date, plus
(B) any Class A Carry-over Amount for each other
distribution date, if any, occurring after the
immediately preceding interest payment date -- or in the
case of the first interest payment date, after the
closing date for your series;
(5) to the Class B certificateholders, the sum of
(A) any Class B Carry-over Amount for the interest payment
date, plus
(B) any Class B Carry-over Amount for each other
distribution date, if any, occurring after the
immediately preceding interest payment date -- or in the
case of the first interest payment date, after the
closing date for your series; and
(6) to the Class C certificateholders, the sum of
(A) any Class C Carry-over Amount for the interest payment
date, plus
(B) any Class C Carry-over Amount for each other distribution date, if
any, occurring after the immediately preceding interest payment
date --or in the case of the first interest payment date, after
the closing date for your series.
(b) On each distribution date during an Early Amortization Period --
if a responsible officer of the trustee of the trust has actual knowledge
of that Early Amortization Period -- and on any other distribution date
after the end of the Accumulation Period, the amount on deposit in the
excess funding account, the principal funding account and -- after the
payment of accrued interest and Carry-over Amounts on the certificates as
described in
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paragraph (a) above -- any amounts in the interest funding account will be
distributed to the certificateholders of your series in the following order
of priority:
. first, to the Class A certificateholders until the outstanding
principal balance of the Class A certificates has been reduced to
zero;
. second, to the Class B certificateholders until the outstanding
principal balance of the Class B certificates has been reduced to
zero; and
. third, to the Class C certificateholders until the outstanding
principal balance of the Class C certificates has been reduced to
zero; provided, however, that the maximum amount distributed
pursuant to this paragraph on any distribution date will not
exceed the excess of (A) the sum of the outstanding principal
balance of the Class A, Class B and Class C certificates, as
applicable, over (B) the sum of unreimbursed Class A, Class B and
Class C Investor Charge-Offs, each on that distribution date.
Distributions on the certificates of your series will be made on each
applicable distribution date to the holders of certificates in whose names the
certificates were registered -- expected to be Cede, as nominee of DTC, for the
Class A and Class B certificates -- at the close of business on the day
preceding that distribution date -- or, if definitive certificates are issued,
on the last day of the preceding calendar month --. However, the final
distribution on the certificates of your series will be made only at the time of
presentation and surrender of the certificates.
Optional Repurchase
On any distribution date occurring after the Invested Amount of the
certificates of your series is reduced to less than 10% of the initial
outstanding principal amount of the certificates of your series, the seller will
have the option to repurchase the interest of your series in the trust. The
purchase price at that time will be equal to the outstanding Invested Amount
plus accrued and unpaid interest on the certificates of your series through the
day preceding the distribution date on which the repurchase occurs. The purchase
price will be deposited in the collection account in immediately available funds
on the distribution date on which the seller exercises that option.
Following that repurchase, the certificateholders of your series will have
no further rights relating to the trust, other than the right to receive the
final distribution on the certificates of your series. In the event that the
seller fails for any reason to deposit the purchase price as described above,
payments will continue to be made to your series as described under "--
Distributions" above.
Early Amortization Events
For purposes of your series, the "Early Amortization Events" consist of:
. the "Early Amortization Events" which are set forth in the pooling
and servicing agreement; and
. the additional "Early Amortization Events" which are set forth in the
supplement for your series.
The supplement for each other series will also set forth additional Early
Amortization Events applicable to the other series -- which may be the same as
or different from the additional Early Amortization Events for your series
described below.
For your series and every other series, "Early Amortization Event" includes
any of the following events:
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1. failure by the seller to convey receivables in Additional
Accounts to the trust within five business days after the day on which it
is required to convey those receivables pursuant to the pooling and
servicing agreement, as described under "Description of the Certificates --
Addition of Accounts" in the prospectus;
2. failure on the part of the seller, the servicer or DFS, as
applicable,
. to make any payment or deposit required by the pooling and
servicing agreement or the receivables contribution and sale
agreement, including but not limited to any Transfer Deposit
Amount or Adjustment Payment, on or before the date occurring
five business days after the date that payment or deposit is
required to be made;
. to deliver a distribution date statement on the date required
under the pooling and servicing agreement -- or within ten
business days after notice from the trustee of the trust of that
failure;
. to comply with its covenant not to create any lien on a
receivable which failure has a material adverse effect on the
certificateholders and which continues unremedied for a period of
60 days after written notice; provided, however, that an Early
Amortization Event will not be deemed to have occurred if the
seller will have repurchased the related receivables or, if
applicable, all the receivables during that period in accordance
with the provisions of the pooling and servicing agreement;
. to observe or perform in any material respect any other covenants
or agreements set forth in the pooling and servicing agreement or
the receivables contribution and sale agreement, which failure
has a materially adverse effect on the certificateholders and
which continues unremedied for a period of 45 days after written
notice of that failure;
3. any representation or warranty made by DFS in the receivables
contribution and sale agreement or by the seller in the pooling and
servicing agreement or any information required to be given by the seller
to the trustee of the trust to identify the accounts
. proves to have been incorrect in any material respect when made
and continues to be incorrect in any material respect for a
period of 60 days after written notice; and
. as a result the interests of the certificateholders of all series
are materially and adversely affected -- excluding, however, any
representation or warranty made by the seller that the pooling
and servicing agreement constitutes, or the transfer of the
receivables to the trust is, a valid sale, transfer and
assignment to the trust of all right, title and interest of the
seller in the receivables and the Collateral Security if the
pooling and servicing agreement constitutes the grant of a
security interest in the receivables and Collateral Security;
. however, an Early Amortization Event will not be deemed to occur
if the seller has repurchased the related receivables, if
applicable, during that period in accordance with the provisions
of the pooling and servicing agreement;
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4. the occurrence of certain events of bankruptcy, insolvency or
receivership relating to any of DFS, the seller or Deutsche Bank North
America Holding Corporation -- so long as DFS is a direct or indirect
subsidiary of Deutsche Bank North America Holding Corporation;
5. the trust or the seller becomes an investment company within the
meaning of the Investment Company Act of 1940, as amended; or
6. any Servicer Default occurs.
The additional "Early Amortization Events" which are Early Amortization
Events for purposes of your series consist of any of the following events:
1. a Carry-over Amount is outstanding on six consecutive distribution
dates -- after giving effect to the distribution on each of those
distribution dates;
2. on any determination date, the average of the Monthly Payment
Rates for the three preceding calendar months is less than [ ]%;
3. the failure to pay the outstanding principal amount of the
certificates of your series by the distribution date in [specify month and
year];
4. the Three Month Net Loss Ratio exceeds [ ]% on an annualized
basis; however, this clause 4. may be amended or waived with the consent of
the seller and each rating agency that the seller has requested to rate
your series and without the consent of any certificateholder;
5. the sum of all Eligible Investments and amounts on deposit in the
excess funding account and any excess funding accounts for any other series
represents more than [ ]% of the total assets of the trust on each of
six or more consecutive determination dates, after giving effect to all
payments made or to be made on the distribution dates relating to those
determination dates; or
6. on any distribution date, the balance of the reserve fund is less
than [ ]% of the aggregate outstanding principal balance of the
certificates of your series, in each case after giving effect to all
deposits and distributions on the distribution date.
If any of the above events occur:
. an Early Amortization Event will be deemed to have occurred
without any notice or other action on the part of any other party
immediately on the occurrence of that event; and
. the Early Amortization Period will commence as of the day on which
the Early Amortization Event occurs.
Monthly distributions of principal to the certificateholders of your series
will begin on the first distribution date following the calendar month in which
an Early Amortization Period has commenced and will continue, to the extent
described under "--Distributions" above, on subsequent distribution dates.
In addition to the consequences of an Early Amortization Event discussed
above, if an insolvency event occurs involving the seller, or the seller
violates its covenant not to create any lien on any receivable, in each case as
provided in the pooling and servicing agreement, on the day of that insolvency
event or that violation, as applicable:
. the seller will immediately cease to transfer receivables to the
trust and promptly give notice to the trustee of the trust of that
insolvency event or violation, as applicable; and
. the trust will be deemed to have terminated, in accordance with
the liquidation, winding up and dissolution procedures described
below.
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Unless the provisions of the pooling and servicing agreement have been
amended, as described under "Description of the Certificates--Amendments" in the
prospectus, to eliminate the provisions relating to the sale of receivables
following the occurrence of an insolvency event relating to the seller -- the
pooling and servicing agreement provides that following the occurrence of an
insolvency event relating to the seller:
. within 15 days the trustee of the trust will publish a notice of
that insolvency event or violation stating that the trustee of the
trust intends to sell, liquidate or otherwise dispose of the
receivables in a commercially reasonable manner and on commercially
reasonable terms;
. however, the trustee will refrain from that action if within a
specified period of time holders of certificates of each series
representing more than 50% of the aggregate outstanding principal
amount of the certificates of each series -- or, for any series
with two or more classes, the certificates of each class -- and
each person holding a Supplemental Certificate, instruct the
trustee of the trust not to sell, liquidate or dispose of the
receivables and to continue transferring receivables as before that
insolvency event or violation, as applicable.
If the portion of those proceeds allocated to your series and the proceeds
of any collections on the receivables in the collection account allocable to
your series are not sufficient to pay the aggregate unpaid principal balance of
the certificates in full plus accrued and unpaid interest thereon, you will
incur a loss. Notwithstanding the above, in the case of the violation of the
covenant not to create a lien on any receivable, the trust will not sell the
receivables unless the proceeds allocable to your series are sufficient to pay
the aggregate unpaid principal balance of the certificates of your series in
full plus accrued and unpaid interest on those certificates.
Termination
The trust will terminate on the date set forth under "Description of the
Certificates--Termination" in the prospectus.
In any event, the last payment of principal and interest on the
certificates will be due and payable no later than the distribution date in
[specify month and year]. In the event that the Invested Amount is greater than
zero on that distribution date, the trustee of the trust will sell or cause to
be sold -- and apply the proceeds to the extent necessary to pay those remaining
amounts to all certificateholders -- an interest in the receivables or some of
the receivables, as specified in the pooling and servicing agreement, in an
amount equal to the sum of:
. 110% of the Invested Amount, after giving effect to deposits and
distributions otherwise to be made on that distribution date; and
. the Available Subordinated Amount on the preceding determination
date, after giving effect to allocations to be made on the
distribution date following that determination date.
However, the amount will not exceed the Series [ ] Allocation
Percentage of receivables on that determination date.
The net proceeds of that sale and any collections on the receivables will
be paid:
. first to Class A certificateholders, until the accrued and unpaid
Class A monthly interest and all Class A Additional Interest is paid
in full and the Class A Invested Amount is reduced to zero;
. second to Class B certificateholders, until the accrued and unpaid
Class B monthly interest and all Class B Additional Interest is paid
in full and the Class B Invested Amount is reduced to zero; and
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. third to Class C certificateholders, until the accrued and unpaid
Class C monthly interest and all Class C Additional Interest is paid
in full the Class C Invested Amount is reduced to zero.
Any remaining proceeds will be paid to the seller.
Servicing Compensation and Payment of Expenses
The servicer's compensation for its servicing activities and reimbursement
for its expenses will be a servicing fee in an amount payable in arrears on each
distribution date generally equal to one-twelfth of the product of:
. 2% or, if the servicing fee has been waived as described below, 0%
for the distribution date in respect of which the servicing fee has
been waived; and
. the Pool Balance as of the last day of the second preceding calendar
month.
The share of the servicing fee allocable to the certificateholders of your
series for any distribution date will generally be equal to one-twelfth of the
product of:
. 2%; and
. the Invested Amount as of the last day of the second preceding
calendar month.
The remainder of the servicing fee will be paid by the seller and the
certificateholders of other series. The servicing fee will be payable to the
servicer solely to the extent amounts are available for distribution therefor in
accordance with the terms of the pooling and servicing agreement.
The servicer will be permitted to waive its right to receive the servicing
fee on any distribution date, so long as it believes that sufficient non-
principal collections will be available on a future distribution date to pay the
servicing fee relating to the waived servicing fee, in which case the servicing
fee for that distribution date will be deemed to be zero.
The servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the accounts and the receivables
including, without limitation, payment of fees and disbursements of the trustee
of the trust and independent accountants and all other fees and expenses which
are not expressly stated in the pooling and servicing agreement to be payable by
the trust or the certificateholders other than federal, state and local income
and franchise taxes, if any, of the trust or the certificateholders.
Reports
On each distribution date, the trustee of the trust will forward, or cause
to be forwarded, to each certificateholder of record -- which, in the case of
Class A and Class B certificateholders, is expected to be Cede, as nominee for
DTC, unless definitive certificates are issued -- a statement prepared by the
servicer setting forth the following information:
. the aggregate amount of collections, the aggregate amount of non-
principal collections and the aggregate amount of principal
collections processed during the immediately preceding calendar month
and the amount on deposit in the collection account;
. the Series [ ] Allocation Percentage, the Floating Allocation
Percentage and the Principal Allocation Percentage for that calendar
month;
. the total amount, if any, distributed on the certificates of your
series;
. the amount of that distribution allocable to principal on each class
of certificates of your series;
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. the amount of that distribution allocable to interest on each class
of certificates of your series;
. the Investor Default Amount for that distribution date;
. the Required Subordination Draw Amount, if any, for the preceding
calendar month;
. the amount of the Class A, Class B and Class C Investor Charge-Offs
and the amounts of reimbursements thereof for the preceding calendar
month;
. the amount of the servicing fee for the preceding calendar month;
. the Controlled Distribution Amount;
. the Invested Amount, separately stating the Class A, Class B and
Class C Invested Amounts, the excess funding account balance and the
outstanding principal balance of each class of certificates of your
series for that distribution -- after giving effect to all
distributions which will occur on that distribution date;
. the "pool factor" for each class of certificates of your series as of
the determination date relating to that distribution date, which
consists of an eleven-digit decimal expressing the Invested Amount of
each class as of that determination date -- determined after taking
into account any reduction in the Invested Amount for that class which
will occur on that distribution date -- as a portion of the initial
principal balance of that class;
. the Available Subordinated Amount for that determination date;
. the reserve fund balance for that date; and
. the principal funding account balance and the interest funding
account balance for that date.
On or before January 31 of each calendar year, the trustee of the trust
will furnish, or cause to be furnished, to each person who at any time during
the preceding calendar year was a certificateholder of record -- which, in the
case of Class A and Class B certificateholders, is expected to be Cede, as
nominee for DTC, unless definitive certificates are issued -- a statement
containing the information required to be provided by an issuer of indebtedness
under the Code for the preceding calendar year or the applicable portion thereof
during which that person was a certificateholder, together with other customary
information as is necessary to enable the certificateholders to prepare their
tax returns.
In addition, as long as the Class A and Class B certificateholder of record
is Cede, as nominee for DTC, certificate owners will receive tax and other
information from participants and indirect participants rather than from the
trustee of the trust. See "Federal Income Tax Considerations" and "State and
Local Tax Consequences" in this prospectus supplement.
Federal Income Tax Considerations
Overview
The following is a summary of material U.S. Federal income tax consequences
of the purchase, ownership and disposition of the offered certificates. This
summary is based on current provisions of the Internal Revenue Code of 1986,
called the "Code", proposed, temporary and final Treasury regulations under the
Code, and published rulings and court decisions. The current tax laws and the
current regulations, rulings and court decisions may be changed, possibly
retroactively. The parts of this summary which relate to matters of law or legal
conclusions, represent the opinion of Mayer, Brown & Platt, special Federal tax
counsel for the seller, and are qualified in this summary. We have not sought
and will not seek any rulings from the Internal
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Revenue Service (the "IRS") about any of the Federal income tax consequences we
discuss. The IRS could take positions contrary to those we discuss.
Characterization of the Certificates and the Trust
In the opinion of Mayer, Brown & Platt, the trust will not be classified as
an association or publicly traded partnership taxable as a corporation for
Federal income tax purposes. Mayer, Brown & Platt is also of the opinion that,
based on the substantive terms of the offered certificates, the offered
certificates will be treated as indebtedness for Federal income tax purposes.
In general, whether for Federal income tax purposes a transaction
constitutes a sale of property or a loan which is secured by the property, is a
question of fact, and is based on the economic substance of the transaction
rather than its form or label. The primary factor in determining whether the
substance of a transaction is a sale or a loan is whether the person who has
purchased the property or made a loan secured by the property has assumed the
risk of loss from the property and has obtained the benefits of ownership of the
property. The intention of the parties is another important factor in
determining whether a transaction will be treated as a sale or a loan for
Federal income tax purposes. The seller expresses in the pooling agreement its
intent that for federal, state and local income and franchise tax purposes, the
offered certificates will be indebtedness. Further, the seller, the servicer and
each initial and subsequent investor, by acquiring an interest in an offered
certificate, agrees or will be deemed to agree to treat the offered certificates
as indebtedness for Federal, state and local income or franchise tax purposes.
Based on its analysis of the substance of the transaction contemplated in
this prospectus and the parties' intentions, Mayer, Brown & Platt has concluded
that the purchasers of the offered certificates will be treated as making a loan
to the seller secured by the receivables. Therefore, Mayer, Brown & Platt is of
the opinion that the offered certificates will be treated as debt for Federal
income tax purposes. However, no transaction closely comparable to that
contemplated in this prospectus has been the subject of any Treasury regulation,
revenue ruling or judicial decision. Prospective investors should also be aware
that opinions of counsel are not binding on the IRS, and the IRS could
successfully challenge treatment of the offered certificates as indebtedness for
Federal income tax purposes.
Except as otherwise expressly indicated, the remaining discussion assumes
that the offered certificates will be treated as debt for Federal income tax
purposes and that payments on the offered certificates are denominated in U.S.
dollars.
Taxation of Interest Income of Certificateholders
If the offered certificates are not treated as issued with "original issue
discount" or "OID", investors will be required to include the stated interest on
the offered certificates in income either when received or accrued, according to
their method of tax accounting. The offered certificates will not be treated as
issued with OID if (1) the interest payable on the offered certificates meets
the requirements for "qualified stated interest" under Treasury Regulations
relating to OID, and (2) any excess of the principal amount of the offered
certificates over the issue price of the offered certificates does not exceed a
de minimis amount. Qualified stated interest generally includes interest that is
payable unconditionally at least annually at a single fixed rate that
appropriately takes into account the length of time between payments. It is
uncertain whether interest payable on the offered certificates will be treated
as qualified stated interest. A de minimis amount is defined by Treasury
Regulations as 1/4% of the principal amount of the offered certificates
multiplied by the number of full years included in their term.
If the offered certificates are treated as issued with OID, then the excess
of the payments other than "qualified stated interest" over the original issue
price for the offered certificates will constitute OID. The original issue
price for the offered certificates will be the initial offering price at which a
substantial amount of the offered certificates are sold to the public. The
owner of an offered certificate must include OID, if any, in income as interest
over the term of the certificate under a constant yield method. In general, OID
must be included in income in advance of the receipt of cash representing that
income. Further, under the Code, special rules relating to OID, market discount
and acquisition premium apply to debt obligations which may be
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accelerated due to prepayments of obligations securing the debt obligation. It
is uncertain whether these special rules apply to the offered certificates. If
they were to apply, the seller would calculate and report OID, if any, based on
a reasonable prepayment assumption.
A subsequent investor who purchases an offered certificate for less than or
more than the adjusted issue price of an offered certificate will be governed by
special rules. A subsequent investor who purchases an offered certificate for
less than the adjusted issue price of the offered certificate, which is referred
to as market discount, may be governed by the "market discount" rules of the
Code. These rules provide, in part, that gain attributable to accrued market
discount will be treated as ordinary income on the receipt of partial principal
payments, or on the sale or disposition of the offered certificate. These rules
also provide for the deferral of interest deductions related to debt incurred to
acquire or carry the offered certificate. A subsequent investor who purchases an
offered certificate for more than the adjusted issue price of the offered
certificate, which is referred to as a premium, may elect to amortize and deduct
this premium over the remaining term of the offered certificate pursuant to
Section 171 of the Code.
Sale of a Certificate
An investor who disposes of an offered certificate by sale, exchange,
redemption or otherwise will recognize gain or loss equal to the difference
between the amount of cash and the fair market value of any property received,
other than amounts attributable to, and taxable as, accrued interest, and the
investor's adjusted tax basis in the offered certificate. In general, the
adjusted tax basis of an offered certificate will equal the investor's cost for
the offered certificate. Any gain or loss will generally be long-term capital
gain or loss, provided that the offered certificate was held as a capital asset
for more than one year. The maximum ordinary income tax rate for individuals
exceeds the maximum long-term capital gains rate for individuals. Any realized
capital losses may generally be used by a corporate taxpayer only to offset
capital gains and by an individual taxpayer only to the extent of capital gains
plus $3,000 of other income.
Possible Classification as a Partnership or as an Association Taxable as a
Corporation
The opinions of Mayer, Brown & Platt that the trust will not be treated as
an association or publicly traded partnership taxable as a corporation and that
the offered certificates will be treated as debt are not binding on the courts
or the IRS. Further, the IRS could assert that, for purposes of the Code, the
transactions contemplated in this prospectus constitute a sale of the
receivables, or an interest therein, to the investors and that the legal
relationship between the seller and some or all of the investors resulting from
the transactions is a partnership, including a publicly traded partnership, or a
publicly traded partnership taxable as a corporation. The seller currently does
not intend to comply with the Federal income tax reporting requirements that
would apply if any offered certificates were treated as interests in a
partnership or a publicly traded partnership taxable as a corporation.
If a partnership between the seller and investors were held to exist, the
partnership itself would not be required to pay Federal income tax. Rather, the
partners of the partnership, including the investors, would be taxed
individually on their distributive shares of the partnership's income, gain,
loss, deductions and credits. The amount and timing of items of income and
deductions of an investor could differ if the offered certificates were held to
constitute partnership interests, rather than debt. In addition, unless the
partnership were treated as engaged in a trade or business, an individual
investor's share of expenses of the partnership would be miscellaneous itemized
deductions that, in the aggregate, are allowed as deductions only to the extent
they exceed two percent of the individual's adjusted gross income, and could be
reduced under Section 68 of the Code if the individual's adjusted gross income
exceeded specified limits. Furthermore, these deductions would be eliminated
altogether for purposes of the alternative minimum tax. As a result, the
individual might be taxed on a greater amount of income than the stated rate on
the offered certificates. Finally, if a partnership were held to exist, all or a
portion of any taxable income allocated to an investor that is a pension,
profit-sharing or employee benefit plan or other tax-exempt entity, including an
individual retirement account, may constitute "unrelated business taxable
income" which generally would be taxable to the tax-exempt investor under the
Code.
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If it were determined that a transaction created an entity classified as a
publicly traded partnership taxable as a corporation, the trust would be
required to pay Federal income tax at corporate income tax rates on its income,
and may have to pay certain state and local taxes, which would reduce the
amounts available for distribution to the investors. If the offered certificates
were treated as partnership interests in a publicly traded partnership, taxable
as a corporation, distributions to the investors generally would not be
deductible in computing the taxable income of the publicly traded partnership.
Also, cash distributions to the investors generally would be treated as
dividends for tax purposes.
FASIT Legislation
Recent legislation created a new type of entity for Federal income tax
purposes called a "financial asset securitization investment trust" or "FASIT."
Arrangements similar to the trust may elect to be treated as a FASIT. A FASIT
election would enable the trust to avoid Federal income taxation and to issue
securities, similar to the offered certificates, which would be treated as debt
for Federal income tax purposes. The seller and servicer will be permitted to
amend the pooling and servicing agreement or the supplement for your series in
order to enable all or a portion of the trust to qualify as a FASIT and to
permit a FASIT election to be made with respect thereto, and to make any
modifications to the pooling and servicing agreement or the supplement for your
series as may be permitted by reason of the making of a FASIT election.
We cannot assure you that the seller will or will not cause any permissible
FASIT election to be made regarding the trust or amend the pooling and servicing
agreement or the supplement for your series in connection with any election. In
addition, if a FASIT election is made, it may cause a holder to recognize gain,
but not loss on any certificates of your series held by it, even though Tax
Counsel will deliver its opinion that an offered certificate will be treated as
debt for federal income purposes without regard to the election and the offered
certificate would be treated as debt following the election. Additionally, any
FASIT election and any related amendments to the pooling and servicing agreement
or the supplement involving your series may have other tax and non-tax
consequences to certificateholders. Accordingly, prospective certificateholders
should consult their tax advisors with regard to the effects of any FASIT
election and any permitted related amendments on them in their particular
circumstances.
Although the FASIT legislation was effective as of September 1, 1997, many
technical issues have not been addressed by Treasury regulations. Transition
rules permit an entity in existence on or after August 31, 1997, like the trust,
to elect FASIT status. However, it is not clear how outstanding interests of an
electing entity would be treated after an election. Thus, it is not clear how
the certificates of your series would be treated if the trust made a FASIT
election.
Prospective investors should consult their tax advisors about how a FASIT
election may affect them.
Foreign Investors
The following information describes the U.S. Federal income tax treatment
of investors that are Foreign Investors if the offered certificates are treated
as debt. The term "Foreign Investor" means any person who is not:
(1) a citizen or resident of the United States,
(2) a corporation, partnership or other entity organized in or under the
laws of the United States or any political subdivision thereof,
(3) an estate, the income of which is includible in gross income for
United States Federal income tax purposes, regardless of its source,
or
(4) a trust if a U.S. court is able to exercise primary supervision over
the administration of the trust and one or more U.S. persons have the
authority to control all substantial decisions of the trust.
Tax would be withheld from payments of interest, including OID, paid to a
Foreign Investor at a rate of 30% unless (1) the income is "effectively
connected" with the conduct by the Foreign Investor of a trade or business in
the United States as evidenced by an IRS Form 4224 or new IRS Form W-8ECI,
signed by the
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investor or its agent; (2) the Foreign Investor delivers an IRS Form 1001 or new
IRS Form W-8BEN, signed by the investor or its agent, claiming exemption from
withholding or a reduced rate of withholding under an applicable tax treaty; or
(3) the Foreign Investor and each securities clearing organization, bank, or
other financial institution that holds the offered certificates on behalf of the
customer in the ordinary course of its trade or business, in the chain between
the investor and the United States person otherwise required to withhold the
United States tax, complies with applicable identification requirements, and the
investor does not actually or constructively own 10% or more of the voting stock
of the seller and is not a controlled foreign corporation of the holder of the
offered certificates. Applicable identification requirements generally will be
satisfied if there is delivered to a securities clearing organization and to the
United States entity otherwise required to withhold tax an IRS Form W-8 or new
IRS Form W-8BEN signed under penalties of perjury by the investor, stating that
the investor is not a United States person and providing the investor's name and
address. In the case of (1), (2) or (3) above, the appropriate form will be
effective provided, that (a) the applicable form is delivered pursuant to
applicable procedures and is properly transmitted to the United States entity
otherwise required to withhold tax, and (b) none of the entities receiving the
form has actual knowledge that the investor is a United States person.
An investor that is a nonresident alien or foreign corporation will not be
liable for United States Federal income tax on gain realized on the sale,
exchange, or redemption of an offered certificate, if (1) this gain is not
effectively connected with the conduct of a trade or business in the United
States, (2) in the case of an individual foreign investor, the investor is not
present in the United States for 183 days or more during the taxable year of the
sale, exchange, or redemption, and (3) in the case of gain representing accrued
interest, the conditions described in the last paragraph are satisfied.
If the trust were reclassified as a partnership that is not taxable as a
corporation, a Foreign Investor might be required to file a U.S. Federal income
tax return and pay tax on its share of partnership income at regular United
States rates, including the branch profits tax in the case of a Foreign Investor
that is a corporation. Withholding tax, at the current rate of 39.6% in the case
of individuals and 35% in the case of corporations would also be deducted from a
Foreign Investor's share of the partnership's "effectively connected taxable
income." If the offered certificates were recharacterized as equity interests in
a publicly traded partnership taxable as a corporation, tax would be withheld
from distributions on the offered certificates treated as dividends generally at
a rate of 30% unless reduced by an applicable treaty or other exemption.
New Withholding Regulations. The Treasury Department has issued new
withholding regulations containing modifications to the withholding, backup
withholding and information reporting rules described in this prospectus
supplement. For example, persons currently required to file Form W-8 or Form
1001 will be required to file new Form W-8BEN and persons currently required to
file Form 4224 will be required to file new Form W-8ECI. The New Withholding
Regulations will generally be effective for payments made after December 31,
1999, but Forms W-8, 1001 and 4224 filed before that date will continue to be
effective until the earlier of December 31, 2000 or their current expiration
date. Prospective investors are advised to consult their tax advisors regarding
the New Withholding Regulations.
Backup Withholding
Backup withholding taxes will be imposed on payments to any investor, other
than an exempt holder like a corporation, tax exempt organization, qualified
pension and profit sharing trust, individual retirement account or nonresident
alien who provides certification of their status as nonresident, at the rate of
31% of the interest paid, and original issue discount accrued, if any, on the
offered certificates if the investor, at the time of issuance, fails to supply
the trustee of the trust or its broker with a certified statement, under
penalties of perjury, containing the investor's name, address, correct taxpayer
identification number, and a statement that backup withholding is not required.
Information returns will be sent annually to the IRS and to each investor
stating the amount of interest paid, and original issue discount accrued, if
any, on the offered certificates and the amount of tax withheld from payments on
the certificates. We advise investors to consult with their tax advisors about
their eligibility for, and the procedure for obtaining, exemption from backup
withholding.
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State and Local Tax Consequences
The activities to be undertaken by the servicer in servicing and collecting
the receivables may be considered to take place in Missouri. The State of
Missouri imposes a state income tax which is based partially on the net income
of corporations, partnerships and other entities doing business in the State of
Missouri. This discussion is based on present provisions of Missouri statutes
and the regulations promulgated thereunder, and applicable judicial or ruling
authority, all of which may change, which change may be retroactive. No
ruling on any of the issues discussed below will be sought from the Missouri
Department of Revenue.
If the Class A and Class B certificates are treated as debt for federal
income tax purposes, in the opinion of Bryan Cave LLP ("Missouri Tax Counsel"),
this treatment will also apply for Missouri income tax purposes. Pursuant to
this treatment, the trust will not be required to pay Missouri income tax and
certificateholders not otherwise required to pay Missouri tax would not be
required to pay that tax solely because of their mere ownership of the Class A
and Class B certificates. Certificateholders already being taxed in Missouri,
however, could be required to pay tax on the income generated from ownership of
these certificates.
In the alternative, if the arrangement created by the pooling and servicing
agreement is treated as a partnership not taxable as a corporation for federal
income tax purposes, in the opinion of Missouri Tax Counsel, the same treatment
should also apply for Missouri income tax purposes. Certificateholders, whether
Missouri residents or non-residents, who were partners in the constructive
partnership would be required to pay Missouri income tax on their distributive
shares of the income from the constructive partnership. However, based on past
and current practices of the Missouri Department of Revenue classification of
the arrangement as a "partnership" would not cause a certificateholder not
otherwise required to pay in Missouri to pay Missouri income tax on income
beyond that derived from the Class A and Class B certificates.
If the arrangement created by the pooling and servicing agreement is
treated as an association taxable as a corporation or a "publicly traded
partnership" taxable as a corporation, then the hypothetical entity could be
required to pay the Missouri income tax. Those taxes could result in reduced
distributions to certificateholders. A certificateholder not otherwise required
to pay tax in Missouri would not be required to pay Missouri income tax as a
result of its mere ownership of that interest.
Notwithstanding the foregoing, regardless of the treatment of the Class A
and Class B certificates or the arrangement for federal income tax purposes, a
certificateholder could be required to pay Missouri income tax if that
certificateholder participated in the negotiation of the pooling and servicing
agreement or otherwise developed a taxable nexus to Missouri.
In the opinion of Missouri Tax Counsel, if the trust is not treated as an
association taxable as a corporation for federal income tax purposes, the trust
will not be required to pay any Missouri franchise tax imposed under Chapter 147
of the Revised Statutes of Missouri.
Because each state's income tax laws vary, it is impossible to predict the
income tax consequences to the certificateholders in all of the state taxing
jurisdictions in which they are already required to pay tax. We recommend that
you consult your own tax advisors regarding state and local income and franchise
taxes.
Due to the complexity of federal, state, local and foreign rules and the current
uncertainty as to the manner of their application to the trust and
certificateholders, it is particularly important that potential investors
consult their own tax advisors about the Federal, state, local, foreign and any
other tax consequences to them of the purchase, ownership and disposition of the
certificates. For example, this prospectus supplement does not discuss tax
consequences to various investors, including banks and thrifts, insurance
companies, regulated investment companies, dealers in securities, holders that
will hold the offered certificates as a position in a "straddle" for tax
purposes or as a part of a "synthetic security" or "conversion transaction" or
other integrated investment comprised of the offered certificates and one or
more other investments, foreign investors, trusts and estates and pass-through
entities with any of these types of investors as equity holders. Further, we do
not furnish information in this summary in the level of detail or with the
attention to an investor's specific tax circumstances that would be provided by
an investor's own tax
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advisor. Additionally, the discussion is limited to the federal income tax
consequences to initial investors and not to purchasers in the secondary market.
ERISA Considerations
General
Section 406 of the Employee Retirement Income Security Act of 1974
("ERISA"), and Section 4975 of the Code, prohibit a pension, profit-sharing or
other employee benefit plan from engaging in certain transactions involving
"plan assets" with persons that are "parties in interest" under ERISA or
"disqualified persons" under the Code. A violation of these "prohibited
transaction" rules may generate excise tax and other liabilities under ERISA and
the Code for that person. For example, if a plan were to acquire certificates, a
prohibited transaction would arise, unless an exemption, like one of the class
exemptions described below, were available, if the seller were a disqualified
person or party in interest. By its acceptance of a Class A certificate or an
interest in a Class A certificate, each Class A certificateholder and owner of
any beneficial interest in a Class A certificate will be deemed to represent and
warrant that its purchase and holding of the certificate will not result in a
nonexempt prohibited transaction under Section 406 of ERISA or Section 4975 of
the Code.
Additional prohibited transactions could arise if the assets of the trust
were deemed to constitute assets of any plan that owned certificates. The
Department of Labor ("DOL") has issued a final regulation (the "Plan Assets
Regulation") concerning the definition of what constitutes the "plan assets" of
an employee benefit plan to which ERISA or the Code applies, or an individual
retirement account ("IRA") (collectively referred to as "Benefit Plans"). Under
the Plan Assets Regulation the assets and properties of certain corporations,
partnerships and certain other entities in which a Benefit Plan acquires an
"equity interest" could be deemed to be assets of the Benefit Plan in certain
circumstances. Accordingly, if Benefit Plans purchase certificates, the trust
could be deemed to hold plan assets of that Benefit Plan unless one of the
exceptions under the Plan Assets Regulation is applicable to the Trust.
Purchasers which are insurance companies should consult with their counsel
regarding a United States Supreme Court decision interpreting the fiduciary
responsibility rules of ERISA, John Hancock Mutual Life Insurance Co. v. Harris
Bank and Trust (114 S.Ct. 517). In John Hancock, the Supreme Court ruled that
assets held in an insurance company's general account may be deemed to be "plan
assets" for ERISA purposes under certain circumstances. Prospective purchasers
should determine whether that decision affects their ability to make purchases
of the certificates.
Plan Assets and the Availability of Exemptions for Certificates
The Plan Assets Regulation contains an exception (the "Publicly-Offered
Securities Exception") that provides that if a Benefit Plan acquires a
"publicly-offered security", the issuer of the security is not deemed to hold
plan assets. A publicly-offered security is a security that is
. freely transferable;
. part of a class of securities that is held, on completion of the
public offering made hereby, by 100 or more investors independent of
the trust and of one another; and
. either is (A) part of a class of securities registered under Section
12(b) or 12(g) of the Securities Exchange Act of 1934 (the "Exchange
Act") or (B) sold to the plan as part of an offering of securities to
the public pursuant to an effective registration statement under the
Securities Act of 1933 (the "Securities Act") and the class of
securities of which that security is a part is registered under the
Exchange Act within 120 days, or any later time as may be allowed by
the Securities and Exchange Commission, after the end of the fiscal
year of the issuer during which the offering of those securities to
the public occurred.
It is anticipated that the Class A certificates will meet the criteria of
the Publicly-Offered Securities Exception as set forth above. The underwriters
expect that the Class A certificates will be held by at least 100
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independent persons at the conclusion of the offering, although no one can
assure you, and no monitoring or other measures will be taken to ensure, that
the 100 independent person requirement will be satisfied.
If the certificates fail to meet the criteria of the Publicly-Offered
Securities Exception and the trust's assets are deemed to include assets of
Benefit Plans that are holders of certificates, transactions involving the trust
and "parties in interest" or "disqualified persons" might be prohibited under
Section 406 of ERISA and Section 4975 of the Code unless an ERISA prohibited
transaction exemption is applicable. Thus, for example, if a participant in any
Benefit Plan is an obligor or guarantor of one of the receivables, under DOL
interpretations the purchase of certificates by that plan could constitute a
prohibited transaction. There are five class exemptions issued by the DOL that
may apply in that event:
. DOL Prohibited Transaction Class Exemption 84-14 -- Class Exemption for
Plan Asset Transactions Determined by Independent Qualified
Professional Asset Managers;
. 91-38 -- Class Exemption for Certain Transactions Involving Bank
Collective Investment Funds;
. 90-1 -- Class Exemption for Transactions Involving Insurance Company
Pooled Separate Accounts;
. 95-60 -- Class Exemption for Certain Transactions Involving Insurance
Company General Accounts; and
. 96-23 -- Class Exemption for Plan Asset Transactions Determined by an
In-House Asset Manager.
No one can assure you that these exemptions, even if all of the conditions
specified in those exemptions are satisfied, will apply to all transactions
involving the trust's assets.
The underwriters currently do not expect that the Class B certificates will
be held by at least 100 independent persons and, therefore, do not expect that
the Class B certificates will qualify as publicly-offered securities under the
Publicly-Offered Securities Exemption. Accordingly, the Class B certificates may
not be acquired by:
(a) any employee benefit plan to which ERISA applies;
(b) any plan or other arrangement -- including an individual retirement
account or Keogh plan -- to which section 4975 of the Code applies; or
(c) any entity whose underlying assets include "plan assets" under the
Publicly-Offered Securities Exemption by reason of any plan's investment in the
entity.
By its acceptance of a Class B certificate or an interest therein, each
Class B certificateholder and owner of a beneficial interest in the Class B
certificates will be deemed to have represented and warranted that it is not an
employee benefit plan, plan or arrangement to which Section 4975 of the Code
applies, or other type of entity covered by clause (a), (b) or (c) of the
preceding sentence.
Review by Benefit Plan Fiduciaries
Due to the complexity of these rules and the penalties imposed on persons
involved in prohibited transactions, it is especially important that any Benefit
Plan fiduciary who proposes to cause a Benefit Plan to purchase certificates
should consult with its own counsel regarding the potential consequences under
ERISA and the Code of the Benefit Plan's acquisition and ownership of
certificates. Assets of a Benefit Plan should not be invested in the
certificates unless it is clear that the assets of the trust will not be plan
assets.
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Underwriting
The seller has agreed to sell [name(s) of underwriter(s)] have agreed to
purchase the principal amount of the Class A and Class B certificates listed in
the table below. The terms of these purchases are governed by an underwriting
agreement between the seller and [ ], for itself and as
representative of all underwriters.
Principal Amount of Underwriter's Price to
Underwriters Class A Certificates Commission Public
- ------------ --------------------- ----------- ------
Principal Amount of Underwriter's Price to
Class B Certificates Commission Public
--------------------- ----------- ------
The underwriters have agreed to purchase all of the offered certificates if
any of the offered certificates are purchased.
[ ], as representative of the underwriters, has advised
the seller that the underwriters propose initially to offer the Class A
certificates to the public at the public offering price stated on the cover page
of this prospectus supplement, and to some dealers at that price, less a
concession of up to [____]% for each Class A certificate. The underwriters may
allow, and those dealers may reallow, concessions up to [____]% of the principal
amount of the Class A certificates to some brokers and dealers.
[ ], as representative of the underwriters, has advised the
seller that the underwriters propose initially to offer the Class B certificates
to the public at the public offering price stated on the cover page of this
prospectus, and to some dealers at that price, less a concession not more than
[____]% for each Class B certificate. The underwriters may allow, and those
dealers may reallow, concessions of up to [____]% of the principal amount of the
Class B certificates to some brokers and dealers.
Additional offering expenses are estimated to be $[____________].
The seller and DFS will indemnify the underwriters against liabilities
caused by (1) any untrue statement or alleged untrue statement of a material
fact contained in this prospectus supplement, the prospectus or the related
registration statement or (2) any omission or alleged omission to state a
material fact required to be stated in this prospectus supplement, the
prospectus or the related registration statement or necessary to make the
statements in this prospectus supplement, the prospectus or the related
registration statement not misleading. The seller and DFS will not, however,
indemnify the underwriters against liabilities caused by any untrue statement or
omission, real or alleged, made in reliance on and in conformity with
information relating to and provided by any underwriter for use in this
prospectus supplement, the prospectus and the related registration statement.
The underwriters may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids for the offered
certificates in accordance with Regulation M under the Exchange Act.
. Over-allotment transactions involve syndicate sales exceeding the
offering size, which creates a syndicate short position.
. Stabilizing transactions permit bids to purchase the offered
certificates so long as the stabilizing bids do not exceed a specified
maximum.
. Syndicate covering transactions involve purchases of the offered
certificates in the open market after the distribution has been
completed in order to cover syndicate short positions.
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. Penalty bids permit the underwriters to reclaim a selling concession
from a syndicate member when the offered certificates originally sold
by that syndicate member are purchased in a syndicate covering
transaction.
These transactions may cause the prices of the offered certificates to be
higher than they would otherwise be in the absence of those transactions.
Neither the seller nor any of the underwriters represent that the underwriters
will engage in any of those transactions or that those transactions, once
commenced, will not be discontinued without notice at any time.
[For any underwriter which is an affiliate of DFS, add: [name of
underwriter] and DFS are each indirect, wholly-owned subsidiaries of Deutsche
Bank AG. DFS is the limited partner of the seller and the parent of Deutsche
Floorplan Receivables, Inc., the general partner of the seller. Any obligations
of [name of underwriter] are the sole responsibility of [name of underwriter]
and do not create any obligation on the part of any affiliate of [name of
underwriter].]
Legal Matters
Certain legal matters relating to the certificates will be passed on for
the seller by Richard C. Goldman, Esq., Chief Legal Officer of the servicer, and
by Mayer, Brown & Platt, Chicago, Illinois. Certain federal income tax matters
will be passed on for the seller by Mayer, Brown & Platt, Chicago, Illinois.
Certain legal matters and certain Missouri income tax matters will be passed on
for the seller by Bryan Cave LLP, St. Louis, Missouri. Certain legal matters
will be passed on for the underwriter(s) by [ ].
S-49
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Glossary
[To be conformed]
"Accumulation Period" means the period beginning on [ ] and ending on
the earlier of (a) the commencement of an Early Amortization Period and (b) the
distribution date in [specify month and year].
"Accumulation Period Length" means [ ].
"Additional Interest" for any distribution date will mean an amount equal
to the sum of the Class A Additional Interest, the Class B Additional Interest
and the Class C Additional Interest.
"Adjustment Date" means, for any interest period, the second London
Business Day prior to the interest payment date preceding that interest period,
and for an interest period commencing on an interest payment date, the second
London Business Day preceding that interest payment date; provided that for the
first interest period and each other interest period prior to the first interest
payment date, the Adjustment Date will be a date determined prior to the closing
date.
"Adjustment Payments" means a deposit in the collection account as
described below. If the servicer adjusts the amount of any receivable because of
a rebate, refund, credit adjustment or billing error to a dealer, or because the
receivable relates to inventory which was refused or returned by a dealer:
. the Seller's Participation Amount will be reduced by the amount of
the adjustment; and
. if following that reduction the Pool Balance would be less than the
Required Participation Amount for the immediately preceding
determination date -- after giving effect to the allocations,
distributions, withdrawals and deposits to be made on the distribution
date immediately following that determination date -- the seller will
be required to deposit a cash amount equal to that deficiency -- up to
the amount of the adjustment -- into the collection account in
immediately available funds on the day on which that adjustment
occurs.
"Approved Affiliate" means (a) Deutsche BSC, but only so long as Deutsche
BSC is applying, or causing to be applied, DFS's underwriting guidelines in
originating those receivables that it intends to transfer to the seller pursuant
to the receivables contribution and sale agreement or (b) any other affiliate of
DFS as to which the Rating Agency Condition has been satisfied.
"Asset Based Receivables" means receivables arising from the asset based
lending business.
"Available Certificateholder Principal Collections" for any distribution
date means the sum of
. the product of: (1) the Floating Allocation Percentage, for the
Revolving Period, or the Principal Allocation Percentage, for the
Accumulation Period or any Early Amortization Period, for the related
calendar month -- or any partial calendar month which occurs as the
first calendar month during an Early Amortization Period) and (2)
principal collections for the related calendar month -- or any partial
calendar month which occurs as the first calendar month during an
Early Amortization Period;
. the amount, if any, of non-principal collections, funds in the Excess
Servicing and Available Seller's Collections, allocated in each case
to cover the Investor Default Amount or reimburse Investor Charge-
Offs; and
. the Series [ ] Allocation Percentage of Miscellaneous Payments
for that distribution date.
"Available Seller's Collections" for any date means the sum of:
. the Available Seller's Non-Principal Collections; plus
. the Available Seller's Principal Collections;
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<PAGE>
. however, the Available Seller's Collections will be zero for any
calendar month if the Available Subordinated Amount is zero on the
determination date immediately following the end of that calendar
month.
"Available Seller's Non-Principal Collections" for any date means an amount
equal to the result obtained by multiplying:
. the excess of (a) the Seller's Percentage for the related calendar
month over (b) the Excess Seller's Percentage for that calendar month;
by
. non-principal collections for that date.
"Available Seller's Principal Collections" for any date means an amount
equal to the product of:
. the excess of (a) the Seller's Percentage for the related calendar
month over (b) the Excess Seller's Percentage for that calendar month;
and
. principal collections for that date.
"Available Subordinated Amount" for a determination date is equal to:
. the result of (a) a fraction, the numerator of which is the Invested
Amount on the last day of the immediately preceding calendar month --
on the first determination date, the Invested Amount on the closing
date -- and the denominator of which is the Pool Balance on that last
day multiplied by (b) the Trust Incremental Subordinated Amount; minus
. the aggregate of the Required Subordination Draw Amounts for all
preceding Distribution Dates.
"Carry-over Amount" means the sum of the Class A Carry-over Amount, the
Class B Carry-over Amount and the Class C Carry-over Amount.
"Class A Additional Interest" means, as of any interest payment date, an
amount equal to the product of:
. the Class A interest rate;
. a fraction the numerator of which is the actual number of days in the
period from and including the prior interest payment date to but
excluding the current interest payment date and the denominator of
which is 360; and
. the Class A Interest Shortfall, or the portion thereof, for that
interest payment date which has not been paid or deposited in the
interest funding account on any prior distribution date.
"Class A Carry-over Amount" for a distribution date is an amount equal to
the excess, if any, of:
. Class A monthly interest for that distribution date, determined as if
the interest rate were based on LIBOR rather than the Net Receivables
Rate; over
. the actual Class A monthly interest for that distribution date.
"Class A Initial Invested Amount" for any date means:
. the initial principal amount of the Class A certificates, which is
$__________, plus
. the product of (a) the Class A Percentage multiplied by (b) the
amount of any withdrawals from the excess funding account in
connection with an increase in the Pool Balance since the closing date
for your series; minus
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. the product of (a) the Class A Percentage multiplied by (b) the
amount of any additions to the excess funding account in connection
with a reduction in the Pool Balance since the closing date for your
series.
"Class A interest rate" is a rate per annum equal to the lesser of:
. [LIBOR] plus ____% per annum; and
. the related Net Receivables Rate.
"Class A Interest Shortfall" is an amount, calculated by the servicer on
the determination date preceding each interest payment date, equal to the
excess, if any, of:
. the sum of (a) the Class A monthly interest for the interest period
applicable to that interest payment date plus (b) the Class A monthly
interest for each interest period applicable to each other
distribution date, if any, occurring after the immediately preceding
interest payment date -- or for the first interest payment date,
after the closing date; over
. the amount which will be available to be paid to the Class A
certificateholders as Class A monthly interest from the interest
funding account on that interest payment date.
"Class A Invested Amount" for any date means an amount equal to the sum of:
. the Class A Initial Invested Amount; minus
. the aggregate amount of principal payments made to Class A
certificateholders prior to that date; minus
. the aggregate amount of all unreimbursed Class A Investor Charge-
Offs;
. however, the Class A Invested Amount will not be less than zero.
"Class A Investor Charge-Off" for a distribution date means the lesser of:
. the amount by which the Class B Investor Charge-Off for that
distribution date would have reduced the Class B Invested Amount to
below zero, if the Class B Invested Amount were permitted to be
reduced to below zero; and
. the portion, if any, of the Investor Default Amount for the related
calendar month remaining after applying that Investor Default Amount
to cap the size of the Class C Investor Charge-Off and the Class B
Investor Charge-Off for that distribution date pursuant to the
definitions of Class C Investor Charge-Off and the Class B Investor
Charge-Off.
"Class A monthly interest" on any distribution date will be an amount equal
to the product of:
. the Class A interest rate;
. a fraction the numerator of which is the actual number of days in the
related interest period and the denominator of which is 360; and
. the outstanding principal balance of the Class A certificates as of
the close of business on the preceding distribution date, after giving
effect to all repayments of principal made to Class A
certificateholders on that preceding distribution date, if any, or for
the first distribution date, the initial principal amount of the Class
A certificates.
"Class A Percentage" means the percentage equivalent of a fraction:
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<PAGE>
. the numerator of which is the outstanding principal balance of the
Class A certificates; and
. the denominator of which is the outstanding principal balance of all
certificates of your series.
"Class B Additional Interest" means, as of any interest payment date, an
amount equal to the product of:
. the Class B interest rate;
. a fraction the numerator of which is the actual number of days in the
period from and including the prior interest payment date to but
excluding the current interest payment date and the denominator of
which is 360; and
. that Class B Interest Shortfall, or the portion thereof for that
interest payment date, which has not been paid or deposited in the
interest funding account on any prior distribution date.
"Class B Carry-over Amount" for a distribution date is an amount equal to
the excess, if any, of:
. Class B monthly interest for that distribution date, determined as if
the interest rate were based on LIBOR rather than the Net Receivables
Rate; over
. the actual Class B monthly interest for that distribution date.
"Class B Initial Invested Amount" for any date means:
. the initial principal amount of the Class B certificates, which is
$__________, plus
. the product of (a) the Class B Percentage multiplied by (b) the
amount of any withdrawals from the excess funding account in
connection with an increase in the Pool Balance since the closing date
for your series; minus
. the product of (a) the Class B Percentage multiplied by (b) the
amount of any additions to the excess funding account in connection
with a reduction in the Pool Balance since the closing date for your
series.
"Class B interest rate" is a rate per annum equal to the lesser of:
. [LIBOR] plus ____% per annum; and
. the related Net Receivables Rate.
"Class B Interest Shortfall" is an amount, calculated by the servicer on
the determination date preceding each interest payment date, equal to the
excess, if any, of:
. the sum of (a) the Class B monthly interest for the interest period
applicable to that interest payment date plus (b) the Class B monthly
interest for each interest period applicable to each other
distribution date, if any, occurring after the immediately preceding
interest payment date -- or for the first interest payment date, after
the closing date; over
. the amount which will be available to be paid to the Class B
certificateholders as Class B monthly interest from the interest
funding account on that interest payment date.
"Class B Invested Amount" for any date means an amount equal to the sum of:
. the Class B Initial Invested Amount; minus
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<PAGE>
. the aggregate amount of principal payments made to Class B
certificateholders prior to that date; minus
. the aggregate amount of all unreimbursed Class B Investor Charge-
Offs;
. however, the Class B Invested Amount will not be less than zero.
"Class B Investor Charge-Off" for a distribution date means the lesser of:
. the amount by which the Class C Charge-Off for that distribution date
would have reduced the Class C Invested Amount to below zero, if the
Class C Invested Amount were permitted to be reduced to below zero;
and
. the portion, if any, of the Investor Default Amount for the related
calendar month remaining after applying that Investor Default Amount
to cap the size of the Class C Investor Charge-Off for that
distribution date pursuant to the definition of Class C Investor
Charge-Off -- that is, the amount, if any, by which Investor Default
Amount for the related calendar month exceeds the amount of the Class
C Investor Charge-Off for that distribution date.
"Class B monthly interest" on any distribution date will be an amount equal
to the product of:
. the Class B interest rate;
. a fraction the numerator of which is the actual number of days in the
related interest period and the denominator of which is 360; and
. the outstanding principal balance of the Class B certificates as of
the close of business on the preceding distribution date, after giving
effect to all repayments of principal made to Class B
certificateholders on that preceding distribution date, if any, or for
the first distribution date, the initial principal amount of the Class
B certificates.
"Class B Percentage" means the percentage equivalent of a fraction:
. the numerator of which is the outstanding principal balance of the
Class B certificates; and
. the denominator of which is the outstanding principal balance of all
certificates of your series.
"Class C Additional Interest" means, as of any interest payment date, an
amount equal to the product of:
. the Class C interest rate;
. a fraction the numerator of which is the actual number of days in the
period from and including the prior interest payment date to but
excluding the current interest payment date and the denominator of
which is 360; and
. that Class C Interest Shortfall, or the portion thereof, for that
interest payment date, which has not been paid or deposited in the
interest funding account on any prior distribution date.
"Class C Carry-over Amount" for a distribution date is an amount equal to
the excess, if any, of:
. Class C monthly interest for that distribution date, determined as if
the interest rate were based on LIBOR rather than the Net Receivables
Rate; over
. the actual Class C monthly interest for that distribution date.
"Class C Initial Invested Amount" for any date means:
. the initial principal amount of the Class C certificates, which is
$__________, plus
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. the product of (a) the Class C Percentage multiplied by (b) the
amount of any withdrawals from the excess funding account in
connection with an increase in the Pool Balance since the closing date
for your series; minus
. the product of (a) the Class C Percentage multiplied by (b) the
amount of any additions to the excess funding account in connection
with a reduction in the Pool Balance since the closing date for your
series.
"Class C interest rate" is a rate per annum equal to the lesser of:
. [LIBOR] plus ____% per annum; and
. the related Net Receivables Rate.
"Class C Investor Charge-Off" for a distribution date means the lesser of:
. the amount by which the Class C Charge-Off for that distribution date
would have reduced the Class C Invested Amount to below zero, if the
Class C Invested Amount were permitted to be reduced to below zero;
and
. the portion, if any, of the Investor Default Amount for the related
calendar month remaining after applying that Investor Default Amount
to ____ the size of the Class C Investor Charge-Off for that
distribution date pursuant to the definition of Class C Investor
Charge-Off -- that is, the amount, if any, by which Investor Default
Amount for the related calendar month exceeds the amount of the Class
C Investor Charge-Off for that distribution date.
"Class C Interest Shortfall" is an amount, calculated by the servicer on
the determination date preceding each interest payment date, equal to the
excess, if any, of:
. the sum of (a) the Class C monthly interest for the interest period
applicable to that interest payment date plus (b) the Class C monthly
interest for each interest period applicable to each other
distribution date, if any, occurring after the immediately preceding
interest payment date -- or for the first interest payment date, after
the closing date; over
. the amount which will be available to be paid to the Class C
certificateholders as Class C monthly interest from the interest
funding account on that interest payment date.
"Class C Invested Amount" for any date means an amount equal to the sum of:
. the Class C Initial Invested Amount; minus
. the aggregate amount of principal payments made to Class C
certificateholders prior to that date; minus
. the aggregate amount of all unreimbursed Class C Investor Charge-
Offs;
. however, the Class C Invested Amount will not be less than zero.
"Class C Investor Charge-Off" for a distribution date will be calculated as
follows:
. If on that distribution date, after giving effect to the allocations,
distributions, withdrawals and deposits to be made on that
distribution date, either (a) the Available Subordination Amount for
the related determination date exceeds zero, or (b) the balance of the
reserve fund on the distribution date exceeds zero, then the Class C
Investor Charge-Off will be zero for that distribution date.
. If on that distribution date, after giving effect to the allocations,
distributions, withdrawals and deposits to be made on that
distribution date, both (a) the
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Available Subordination Amount for the related determination date is
zero, and (b) the balance of the reserve fund is zero, then the Class
C Investor Charge-Off for that distribution date will equal the lesser
of the Deficiency Amount for that distribution date and the Investor
Default Amount for the preceding calendar month.
"Class C monthly interest" on any distribution date will be an amount equal
to the product of:
. the Class C interest rate;
. a fraction the numerator of which is the actual number of days in the
related interest period and the denominator of which is 360; and
. the outstanding principal balance of the Class C certificates as of
the close of business on the preceding distribution date, after giving
effect to all repayments of principal made to Class C
certificateholders on that preceding distribution date, if any, or for
the first distribution date, the initial principal amount of the Class
C certificates.
"Class C Percentage" means the percentage equivalent of a fraction:
. the numerator of which is the outstanding principal balance of the
Class C certificates; and
. the denominator of which is the outstanding principal balance of all
certificates of your series.
"Collateral Security" for a receivable generally includes the security
interest granted by or on behalf of the related Dealer with respect thereto.
"Controlled Amortization Amount" means an amount equal to:
. the Invested Amount as of the determination date on which the
Accumulation Period Length is determined -- after giving effect to any
changes on that date -- divided by
. the number of months comprising the Accumulation Period Length.
"Controlled Distribution Amount" for a distribution date means the excess,
if any, of:
. the product of the Controlled Amortization Amount and the number of
Distribution Dates relating to the Accumulation Period through and
including that distribution date; over
. the amount on deposit in the excess funding account and the principal
funding account -- including any amounts deposited therein from the
excess funding account -- before giving effect to any withdrawals from
or deposits to those accounts on that distribution date.
"Dealer" means a person engaged generally in the business of purchasing
consumer or commercial products from a manufacturer or distributor thereof and
holding the products for sale or lease in the ordinary course of business or a
person engaged generally in the business of manufacturing or distributing
products for sale to dealers in the ordinary course of business.
"Defaulted Amount" on any determination date means an amount, which will
not be less than zero, equal to:
. the principal amount, exclusive of the discounted portion that, if
collected, would have been treated as a Non-Principal Collection, of
receivables that became Defaulted Receivables during the preceding
calendar month; less
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. the full amount, exclusive of the discounted portion, of any Defaulted
Receivables which may be reassigned to the seller or purchased by the
servicer for that calendar month unless certain events of bankruptcy,
insolvency, or receivership have occurred regarding either of the
seller or the servicer, in which event the Defaulted Amount will not
be reduced for those Defaulted Receivables. The pooling and servicing
agreement provides that receivables will be charged off as
uncollectible in accordance with the servicer's customary and usual
policies and procedures for servicing its own comparable revolving
dealer wholesale loan accounts.
"Defaulted Receivables" on any determination date are:
(1) all receivables which were Eligible Receivables when transferred to
the trust, which arose in an account which became an Ineligible
Account after the date of transfer of those receivables to the trust
and which remained outstanding for any six consecutive determination
dates thereafter; and
(2) all receivables, other than all Ineligible Receivables, which were
charged off as uncollectible for the immediately preceding calendar
month.
DFS's charge-off policy is based on SAU/NSF aging.
. For "Pay-as-Sold" accounts, see "Description of the Dealer Floorplan
Financing Business of DFS--Payment Terms" in the prospectus,
receivables which are coded as SAU/NSF are charged off at the end of
the month in which those receivables had been so coded for at least
181 days.
. For delinquent scheduled payment accounts, DFS performs inventory
inspections to evaluate its collateral position with the related
Dealer as DFS deems necessary. If the inspection reveals an
uncollateralized position, the shortage is coded SAU. The SAU will be
charged off on or before 181 days.
. "SAU" is the code on DFS's servicing records representing the unpaid
portion of a receivable balance as to which the related product has
been sold but not paid in full.
. DFS's "NSF" code represents checks from customers returned for
insufficient funds. DFS's charge off policy may change over time.
"Deficiency Amount" is the amount, if any, by which
(1) the sum of
(a) Monthly Interest for the next distribution date,
(b) any Monthly Interest for any prior distribution dates required to
be but not deposited in the interest funding account on a prior
distribution date,
(c) Additional Interest, if any, for the next distribution date and
any Additional Interest for any prior distribution dates required to
be but not deposited into the interest funding account on a prior
distribution date, but only to the extent permitted by applicable law,
(d) the Monthly Servicing Fee for the next distribution date,
(e) the Investor Default Amount for the next distribution date, and
(f) the amount of any Adjustment Payment allocated to your series for
the next distribution date that has not been deposited in the
collection account as required under the pooling and servicing
agreement; exceeds
(2) the sum of non-principal collections allocated to your series for the
next distribution date, plus any Investment Proceeds for the next
distribution date.
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"Delayed Funding Receivable" means a receivable in respect of which the
related Floorplan Agreement permits DFS or an Approved Affiliate to delay
payment of the purchase price of the related product to the Manufacturer for a
specified period after the invoice date for the product. If the Rating Agency
Condition is satisfied, then the receivables referred to in the preceding
sentence will not be Delayed Funding Receivables and the provisions relating to
Delayed Funding Receivables will no longer be of any force or effect.
"Discount Factor" will be calculated as follows:
. If on any distribution date the Net Receivables Rate for that
distribution date less (1) the weighted average of the interest rates,
as determined below, for all outstanding series of certificates for
that distribution date less (2) the annualized Net Loss Rate -- as
defined in the pooling and servicing agreement -- for the preceding
twelve calendar months is less than 1%, then the Discount Factor for
that distribution date will be adjusted upwards, rounded up to the
nearest 0.1% -- but in no event will the Discount Factor exceed 1% --
so that the Net Receivables Rate less the rate in clause (1) less the
rate in clause (2) will be equal to 1%; and the Discount Factor will
remain at the adjusted percentage amount until it is further adjusted
by the terms of this sentence or either of the following two
sentences.
. Notwithstanding the foregoing, the seller, at its discretion, may
increase or decrease the Discount Factor, but in no event will the
Discount Factor exceed 1% or be less than the percentage amount
required by the immediately preceding sentence or be greater than the
percentage amount required by the next sentence.
. Notwithstanding the foregoing, if the application of the Discount
Factor would cause the Pool Balance to be less than the Required
Participation Amount, then the Discount Factor will be the
percentage -- which will in no event be less than 0% -- rounded down
to the nearest 0.1%, which, when applied, will cause the Pool Balance
to at least equal the Required Participation Amount. For purposes of
this definition:
(1) if the interest rate on a class of certificates is calculated
as the lesser of (a) a fixed rate or a formula rate and (b) the Net
Receivables Rate, then the interest rate will be the rate in clause
(a); and
(2) if an interest rate swap agreement provides the interest
distributable on a series or class of certificates, then the interest
rate for the series or class of certificates will be the interest rate
payable to the related swap counterparty.
"Discount Portion" means, for a receivable, the portion of that receivable
equal to the product of the Discount Factor and the balance of the receivable.
"Early Amortization Event" has the meaning set forth under "Description of
the Certificates--Early Amortization Events" in this prospectus supplement.
"Early Amortization Period" for any series will begin at the close of
business on the business day preceding the occurrence of an Early Amortization
Event for that series--that is, either
(a) one of the Early Amortization Events set forth in the pooling and
servicing agreement that applies to all series or
(b) one of the Early Amortization Events that applies to that
particular series and is set forth in the supplement for that
series. The Early Amortization Events applicable to your series
are listed under Description of the Certificates -- Early
Amortization Events" in this prospectus supplement.
The Early Amortization Period for any series will end on the earliest to
occur of:
(a) the payment in full of the invested amount for that series, or in
the case of your series, the Invested Amount,
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(b) the date specified as a termination date in the supplement for
that series, which in the case of your series is the distribution
date in [specify month and year], and
(c) the end of the first month during which the seller cured an Early
Amortization Event relating to the failure of the seller to
convey receivables in Additional Accounts to the trust within
five business days after the day on which it is required to
convey those receivables pursuant to the pooling and servicing
agreement--so long as no other Early Amortization Event has
occurred relating to that series and the scheduled termination of
the Revolving Period for that series has not occurred.
"Eligible Account" means each individual revolving credit arrangement
payable in U.S. dollars and established by DFS or an Approved Affiliate with a
Dealer in the ordinary course of business pursuant to a Financing Agreement,
which arrangement, as of the date of determination with respect thereto:
. is in favor of a Dealer which is doing business in the United States
of America, including its territories and possessions, and which has
not been identified by the servicer as being the subject of any
voluntary or involuntary bankruptcy proceeding or being in a voluntary
or involuntary liquidation,
. is in existence and maintained and serviced by DFS or an Approved
Affiliate and
. is an account in respect of which no amounts have been charged off as
uncollectible.
Eligible Accounts include accounts in which another lender participates.
See "The Dealer Floorplan Financing Business of DFS--Participation Arrangements"
in the prospectus. Receivables arising in accounts in which another lender
participates include only DFS's undivided interest in the related advance and
not the undivided interest of the other lender.
"Eligible Deposit Account" means either:
. a segregated account with an Eligible Institution; or
. a segregated trust account with the corporate trust department of a
depository institution or trust company organized under the laws of
the United States or any one of the states thereof -- or any domestic
branch of a foreign bank -- having corporate trust powers and acting
as trustee for funds deposited in such account, so long as any of the
securities of such depository institution or trust company has a
credit rating from each rating agency in one of its generic rating
categories which signifies investment grade.
"Eligible Institution" means:
. the corporate trust department of the trustee;
. a depository institution or trust company organized under the laws of
the United States or any one of the states thereof, or a domestic
branch of a foreign bank, which at all times (1) has either (a) a
long-term unsecured debt rating acceptable to each rating agency or
(b) a certificate of deposit rating acceptable to each rating agency
and (2) is a member of the FDIC.
"Eligible Investments" means book-entry securities, negotiable instruments
or securities of the type contemplated by the pooling and servicing agreement,
or any other investment as may be permitted by each Rating Agency without
reducing or withdrawing the rating of the certificates of any series.
"Eligible Receivable" means each receivable:
. which was originated or acquired by DFS in the ordinary course of
business;
. which arose under an account that at that time was an Eligible
Account;
. which is owned by DFS at the time of sale or contribution by DFS to
the seller;
. which represents the obligation of a Dealer to repay an advance made
to or on behalf of the Dealer;
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. which at the time of creation and at the time of transfer to the trust
is secured, to the extent required by the related financing agreement,
by a perfected first priority security interest -- whether by prior
filing, purchase money security interest statutory priority, or
subordination agreement from prior filers -- in the products, accounts
receivable or other collateral relating thereto; however, the security
interest need not be a first priority security interest in the case of
a receivable arising in an account for which the payment terms are on
a scheduled payment plan basis and the maximum credit line is $250,000
or less, but only if that account was designated as an account on or
before the closing date for a series issued in 1994;
. which was created in compliance in all respects with all requirements
of law applicable thereto and pursuant to a floorplan, accounts
receivable, asset based lending or unsecured receivable financing
agreement which complies in all respects with all requirements of law
applicable to any party thereto;
. for which all consents and governmental authorizations required to be
obtained by DFS or the seller in connection with the creation of that
receivable or the transfer of that receivable to the trust or the
performance by DFS of the floorplan, accounts receivable, asset based
lending or unsecured receivable financing agreement pursuant to which
that receivable was created, have been duly obtained and are in full
force and effect;
. as to which at all times following the transfer of that receivable to
the trust, the trust will have good and marketable title thereto free
and clear of all liens arising prior to the transfer or arising at any
time, other than liens permitted pursuant to the pooling and servicing
agreement;
. which has been the subject of a valid transfer and assignment from the
seller to the trust of all the seller's interest in that receivable,
including any proceeds of that receivable;
. which will at all times be the legal and assignable payment obligation
of the related Dealer, enforceable against the Dealer in accordance
with its terms except as may be limited by applicable bankruptcy or
other similar laws;
. which at the time of transfer to the trust is not encumbered by any
right of rescission, setoff, or any other defense of the Dealer;
. as to which, at the time of transfer of the receivable to the trust,
DFS and the seller have satisfied all their respective obligations
regarding that receivable required to be satisfied at that time;
. as to which, at the time of transfer of the receivable to the trust,
neither DFS nor the seller has taken or failed to take any action
which would impair the rights of the trust or the certificateholders
in that receivable;
. which constitutes "chattel paper," an "account" or a "general
intangible" as defined in Article 9 of the UCC as then in effect in
the State of Missouri; however, the financing agreement giving rise to
the receivable may, however, be subject by its terms, or by judicial
interpretation, to the laws of other states;
. which was transferred to the trust with all applicable governmental
authorizations; and
. if the receivable has the benefit of a Floorplan Agreement with a
Manufacturer, the Floorplan Agreement provides, except as otherwise
provided in that agreement -- which may vary among Floorplan
Agreements -- that the Manufacturer is obligated to repurchase the
products securing the receivable after the servicer repossesses the
products following the related Dealer's default. For a description of
Floorplan Agreements, see "The Dealer Floorplan Financing Business of
DFS--Floorplan Agreements with Manufacturers" in the prospectus.
Delayed Funding Receivables will be Eligible Receivables. Delayed Funding
Receivables -- including any collections on those Delayed Funding Receivables
and Defaulted Amounts in respect of those Delayed
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Funding Receivables -- will cease to be included in the trust on the day, if
any, on which an insolvency event in respect of DFS occurs.
"Enhancement" means the rights and benefits provided to the
certificateholders of any series or class pursuant to any letter of credit,
surety bond, cash collateral account, spread account, guaranteed rate agreement,
maturity liquidity facility, tax protection agreement, interest rate swap
agreement or other similar arrangement. The subordination of any series or class
to any other series or class or of the seller's interest to any series or class
will be deemed to be an Enhancement.
"Enhancement Provider" means the provider of any Enhancement, other than
any certificateholders the certificates of which are subordinated to any series
or class.
"Excess Seller's Percentage" for any calendar month means a percentage,
which will never be less than 0% nor more than 100%, calculated as described
below.
. If the Excess Seller's Percentage is applied to non-principal
collections and defaulted receivables, it means 100% minus the sum of:
(1) the aggregate of the floating allocation percentages for each
outstanding series for the applicable calendar month; plus
(2) the percentage equivalent of a fraction, the numerator of which is
the aggregate of the available subordinated amounts for each
outstanding series as of the determination date occurring in that
calendar month -- after giving effect to the allocations,
distributions, withdrawals and deposits to be made on the next
distribution date -- and the denominator of which is the Pool
Balance as of the last day of the immediately preceding calendar
month.
. If the Excess Seller's Percentage is applied to principal collections,
it means 100% minus the sum of:
(a) the sum of the aggregate of the principal allocation percentages
for each outstanding series in its amortization, accumulation or
early amortization period for the applicable calendar month and
the aggregate of the floating allocation percentages for each
outstanding series in its revolving period for that calendar
month; plus
(b) the percentage described in clause (2) above for that calendar
month.
"Excess Servicing" for any distribution date means the amount described in
clause (9) under "Description of the Certificates -- Distributions from the
Collection Account; Reserve Fund" in this prospectus supplement.
"Financing Agreement" means any wholesale financing agreement, accounts
receivable financing agreement, asset based lending financing agreement or
unsecured receivable financing agreement.
"Floating Allocation Percentage" for any calendar month after the month in
which the closing date for your series occurs means the percentage equivalent,
which will never exceed 100%, of a fraction:
. the numerator of which is the Invested Amount as of the last day of
the immediately preceding calendar month; and
. the denominator of which is the Pool Balance as of that last day.
The Floating Allocation Percentage for the month in which the closing date
for your series occurs will mean the percentage equivalent of a fraction:
. the numerator of which is the sum of the initial principal balances of
the certificates of your series; and
. the denominator of which is the Pool Balance on the [specify cut-off
date].
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"Floorplan Agreement" means an agreement, entered into by DFS or the
related Approved Affiliate and a Manufacturer, as amended or modified from time
to time, pursuant to which the Manufacturer agrees, among other matters, to
repurchase from DFS or the Approved Affiliate, as applicable, Products sold by
the manufacturer to any of its Dealers and financed by DFS or the Approved
Affiliate under a wholesale financing agreement if DFS or the Approved Affiliate
acquires possession of the Products because of a default by the Dealer under the
wholesale financing agreement, voluntary surrender or other circumstances.
"Incremental Default Amount" on any determination date equals:
. the Overconcentration Default Amount on that determination date; minus
. the full amount of any defaulted receivables included in the
definition of Overconcentration Default Amount which may be reassigned
or assigned to the seller or the servicer in accordance with the terms
of the pooling and servicing agreement, but not less than zero, except
as described in the next sentence.
If certain events of bankruptcy, insolvency or receivership involving
the seller have occurred, the amount of the defaulted receivables which may
be reassigned to the seller will not be so subtracted and, if certain
events of bankruptcy, insolvency or receivership involving the seller have
occurred, the amount of the defaulted receivables which may be assigned to
the servicer will not be so subtracted.
"Ineligible Account" means an Account that at the time of determination is
not an Eligible Account.
"Ineligible Receivable" means, without duplication,
. any receivable that arises in an Eligible Account, was not an Eligible
Receivable at the time of its transfer to the trust and was transferred to
the trust,
. any receivable that, at the time of its transfer to the trust, has
been SAU or NSF for more than 30 days and
. the aggregate of receivables that, at the time of transfer of each of
the receivables to the trust, have been SAU or NSF for a period of one to
30 days but only to the extent that the aggregate amount exceeds 0.75% of
the Pool Balance at the end of the calendar month.
"Invested Amount" means for any date the sum of:
. the Class A Invested Amount;
. the Class B Invested Amount; and
. the Class C Invested Amount.
"Investment Proceeds" for any distribution date means an amount equal to
the sum of:
. the net investment earnings credited to the collection account on the
related determination date on funds held in the interest funding
account, the principal funding account, the excess funding account and
the reserve fund; and
. the Series [ ] Allocation Percentage of net investment earnings
credited to the collection account on the related determination date
relating to funds held in the collection account.
"Investor Default Amount" means, for any distribution date, an amount equal
to the product of:
. the Defaulted Amount for the preceding calendar month, and
. the Floating Allocation Percentage for the preceding calendar month.
["LIBOR" means, for any interest period, the offered rates for deposits in
United States dollars having a maturity of three months (the "Index Maturity")
commencing on the related Adjustment Date which appears
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<PAGE>
on Telerate Page 3750 as of approximately 11:00 A.M., London time, on the date
of calculation as determined by the trustee of the trust.] If at least two
offered rates appear on Telerate Page 3750, LIBOR will be the arithmetic mean --
rounded upwards, if necessary, to the nearest one-sixteenth of a percent -- of
those offered rates.
If fewer than two offered rates appear, LIBOR for the interest period will
be determined at approximately 11:00 A.M., London time, on the Adjustment Date
on the basis of the rate at which deposits in United States dollars having the
Index Maturity are offered to prime banks in the London interbank market by four
major banks in the London interbank market selected by the trustee of the trust
and in a principal amount equal to an amount of not less than US $1,000,000 and
that is representative for a single transaction in that market at that time.
. The trustee of the trust will request the principal London office of
each of those banks to provide a quotation of its rate.
. If at least two of the banks quote rates to the trustee, LIBOR will be
the arithmetic mean -- rounded upwards, if necessary, to the nearest
one-sixteenth of one percent -- of those quotations.
. If fewer than two of the banks quote rates to the trustee, LIBOR for
that interest period will be the arithmetic mean -- rounded upwards,
if necessary, to the nearest one-sixteenth of one percent -- of the
rates quoted at approximately 11:00 A.M., New York City time, on the
Adjustment Date by three major banks in New York, New York selected by
the trustee of the trust for loans in United States dollars to leading
European banks having the Index Maturity and in a principal amount
equal to an amount of not less than US $1,000,000 and that is
representative for a single transaction in that market at that time.
. However, if the banks selected are not providing quotations, LIBOR in
effect for the applicable period will be LIBOR in effect for the
previous period; provided further, however, that on any Adjustment
Date during the Early Amortization Period, the "Index Maturity" will
equal one month.
"London Business Day" means any business day on which dealings in deposits
in United States dollars are transacted in the London interbank market.]
"Manufacturer" means a manufacturer, distributor or other vendor engaged
generally in the business of manufacturing or distributing products for sale or
lease to Dealers in the ordinary course of business.
"Miscellaneous Payments" for any calendar month means the sum of:
. Adjustment Payments and Transfer Deposit Amounts received during that
calendar month; and
. Unallocated Principal Collections on the applicable distribution date
available to be treated as Miscellaneous Payments as described under
"Description of the Certificates--Allocations Among Series" in the
prospectus.
"Monthly Interest" for any distribution date will mean an amount equal to
the sum of the Class A monthly interest, the Class B monthly interest and the
Class C monthly interest.
"Monthly Payment Rate" for a calendar month is the percentage equivalent of
a fraction:
. the numerator of which is the principal collections, without
deducting the discount portion, collected during that calendar month;
and
. the denominator of which is the average daily aggregate principal
balance of the receivables -- without deducting the discount portion -
- for that calendar month.
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"Monthly Principal" for any distribution date relating to the Accumulation
Period or any Early Amortization Period will equal the Available
Certificateholder Principal Collections for that distribution date. However,
. for each distribution date during the Accumulation Period, Monthly
Principal may not exceed the Controlled Distribution Amount for that
distribution date; and
. Monthly Principal will not exceed the aggregate outstanding principal
balances of the certificates of your series.
["Monthly Servicing Fee" means [ ]
"Net Receivables Rate" for each distribution date immediately following an
interest period is:
. the weighted average of the interest rates borne by the receivables
during the second calendar month preceding that distribution date --
interest payments on the receivables at those rates generally being
due and payable in the calendar month preceding that distribution
date; plus
. the product of (a) the Monthly Payment Rate for the calendar month
preceding that distribution date, (b) the discount factor for that
distribution date and (c) twelve; less
. 2% per annum, unless the Servicing Fee has been waived for the
applicable calendar month.
"Non-Principal Collections" means collections of interest, all other non-
principal charges, including insurance service fees and handling fees, and
Discount Portions under the receivables; provided that all Recoveries will be
Non-Principal Collections.
"Non-Principal Receivables" for any account means all amounts billed to the
related Dealer in respect of interest and all other non-principal charges.
"Overconcentration Default Amount" on any determination date means the
lesser of:
. the aggregate amount of receivables which became defaulted receivables
during that calendar month and which arose in an account that is
included in the calculation of the Overconcentration Amount; and
. the Overconcentration Amount on that determination date.
"Pay-as-Sold" is described in the prospectus under "The Dealer Floorplan
Financing Business of DFS -- Payment Terms."
"Pool Balance" means, as of the time of determination, (a) the aggregate of
Principal Receivables, without deducting therefrom the Discount Portion, in the
trust at the time, other than all Ineligible Receivables, multiplied by (b) 1
minus the Discount Factor.
"Principal Allocation Percentage" for any calendar month means the
percentage equivalent, which will never exceed 100%, of a fraction:
. the numerator of which is the Invested Amount as of the last day of
the Revolving Period; and
. the denominator of which is the Pool Balance as of the last day of the
immediately preceding calendar month;
However, for the portion of any calendar month that falls after the date on
which any Early Amortization Event occurs, unless, in limited circumstances
involving the addition of accounts, that Early Amortization Event will have been
cured, the Principal Allocation Percentage will be reset using the Pool Balance
as of the close of business on the date on which the Early Amortization Event
occurred and principal
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collections will be allocated for that portion of the calendar month using the
reset Principal Allocation Percentage.
"Principal Receivables" for an Account means amounts shown on the
servicer's records as receivables, other than the amounts which represent Non-
Principal Receivables and Discount Portions, payable by the related Dealer.
"Products" means the commercial and consumer goods financed by DFS or the
related Approved Affiliate for Dealers pursuant to a wholesale financing
agreement.
"Rating Agency Condition" means, for any action, that each rating agency
will have notified the seller, the servicer and the trustee in writing that the
action will not result in a reduction or withdrawal of the rating of any
outstanding series or class for which it is a rating agency.
"Recoveries" on any determination date means all amounts received,
including insurance proceeds, by the servicer during the calendar month
immediately preceding the determination date from receivables which have
previously become Defaulted Receivables.
"Required Participation Amount" for any date means an amount equal to the
sum of:
. the sum of the product for each series of (1) the Required
Participation Percentage for that series times (2) the initial
invested amount of that series minus the amount of any deposits into
its excess funding account in connection with a reduction in the Pool
Balance plus the amount of any withdrawals from its excess funding
account in connection with an increase in the Pool Balance; plus
. the Trust Available Subordinated Amount on the immediately preceding
determination date, after giving effect to the allocations,
distributions, withdrawals and deposits to be made on the distribution
date following that determination date.
"Required Participation Percentage" means, for any series, the percentage
specified for that series in the related supplement; provided, however, that the
seller may, with ten days' prior notice to the trustee, each rating agency and
any Enhancement Provider, reduce the Required Participation Percentage to not
less than 100%, so long as the Rating Agency Condition has been satisfied.
"Required Subordination Draw Amount" means the lesser of the Deficiency
Amount and the Available Subordinated Amount.
"Reserve Fund Deposit Amount" is the amount, if any, by which the Reserve
Fund Required Amount exceeds the amount on deposit in the reserve fund.
"Reserve Fund Required Amount" means an amount which on any distribution
date will equal the product of:
. [ ]%; and
. the aggregate outstanding balance of the certificates of your series
as of that distribution date -- after giving effect to any change in
that aggregate outstanding balance on that distribution date.
"Revolving Period" for your series means the period beginning on the
closing date for your series and ending on the earlier of:
. the close of business on the day immediately preceding the
Accumulation Period, and
. the close of business on the day an Early Amortization Period
commences;
. however, if any Amortization Period ends as described in clause (c) of
the definition of Early Amortization Period, the Revolving Period will
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recommence as of the close of business on the day that Early
Amortization Period ends.
"Seller's Participation Amount" means, at any time of determination, an
amount equal to the Pool Balance at the time minus the aggregate Invested
Amounts for all outstanding series at the time.
"Seller's Percentage" means a percentage calculated as described below.
. If the Seller's Percentage is applied to non-principal collections and
defaulted receivables, it means 100% minus the aggregate of the
floating allocation percentages for each outstanding series, including
your series.
. If the Seller's Percentage is applied to principal collections, it
means 100% minus the sum of:
(a) the aggregate of the floating allocation percentages for each
outstanding series, including your series, if applicable, in its
revolving period; and
(b) the aggregate of the principal allocation percentages for each
outstanding series, including your series, if applicable, in its
amortization, accumulation or early amortization period, but in
each case will not be less than 0%.
"Series [ ] Allocation Percentage" means, for any calendar month, the
percentage equivalent of a fraction:
. the numerator of which is the Invested Amount as of the last day of
the immediately preceding calendar month; and
. the denominator of which is the Trust Invested Amount as of that last
day.
"Termination Date" means the distribution date in [specify month and year].
"Three Month Net Loss Ratio" means the ratio, expressed as a percentage,
of:
. the average for each month of the net losses on the receivables,
exclusive of the ineligible receivables, owned by the trust -- that
is, gross losses less recoveries on the receivables, including,
without limitation, recoveries from collateral security in addition to
recoveries from the products, recoveries from Manufacturers and
insurance proceeds -- during any three consecutive calendar months, to
. the average of the month-end aggregate balances of those receivables
-- without deducting the discount portion -- for that three-month
period.
"Transfer Deposit Amount" means, for any receivable reassigned or assigned
to the seller or the servicer, as applicable, the amounts specified in the
pooling and servicing agreement.
"Trust Available Subordinated Amount" means the sum of:
. the Available Subordinated Amount; and
. the aggregate available subordinated amounts for all other outstanding
series.
"Trust Incremental Subordinated Amount" on any determination date equals
the excess, if any, of:
. the Overconcentration Amount on that determination date; over
. the Incremental Default Amount for that determination date.
"Trust Invested Amount" means, for any calendar month, the sum of:
. the Invested Amount; and
. the invested amounts for all other outstanding series.
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Annex I
Other Series
This Annex I sets forth certain characteristics of Series [ ].
Initial principal balance ............ $[ ]
Scheduled interest payment dates ..... fifteenth day of each month (or, if
that day is not a business day, the
next succeeding business day)
Current outstanding principal
balance .............................. $[ ]
Revolving period...................... [ ] to the earlier of (i) the day
immediately preceding the accumulation
period for that series (which day could
be [ ]) and (ii) the business day
immediately preceding an Early
Amortization Period.
Expected final distribution date .... [ ] distribution date
Termination date .................... [ ] distribution date
I-I
<PAGE>
Distribution Financial Services Floorplan Master Trust
Issuer
DEUTSCHE FLOORPLAN RECEIVABLES, L.P.
Seller
DEUTSCHE FINANCIAL SERVICES CORPORATION
Servicer
$[ ] Asset Backed Certificates, Series [ ], Class A
$[ ] Asset Backed Certificates, Series [ ], Class B
--------------------------------------
PROSPECTUS SUPPLEMENT
--------------------------------------
[Name(s) of Underwriter(s)]
You should rely only on the information contained in this document or that we
have referred you to. We have not authorized anyone to provide you with other or
different information.
We are not offering the certificates in any jurisdiction where the offer is not
permitted.
Until [ ], all dealers that effect transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and regarding their unsold allotments or
subscriptions.
<PAGE>
[ALTERNATE PAGES FOR FORM OF MARKET-MAKING PROSPECTUS SUPPLEMENT TO FOLLOW]
<PAGE>
Prospectus
DISTRIBUTION FINANCIAL SERVICES FLOORPLAN MASTER TRUST
Issuer
DEUTSCHE FLOORPLAN RECEIVABLES, L.P.
Seller
DEUTSCHE FINANCIAL SERVICES CORPORATION
Servicer
ASSET BACKED CERTIFICATES
- --------------------------------------------------------------------------------
Consider carefully the discussion under "Risk Factors" beginning on page 4 of
this prospectus.
The certificates will represent interests in the trust only and will not
represent interests in or obligations of the seller, the servicer, Deutsche Bank
AG, or any other person or entity. This prospectus and the accompanying
prospectus supplement together constitute the full prospectus for the
certificates of your series.
This prospectus may be used to offer and sell any series of certificates only if
accompanied by the prospectus supplement for that series.
- --------------------------------------------------------------------------------
The trust --
. may periodically issue asset backed certificates in one or more series with
one or more classes; and
. will own --
. receivables generated from time to time in a portfolio of revolving credit
arrangements with dealers, manufacturers or distributors to finance
inventory, accounts receivable or other assets;
. payments due on those receivables; and
. other property described in this prospectus and in the accompanying
prospectus supplement.
The certificates --
. will represent interests in the trust and will be paid only from the trust
assets;
. may have one or more forms of enhancement; and
. will be issued as part of a designated series which may include one or more
classes of certificates and enhancement.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the certificates or determined that
this prospectus is accurate or complete. Any representation to the contrary is
a criminal offense.
<PAGE>
Important notice about information presented in this
prospectus and the accompanying prospectus supplement
We provide information to you about the certificates in two separate documents
that progressively provide more detail: (a) this prospectus, which provides
general information, some of which may not apply to a particular series of
certificates, including your series, and (b) the accompanying prospectus
supplement, which describes specific terms of your series of certificates.
If the terms of your series of certificates vary between this prospectus and
the accompanying prospectus supplement, you should rely on the information in
the prospectus supplement.
You should rely only on the information provided in this prospectus and the
accompanying prospectus supplement including the information incorporated by
reference. We have not authorized anyone to provide you with other or different
information. We are not offering the certificates in any jurisdiction where the
offer is not permitted. We do not claim the accuracy of the information in this
prospectus or the accompanying prospectus supplement as of any date other than
the dates stated on their respective covers.
We include cross-references in this prospectus and in the accompanying
prospectus supplement to captions in these materials where you can find further
related discussions. The following Table of Contents and the Table of Contents
included in the accompanying prospectus supplement provide the pages on which
these captions are located.
Some terms used in this prospectus are defined under the caption "Glossary"
beginning on page 43 in this prospectus.
<PAGE>
TABLE OF CONTENTS
[TO BE CONFORMED]
<TABLE>
<CAPTION>
Page
<S> <C>
Summary................................................................................... 1
The Parties............................................................................... 1
Seller.................................................................................. 1
Originators of the Receivables.......................................................... 1
Servicer................................................................................ 1
Trustee................................................................................. 1
The Trust............................................................................... 1
The Certificates........................................................................ 2
The Trust Assets........................................................................ 2
Tax Status.............................................................................. 2
ERISA Considerations.................................................................... 2
Risk Factors............................................................................ 2
Risk Factors.............................................................................. 4
Bankruptcy of DFS, Deutsche BSC or the Seller Could Result in Losses or Delays in
Payments on the Certificates......................................................... 4
Prior Interests in Receivables Could Result in Losses or Delays in Payments on the
Certificates........................................................................... 6
Commingling by the Servicer May Result in Delays or Reductions in Payments on the
certificates........................................................................... 6
Insolvency Laws May Adversely Affect the Collection of Receivables...................... 7
Lack of Security Interest Could Result in Delays or Reductions in Payments on the
certificates........................................................................... 7
Reduced Collections or Originations of receivables Could Result in Early Repayment,
Delayed Payment or Reduced Payment of the Certificates............................... 7
Potential Delays or Reductions in Payments on Certificates Due to Addition of Accounts.. 8
Potential Delays or Reductions in Payments on Certificates Due to Dependence of
the Trust on DFS..................................................................... 8
Potential Delays and Losses on the Certificates Due to Decrease in Sales of Products.... 9
You May Not Be Able to Influence Actions of the Trust................................... 9
The Existence or Issuance of Additional Series May Adversely Affect the Timing and
Amounts of Payments on Certificates.................................................. 10
Possible Delays and Reductions in Payments on Certificates Due to Priority Differences
Among the Classes.................................................................... 10
Potential Delays or Reductions in Payments on Certificates Due to the Ability of the
Servicer to Change Payment Terms..................................................... 10
Deutsche Floorplan Receivables, L.P. and Deutsche Floorplan Receivables, Inc.............. 11
Deutsche Floorplan Receivables, L.P..................................................... 11
Deutsche Floorplan Receivables, Inc. ................................................... 11
The Trust................................................................................. 12
Use of Proceeds........................................................................... 13
The Dealer Floorplan Financing Business of DFS............................................ 13
General................................................................................. 13
Credit Underwriting Process............................................................. 14
Creation of Receivables................................................................. 15
Payment Terms........................................................................... 16
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Floorplan Agreements with Manufacturers................................................. 17
Billing Procedures...................................................................... 17
Dealer Monitoring....................................................................... 17
Realization on Receivables.............................................................. 18
Asset Based Receivables................................................................. 19
Private Label Programs.................................................................. 19
Participation Arrangements.............................................................. 19
Description of the Certificates........................................................... 19
General................................................................................. 19
Principal and Interest on the Certificates.............................................. 20
Book-Entry Registration................................................................. 20
Definitive Certificates................................................................. 24
Supplemental Certificates............................................................... 25
New Issuances........................................................................... 26
Uncertified Series...................................................................... 26
Representations and Warranties.......................................................... 27
The Overconcentration Amounts........................................................... 31
Addition of Accounts.................................................................... 33
Removal of Accounts; Transfers of Participations........................................ 35
Collection Account...................................................................... 36
Allocations Among Series................................................................ 36
Discount Factor......................................................................... 37
Allocation of Collections; Deposits in Collection Account............................... 38
Termination............................................................................. 40
Indemnification......................................................................... 40
Collection and Other Servicing Procedures............................................... 41
Servicer Covenants...................................................................... 41
Servicing Compensation.................................................................. 42
Certain Matters Regarding the Servicer.................................................. 42
Servicer Default........................................................................ 43
Evidence as to Compliance............................................................... 44
Amendments.............................................................................. 44
List of Certificateholders.............................................................. 45
The Trustee............................................................................. 46
Description of the Receivables Contribution and Sale Agreement............................ 46
Sale or Transfer of Receivables......................................................... 46
Representations and Warranties.......................................................... 46
Certain Covenants....................................................................... 47
Termination............................................................................. 48
Certain Legal Aspects of the Receivables.................................................. 48
Transfer of Receivables................................................................. 48
Certain Matters Relating to Bankruptcy.................................................. 49
Legal Matters............................................................................. 51
Reports to Certificateholders............................................................. 51
Where You Can Find More Information....................................................... 51
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Glossary............................................................................... 52
Exhibit A: Global Clearance, Settlement and Tax Documentation Procedures............... A-1
</TABLE>
iii
<PAGE>
Summary
This summary highlights selected information from this document. This
summary does not contain all of the information that you need to consider in
making your investment decision and is qualified by the more complete
descriptions contained in this prospectus and the accompanying prospectus
supplement. To understand all of the terms of an offering of the certificates,
you should read carefully this entire prospectus and the accompanying prospectus
supplement, including the information under "Risk Factors" in this prospectus
and the accompanying prospectus supplement.
<TABLE>
The Parties
<S> <C>
Seller................... Deutsche Floorplan Receivables, L.P., a Delaware
limited partnership.
. The general partner of the seller is Deutsche
Floorplan Receivables, Inc., a wholly-owned
subsidiary of Deutsche Financial Services
Corporation.
. The limited partner of the seller is Deutsche
Financial Services Corporation.
Originators of the
Receivables.............. Each of Deutsche Financial Services Corporation and
Deutsche Business Services Corporation:
. is a party to revolving credit arrangements that
give rise to receivables; and
. transfers receivables to the seller pursuant to a
receivables contribution and sale agreement.
Servicer................. Deutsche Financial Services Corporation.
Trustee.................. ___________________________.
The Trust................ Distribution Financial Services Floorplan Master
Trust. The trust was formed pursuant to a pooling and
servicing agreement among the seller, the servicer and
the trustee. The trust is a master trust and will
engage in the following activities:
</TABLE>
1
<PAGE>
. acquiring and holding accounts and related assets;
. issuing and making payment on the certificates; and
. activities which are incidental to or relating to
the foregoing.
The Certificates Each prospectus supplement will describe the
certificates that are being offered to investors at
that time. The offered certificates will include one
or more classes of certificates issued pursuant to a
supplement to the pooling and servicing agreement.
This prospectus and the accompanying prospectus
supplement sometimes refer to the certificates issued
pursuant to a supplement as a series. This prospectus
and the accompanying prospectus supplement may not
offer all classes of a series. Instead, the seller may
retain one or more classes and may sell one or more
classes in private placements.
The Trust Assets The assets of the trust include receivables generated
from time to time under revolving credit arrangements
that we call accounts.
The assets of the trust also include all of the
seller's right, title and interest in:
. all security interests purporting to secure payment
of the receivables, and all agreements or
arrangements supporting or securing payment of the
receivables;
. all documents, books and records relating to the
receivables; and
. monies due or to become due on the foregoing.
The seller may remove accounts that it transferred
to the trust.
The trust's assets will be allocated among the seller
and the certificateholders of all series.
2
<PAGE>
Tax Status The related prospectus supplement contains information
concerning the application of the federal income tax
laws, including whether the certificates of your
series will be characterized as debt for federal
income tax purposes.
ERISA Considerations The related prospectus supplement contains information
concerning whether the certificates of your series are
eligible for purchase by employee benefit plans.
Risk Factors You should consider the factors set forth under "Risk
Factors" beginning on page 3 of this prospectus.
3
<PAGE>
Risk Factors
In addition to the other information contained in this prospectus and the
prospectus supplement, you should consider the following risk factors, and the
"Risk Factors" set forth in the prospectus supplement, in deciding whether to
purchase certificates. The disclosure below and in the "Risk Factors" set forth
in the prospectus supplement summarize material risks of investing in the
certificates. The summary does not purport to be complete; to fully understand
and evaluate it, you should also read the rest of this prospectus and the
related prospectus supplement.
Bankruptcy of DFS, Deutsche BSC or Each of DFS and Deutsche BSC has
the Seller Could Result in Losses or warranted to the seller in the
Delays in Payments on the receivables contribution and sale
Certificates agreement that the initial
contribution and subsequent sales of
the receivables by it to the seller
are valid transfers of the
receivables to the seller. However,
if DFS or Deutsche BSC were to become
a debtor in a bankruptcy case, a
bankruptcy trustee or creditor of DFS
or Deutsche BSC, or DFS or Deutsche
BSC as debtor in possession, may take
the position that the transfer of the
receivables to the seller should be
characterized as a pledge of the
receivables. If so, the trustee for
the trust would be required to go
through bankruptcy court proceedings
to establish its rights to
collections on the receivables in the
trust, and, if the transfer were held
to be a pledge, to establish the
amount of claims secured by the
pledge. These proceedings could
result in delays and possibly
reductions in payments to you.
Likewise, if the seller were to
become a debtor in a bankruptcy case
and a bankruptcy trustee or creditor
of the seller or the seller as debtor
in possession were to take the
position that the transfer of the
receivables from the seller to the
trust should be characterized as a
pledge of those receivables, then
delays and reductions in payments on
the certificates could result.
Payments for repurchases of
receivables by DFS or the seller
pursuant to the pooling and servicing
agreement may be recoverable by DFS
or the seller as debtor in possession
or by a creditor or a
trustee-in-bankruptcy of DFS or the
seller as a preferential transfer
from DFS or the seller if those
payments are made within one year
prior to the filing of a bankruptcy
case relating to DFS or the seller.
If the seller, the servicer, DFS or
Deutsche BSC were to become the subject
of bankruptcy proceedings, an early
amortization event would occur for
all outstanding series. Under the
terms of the relevant agreements:
. the bankruptcy of the seller and the
involuntary bankruptcy of DFS or
Deutsche BSC may result in no new
receivables being transferred to the
trust; and the bankruptcy of the
seller will result in the trustee of
the trust selling the receivables
unless holders of more than 50% of
the investor interest of each class
of outstanding certificates gave the
trustee other instructions. The trust
would then terminate earlier than
planned and you could have a loss if
the sale of the receivables produced
insufficient net proceeds to pay you
in full.
The bankruptcy court may have the
power:
4
<PAGE>
. regardless of the terms of the
relevant agreements, (a) to prevent
the beginning of an early
amortization period, (b) to prevent
the early sale of the receivables and
termination of the trust or (c) to
require new receivables to continue
being transferred to the trust; or
. regardless of the instructions of the
certificateholders, (a) to require
the early sale of the trust's
receivables, (b) to require
termination of the trust and
retirement of the certificates,
including the certificates of your
series, or (c) to prohibit the
continued transfer of receivables to
the trust.
There is a time delay between the
servicer's receipt of collections and
its deposit of those collections in a
deposit account of the trust. If the
servicer becomes the subject of
bankruptcy proceedings, the trustee's
claim to collections in the
servicer's possession at the time of
the bankruptcy filing may not be
perfected. In this event, funds
available to pay principal and
interest on your certificates may be
reduced.
If the servicer becomes insolvent,
the bankruptcy court might have the
power to prevent either the trustee
or the holders of certificates from
appointing a new servicer. In this
event, the ability of the servicer to
service the receivables could be
impaired by its bankruptcy and its
actions would be supervised by a
court, which could cause delays or
reductions in payments to you.
In addition, in a case decided by
United States Court of Appeals for
the Tenth Circuit in 1993, the court
said, in effect, that accounts
transferred by a seller to a buyer
would remain property of the debtor's
bankruptcy estate. If, following a
bankruptcy of DFS, Deutsche BSC or
the seller, a court were to follow
the reasoning of the court in that
case, delays and reductions in
payments on your certificates could
result.
If DFS or Deutsche BSC were to become
a debtor in a bankruptcy case and a
creditor or trustee-in-bankruptcy of
that debtor or that debtor itself
were to request a bankruptcy court to
order that DFS or Deutsche BSC, as
applicable, be substantively
consolidated with the seller, delays
and reductions in payments on your
certificates could result.
In addition, if an insolvency event
were to occur involving DFS or
Deutsche BSC, any delayed funding
receivables that had not yet been
funded may not become funded and may
be executory contracts that can be
disaffirmed by the
trustee-in-bankruptcy of DFS or
Deutsche BSC, in which case the
related dealers would no longer be
obligated to pay those delayed
funding receivables, which the trust
has already paid for. A delayed
funding receivable is a receivable
for which the related agreement
permits DFS to delay payment of the
purchase price of the related product
to the manufacturer for a specified
period after the invoice date for the
product.
5
<PAGE>
Prior Interests in Receivables Could agreement provides for the transfer of
Result in Losses or Delays in of receivables by DFS and Deutsche
Payments on the Certificates BSC to the seller. The pooling and
servicing agreement provides for the
transfer of receivables by the
seller to the trust. However, a
court could conclude that the
government or other persons or
entities have a lien or other
interest in the receivables with
priority over the trust's interest.
Claims of the government or other
persons or entities in the
receivables could reduce or delay
the collections on the receivables
available for distribution to you.
For example, if a court concludes that
the transfer by DFS or Deutsche BSC to
the seller, or the transfer by the
seller to the trust, is only a grant of
a security interest in the receivables,
some liens on the property of DFS,
Deutsche BSC or the seller arising
before new receivables come into
existence may take priority over, and
may be entitled to be paid before, the
interest of the seller or the trust in
those receivables. Those liens include a
tax or government lien or other liens
permitted under the law without the
consent of DFS, Deutsch BSC or the
seller.
Commingling by the Servicer May The pooling and servicing agreement
Result in Delays or Reductions in allows the servicer to retain
Payments on the Certificates collections received from the
receivables. So long as rating
agencies that have rated outstanding
series have approved of the retention
of collections by the servicer, the
servicer does not have to deposit
collections into the collection
account until the related
distribution date.
Until the servicer deposits payments
on the receivables into the
collection account, the servicer may
use those funds for its own benefit
and will not segregate those funds
from its own assets, and the proceeds
of any investment of those funds will
accrue to the servicer. The servicer
will pay no fee to the trust or any
certificateholder for any use by the
servicer of collections on the
receivables. If the servicer became
insolvent, the servicer's failure to
deposit collections in the collection
account may result in delays or
reductions in payments on your
certificates.
Insolvency Laws May Adversely Affect If a customer of DFS becomes bankrupt
the Collection of Receivables or insolvent, federal and state
bankruptcy and debtor relief laws may
result in delays or reductions
in payments due on those receivables
and, in turn, could result in reductions
or delays in payments to you.
Lack of Security Interest Could The seller has represented and
Result in Delays or Reductions in warranted in the pooling and
Payments on the Certificates servicing agreement that each
receivable is at the time of creation
generally secured by a first priority
perfected security interest in the
related product, account receivable
or other asset.
. However, receivables arising in an
account for which the payment terms
are on a scheduled payment plan basis
and whose maximum credit limit is at
or below $250,000 need not be secured
by a first priority security interest
if the account was in the trust at or
before March 1994. The failure of
these accounts to be secured by a
first priority security interest will
not
6
<PAGE>
constitute a breach of the seller's
representation and warranty as to
perfection matters.
. Even if a receivable is secured by
a product held by a dealer, DFS's
security interest in the product will
terminate at the time that the
product is sold. If the dealer is not
required to remit, or fails to remit,
to DFS amounts owed on products that
have been sold, the related
receivables will no longer be secured
by the products. As a result, delays
or reductions in the amounts of
collections on the related
receivables could occur and, in turn,
delays and reductions in payments to
you could occur.
Reduced Collections or Originations You may suffer delays on reductions
of Receivables Could Result in Early in payments on your certificates
Repayment, Delayed Payment or because of the performance of the
Reduced Payment of the Certificates dealers or the receivables.
. The receivables arising from the
purchase of inventory are generally
payable by dealers either after
retail sale of the related product
or, in some cases, in accordance with
a predetermined schedule, whether or
not the product has been sold. The
timing of sales of products is
uncertain and varies depending on the
product type.
. The relative portions of the trust's
pool of receivables made up of
receivables secured by products,
receivables secured by accounts
receivable and receivables secured by
other assets may vary over time and
cannot be predicted. The mix of
products securing receivables may
also be expected to vary over time
and cannot be predicted. As a
result, it is possible that the
credit quality of the receivables in
the trust, as a whole, may decline as
a result of the addition of
additional receivables.
. We cannot promise you that there
will be additional receivables
created under the accounts or that
any particular pattern of dealer
repayments will occur. The payment
of principal on the certificates
depends on dealer repayments, and
collections during the accumulation
period described in the related
prospectus supplement may not be
sufficient to fully amortize your
certificates on the date referred to
in the prospectus supplement.
In addition, a significant decline in the
amount of receivables generated could
cause an early amortization event and
could result in payment of your
certificates sooner than expected.
The receivables will be treated as being
transferred to the trust at a discount in
order to generate imputed interest
collections. Reductions in the payment
rate by dealers will result in a reduction
in the amount of imputed interest
collections and the amounts available to
pay interest on the certificates and the
servicing fee and to cover defaults and
delinquencies on the receivables.
Potential Delays or Reductions in You may suffer delays or reductions
Payments on Certificates Due to in payments on your certificates
Addition of Accounts because of the addition of accounts
to the trust.
7
<PAGE>
. The seller may, and in some
cases will be obligated to,
designate additional
accounts, the receivables in
which will be conveyed to the
trust.
. Additional accounts may
include accounts originated
under criteria different from
those which were applied to
previously designated
additional accounts.
Additional accounts may also
provide financing for
products of types different
from those included in the
trust at the time that your
series is issued.
. Additional accounts
designated in the future may
not be of the same credit
quality, any may not relate
to the same types of
products, as previously
designated accounts. If
additional accounts are not
of the same credit quality as
previously designated
accounts or if new product
types that secure the
receivables in new accounts
do not provide security that
is as favorable as that
provided by existing product
types, then delays or
reductions in payments on
your certificates could
result.
Potential Delays or Reductions in You may suffer delays and reductions
Payments on Certificates Due to in payments on your certificates if
Dependence of the Trust on DFS DFS does not generate a sufficient
level of receivables or if DFS does
not perform its obligations as
servicer or otherwise under the
pooling and servicing agreement, the
supplements or the receivables
contribution and sale agreement.
. The trust completely depends on DFS
to generate new receivables. DFS
competes with various other financing
sources, including independent
finance companies, manufacturer-
affiliated finance companies and
banks, which are in the business of
providing financing arrangements to
dealers. Competition from other
financing sources may result in a
reduction in the amount of
receivables generated by DFS. We
cannot assure you that DFS will
continue to generate receivables at
the same rate as in prior years.
. In addition, if DFS were to cease
acting as servicer, delays in
processing payments on the
receivables and information relating
to the trust and its assets could
occur and could result in delays
and reductions in payments to you.
Potential Delays and Losses on the You may suffer delays or reductions
Certificates Due to Decrease in in payments on your certificates due
Sales of Products to decreased sales of products relating
to the receivables.
. DFS's ability to generate new
receivables, and a dealer's ability
to make payments on the receivables
owned by the trust, will depend on
the sales of the products relating to
those receivables. A variety of
social and economic factors will
affect the level of sales of products
relating to the receivables,
including national and regional
unemployment levels and levels of
economic activity in general,
interest rates and consumer
perceptions of economic conditions.
8
<PAGE>
. A reduction in sales of products of
the type that secure receivables
would reduce payments to the trust,
which, in turn, could result in
delays or reductions in payments to
you.
You May Not Be Able to Influence You may be unable to influence or
Actions of the Trust otherwise control the actions of the
trust, and, as a result, you may be
unable to stop actions that are adverse
to you.
. Certificateholders of any series or
any class within a series may need
the approval or consent of other
certificateholders, whether in the
same or a different series, to take
or direct various actions, including
amending the pooling and servicing
agreement and directing a
reassignment of the entire portfolio
of receivables.
. In addition, following the occurrence
of an insolvency event involving the
seller, the holders of certificates
evidencing more than 50% of the
aggregate unpaid principal amount of
each series or each class of each
series [and any holder of a
certificate representing a portion of
the seller's interest in the trust],
will be required in order to direct
the trustee not to sell or otherwise
liquidate the receivables.
. The interests of the
certificateholders of any class or
series may not coincide with your
interests, making it more difficult
for you to achieve your desired
results in a situation requiring the
consent or approval of other
certificateholders.
. In addition, the seller, the The
Existence or Issuance of servicer and
the trustee may Additional Series May
Adversely amend the pooling and
Affect the Timing and Amounts of
servicing agreement or the Payments
on Certificates supplement for your
series without your consent in the
circumstances described in this
prospectus.
The Existence or Issuance of The existence or issuance of other
Additional Series May Adversely series could result in delays or
Affect the Timing and Amounts of reductions in payments on your series.
Payments on Certificates The trust has issued series before
issuing your series. The trust is
expected to issue additional series--
which may be represented by different
classes within a series--from time to
time without your consent. The terms of
any series may be different from your
series. It is a condition to the
issuance of each new series that each
rating agency that has rated an
outstanding series confirm in writing
that the issuance of the new series will
not result in a reduction or withdrawal
of its rating. However, a ratings
confirmation does not guarantee that the
timing or amount of payments on your
series will remain the same.
Possible Delays and Reductions in Each class of certificates of a series
Payments on Certificates Due to may have a different priority in the
Priority Differences Among the ranking of payments of principal and
Classes interest. Because of this priority
structure, if you hold a class that is
paid later than another class, you bear
more risk of loss than holders of prior
classes and you could experience delays
or reductions in payments on your
certificates.
Potential Delays or Reductions in The servicer will have the right to
Payments on Certificates Due to the change the terms of the receivables--
including payment terms, finance charges
and other fees it charges. Changes in
relevant law, changes in the marketplace
or
9
<PAGE>
Ability of the Servicer to Change prudent business practice could lead
Payment Terms the servicer to change the terms of the
receivables, which could result in
delays or reductions in payments on your
certificates.
For definitions of some of the terms used in this prospectus, see the "Glossary"
in this prospectus.
10
<PAGE>
Deutsche Floorplan Receivables, L.P.
and Deutsche Floorplan Receivables, Inc.
Deutsche Floorplan Receivables, L.P.
The seller is a limited partnership formed under the laws of the State of
Delaware, of which Deutsche Floorplan Receivables, Inc. is the general partner
and DFS is the limited partner. DFS's limited partnership interest in the
seller constitutes ninety-nine percent (99%) of the total partnership interests
in the seller, with the remaining one percent (1%) owned by the general partner.
The seller was organized for limited purposes, which include:
. purchasing receivables from DFS and its affiliates;
. transferring receivables to third parties; and
. any activities incidental to and necessary or convenient for the
accomplishment of those purposes.
The seller has taken steps in structuring the transactions contemplated
hereby that are intended to reduce the likelihood that the voluntary or
involuntary application for relief by DFS under the United States Bankruptcy
Code or similar applicable state laws will not result in consolidation of the
assets and liabilities of the seller with those of DFS. For example, articles of
incorporation of the general partner of the seller:
. restrict the nature of the general partner's business;
. restrict the seller's ability to commence a voluntary case or
proceeding under the U.S. Bankruptcy Code without the unanimous
affirmative vote of all of its directors; and
. provide for the general partner to have not less than two directors who
qualify under the articles of incorporation as "independent directors."
We cannot assure you that those steps will be sufficient to prevent the
consolidation of the seller and DFS.
If Additional Accounts are added to the trust, DFS may make contributions
of capital to the seller to fund a portion of the purchase price of the
receivables arising in Additional Accounts.
Deutsche Floorplan Receivables, Inc.
Deutsche Floorplan Receivables, Inc., a wholly-owned subsidiary of DFS, was
incorporated in the State of Nevada in 1993. Deutsche Floorplan Receivables,
Inc. was organized for limited purposes, which include:
. acting as the general partner in a limited partnership engaged in
purchasing receivables from DFS and its affiliates;
. transferring those receivables to third parties, acting as general
partner in limited partnerships that acquire receivables; and
. any activities incidental to and necessary or convenient for the
accomplishment of those purposes.
The principal executive offices of Deutsche Floorplan Receivables, Inc. are
located at Bank of America Plaza, 300 South Fourth Street, Suite 1100, Las
Vegas, Nevada 89101. The telephone number of those offices is (702) 385-1668.
11
<PAGE>
The Trust
The trust was formed in accordance with the laws of the State of New York
pursuant to the pooling and servicing agreement. The trust was formerly known as
Deutsche Floorplan Receivables Master Trust. The seller has transferred and will
transfer to the trust, without recourse, the receivables arising under accounts.
The property of the trust will consist of:
. receivables generated in any accounts in the trust or added to the
trust from time to time, excluding: (a) receivables paid or charged
off; (b) receivables in any accounts that are removed from the trust
from time to time; and (c) any undivided interest in the receivables in
some accounts that have been transferred to a third party as described
in this prospectus under "The Dealer Floorplan Financing Business of
DFS--Participation Arrangements";
. an assignment of all the seller's rights and remedies under the
receivables contribution and sale agreement;
. funds collected or to be collected in respect of the receivables;
. funds on deposit in certain accounts of the trust;
. a security interest in the Collateral Security; and
. rights of the seller regarding the financed inventory under the
Floorplan Agreements.
See "Description of the Certificates" in this prospectus.
The property of the trust may include Enhancements for the benefit of a
particular series. Your series will not have any interest in any Enhancements
provided for the benefit of any other series.
Use of Proceeds
The net proceeds from the sale of each series will be paid to the seller as
consideration for the transfer of the receivables to the trust. The seller will
use those proceeds for general operating purposes, including the distribution of
those proceeds to its limited partner, DFS. DFS may use the proceeds it
receives to repay inter-company debt and for other general corporate purposes.
The Dealer Floorplan Financing Business of DFS
General
The receivables sold or to be sold to the seller have been or will
generally be selected from extensions of credit made by DFS to Dealers in the
Floorplan Business and the Accounts Receivable Business.
The products financed within the Floorplan Business may include, among
others:
. computers and computer products;
. manufactured housing;
. recreational vehicles;
. boats and motors;
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. consumer electronics and appliances;
. keyboards and other musical instruments;
. industrial and agricultural equipment;
. office automation products, snowmobiles; and
. motorcycles.
The types of products financed may change over time. Occasionally, specific
transactions under the Accounts Receivable Business are documented as sales of
receivables to DFS.
The Floorplan Receivables are generally secured by the products being
financed and, in limited cases, by other personal property, personal guarantees,
mortgages on real estate, assignments of certificates of deposit, or letters of
credit. The amounts of the advances are generally equal to 100% of the invoice
price of the product.
The A/R Receivables are secured by accounts receivable owed to the Dealer
against which an extension of credit was made and, in limited cases, by other
personal property, mortgages on real estate, assignments of certificates of
deposit or letters of credit. The accounts receivable which are pledged to DFS
as collateral may or may not be secured by collateral. The amount advanced
generally does not exceed 80%-85% of the amount of the eligible accounts
receivable.
Both Floorplan Receivables and A/R Receivables are generally full recourse
obligations of the related Dealer.
DFS originates and services its receivables from its principal office in
St. Louis, Missouri and in branch offices located throughout the United States.
Receivables originated in the State of Louisiana arise from extensions of credit
to Dealers by Deutsche BSC, which receivables are serviced by DFS. In the
future, receivables in the trust may include receivables originated by other
affiliates of DFS, on the condition that the Rating Agency Condition is
satisfied. References in this prospectus to originations by DFS will be deemed
to include originations by Deutsche BSC and any other affiliate of DFS.
Credit Underwriting Process
A Dealer requesting the establishment of a credit line with DFS is required
to submit an application and financial information, including audited or
unaudited financial statements and, in some cases, tax returns. DFS attempts to
talk to, or receive reference letters from, several of the applicant's current
creditors and may also obtain a credit agency report on the applicant's credit
history. In addition to that current financial information and historical credit
information, DFS will consider the following factors:
. the reason for the request for the extension of credit;
. the need for the credit line;
. the products to be financed and the financial status of the
manufacturer of those products, if any, that would enter into a related
Floorplan Agreement; and
. the experience of the Dealer's management.
The determination of whether to extend credit and of the amount to be
extended is based on a weighing of the above factors. The Dealer credit
underwriting process of DFS also involves the use of a system that DFS refers
to as the "expert credit system". The expert credit system employs artificial
intelligence technology to simulate the analytical approach of senior
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underwriting personnel. By utilizing a standardized review process to analyze
credit information, the expert credit system adds greater consistency to
underwriting decisions across geographic areas and product lines. While all
Dealer applications are processed through the expert credit system, DFS does not
use the expert credit system as a credit scoring system that results in a
numerical score that approves or disapproves the extension of credit or that
indicates what amount of credit may be extended.
The size of a credit line to a Dealer determines who in DFS or above DFS
may approve the credit line.
. Extensions of credit lines of more that $10,000,000 if secured and
$5,000,000 if unsecured may be approved by management of [Deutsche Bank
North America Holding Corporation] or Deutsche Bank AG.
. Extensions of credit up to $10,000,000 if secured and $5,000,000 if
unsecured may be approved by the president of DFS.
. Extensions of credit up to $5,000,000 may be approved by DFS's director
of portfolio control.
. A DFS division president may approve extensions of credit in amounts
which vary by program but do not exceed $1,500,000.
. Less senior officers have lower levels of approval authority.
DFS reviews individual Dealer credit limits:
. prior to any increase in that credit limit;
. generally every 12 to 18 months; and
. after becoming aware that the Dealer is experiencing financial
difficulties or is in default on its obligations under its agreement
with DFS.
Creation of Receivables
The Floorplan Business is typically documented by an agreement between DFS
and the Dealer which provides for both the extension of credit and a grant of
security interest.
. The agreement generally is for an unspecified period of time and
creates a discretionary line of credit, which DFS may terminate at any
time in its sole discretion. However, termination of a line of credit
may be limited by prevailing standards of commercial reasonableness and
good faith, which may require commercially reasonable notice and other
accommodations by DFS.
. Absent default by the Dealer, the outstanding Floorplan Receivables
owed by the Dealer cannot be accelerated, even if the line of credit is
terminated.
. After the effective date of termination, DFS is under no obligation to
continue to provide additional financing, but the then current
outstanding balance will be repayable in accordance with the Pay-as-
Sold or Scheduled Payment Plan terms of that Dealer's program with DFS,
as described below.
In the case of Floorplan Receivables, advances made for the purchase of
inventory are most commonly arranged in the following manner: The Dealer will
contact the Manufacturer and place a purchase order for a shipment of inventory.
If the Manufacturer has been advised that DFS is the Dealer's inventory
financing source, the Manufacturer will contact DFS to obtain an approval number
for the purchase order. At the time of that request, DFS will determine whether:
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. the Manufacturer is in compliance with its Floorplan Agreement;
. the Dealer is in compliance with its program with DFS; and
. the purchase order is within the Dealer's credit limit.
If so, DFS will issue an approval number to the Manufacturer.
The Manufacturer will then ship the inventory and directly submit its
invoice for the purchase order to DFS for payment. Interest or finance charges
normally begin to accrue on the Dealer's accounts as of the invoice date. The
proceeds of the loan being made by DFS to the Dealer are paid directly to the
Manufacturer in satisfaction of the invoice price and will normally be funded at
that time.
In some cases, however, DFS will negotiate a delay in funding the advance
for a period which in most cases ranges from a few days to up to 30 days, and in
some cases ranges up to 90 days, after the date of the invoice. These Delayed
Funding Receivables will be transferred to and paid for by the trust on the date
of the invoice, even though the receivables are not funded by DFS until a later
time -- that is, when DFS pays the advance to the Manufacturer in payment of the
invoice price.
DFS and the Manufacturer may also agree that DFS may discount the invoice
price of the inventory ordered by the Dealer. Under this arrangement, the
Manufacturer will deem itself paid in full when it receives the discounted
amount. Typically, in exchange for the float permitted by the payment delay
and/or the discount, DFS will agree to provide the Manufacturer's Dealers with
reduced interest, or perhaps no interest, for some period of time. Thus, the
Dealer's financing program may provide for so-called "interest free" or "free
flooring" periods during which no interest or finance charges will accrue on
their accounts.
Payment Terms
DFS's Floorplan Business provides two basic payment terms to Dealers:
. Pay-as-Sold financing programs; or
. Scheduled Payment Plan.
Under a "Pay-as-Sold" program, the Dealer is obligated to pay interest or
finance charges monthly, but principal repayment on any particular item of
inventory financed by DFS is due and payable only at the time sale of that item
by the Dealer or at a predetermined maturity date. On occasion, DFS may require
particular Dealers to begin repaying principal in installments if the unit has
not been sold within a specified period of time. These payments are referred to
as "curtailments." Even if curtailment payments are owing on a unit, the
outstanding balance owing on that unit will remain fully payable if the unit is
sold. Pay-as-Sold programs are principally offered in the motorcycle,
recreational vehicle, boat and motor, agricultural equipment, and other product
lines in which the individual inventory price is high and the product inventory
turn is relatively slow.
"Scheduled Payment Plans", in contrast, require that principal be repaid in
accordance with a particular schedule. Depending on the product line and the
particular inventory turns of the individual Dealer, the majority of these
payment terms are generally no longer than 90 days. Under a Scheduled Payment
Plan, the Dealer is obligated to make payments in accordance with an agreed on
schedule, regardless of when the item of inventory is actually sold.
In the case of A/R Receivables, the Dealer is obligated to pay interest or
finance charges monthly. Principal repayment is due in the amount of the
collections on the underlying accounts receivable at the time those collections
are paid.
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In the case of Asset Based Receivables, interest is payable monthly, while
principal is payable at the end of the term of the credit facility, or, if
earlier, when and to the extent principal outstandings exceed eligible
collateral at negotiated advance rates.
Floorplan Agreements with Manufacturers
DFS will provide financing for products for a particular Dealer, in most
instances, only if DFS has also entered into a Floorplan Agreement with the
Manufacturer of the product. Pursuant to the Floorplan Agreement, the
Manufacturer will agree, among other matters, to purchase from DFS those
products sold by the Manufacturer to a Dealer and financed by DFS if DFS
acquires possession of the products pursuant to repossession, voluntary
surrender, or other circumstances. This arrangement reduces the time, expense
and risk normally associated with a secured lender's disposition of collateral.
The terms of repurchase obligations of Manufacturers may vary, both by
industry and by Manufacturer.
. In some instances, the Manufacturer will be obligated to repurchase the
product for a price equal to the unpaid principal balance owed by the
Dealer for the product in question whenever DFS acquires possession of
that product.
. On occasion, different terms may be negotiated. The terms may provide
for a smaller purchase price, or a purchase price which declines over
time, or time periods beyond which no obligation to purchase by the
Manufacturer will apply.
. Some Floorplan Agreements may also eliminate the repurchase obligation
or reduce the purchase price payable by the Manufacturer, depending on
the condition of the inventory acquired by DFS.
In determining whether to include a Manufacturer's products in its
Floorplan Business, DFS considers:
. the Manufacturer's financial status;
. its number of years in the business;
. the number of years the product has been sold; and
. whether its products are sold nationally or in a limited area.
In general, the more favorable DFS's determination of those factors, the
larger the amount of Dealer outstanding payables to DFS that will be permitted.
DFS generally reviews Manufacturers annually in the case of Manufacturers whose
Dealers have outstanding payables to DFS of more than $10,000,000 and less
frequently in the case of other Manufacturers.
Billing Procedures
At the beginning of each month DFS sends to each account obligor a billing
statement for the interest, if any, and any other non-principal charges accrued
or arising in the prior month. Payment is generally due in respect of that
statement by the 15th of that month.
Dealer Monitoring
Inventory inspections are performed to physically verify the collateral
used to secure a Dealer's loan, check the condition of the inventory, account
for any missing inventory and collect funds due to DFS. The inventory
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inspection, or "floorcheck," is one of the key tools for monitoring inventory
financed by DFS on Pay-as-Sold terms.
. Floorchecks are usually performed every 30-45 days, or every 60-75 days
for industrial or agricultural equipment.
. Floorchecks are performed by field service representatives who are
specially trained to audit Dealer inventory. DFS has developed a
computerized field audit communications network providing field service
representatives with timely and accurate inventory reports on the day
of inspection. Any discrepancies in a Dealer's inventory or payment
schedule, or other problems discovered by a field service
representative, are promptly reported to regional office management.
Floorchecks generally are not performed on Dealers on Scheduled Payment
Plans. However, DFS monitors these Dealers for payment delinquencies. The
regional office makes telephone contact with delinquent Dealers after a
Scheduled Payment Plan payment of $10,000 or more is 5 days past due in order to
resolve any problems. If a Dealer is 10 days past due with a Scheduled Payment
Plan payment in an amount greater than $100,000 or 15 days past due with a
payment of $10,000-$100,000, field service representatives will visit the Dealer
to verify the related collateral and report their findings to the regional
office.
In addition to monitoring an A/R receivables Dealer's weekly activity, one
of the key control elements of the A/R receivables program is the field audit,
during which an accounts receivable auditor reviews certain books and records of
an A/R receivables Dealer. The audits are performed generally on a quarterly
basis. Any deficiencies revealed during the audit are discussed with the Dealer
and reported to regional office management.
Realization on Receivables
If a Dealer has defaulted in its obligations to DFS under the related
financing agreement:
. After expiration of any and all applicable notice and cure periods that
may have been agreed to between DFS and that Dealer, DFS may declare
the Dealer's obligations immediately due and payable and enforce all of
its legal rights and remedies, including commencement of proceedings to
foreclose on any collateral, limited by the prevailing standards of
commercial reasonableness and good faith.
. After learning of the default, DFS makes contact with the Dealer to
determine whether it can develop a workout arrangement with the Dealer
to cure all defaults. If disputes with the Dealer exist, those disputes
may be submitted to arbitration. If DFS determines that an arrangement
to cure a default cannot be successfully implemented, the Dealer's
payment obligations are accelerated.
. DFS then attempts to obtain possession of the collateral, except in the
case of A/R Receivables. In the case of A/R Receivables, DFS attempts
to collect directly from the obligors on the accounts receivable; for
some accounts relating to A/R Receivables, DFS will already control the
collection of accounts receivable through the use of lockboxes.
. If a Manufacturer is obligated to repurchase the collateral under a
Floorplan Agreement as described above under "--Floorplan Agreements
with Manufacturers," the collateral is delivered to the related
Manufacturer.
See "The Accounts--Loss Experience" in the prospectus supplement.
Asset Based Receivables
Asset Based Receivables arise from asset based revolving credit facilities
provided to some Dealers.
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. These facilities typically involve a revolving line of credit, often
for a contractually committed period of time, pursuant to which the
borrower may draw the lesser of the maximum amount of the line of
credit or a specifically negotiated loan availability amount. The loan
availability amount is determined by multiplying agreed advance rates
against the value of certain types of assets.
. In these facilities, DFS will most typically lend against finished
inventory and parts in the Dealer's possession which are free and clear
of other liens and otherwise in compliance with specified standards.
DFS will also lend in accordance with an advance rate against a
borrower's eligible accounts receivable.
. DFS's asset based revolving credit facilities are usually secured by
the assets which constitute the borrowing base against which the loan
availability amount is calculated and, occasionally, by other personal
property, mortgages or other assets of the borrower. Asset Based
Receivables are not always supported by any Floorplan Agreement with a
Manufacturer.
Private Label Programs
Under DFS's so-called "private label" programs, DFS will agree to provide
inventory financing and accounts receivable financing for Dealers of a
Manufacturer under the name of the Manufacturer. Presently DFS operates under
the following names:
. Carrier Distribution Credit Corporation, to provide financing for
Dealers of products manufactured or sold by Carrier Corporation --
heating, ventilation and air conditioning;
. Resellers Credit Corporation, to provide financing to Dealers of
products manufactured or sold by Ingram Micro, Inc. -- computer
products;
. IE Financial Services, to provide financing to Dealers of products
manufactured or sold by Intelligent Electronics, Inc. -- computer
products;
. MicroAge Commercial Credit, to provide financing to Dealers of products
manufactured or sold by MicroAge Computer Centers, Inc. --computer
products;
. Snapper Finance Company, to provide financing to Dealers of products
manufactured or sold by Snapper, Inc. -- lawn mowers and other garden
products; and
. Tracker Marine L.P., which provides financing to Dealers of products
manufactured by Tracker Marine L.P. -- boats and motors.
The Manufacturer may or may not have an equity participation in certain of
the receivables funded by those private label programs. Other private label
programs may be developed from time to time.
Participation Arrangements
From time to time DFS will enable other financing sources to participate in
certain of its credit facilities.
. Pursuant to a typical Participation, the documentation for the
underlying line of credit will remain in the name of DFS, as lender. In
a separate contractual arrangement with DFS, the participant will agree
to provide a portion of the funding for that facility in exchange for
an agreed interest rate. Occasionally, fees and other charges may also
be shared with the participant.
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. In some situations, if participants cease to participate, the size
of the credit facility may be reduced.
. The receivables to be sold by DFS to the seller, and in turn by the
seller to the trust, may include the non-participated portion of
receivables from accounts which have been participated.
. In addition, limited by substantially the same limitations that apply
to the removal of accounts, the seller may cause the trust to transfer
an interest in some receivables to the seller, which may thereafter
transfer that interest to another person in the form of a
Participation.
. In addition, DFS may, from time to time, enter into syndicated credit
facilities, pursuant to which multiple lenders, including DFS, will
jointly establish a credit facility administered by a lender agent.
Under these facilities, DFS and its co-lenders will agree, pursuant to
the terms of the loan agreement with the borrower, to provide a portion
of the overall credit facility up to their respective maximum
commitment amounts. In return, DFS and its co-lenders generally share
in the interest and principal payments and other fees and charges on a
pro-rata basis.
Description of the Certificates
General
The certificates will be issued in series. Each series will represent an
interest in the trust. Each series will be issued pursuant to the pooling and
servicing agreement, as supplemented by the supplement for that series. The
pooling and servicing agreement and a form of supplement have been filed as
exhibits to the Registration Statement of which this prospectus is a part. A
copy of the supplement relating to a series will be filed with the Securities
and Exchange Commission following issuance of the related series. The following
summary describes certain terms of the pooling and servicing agreement and
supplement, but it does not purport to be complete and is qualified in its
entirety by reference to the pooling and servicing agreement and each
supplement. See also "Description of the Certificates" in the related prospectus
supplement.
The certificates will evidence undivided interests in the trust
representing the right to receive from the trust funds up to, but not more than
the amounts required to make payments of interest on and principal of the
certificates.
Each class of certificates offered by this prospectus and the related
prospectus supplement will initially be represented by one or more certificates
registered in the name of the nominee of The Depository Trust Company, except as
set forth below. The offered certificates will be available for purchase in
minimum denominations of $1,000 and integral multiples in book-entry form. The
seller has been informed by DTC that DTC's nominee will be Cede & Co.
Accordingly, Cede & Co. is expected to be the holder of record of the offered
certificates. No certificate owner will be entitled to receive a certificate
representing that person's beneficial interest in the offered certificates.
Unless and until definitive certificates are issued under the limited
circumstances described in this prospectus, all references in this prospectus or
the prospectus supplement to actions by certificateholders will refer to actions
taken by DTC on instructions from its participants, and all references in this
prospectus or the prospectus supplement to distributions, notices, reports and
statements to certificateholders will refer to distributions, notices, reports
and statements to Cede & Co., as the registered holder of the offered
certificates. See "--Book-Entry Registration" and "--Definitive Certificates"
below.
Principal and Interest on the Certificates
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The timing and priority of payment, seniority, interest rate and amount of
or method of determining payments of principal and interest, and any other
payments, if so specified in the related prospectus supplement, on each class of
certificates will be described in the related prospectus supplement. Each
prospectus supplement will specify the dates on which payments will be made,
which may be monthly, quarterly or otherwise.
The right of holders of any class of certificates to receive payments of
principal and interest, and any other payments, if so specified in the related
prospectus supplement, may be senior or subordinate to the rights of holders of
any other class or classes of certificates of the series, as described in the
related prospectus supplement. If provided in the related prospectus supplement,
a series may include one or more classes of certificates entitled to (a)
principal payments with disproportionate, nominal or no interest payments or (b)
interest payments with disproportionate, nominal or no principal payments. Each
class of certificates 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 certificates, or any combination of the foregoing. The related prospectus
supplement will specify the interest rate or the method for determining the
interest rate for each class of certificates of a given series. One or more
classes of certificates of a series may be redeemable in whole or in part under
the circumstances specified in the related prospectus supplement.
In the case of a series of certificates which includes two or more classes
of certificates, the sequential order and priority of payment in respect of
principal and interest of each class, if any, will be set forth in the related
prospectus supplement.
One or more classes of the related series of certificates may be entitled
to receive principal payments prior to the receipt of principal payments by
other classes of that series.
One or more classes of a series of certificates may have principal payment
schedules which are fixed or based on targeted schedules derived by assuming
differing prepayment rates. One or more classes of the related series of
certificates may be designated to receive principal payments on a distribution
date only if principal payments have been made to another class of certificates,
and to receive any excess payments over the amount required to be paid to
another class of certificates.
Book-Entry Registration
Certificate owners may hold their interests in the offered certificates
through DTC, in the United States, or Cedel Bank or the Euroclear System, in
Europe, if they are participants in those systems, or indirectly through
organizations that are participants in those systems. Cede & Co., as nominee for
DTC, will hold the offered certificates. Cedel and Euroclear will hold omnibus
positions on behalf of their respective participants, through customers'
securities accounts in Cedel's and Euroclear's names on the books of their
respective depositaries. The depositaries in turn will hold the positions in
customers' securities accounts in the depositaries' names on the books of DTC.
DTC has advised us and the underwriters that it is:
. a limited-purpose trust company organized under the New York Banking
Law;
. a "banking organization" within the meaning of the New York Banking
Law;
. 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 under the provisions of Section 17A of
the Exchange Act.
DTC holds securities for its participants and facilitates the clearance and
settlement among its participants of securities transactions, including
transfers and pledges, in deposited securities through electronic book-entry
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changes in its participants' accounts. This eliminates the need for physical
movement of securities certificates. DTC participants include securities brokers
and dealers, banks, trust companies, clearing corporations and other
organizations. Indirect access to the DTC system is also available to others
including securities brokers and dealers, banks, and trust companies that clear
through or maintain a custodial relationship with a participant, either directly
or indirectly. The rules applicable to DTC and its participants are on file with
the Securities and Exchange Commission.
Transfers between participants on the DTC system will occur in accordance
with DTC rules. Transfers between participants on the Cedel system and
participants on the Euroclear system will occur in accordance with their rules
and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Cedel
participants or Euroclear participants, on the other, will be effected by DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by that system's depositary. However, these cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in that system in accordance
with its rules and procedures and within its established deadlines, European
time. The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to its
depositary 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
their system's depositary.
Because of time-zone differences, credits of securities in Cedel or
Euroclear as a result of a transaction with a DTC participant will be made
during the subsequent securities settlement processing, dated the business day
following the DTC settlement date. The credits for any transactions in these
securities settled during this processing will be reported to the relevant Cedel
participant or Euroclear participant on that business day. Cash received in
Cedel or Euroclear as a result of sales of securities by or through a Cedel
participant or a Euroclear participant to a DTC participant will be received and
available on the DTC settlement date. However, it will not be available in the
relevant Cedel or Euroclear cash account until the business day following
settlement in DTC.
Purchases of offered certificates under the DTC system must be made by or
through DTC participants, which will receive a credit for the offered
certificates on DTC's records. The ownership interest of each actual
certificate owner is in turn to be recorded on the DTC participants' and
indirect participants' records. Certificate owners will not receive written
confirmation from DTC of their purchase. However, certificate owners are
expected to receive written confirmations providing details of the transaction,
as well as periodic statements of their holdings, from the DTC participant or
indirect participant through which the certificate owner entered into the
transaction. Transfers of ownership interests in the offered certificates are to
be accomplished by entries made on the books of DTC participants acting on
behalf of certificate owners. Certificate owners will not receive certificates
representing their ownership interest in offered certificates unless use of the
book-entry system for the offered certificates is discontinued.
To facilitate subsequent transfers, all securities deposited by DTC
participants with DTC are registered in the name of DTC's nominee, Cede & Co.
The deposit of securities with DTC and their registration in the name of Cede &
Co. effects no change in beneficial ownership. DTC has no knowledge of the
actual certificate owners of the offered certificates; DTC's records reflect
only the identity of the DTC participants to whose accounts the offered
certificates are credited, which may or may not be the actual beneficial owners
of the certificates. The DTC participants will remain responsible for keeping
account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to DTC participants,
by DTC participants to indirect participants, and by DTC participants and
indirect participants to certificate owners will be governed by arrangements
among them and by any statutory or regulatory requirements as may be in effect
from time to time.
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Neither DTC nor Cede & Co. will consent or vote on behalf of the offered
certificates. Under its usual procedures, DTC mails an omnibus proxy to the
issuer as soon as possible after the record date, which assigns Cede & Co.'s
consenting or voting rights to those DTC participants to whose accounts the
offered certificates are credited on the record date, identified in a listing
attached the proxy.
Principal and interest payments on the offered certificates will be made to
DTC. DTC's practice is to credit its participants' accounts on the applicable
distribution date in accordance with their respective holdings shown on DTC's
records unless DTC has reason to believe that it will not receive payment on
that distribution date. Payments by DTC participants to certificate owners will
be governed by standing instructions, customary practices, and any statutory or
regulatory requirements as may be in effect from time to time. These payments
will be the responsibility of the DTC participant and not of DTC, the trustee or
the seller. Payment of principal and interest to DTC is the responsibility of
the trustee, disbursement of the payments to DTC participants is the
responsibility of DTC, and disbursement of the payments to certificate owners is
the responsibility of DTC participants and indirect participants.
DTC may discontinue providing its services as securities depository for the
offered certificates at any time by giving reasonable notice to the seller or
the trustee. Under these circumstances, if a successor securities depository is
not obtained, definitive certificates are required to be printed and delivered.
The seller and, after the occurrence of a Servicer Default, a specified
percentage of each class of certificate owners may decide to discontinue use of
the system of book-entry transfers through DTC or a successor securities
depository. In that event, definitive certificates will be delivered to
certificate owners. See "--Definitive Certificates."
DTC management is aware that some computer applications, systems, and the
like for processing data that are dependent on calendar dates, including dates
before, on, and after January 1, 2000, may encounter Year 2000 problems. DTC has
informed its participants and other members of the financial community that it
has developed and is implementing a program so that its systems continue to
function appropriately, as the same relate to the timely payment of
distributions to securityholders, book-entry deliveries, and settlement of
trades within DTC.
DTC's ability to perform properly its services is also dependent on other
parties, including issuers and their agents, DTC's direct and indirect
participants, third party vendors from whom DTC licenses software and hardware,
and third party vendors on whom DTC relies for information or the provision of
services, including telecommunication and electrical utility service providers.
DTC has informed members of the financial community that it is contacting, and
will continue to contact, third party vendors from whom DTC acquires services
to: (1) impress on them the importance of these services being Year 2000
compliant; and (2) determine the extent of their efforts for Year 2000
remediation and testing of their services.
According to DTC, the foregoing information about DTC has been provided for
informational purposes only and is not intended to serve as a representation,
warranty, or contract modification of any kind.
Cedel is incorporated under the laws of Luxembourg as a professional
depository. Cedel holds securities for its participating organizations 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 32 currencies,
including United States dollars.
Cedel participants are financial institutions around the world, including
underwriters, securities brokers and dealers, banks, trust companies, and
clearing corporations. Indirect access to Cedel is also available to others,
including 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 and to clear and settle transactions between Euroclear participants
through simultaneous electronic book-entry delivery against
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payment. This eliminates the need for physical movement of certificates.
Transactions may be settled in any of 32 currencies, including United States
dollars.
The Euroclear System is operated by Morgan Guaranty Trust Company of New
York, Brussels, Belgium office, the Euroclear operator, under contract with
Euroclear Clearance System, Societe Cooperative, a Belgium cooperative
corporation, the Euroclear 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
Euroclear cooperative. The board of the Euroclear cooperative establishes policy
for the Euroclear System.
Euroclear participants include banks -- including central banks --
securities brokers and dealers and other professional financial intermediaries.
Indirect access to the Euroclear System is also available to other firms that
maintain a custodial relationship with a Euroclear participant, either directly
or indirectly.
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. These terms and conditions
govern transfers of securities and cash within the Euroclear System, withdrawal
of securities and cash from the Euroclear System, and receipts of payments for
securities in the Euroclear System. All securities in the Euroclear System are
held on a fungible basis without attribution of specific certificates to
specific securities clearance accounts. The Euroclear operator acts under these
terms and conditions only on behalf of Euroclear participants and has no record
of or relationship with persons holding through Euroclear participants.
Distributions on the offered certificates 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 depositary. These distributions must be reported for
tax purposes in accordance with 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 certificateholder on behalf of a Cedel participant or Euroclear
participant only in accordance with its rules and procedures, and depending on
its depositary's ability to effect these actions on its behalf through DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of offered certificates among participants of
DTC, Cedel and Euroclear, they are under no obligation to perform or continue to
perform these procedures and these procedures may be discontinued at any time.
Definitive Certificates
Certificates issued in fully registered, certificated form are referred to
in this prospectus as "definitive certificates". Certificates will be issued as
definitive certificates, rather than to DTC or its nominee, only if:
. the seller advises the trustee in writing that DTC is no longer willing
or able to properly discharge its responsibilities as Depository
regarding the offered certificates, as applicable, and the trustee or
the seller is unable to locate a qualified successor;
. the seller, at its option, elects to terminate the book-entry system
through DTC regarding that class; or
. after the occurrence of a Servicer Default, certificateholders, as
applicable, representing not less than 50% of the aggregate unpaid
principal amount of those certificates advise the trustee for the trust
and advise and DTC through clearing agency participants in writing that
the continuation of a book-entry system through DTC, or a successor
thereto, is no longer in the best interests of those
certificateholders.
If any of these events occurs, DTC is required to notify all of its
participants of the availability through DTC of definitive certificates. At the
time of surrender by DTC of the certificate or certificates representing
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the outstanding certificates and instructions for re-registration, the trustee
will issue those certificates, as applicable, in the form of definitive
certificates, and thereafter the trustee will recognize the holders of those
definitive certificates as certificateholders under the pooling and servicing
agreement.
Distributions of principal of and interest on the offered certificates will
be made by the trustee directly to Holders in accordance with the procedures set
forth in this prospectus and in the pooling and servicing agreement. See
"Description of the Certificates--Distributions" in the prospectus supplement.
. Distributions on each distribution date will be made to holders in
whose names the definitive certificates were registered at the close of
business on the related Record Date.
. Distributions will be made by check mailed to the address of each
holder as it appears on the register maintained by the trustee.
. The final distribution on any certificate, whether definitive
certificates or the certificate or certificates registered in the name
of Cede representing the certificates, however, will be made only after
presentation and surrender of the certificate on the final payment date
at office or agency that is specified in the notice of final
distribution to certificateholders. The trustee will provide that
notice to registered certificateholders not later than the fifth day of
the month of the final distribution.
. The trustee will pay to the seller any monies held by it for the
payment of principal or interest that remain unclaimed for two years
after that notice. After that payment to the seller, certificateholders
entitled to the money must look to the seller for payment as general
creditors unless an applicable abandoned property law designates
another person.
Definitive certificates will be transferable or exchangeable at the offices
of the trustee, which will initially be [ ]. The trustee will not
impose a service charge for any registration of transfer or exchange, but the
trustee may require payment of a sum sufficient to cover any tax or other
governmental charge imposed in connection therewith.
Supplemental Certificates
The pooling and servicing agreement provides that the seller may exchange a
portion of the certificate evidencing the seller's interest in the trust for a
supplemental certificate for transfer or assignment to a person designated by
the seller at the time of execution and delivery of a supplement to the pooling
and servicing agreement, which supplement will be limited by the amendment
section of the pooling and servicing agreement to the extent that it amends any
of the terms of the pooling and servicing agreement; provided that:
. the seller will after giving effect thereto have an interest in the
Pool Balance of not less than 2% of the Pool Balance,
. the seller will have delivered to the trustee, each rating agency and
any Enhancement Provider a Tax Opinion regarding that exchange and
. the seller will have delivered to the trustee evidence of satisfaction
of the Rating Agency Condition.
The pooling and servicing agreement will permit the seller's interest in
the trust to be uncertificated rather than represented by a physical
certificate. All references in this prospectus or the related prospectus
supplement to the "seller's certificate" will be deemed to refer to an
uncertificated interest of the seller in the trust.
The seller's interest in the trust is not being offered by this prospectus
or any prospectus supplement.
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New Issuances
The pooling and servicing agreement provides that, pursuant to one or more
supplements, the seller may cause the trustee to issue one or more new series.
Under the pooling and servicing agreement, the seller may specify, among other
things, the following type of terms for any series:
. the name or designation for the series;
. its initial principal amount;
. its interest rate or the method for determining its interest rate;
. a date on which it will begin its amortization period or controlled
amortization period, if any;
. the method for allocating principal and interest to certificateholders;
. the percentage used to calculate monthly servicing fees;
. the issuer and terms of any Enhancement for the series or the level of
subordination provided by the seller's interest;
. the terms on which the certificates of that series may be exchanged for
certificates of another series, be repurchased, redeemed in an optional
redemption or mandatory redemption by the seller or be remarketed by
any remarketing agent;
. the series termination date; and
. any other terms permitted by the pooling and servicing agreement.
The seller may offer any series under a prospectus or other disclosure
document in transactions either registered under the Securities Act of 1933 or
exempt from registration thereunder, directly or through one or more
underwriters or placement agents. There is no limit to the number of series
that may be issued under the pooling and servicing agreement.
Each series may have an amortization period or accumulation period which
may have a different length and begin on a different date than the amortization
period or accumulation period for any other series. Further, one or more series
may be in their early amortization periods or accumulation periods while other
series are not. Thus, certain series may be amortizing or accumulating
principal, while other series are not amortizing or accumulating principal.
Also, different series may have the benefits of different forms of Enhancement
issued by the same or different entities.
Under the pooling and servicing agreement, the trustee will hold each form
of Enhancement only on behalf of the series, or a particular class within a
series, to which it relates. Your series will not have any interest in any
Enhancements provided for the benefit of any other series. The pooling and
servicing agreement also provides that the seller may specify different interest
rates and monthly servicing fees for each series, or a particular class within a
series. In addition, the seller has the option under the pooling and servicing
agreement to vary between series, or classes within a series, the terms on which
a series, or classes within a series, may be repurchased by the seller.
A new series may be issued at any time if the conditions specified in the
pooling and servicing agreement are satisfied.
Uncertificated Series
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Notwithstanding the references in this prospectus and the prospectus
supplement to certificates of a series, any series may be issued in
uncertificated form--that is, without being evidenced by a certificate of any
kind. This is in addition to, and not the same as, the fact that certificates
of a series may be issued in book-entry form and held through DTC, Cedel Bank or
the Euroclear System.
All references in this prospectus or the related prospectus supplement (a)
to a series of certificates will be deemed to refer also to an uncertificated
series, and (b) to certificateholders of a series will be deemed to refer also
to the holder or holders of an uncertificated series.
Representations and Warranties
The seller has made and will make representations and warranties to the
trustee and the trust relating to the accounts, the receivables and the
Collateral Security to the effect, among other things that:
. as of the Initial Cut-Off Date and each Series Issuance Date, or, in
the case of an Additional Account, as of the Additional Cut-Off Date,
and the Addition Date, each account or Additional Account was or is an
Eligible Account or, if it was or is an Ineligible Account on that
date, that account is being removed from the trust in accordance with
the requirements of the pooling and servicing agreement;
. as of the Initial Cut-Off Date -- or as of the Additional Cut-Off Date,
in the case of any Additional Accounts -- or as of any Transfer Date,
each receivable conveyed to the trust is an Eligible Receivable except
as provided in the pooling and servicing agreement;
. each receivable and all Collateral Security conveyed to the trust on
each Transfer Date or, in the case of Additional Accounts, on the
Addition Date, and all of the seller's right, title and interest in the
receivables contribution and sale agreement, have been conveyed to the
trust free and clear of any liens; and
. all appropriate consents and governmental authorizations required to be
obtained by the seller in connection with the conveyance of each
receivable or Collateral Security have been duly obtained.
If the seller breaches any representation and warranty described in the
preceding paragraph and the breach remains uncured for 30 days or any longer
period as may be agreed to by the trustee, after the earlier to occur of the
discovery of that breach by the seller or the servicer or receipt of written
notice of that breach by the seller or the servicer, and that breach has a
material adverse effect on the certificateholders' interest in any receivable or
account, that receivable or, in the case of a breach relating to an account, all
receivables in the related account will be reassigned to the seller on the terms
and conditions set forth below and that account will no longer be included as an
account.
The applicable receivable will be reassigned to the seller on or before the
end of the calendar month in which that reassignment obligation arises by the
seller directing the servicer to deduct the principal balance of that
receivable, discounted by the Discount Factor for the calendar month preceding
that determination date, from the Pool Balance.
. In the event that the deduction would cause the Pool Balance to be less
than the Required Participation Amount on the preceding determination
date -- after giving effect to the allocations, distributions,
withdrawals and deposits to be made on the distribution date following
that determination date -- on the date on which that reassignment is to
occur the seller will be obligated to make a deposit into the
collection account in immediately available funds in an amount equal to
the amount by which the Pool Balance would be less than the Required
Participation Amount, provided that if the Transfer Deposit Amount is
not so deposited, the principal balance of the related receivables will
be deducted from the Pool Balance only to the extent the Pool Balance
is not reduced below the Required Participation
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Amount and any principal balance not so deducted will not be reassigned
and will remain part of the trust.
. The reassignment of the receivable to the seller and the payment of any
related Transfer Deposit Amount will be the sole remedy respecting any
breach of the representations and warranties described in the preceding
paragraph regarding the receivable available to certificateholders or
the trustee on behalf of certificateholders.
The seller will also make representations and warranties to the trust to
the effect, among other things, that as of each Series Issuance Date:
. it is duly organized as a limited partnership and in good standing, it
has the authority to consummate the transactions contemplated by the
pooling and servicing agreement and the pooling and servicing agreement
constitutes a valid, binding and enforceable agreement of the seller;
and
. the pooling and servicing agreement constitutes a valid sale, transfer
and assignment to the trust of all right, title and interest of the
seller in or under (a) the receivables and the Collateral Security,
whether then existing or thereafter created, (b) the receivables
contribution and sale agreement, and (c) the resulting proceeds --
including proceeds in any of the accounts established for the benefit
of the certificateholders -- and at the time of filing of financing
statements under the UCC as then in effect in the State of Missouri,
which is effective as to each receivable existing on the closing
date -- or as of the Addition Date, if applicable -- or, as to each
receivable arising thereafter, at the time of creation of that
receivable, the trust will have a perfected ownership interest in that
property.
In the event that the breach of any of the representations and warranties
described in the preceding paragraph has a material adverse effect on the
interests of the holders of the outstanding series, then either the trustee or
the holders of certificates of all outstanding series evidencing more than 50%
of the aggregate unpaid principal amount of all outstanding series, by written
notice to the seller and the servicer -- and to the trustee and any Enhancement
Provider if given by certificateholders -- may direct the seller to accept the
reassignment of the certificateholders' interest in the trust within 60 days of
that notice, or within any longer period specified in that notice.
. The seller will be obligated to accept the reassignment of the
certificateholders' interest on a distribution date occurring within
the 60-day period. The reassignment will not be required to be made,
however, if at the end of that period of time, the representations and
warranties will then be true and correct in all material respects and
any material adverse effect caused by that breach will have been cured.
. The portion of the price for the reassignment will be equal to the sum
of the amounts for each outstanding series specified for that portion
in the related supplement for those series. The payment of the
reassignment price for all outstanding series, in immediately available
funds, will be considered a payment in full of the certificateholders'
interest in the trust. The portion of funds allocable to the
certificateholders' interest in the trust will be distributed following
presentation and surrender of the certificates.
. If the trustee or the certificateholders give a notice as provided
above, the obligation of the seller to make any deposit will constitute
the sole remedy respecting a breach of the representations and
warranties available to certificateholders or the trustee on behalf of
the certificateholders.
The Overconcentration Amounts
The Available Subordinated Amount will be adjusted to reflect, on each
determination date, the aggregate principal amount of receivables in the trust
on that distribution date which are A/R Receivable
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Overconcentrations, Asset Based Receivable Overconcentrations, Dealer
Overconcentrations, Manufacturer Overconcentrations, and Product Line
Overconcentrations allocable to the certificateholders' interest.
The seller, without the consent of any certificateholder, may change each
of the Overconcentrations to a level acceptable to each rating agency as long as
the Rating Agency Condition is satisfied.
Addition of Accounts
The seller has the right to designate from time to time Additional Accounts
to be included in the trust if it satisfies the conditions set forth in the
pooling and servicing agreement. In addition, the seller is required to add the
receivables of Additional Accounts if either:
. the Pool Balance, exclusive of Delayed Funding Receivables, on the
last day of any calendar month is less than the Required Participation
Amount as of the following distribution date; or
. the Seller's Participation Amount, exclusive of Delayed Funding
Receivables, as of the following distribution date multiplied by the
portion of the seller's interest, exclusive of Delayed Funding
Receivables, represented by the seller's certificate is less than 5%
of the Pool Balance, exclusive of Delayed Funding Receivables, on that
last day.
In either case, unless insolvency events contemplated by the pooling and
servicing agreement have occurred involving the seller, the seller will be
required to transfer and assign to the trust, within 10 business days after the
end of the applicable calendar month, interests in all receivables arising in
the Additional Accounts, whether those receivables are then existing or
thereafter created.
Additional Accounts may not be of the same credit quality as the accounts
which are in the trust at the time the Additional Accounts are added to the
trust. Additional Accounts may have been originated by DFS at a later date
using credit criteria different from those which were applied to existing
accounts.
We cannot assure you that the seller would be able to, or would be
permitted to, add Additional Accounts to the trust at any particular time.
Removal of Accounts; Transfers of Participations
The seller will have the right at any time to require the removal from the
trust of Eligible Accounts, including all amounts then held by the trust or
thereafter received by the trust on the Eligible Accounts to be removed. To
remove any Eligible Account and those amounts, the seller, or the servicer on
its behalf, will, among other things:
. on or before the fifth business day prior to the date of removal,
furnish to the trustee, any Enhancement Provider, and each rating
agency a written notice of removal specifying the removal date;
. on or before the fifth business day after the removal date, the seller
will have furnished to the trustee a computer file, microfiche list or
other list of the accounts that were removed on the removal date,
specifying for each removed account as of the date of the removal
notice its number, the aggregate amount outstanding in that removed
account and the aggregate amount of receivables in that removed
account;
. represent and warrant that the removal of any Eligible Account on the
removal date will not, in the reasonable belief of the seller, cause
an Early Amortization Event to occur or cause the Pool Balance to be
less than the Required Participation Amount;
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. represent and warrant that no selection procedures believed by the
seller to be adverse to the interest of the certificateholders were
utilized in selecting the removed accounts; and
. obtain evidence that the Rating Agency Condition has been satisfied.
All receivables existing in the removed accounts will be assigned to the
seller as of the removal date. On or prior to the tenth business day following
the date on which an account becomes an Ineligible Account -- which date will be
deemed the removal date for the account -- the seller will commence the removal
of that account from the trust. However, all receivables existing in the
account -- other than an account that was an Ineligible Account at the time it
was originally designated as an account -- as of the Removal Date will continue
to be a trust asset.
The seller may cause the trust to transfer to the seller a Participation in
the receivables in one or more accounts, limited by the same limitations
described above regarding the removal of accounts, except that the removal will
relate to an undivided percentage interest in the receivables in an account
rather than a dollar amount. The seller may thereafter transfer the
Participation to other persons.
Accounts that are terminated by their Dealers after they have paid the
related receivables in full will be deemed to be removed from the trust without
having to follow the procedures described above.
Collection Account
The servicer has established and is required to maintain, or cause to be
established and maintained, an Eligible Deposit Account in the name of the
trustee, on behalf of the trust, for the benefit of the seller,
certificateholders of all Series and any Enhancement Providers (the "collection
account").
Funds in the collection account generally will be invested in investments
acceptable to each rating agency as being consistent with the then-current
rating of the certificates. Any earnings -- net of losses and investment
expenses -- on funds in the collection account will be credited to the
collection account. The servicer will have the revocable power to instruct the
trustee to make withdrawals and payments from the collection account for the
purpose of carrying out its duties under the pooling and servicing agreement.
Allocations Among Series
The supplement for each series will specify how collections of Non-
Principal Receivables and Principal Receivables, Defaulted Receivables and
Miscellaneous Payments will be allocated to that Series, between the
certificateholders' interest and the seller's interest, among the series in any
group and among the classes in any series. Amounts so allocated to any series
will not, except as specified in the related supplement, be available to any
other series.
On each distribution date, (a) the servicer will allocate Excess Principal
Collections, as described below, to each series as set forth in the related
supplement and (b) the servicer will instruct the trustee to withdraw from the
Collection Account and pay to the seller:
(1) an amount equal to the excess, if any, of (a) the aggregate
amount for all outstanding series of collections of Principal
Receivables which the related supplements specify are to be treated as
"Excess Principal Collections" for that distribution date over (b) the
aggregate amount, if any, for all outstanding series which the related
supplements specify are "Principal Shortfalls" for that distribution
date; and
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(2) without duplication, the aggregate amount for all
outstanding series of that portion of Principal Collections which the
related supplements specify are to be allocated and paid to the seller
for that distribution date;
provided, however, that, in the case of clauses (1) and (2), the amounts will be
paid to the seller only if the Pool Balance for that distribution date,
determined after giving effect to any Principal Receivables transferred to the
trust on that date, exceeds the Required Participation Amount for the
immediately preceding determination date, after giving effect to the
allocations, distributions, withdrawals and deposits to be made on such
distribution date. The amount held in the collection account as a result of the
proviso in the preceding sentence ("Unallocated Principal Collections") will be
paid to the seller at the time the Pool Balance exceeds the Required
Participation Amount for the immediately preceding determination date, after
giving effect to the allocations, distributions, withdrawals and deposits to be
made on that distribution date immediately following that determination date;
provided, however, that any Unallocated Principal Collections on deposit in the
collection account at any time during which any series is in its amortization
period, accumulation period or Early Amortization Period will be deemed to be
"Miscellaneous Payments".
Discount Factor
Finance charges are payable on the receivables generally. However, finance
charges will not begin to accrue on a portion of the receivables until a certain
period of time has elapsed after their origination.
. Therefore, in order to create imputed interest in respect of those
receivables for their non-interest bearing period and for
administrative uniformity in accounting for collections, a portion of
the collections on each receivable that is not part of the finance
charges, if any, paid on that receivable will be treated as Non-
Principal Collections.
. The portion of the balance of a receivable that will be treated as a
finance charge when the receivable is collected will be equal to the
product of the balance of the receivable times the Discount Factor in
effect at the time of the collection of the receivable.
Allocation of Collections; Deposits in Collection Account
The pooling and servicing agreement provides that the servicer, no later
than two business days after the processing date, will deposit all collections
received from the receivables, excluding, with certain exceptions, certain
portions thereof of those collections allocable to the seller, into the
collection account. However, for so long as:
. DFS remains the servicer under the pooling and servicing agreement;
. no Servicer Default has occurred and is continuing; and
. DFS arranges for and maintains a letter of credit or other form of
Enhancement for the servicer's obligation to make deposits of
collections on the receivables in the collection account that is
acceptable in form and substance to each rating agency or DFS
otherwise obtains each rating agency confirmation described below,
then DFS need not deposit collections into the collection account
until the business day immediately preceding the date on which those
funds are required to be distributed to certificateholders, at which
time DFS will make those deposits in an amount equal to the net amount
of those deposits and withdrawals which would have been made had the
conditions of this sentence not applied
Until collections are deposited into the collection account, the servicer
may use the collections for its own benefit, and the proceeds of any investment
of those collections will accrue to the servicer. So long as the
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servicer holds collections and is permitted to use the collections for its own
benefit, the certificateholders are exposed to risk of loss, including risk
resulting from the bankruptcy or insolvency of the servicer. The servicer will
pay no fee to the trust or any certificateholder for any use by the servicer of
funds representing collections on the receivables.
In addition, during any calendar month the servicer will generally be
required to deposit Non-Principal Collections and Principal Collections into the
collection account only to the extent of, without duplication:
. the distributions required to be made to certificateholders;
. the amounts required to be deposited into any deposit, trust, reserve
or similar account maintained for the benefit of certificateholders;
and
. the amounts required to be paid to any Enhancement Provider on the
distribution date relating to that calendar month.
If, at any time prior to that distribution date, the amount of collections
deposited in the collection account exceeds the amount required to be deposited,
the servicer will be permitted to withdraw the excess from the collection
account.
In addition, as an administrative convenience, the servicer will be
permitted to make the deposit of Non-Principal Collections, Principal
Collections and other amounts net of distributions or payments to be made to the
servicer.
Termination
The trust will terminate on the earlier to occur of:
. the day following the distribution date on which the aggregate
invested amounts for all series is zero, if the seller elects to
terminate the trust at that time; and
. December 31, 2014.
At the time of termination of the trust, all right, title and interest in
the receivables and other funds of the trust, other than amounts in the
collection account for the final distribution of principal and interest to
certificateholders, will be conveyed and transferred to the seller.
Indemnification
The pooling and servicing agreement provides that the servicer will
indemnify the trust and the trustee from and against any loss, liability,
expense, damage or injury suffered or sustained arising out of any acts or
omissions arising out of activities of the trust, the trustee or the servicer
pursuant to the pooling and servicing agreement.
. However, that the trust or the trustee will not be so indemnified if
those acts or omissions constitute fraud, gross negligence, breach of
fiduciary duty or willful misconduct by the trustee.
. In addition, the servicer will not indemnify the trust, the trustee or
the certificateholders for any act taken by the trustee at the request
of the certificateholders or for any tax required to be paid by the
trust or the certificateholders or for any loss as an investor in the
certificates.
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The pooling and servicing agreement generally provides that, except as
described above, neither the seller, the servicer, Deutsche FRI nor any of their
directors, officers, employees or agents will be under any liability to the
trust, the trustee, the certificateholders or any other person for taking any
action, or for refraining from taking any action, pursuant to the pooling and
servicing agreement.
In addition, the pooling and servicing agreement provides that the servicer
is not under any obligation to appear in, prosecute or defend any legal action
which is not incidental to its servicing responsibilities under the pooling and
servicing agreement. The servicer may, in its sole discretion, undertake any
legal action which it may deem necessary or desirable for the benefit of
certificateholders regarding the pooling and servicing agreement and the rights
and duties of the parties thereto and the interest of the certificateholders
thereunder.
Collection and Other Servicing Procedures
Pursuant to the pooling and servicing agreement, the servicer is
responsible for servicing, collecting, enforcing and administering the
receivables in accordance with customary and usual procedures for servicing its
own revolving credit line Dealer wholesale loans, except where the failure to so
act would not materially and adversely affect the rights of the trust.
Pursuant to the pooling and servicing agreement, DFS covenants that it may
only change the terms relating to the accounts if:
. in the servicer's reasonable judgment, no Early Amortization Event
will occur as a result of the change; and
. the change is made applicable to the comparable segment of the
portfolio of revolving credit line Dealer wholesale loan accounts with
similar characteristics owned or serviced by DFS and not only to the
accounts.
Servicing activities to be performed by the servicer include:
. collecting and recording payments;
. communicating with Dealers;
. investigating payment delinquencies;
. evaluating the increase of credit limits; and
. maintaining internal records for each account.
Managerial and custodial services performed by the servicer on behalf of
the trust include:
. providing assistance in any inspections of the documents and records
relating to the accounts and receivables by the trustee pursuant to
the pooling and servicing agreement;
. maintaining the agreements, documents and files relating to the
accounts and receivables as custodian for the trust; and
. providing related data processing and reporting services for
certificateholders and on behalf of the trustee.
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Servicer Covenants
In the pooling and servicing agreement the servicer covenants that:
. it will duly satisfy all obligations on its part to be fulfilled under
or in connection with the receivables and accounts, will maintain in
effect all qualifications required in order to service the receivables
and accounts and will comply in all material respects with all
requirements of law in connection with servicing the receivables and
the accounts, the failure to comply with which would have a material
adverse effect on the certificateholders of any outstanding series;
. it will not permit any rescission or cancellation of a receivable
except as ordered by a court of competent jurisdiction or other
government authority;
. it will do nothing to impair the rights of the certificateholders in
the receivables; and
. it will not reschedule, revise or defer payments due on any receivable
except in accordance with its guidelines for servicing revolving
credit line Dealer loans.
Under the terms of the pooling and servicing agreement, if the seller or
the servicer discovers, or receives written notice, that any covenant of the
servicer set forth above has not been complied with in all material respects and
the noncompliance has not been cured within 30 days thereafter, or any longer
period as the trustee may agree to, and has a material adverse effect on the
interests of all certificateholders in any receivable or account:
. DFS, as servicer, will purchase that receivable or all receivables in
that account, as applicable. That purchase will be made on the
determination date following the expiration of the 30 day cure period
and the servicer will be obligated to deposit into the collection
account an amount equal to the amount of that receivable plus accrued
and unpaid interest on that receivable in the collection account.
. The amount of the deposit will be deemed a Transfer Deposit Amount.
The purchase by the servicer constitutes the sole remedy available to the
certificateholders if that covenant or warranty of the servicer is not satisfied
and the trust's interest in any of those purchased receivables will be
automatically assigned to the servicer.
Servicing Compensation
The servicer's compensation for each series for its servicing activities
and reimbursement for its expenses will be a monthly servicing fee in an amount,
specified in the related prospectus supplement, payable in arrears on each
distribution date prior to the Termination Date.
Certain Matters Regarding the Servicer
The pooling and servicing agreement provides that servicer may not resign
from its obligations and duties under the pooling and servicing agreement,
except on determination that those duties are no longer permissible under
applicable law. No resignation of the servicer will become effective until the
trustee or a successor to the servicer has assumed the servicer's
responsibilities and obligations under the pooling and servicing agreement.
Any person into which, in accordance with the pooling and servicing
agreement, the servicer may be merged or consolidated or any person resulting
from any merger or consolidation to which the servicer is a party, or any person
succeeding to the business of the servicer, will be the successor to the
servicer under the pooling and servicing agreement.
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Servicer Default
In the event of any Servicer Default, the trustee, by written notice to the
servicer, may terminate all of the rights and obligations of the servicer, as
servicer, under the pooling and servicing agreement and in and to the
receivables and the proceeds of those receivables and appoint a new servicer.
The rights and interest of the seller under the pooling and servicing agreement
in the seller's interest will not be affected by the appointment of a new
servicer.
The trustee will as promptly as possible appoint a successor servicer and
if no successor servicer has been appointed by the trustee and has accepted that
appointment by the time the servicer ceases to act as servicer, all rights,
authority, power and obligations of the servicer under the pooling and servicing
agreement will pass to and be vested in the trustee.
Prior to any appointment of a new servicer, the trustee will review any
bids obtained from potential servicers meeting certain eligibility requirements
set forth in the pooling and servicing agreement to serve as successor servicer
for servicing compensation not more than the Servicing Fee plus certain excess
amounts payable to the seller.
Evidence as to Compliance
The pooling and servicing agreement provides that on or before April 30 of
each calendar year the servicer will cause a firm of nationally recognized
independent public accountants -- who may also render other services to the
servicer or the seller -- to furnish a report relating to certain matters in
connection with the servicing of the receivables.
The pooling and servicing agreement provides for delivery to the trustee on
or before April 30 of each calendar year of a statement signed by an officer of
the servicer to the effect that the servicer has fully performed, or caused to
be fully performed its obligations in all material respects under the pooling
and servicing agreement throughout the preceding year or, if there has been a
default in the performance of any of those obligations, specifying the nature
and status of the default.
Copies of all statements, certificates and reports furnished to the trustee
may be obtained by a request in writing delivered to the trustee. See "--The
Trustee" below.
Amendments
The pooling and servicing agreement or any supplement may be amended by the
seller, the servicer and the trustee, without certificateholder consent, so long
as any action will not, as evidenced by an opinion of counsel, adversely affect
in any material respect the interests of the certificateholders.
Notwithstanding the foregoing, the pooling and servicing agreement may be
amended by the servicer, the seller and the trustee without the consent of any
of the certificateholders to change in any manner the treatment of Delayed
Funding Receivables under the pooling and servicing agreement, but only if the
Rating Agency Condition is satisfied.
In addition, the pooling and servicing agreement or any supplement may be
amended by the servicer and the trustee at the direction of the seller without
the consent of any of the certificateholders:
(1) to add, modify or eliminate provisions that may be necessary or
advisable in order to enable the seller or any of its affiliates, including
Deutsche Bank AG, to minimize or avoid capital charges under any applicable
law, rule, regulation or guideline relating to regulatory or risk-based
capital;
(2) to enable all or a portion of the trust to qualify as a partnership
for federal income tax purposes under applicable regulations on the
classification of entities as partnerships or corporations under the Code,
and to
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the extent that those regulations eliminate or modify the need therefor, to
modify or eliminate existing provisions of the pooling and servicing
agreement or any supplement relating to the intended availability of
partnership treatment of the trust for federal income tax purposes;
(3) to enable all or a portion of the trust to qualify as, and to permit
an election to be made to cause the trust to be treated as, a "financial
asset securitization investment trust," as described in the provisions of
the "Small Business Job Protection Act of 1996," H.R. 3448 -- and, in
connection with that type of election, to modify or eliminate existing
provisions of the pooling and servicing agreement or any supplement
relating to the intended Federal income tax treatment of the certificates
and the trust in the absence of that type of election, which may include
elimination of the sale of receivables should an insolvency event involving
the seller occur pursuant to the pooling and servicing agreement and
certain provisions of the pooling and servicing agreement relating to the
liability of the seller; or
(4) to enable the seller or any of its affiliates to comply with or obtain
more favorable treatment under any law or regulation or any accounting rule
or principle, so long as in each case the Rating Agency Condition has been
satisfied and, in the case of (2) or (3), the seller and the trustee have
received an opinion of counsel to the effect that the amendment will not
adversely affect the characterization of the certificates of any
outstanding series or class as debt or partnership interests; provided,
however, that if that type of amendment occurs while the series issued by
the trust in 1996 is outstanding an opinion of counsel for the seller,
addressed and delivered to the trustee, will be required providing that the
amendment will not adversely affect in any material respect the interests
of any investor certificateholders of the series issued by the trust in
1996.
The pooling and servicing agreement or any supplement may be amended by the
seller, the servicer and the trustee with the consent of the holders of
certificates evidencing more than 50% of the aggregate unpaid principal amount
of the certificates of all adversely affected series for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of the pooling and servicing agreement or any supplement or of modifying in any
manner the rights of certificateholders. The amendment, however, may not:
(a) reduce in any manner the amount of, or delay the timing of,
distributions required to be made on any certificate;
(b) change the definition of or the manner of calculating the interest of
any certificateholder;
(c) reduce the amount available under any Enhancement;
(d) adversely affect the rating of any series or class by any rating
agency without the consent of all holders of certificates of that series or
class; or
(e) reduce the percentage described above of the unpaid principal amount
of certificates the holders of which are required to consent to any
amendment, in the case of (a), (b) and (c) without the consent of the
holder of that certificate and, in the case of (e), without the consent of
all certificateholders of the adversely affected series.
The pooling and servicing agreement may not be amended in any manner which
materially adversely affects the interests of any Enhancement Provider without
its prior consent.
List of Certificateholders
On written request of any three or more certificateholders of record the
trustee will afford those certificateholders access during business hours to the
current list of certificateholders for purposes of communicating with other
certificateholders about their rights under the pooling and servicing agreement.
See "--Book-Entry Registration" and "--Definitive Certificates" above.
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The pooling and servicing agreement does not provide for any annual or
other meetings of certificateholders.
The Trustee
[ ], a [ ], will act as trustee under the
pooling and servicing agreement. The trustee is located at, and any request for
copies of statements, certificates and reports furnished to the trustee should
be addressed to the trustee at __________________________________. The seller,
the servicer and their respective affiliates may from time to time enter into
normal banking and trustee relationships with the trustee and its affiliates.
The trustee may hold certificates in its own name with the same rights it would
have if it were not the trustee.
The pooling and servicing agreement does not require the trustee:
. to make any initial or periodic general examination of the receivables
or any records relating to the receivables for the purpose of
establishing the presence or absence of defects, compliance with
representations and warranties of the seller or for any other purpose;
or
. make any initial or periodic general examination of the servicer for
the purpose of establishing the compliance by the servicer with its
representations or warranties, the observation of its obligations
under the pooling and servicing agreement or for any other purpose.
For purposes of meeting the legal requirements of certain local
jurisdictions, the trustee will have the power to appoint a co-trustee or
separate trustees of all or a part of the trust. In the event of that type of
appointments, all rights, powers, duties and obligations will be conferred or
imposed on the trustee and the separate trustee or co-trustee jointly, or in any
jurisdiction in which the trustee will be incompetent or unqualified to perform
certain acts singly, on the separate trustee or co-trustee, who will exercise
and perform the rights, powers, duties and obligations solely at the direction
of the trustee.
The trustee may resign at any time, in which event the seller will be
obligated to appoint a successor trustee. The servicer may also remove the
trustee if the trustee ceases to be eligible to continue as trustee under the
pooling and servicing agreement or if the trustee becomes insolvent. In those
circumstances, the servicer may appoint a successor trustee. Any resignation or
removal of the trustee and appointment of a successor trustee does not become
effective until the acceptance of the appointment by the successor trustee.
Description of the Receivables Contribution and Sale Agreement
The following summary describes certain terms of the receivables
contribution and sale agreement, but it does not purport to be complete and is
qualified in its entirety by reference to the receivables contribution and sale
agreement. If other affiliates of DFS originate receivables and sell them to the
seller for transfer to the trust, those other affiliates will become parties to
the receivables contribution and sale agreement and make representations,
warranties and covenants similar to those described regarding DFS and Deutsche
BSC.
Sale or Transfer of Receivables
Pursuant to the receivables contribution and sale agreement, DFS and
Deutsche BSC have contributed or sold to the seller all of their right, title
and interest in and to all of the receivables and the Collateral Security as of
the Initial Cut-Off Date and all of the receivables thereafter created with
respect thereto. Pursuant to the pooling and servicing agreement, the seller has
transferred to the trust all of its right, title and interest in and to the
receivables contribution and sale agreement.
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Representations and Warranties
Each of DFS and Deutsche BSC has or will make representations and
warranties to the seller to the effect that, among other things, as of each
Series Issuance Date, it was duly incorporated and in good standing and that it
has the authority to consummate the transactions contemplated by the receivables
contribution and sale agreement.
Each of DFS and Deutsche BSC has or will also make representations and
warranties to the seller relating to the receivables to the effect, among other
things that:
. as of the Initial Cut-Off Date and each Series Issuance Date, each of
the accounts is an Eligible Account and, in the case of Additional
Accounts, on the applicable Additional Cut-Off Date and each
subsequent closing date, the Additional Account is an Eligible
Account; and
. on the Initial Closing Date, each Additional Cut-Off Date and on each
Transfer Date, each receivable conveyed on that date is an Eligible
Receivable or, if that receivable is not an Eligible Receivable, the
receivable is conveyed to the seller.
In the event of a breach of the representation and warranty described in
the preceding sentence, which results in a transfer of the receivable to the
seller pursuant to the pooling and servicing agreement, then DFS or Deutsche
BSC, as the case may be, will repurchase the receivable from the seller on the
date of that retransfer. The purchase price for the Ineligible Receivable will
be the face amount of that Ineligible Receivable plus any accrued and unpaid
interest thereon.
Each of DFS and Deutsche BSC has or will also make representations and
warranties to the seller to the effect, among other things, that as of the
Initial Closing Date and each Series Issuance Date:
. the receivables contribution and sale agreement constitutes a legal,
valid and binding obligation of DFS or Deutsche BSC, as the case may
be; and
. the receivables contribution and sale agreement constitutes a valid
sale or transfer to the seller of all right, title and interest of DFS
and Deutsche BSC in and to the receivables, whether then existing or
thereafter created in the accounts, the Collateral Security and the
proceeds thereof which is effective as to each receivable at the time
of the creation of that receivable.
If the breach of any of the representations and warranties described in the
preceding sentence results in the obligation of the seller under the pooling and
servicing agreement to accept retransfer of the receivables, DFS and Deutsche
BSC will be obligated to repurchase the receivables retransferred to DFS for an
amount of cash equal to the amount of cash the seller is required to deposit
under the pooling and servicing agreement in connection with that retransfer.
DFS and Deutsche BSC will agree to indemnify the seller and to hold the
seller harmless from and against any and all losses, damages and expenses
(including reasonable attorneys' fees) suffered or incurred by the seller if the
foregoing representations and warranties are materially false.
Certain Covenants
In the receivables contribution and sale agreement, each of DFS and
Deutsche BSC has covenanted that it will perform its obligations under the
agreements relating to the receivables and the accounts in conformity with its
then-current policies and procedures relating to the receivables and the
accounts.
Each of DFS and Deutsche BSC has covenanted further that, except for the
sale and conveyances under the receivables contribution and sale agreement and
the interests created under Participations, DFS and Deutsche
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BSC will not sell, pledge, assign or transfer any interest in the receivables to
any other person. Each of DFS and Deutsche BSC also has covenanted to defend and
indemnify the seller for any loss, liability or expense incurred by the seller
in connection with a breach by DFS or Deutsche BSC of any of its
representations, warranties or covenants contained in the receivables
contribution and sale agreement.
In addition, DFS and Deutsche BSC have expressly acknowledged and consented
to the seller's assignment of its rights relating to the receivables under the
receivables contribution and sale agreement to the trustee.
Termination
The receivables contribution and sale agreement will terminate immediately
after the trust terminates. In addition, if DFS or Deutsche BSC becomes party to
any bankruptcy or similar proceeding, other than as a claimant, and, if that
proceeding is not voluntary and is not dismissed within 60 days of its
institution, DFS or Deutsche BSC, as the case may be, will immediately cease to
sell or transfer receivables to the seller and will promptly give notice of that
event to the seller and to the trustee.
Certain Legal Aspects of the Receivables
Transfer of Receivables
Pursuant to the receivables contribution and sales agreement, DFS and
Deutsche BSC transfer receivables to the seller and pursuant to the pooling and
servicing agreement, the seller transfers those receivables to the trust. The
seller has represented and warranted and will represent and warrant on the
closing date for each series that the transfer to the trust constituted a valid
transfer and assignment to the trust of all right, title and interest of the
seller in and to the receivables and that, under the UCC as in effect in
Missouri, there exists a valid, subsisting and enforceable first priority
perfected ownership interest in the receivables, in existence at the time of the
formation of the trust or at the date of addition of any Additional Accounts, in
favor of the trust and a valid, subsisting and enforceable first priority
perfected ownership interest in the receivables created thereafter in favor of
the trust on and after their creation. However, the transfer of receivables by
the seller to the trust could be deemed to create a security interest under the
UCC. For a discussion of the trust's rights arising from these representations
and warranties not being satisfied, see "Description of the Certificates--
Representations and Warranties" in this prospectus.
Each of DFS, Deutsche BSC and the seller has represented that the
receivables are "chattel paper", "accounts" or "general intangibles" for
purposes of the UCC as in effect in Missouri, or, in the case of Deutsche BSC,
Georgia.
If the receivables are deemed to be chattel paper and the transfer of those
receivables by either DFS or Deutsche BSC to the seller or by the seller to the
trust is deemed either to be a sale or to create a security interest, the UCC as
in effect in Missouri or, in the case of Deutsche BSC, Georgia, applies and the
transferee must either take possession of the chattel paper or file an
appropriate financing statement or statements in order to perfect its interest
in that chattel paper.
If the receivables are treated as accounts and the transfer of those
receivables by either DFS or Deutsche BSC to the seller or by the seller to the
trust is deemed either to be a sale or to create a security interest, the
transferee must file an appropriate financing statement or statements in order
to perfect its interest in those accounts under the UCC in Missouri or, in the
case of Deutsche BSC, Georgia.
If a transfer of general intangibles is deemed to create a security
interest, filing an appropriate financing statement or statements is also
required under the UCC as in effect in Missouri or, in the case of Deutsche BSC,
Georgia, in order to perfect the trust's security interest.
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If a transfer of general intangibles is deemed to be a sale, then the UCC
as in effect in Missouri or, in the case of Deutsche BSC, Georgia, is not
applicable and no further action under the UCC as in effect in those states is
required to protect the trust's interest from creditors of DFS, Deutsche BSC and
the seller.
DFS has retained and will retain and will not deliver to the trustee
records or agreements relating to the receivables. The records and agreements
relating to the receivables have not been and will not be segregated from those
relating to other accounts of DFS, and the physical documentation relating to
the receivables has not and will not be stamped or marked to reflect the
transfer of the receivables to the trust. Any interest in receivables acquired
by the seller, and the trust, will be limited by the rights and defenses --
including rights of setoff -- of the applicable Dealer against DFS or Deutsche
BSC, as the case may be.
There are some circumstances under the UCC and applicable federal law in
which third parties could have an interest in the receivables with priority over
the trust's interest. A purchaser of the receivables who gives new value and
takes possession of the instruments which evidence the receivables -- that is,
the chattel paper -- in the ordinary course of that purchaser's business may,
under certain circumstances, have priority over the interest of the trust in the
receivables. A tax or other government lien on property of DFS, Deutsche BSC or
the seller arising prior to the time a receivable is conveyed to the trust may
also have priority over the interest of the trust in that receivable. Statutory
and judgment liens arising under local law may also gain priority over claims of
the trust.
In addition, while DFS is the servicer, cash collections on the receivables
may, under certain circumstances, be commingled with the funds of DFS prior to
deposit in the collection account. If DFS became involved in bankruptcy
proceedings, the certificateholders might incur a loss on collections not
deposited in the collection account. See "Risk Factors--Commingling By the
Servicer May Result in Delays or Reductions in Payment on the Certificates" in
this prospectus.
The seller has warranted to the trust that the transfer of the receivables
to the trust is a sale of the receivables to the trust. The seller is required
to take all actions that are required under Missouri law to perfect the trust's
ownership interest in the receivables and the seller has warranted to the trust
that the trust will at all times have a first priority perfected ownership
interest in the receivables and, with certain exceptions, proceeds of those
receivables. Nevertheless, a tax or government lien on property of DFS, Deutsche
BSC or the seller arising prior to the time a receivable is conveyed to the
trust may have priority over the interest of the trust in that receivable.
In administering the receivables, the servicer may exercise a right of set-
off in a Floorplan Agreement against a Manufacturer that becomes insolvent. It
is possible that the exercise of a right of set-off may take the form of not
funding a Delayed Funding Receivable owned by the trust and applying the funds
toward an obligation of the Manufacturer in respect of a receivable owned by DFS
or one of its affiliates. The Dealer obligated under that Delayed Funding
Receivable may in turn take the position that DFS has failed to perform its
obligation under the Delayed Funding Receivable and, consequently, that it is
discharged from its obligation to pay that Delayed Funding Receivable.
Certain Matters Relating to Bankruptcy
Each of DFS and Deutsche BSC has warranted to the seller in the receivables
contribution and Sale agreement that the sale of the receivables by it to the
seller is a valid sale of the receivables to the seller. In addition, DFS,
Deutsche BSC and the seller have agreed to treat the transactions described in
this prospectus as a sale of the receivables to the seller, and DFS and Deutsche
BSC have and will take all actions that are required under Missouri law -- in
the case of Deutsche BSC, Georgia law -- to perfect the seller's ownership
interest in the receivables. Notwithstanding the foregoing, if DFS or Deutsche
BSC were to become a debtor in a bankruptcy case and a creditor or trustee in
bankruptcy of that debtor or that debtor itself were to take the position that
the sale of receivables from that debtor to the seller should be recharacterized
as a pledge of those receivables to secure a borrowing from the debtor, then
delays in payments of collections of receivables to the seller
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could occur or, should the court rule in favor of any trustee, debtor in
possession or creditor, reductions in the amount of those payments could result.
In addition, if DFS or Deutsche BSC were to become a debtor in a bankruptcy
case and a creditor or trustee-in-bankruptcy of that debtor or that debtor
itself were to request a court to order that DFS or Deutsche BSC, as applicable,
should be substantively consolidated with the seller, delays in payments on the
certificates could result. Should the bankruptcy court rule in favor of any
creditor, trustee-in-bankruptcy or such debtor, reductions in those payments
could result.
If DFS were to become a debtor in a bankruptcy case prior to funding a
Delayed Funding Receivable, its trustee-in-bankruptcy or its creditors may
assert that the Delayed Funding Receivable is an executory contract and the
trustee-in-bankruptcy may disaffirm DFS's obligation to fund the receivable. A
disaffirmance would discharge the obligation of the Dealer on that Delayed
Funding Receivable to pay that receivable and the trust would suffer a loss in
respect of that receivable.
A limited partnership, like the seller, could become insolvent if its
general partner becomes insolvent -- which, in the case of the seller, is
Deutsche FRI. Pursuant to the pooling and servicing agreement, the trustee, all
certificateholders and any Enhancement Provider will covenant that they will not
at any time institute against the seller any bankruptcy, reorganization or other
proceedings under any federal or state bankruptcy or similar law. However, if
the seller were to become a debtor in a bankruptcy case, and a bankruptcy
trustee for the seller or the seller as debtor in possession or a creditor of
the seller were to take the position that the transfer of the receivables from
the seller to the trust should be recharacterized as a pledge of the
receivables, then delays in payments on the certificates or, should the court
rule in favor of the trustee, debtor in possession or creditor, reductions in
the amount of those payments could result.
If DFS or the seller were to become a debtor in a bankruptcy case, then,
pursuant to the receivables contribution and sale agreement, new receivables
would no longer be transferred to the seller and, pursuant to the pooling and
servicing agreement, only collections on receivables theretofore sold to the
seller and transferred to the trust would be available to be applied to pay
interest accruing on the certificates and to pay the principal amount of the
certificates. Under those circumstances, the servicer is obligated to allocate
all Principal collections to the oldest principal balance first. If that
allocation method were to be altered by the bankruptcy court, the rate of
payment on the certificates might be adversely affected.
The occurrence of certain events of bankruptcy, insolvency or receivership
involving the servicer will result in a Servicer Default, which Servicer
Default, in turn, will result in an Early Amortization Event. See "Description
of the Certificates--Early Amortization Events" in the prospectus supplement.
If no other Servicer Default other than the commencement of bankruptcy or
similar event exists, a trustee-in-bankruptcy of the servicer may have the power
to prevent either the trustee or the certificateholders from appointing a
successor servicer.
In addition, under federal or state fraudulent transfer laws, a court
could, among other things, subordinate the rights of the certificateholders in
the receivables to the rights of creditors of DFS or Deutsche BSC, if a court
were to find, among other things, that DFS or Deutsche BSC, as applicable,
received less than reasonably equivalent value or fair consideration for those
receivables and at the time of any transfers were insolvent.
Payments made in respect of repurchases of receivables by DFS or the seller
pursuant to the pooling and servicing agreement may be recoverable by DFS or the
seller, as debtor in possession, or by a creditor or a trustee-in-bankruptcy of
DFS or the seller as a preferential transfer from DFS or the seller if those
payments are made within one year prior to the filing of a bankruptcy case in
respect of DFS.
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Legal Matters
Richard C. Goldman, Esq., Chief Legal Officer of the servicer, will render
an opinion for the seller regarding certain legal matters relating to each
series. Mayer, Brown & Platt, Chicago, Illinois will render an opinion for the
seller regarding certain legal matters and certain federal income tax matters
relating to each series. Bryan Cave LLP, St. Louis, Missouri will render an
opinion for the seller regarding certain legal matters and certain Missouri tax
matters relating to each series.
Reports to Certificateholders
The servicer will prepare monthly and annual unaudited reports that will
contain information about the trust. The reports will not constitute financial
statements prepared in accordance with generally accepted accounting principles.
Unless and until definitive Certificates are issued, the reports will be sent
only to Cede & Co. which is the nominee of DTC and the registered holder of the
offered certificates. See "Description of the Certificates--Book-Entry
Registration," and "--Evidence as to Compliance" in this prospectus and
"Description of the Certificates--Reports" in the prospectus supplement.
Where You Can Find More Information
We filed a registration statement relating to the certificates with the
Securities and Exchange Commission. This prospectus is part of the registration
statement, but the registration statement includes additional information.
You may read and copy any reports, statements or other information we file
with the Securities and Exchange Commission at the public reference room of the
Securities and Exchange Commission in Washington, D.C., New York, New York or
Chicago, Illinois. You can request copies of these documents, on payment of a
duplicating fee, by writing to the Securities and Exchange Commission. Please
call the Securities and Exchange Commission at (800) SEC-0330 for further
information on the operation of the public reference rooms. Our Securities and
Exchange Commission filings are also available to the public on the Securities
and Exchange Commission Internet site (http://www.sec.gov.).
The Securities and Exchange Commission allows us to "incorporate by
reference" information we file with it, which means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is considered to be part of this
prospectus. Information that we file later with the Securities and Exchange
Commission will automatically update the information in this prospectus. In all
cases, you should rely on the later information over different information
included in this prospectus or the accompanying prospectus supplement. We
incorporate by reference any future reports and proxy materials filed by or on
behalf of the trust until we terminate our offering of the certificates.
As a recipient of this prospectus, you may request a copy of any document
we incorporate by reference, except exhibits to the documents -- unless the
exhibits are specifically incorporated by reference -- at no cost, by writing or
calling us at: Deutsche Financial Services Corporation, 655 Maryville Centre
Drive, St. Louis, Missouri 63141, Telephone (314) 523-3000, Attention: General
Counsel.
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Glossary
[To be conformed]
"Accounts Receivable" means, for any Dealer, all amounts shown on the
Dealer's records as amounts payable by a customer in respect of goods or
services sold by the Dealer to the customer.
"Accounts Receivable Business" means the extensions of credit made by DFS
or an Approved Affiliate to Dealers in order to finance the Accounts Receivable
of the Dealers.
"Accounts Receivable Financing Agreement" means an accounts receivable
financing agreement entered into by DFS or an Approved Affiliate with a Dealer
in connection with the Accounts Receivable Business with the Dealer, as amended
or modified from time to time.
"Addition Date" means [ ].
"Additional Accounts" means each individual revolving credit arrangement
established by DFS or an Approved Affiliate with a Dealer in connection with the
Floorplan Business, the Accounts Receivable Business, or the Asset Based Lending
Business, which account is designated to be included as an Account in the trust.
"Additional Cut-Off Date" means, for Additional Accounts, the day specified
in accordance with the pooling and servicing agreement.
"Adjustment Payment" means a deposit in the collection account as described
below. If the servicer adjusts the amount of any receivable because of a rebate,
refund, credit adjustment or billing error to a Dealer, or because the
receivable relates to inventory which was refused or returned by a Dealer:
. the Seller's Participation Amount will be reduced by the amount of the
adjustment; and
. if following that reduction the Pool Balance would be less than the
Required Participation Amount for the immediately preceding
determination date -- after giving effect to the allocations,
distributions, withdrawals and deposits to be made on the distribution
date immediately following that determination date --the seller will
be required to deposit a cash amount equal to that deficiency -- up to
the amount of the adjustment -- into the collection account in
immediately available funds on the day on which that adjustment
occurs.
"Approved Affiliate" means (a) Deutsche BSC, but only so long as Deutsche
BSC is applying, or causing to be applied, DFS's underwriting guidelines in
originating those receivables that it intends to transfer to the seller pursuant
to the Receivables Contribution and Sale Agreement or (b) any other affiliate of
DFS as to which the Rating Agency Condition has been satisfied.
"A/R Receivable Overconcentration" on any determination date means the
excess of:
(a) the aggregate of all amounts of principal receivables in accounts
created pursuant to Accounts Receivable Financing Agreements on
the last day of the calendar month immediately preceding the
determination date, over
(b) 20% of the Pool Balance on the last day of that immediately
preceding calendar month.
"A/R Receivables" means receivables arising from the Accounts Receivable
Business.
"Asset Based Lending Business" means the extensions of credit made by DFS
or an Approved Affiliate to Dealers in order to provide loans based on the value
of certain assets of the Dealer and secured by a first priority security
interest in the assets.
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"Asset Based Lending Financing Agreement" means an asset based lending
financing agreement entered into by DFS or an Approved Affiliate and a Dealer in
connection with the Asset Based Lending Business with the Dealer, as amended or
modified from time to time.
"Asset Based Receivable Overconcentration" on any determination date means
the excess of:
(a) the aggregate of all amounts of principal receivables in accounts
created pursuant to Asset Based Lending Financing Agreements on
the last day of the calendar month immediately preceding that
determination date, over
(b) 15% of the Pool Balance on the last day of that immediately
preceding calendar month.
"Asset Based Receivables" means receivables arising from Asset Based
Lending Business.
"Automatic Addition Condition" will mean, for the addition of accounts
that:
. during the calendar quarter in which that addition occurs, the
number of new accounts for Dealers that are financing products of
the type already being financed by DFS and purchasing those
products from Existing Manufacturers does not exceed 5% of the
number of all accounts at the end of the preceding calendar
quarter,
. during the twelve months ending at the beginning of that calendar
quarter, the number of those new accounts does not exceed 20% of
the number of all accounts at the beginning of that twelve month
period,
. the average for the three months preceding the month of that
addition of the aggregate balance of receivables that have been
SAU or NSF for more than 30 days does not exceed 1.25% of the
Pool Balance at the end of the month preceding the month of the
addition; and
. the annualized average for that three month period of the net
losses incurred in respect of the receivables does not exceed
1.75% of the Pool Balance at the end of the month preceding the
month of the addition.
"Collateral Security" for a Receivable generally includes the security
interest granted by or on behalf of the related Dealer with respect thereto.
"Dealer" means a person engaged generally in the business of purchasing
consumer or commercial products from a manufacturer or distributor of those
types of products and holding the products for sale or lease in the ordinary
course of business or a person engaged generally in the business of
manufacturing or distributing products for sale to dealers in the ordinary
course of business.
"Dealer Overconcentration" on any determination date means,
(1) for any account with a Dealer other than a Specified Dealer, the
excess of:
(a) the aggregate amount of principal receivables in that
account on the last day of the calendar month immediately
preceding that determination date, over
(b) 2% of the Pool Balance on the last day of that immediately
preceding calendar month; and
(2) any account with a Specified Dealer, the excess of (a) the
aggregate amount of principal receivables in that account on the
last day of the calendar month immediately preceding that
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determination date over (b) 3% of the Pool Balance as of that
immediately preceding calendar month.
"Defaulted Amount" on any determination date means an amount, which will
not be less than zero, equal to:
. the principal amount, exclusive of the discounted portion that, if
collected, would have been treated as a Non-Principal Collection, of
receivables that became Defaulted Receivables during the preceding
calendar month; less
. the full amount, exclusive of the discounted portion, of any Defaulted
Receivables which may be reassigned to the seller or purchased by the
servicer for that calendar month unless certain events of bankruptcy,
insolvency, or receivership have occurred regarding either of the
seller or the servicer, in which event the Defaulted Amount will not
be reduced for those Defaulted Receivables. The pooling and servicing
agreement provides that receivables will be charged off as
uncollectible in accordance with the servicer's customary and usual
policies and procedures for servicing its own comparable revolving
Dealer wholesale loan accounts.
"Defaulted Receivables" on any determination date are:
(1) all receivables which were Eligible Receivables when transferred to
the trust, which arose in an account which became an Ineligible
Account after the date of transfer of those receivables to the trust
and which remained outstanding for any six consecutive determination
dates thereafter; and
(2) all receivables, other than all Ineligible Receivables, which were
charged off as uncollectible for the immediately preceding calendar
month.
DFS's charge-off policy is based on SAU/NSF aging.
. For "Pay-as-Sold" accounts, see "Description of the Dealer Floorplan
Financing Business of DFS--Payment Terms" in this prospectus,
receivables which are coded as SAU/NSF are charged off at the end of
the month in which those receivables had been so coded for at least
181 days.
. For delinquent scheduled payment accounts, DFS performs inventory
inspections to evaluate its collateral position with the related
Dealer as DFS deems necessary. If the inspection reveals an
uncollateralized position, the shortage is coded SAU. The SAU will be
charged off on or before 181 days.
. "SAU" is the code on DFS's servicing records representing the unpaid
portion of a receivable balance as to which the related product has
been sold but not paid in full.
. DFS's "NSF" code represents checks from customers returned for
insufficient funds. DFS's charge off policy may change over time.
"Definitive Certificates" are defined under "Description of the
Certificates -- Definitive Certificates."
"Delayed Funding Receivable" means a receivable in respect of which the
related Floorplan Agreement permits DFS or an Approved Affiliate to delay
payment of the purchase price of the related product to the Manufacturer for a
specified period after the invoice date for the product. If the Rating Agency
Condition is satisfied, then the receivables referred to in the preceding
sentence will not be Delayed Funding Receivables and the provisions relating to
Delayed Funding Receivables will no longer be of any force or effect.
"Determination Date" means, for any distribution date, the day that is two
business days prior to the distribution date.
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"Deutsche BSC" means Deutsche Business Services Corporation, a Missouri
corporation, and its successors in interest.
"DFS" means Deutsche Financial Services Corporation, a Nevada corporation,
and its successors and assigns. For purposes of convenience, this prospectus may
sometimes refer to DFS and Deutsche BSC collectively, in their capacities as
originators of receivables or as parties to the receivables contribution and
sale agreement, as "DFS".
"Discount Factor" will be calculated as follows:
. If on any distribution date the Net Receivables Rate for that
distribution date less (1) the weighted average of the interest rates,
as determined below, for all outstanding series of certificates for
that distribution date less (2) the annualized Net Loss Rate -- as
defined in the pooling and servicing agreement --for the preceding
twelve calendar months is less than 1%, then the Discount Factor for
that distribution date will be adjusted upwards, rounded up to the
nearest 0.1% -- but in no event will the Discount Factor exceed 1% --
so that the Net Receivables Rate less the rate in clause (1) less the
rate in clause (2) will be equal to 1%; and the Discount Factor will
remain at the adjusted percentage amount until it is further adjusted
by the terms of this sentence or either of the following two
sentences.
. Notwithstanding the foregoing, the seller, at its discretion, may
increase or decrease the Discount Factor, but in no event will the
Discount Factor exceed 1% or be less than the percentage amount
required by the immediately preceding sentence or be greater than the
percentage amount required by the next sentence.
. Notwithstanding the foregoing, if the application of the Discount
Factor would cause the Pool Balance to be less than the Required
Participation Amount, then the Discount Factor will be the
percentage -- which will in no event be less than 0% -- rounded down
to the nearest 0.1%, which, when applied, will cause the Pool Balance
to at least equal the Required Participation Amount. For purposes of
this definition:
(1) if the interest rate on a class of certificates is
calculated as the lesser of (a) a fixed rate or a formula rate and
(b) the Net Receivables Rate, then the interest rate will be the
rate in clause (a); and
(2) if an interest rate swap agreement provides the interest
distributable on a series or class of certificates, then the
interest rate for the series or class of certificates will be the
interest rate payable to the related swap counterparty.
"Discount Portion" means, for a receivable, the portion of that receivable
equal to the product of the Discount Factor and the balance of the receivable.
"DTC" means The Depository Trust Company.
"Early Amortization Event" has the meaning set forth in the prospectus
supplement.
"Early Amortization Period" has the meaning set forth in the prospectus
supplement.
"Eligible Account" means each individual revolving credit arrangement
payable in U.S. dollars and established by DFS or an Approved Affiliate with a
Dealer in the ordinary course of business pursuant to a Financing Agreement,
which arrangement, as of the date of determination with respect thereto:
. is in favor of a Dealer which is doing business in the United States
of America, including its territories and possessions, and which has
not been identified by the servicer as being the subject of any
voluntary or involuntary bankruptcy proceeding or being in a voluntary
or involuntary liquidation,
. is in existence and maintained and serviced by DFS or an Approved
Affiliate and
. is an account in respect of which no amounts have been charged off as
uncollectible.
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Eligible Accounts include accounts in which another lender participates.
See "The Dealer Floorplan Financing Business of DFS--Participation Arrangements"
in this prospectus. Receivables arising in accounts in which another lender
participates include only DFS's undivided interest in the related advance and
not the undivided interest of the other lender.
"Eligible Deposit Account" means either:
. a segregated account with an Eligible Institution; or
. a segregated trust account with the corporate trust department of a
depository institution or trust company organized under the laws of
the United States or any one of the states -- or any domestic branch
of a foreign bank -- having corporate trust powers and acting as
trustee for funds deposited in that account, so long as any of the
securities of that depository institution or trust company has a
credit rating from each rating agency in one of its generic rating
categories which signifies investment grade.
"Eligible Institution" means:
. the corporate trust department of the trustee;
. a depository institution or trust company organized under the laws of
the United States or any one of the states, or a domestic branch of a
foreign bank, which at all times (1) has either (a) a long-term
unsecured debt rating acceptable to each rating agency or (b) a
certificate of deposit rating acceptable to each rating agency and (2)
is a member of the FDIC.
"Eligible Investments" means book-entry securities, negotiable instruments
or securities of the type contemplated by the pooling and servicing agreement,
or any other investment as may be permitted by each Rating Agency without
reducing or withdrawing the rating of the certificates of any series.
"Eligible Receivable" means each receivable:
. which was originated or acquired by DFS in the ordinary course of
business;
. which arose under an account that at that time was an Eligible
Account;
. which is owned by DFS at the time of sale or contribution by DFS to
the seller;
. which represents the obligation of a Dealer to repay an advance made
to or on behalf of the Dealer;
. which at the time of creation and at the time of transfer to the trust
is secured, to the extent required by the related financing agreement,
by a perfected first priority security interest -- whether by prior
filing, purchase money security interest statutory priority, or
subordination agreement from prior filers -- in the products, accounts
receivable or other collateral relating thereto; however, the security
interest need not be a first priority security interest in the case of
a receivable arising in an account for which the payment terms are on
a Scheduled Payment Plan basis and the maximum credit line is $250,000
or less, but only if that account was designated as an account on or
before the closing date for a series issued in 1994;
. which was created in compliance in all respects with all requirements
of law applicable thereto and pursuant to a floorplan, accounts
receivable, asset based lending or unsecured receivable financing
agreement which complies in all respects with all requirements of law
applicable to any party thereto;
. for which all consents and governmental authorizations required to be
obtained by DFS or the seller in connection with the creation of that
receivable or the transfer of that receivable to the trust or the
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performance by DFS of the floorplan, accounts receivable, asset based
lending or unsecured receivable financing agreement pursuant to which
that receivable was created, have been duly obtained and are in full
force and effect;
. as to which at all times following the transfer of that receivable to
the trust, the trust will have good and marketable title thereto free
and clear of all liens arising prior to the transfer or arising at any
time, other than liens permitted pursuant to the pooling and servicing
agreement;
. which has been the subject of a valid transfer and assignment from the
seller to the trust of all the seller's interest in that receivable,
including any proceeds of that receivable;
. which will at all times be the legal and assignable payment obligation
of the related Dealer, enforceable against the Dealer in accordance
with its terms except as may be limited by applicable bankruptcy or
other similar laws;
. which at the time of transfer to the trust is not encumbered by any
right of rescission, setoff, or any other defense of the Dealer;
. as to which, at the time of transfer of the receivable to the trust,
DFS and the seller have satisfied all their respective obligations
regarding that receivable required to be satisfied at that time;
. as to which, at the time of transfer of the receivable to the trust,
neither DFS nor the seller has taken or failed to take any action
which would impair the rights of the trust or the certificateholders
in that receivable;
. which constitutes "chattel paper," an "account" or a "general
intangible" as defined in Article 9 of the UCC as then in effect in
the State of Missouri; however, the financing agreement giving rise to
the receivable may, however, be subject by its terms, or by judicial
interpretation, to the laws of other states;
. which was transferred to the trust with all applicable governmental
authorizations; and
. if the receivable has the benefit of a Floorplan Agreement with a
Manufacturer, the Floorplan Agreement provides, except as otherwise
provided in that agreement -- which may vary among Floorplan
Agreements -- that the Manufacturer is obligated to repurchase the
products securing the receivable after the servicer repossesses the
products following the related Dealer's default. For a description of
Floorplan Agreements, see "The Dealer Floorplan Financing Business of
DFS--Floorplan Agreements with Manufacturers."
Delayed Funding Receivables will be Eligible Receivables. Delayed Funding
Receivables -- including any collections on those Delayed Funding Receivables
and Defaulted Amounts in respect of those Delayed Funding Receivables -- will
cease to be included in the trust on the day, if any, on which an Insolvency
Event in respect of DFS occurs.
"Enhancement" means the rights and benefits provided to the
certificateholders of any series or class pursuant to any letter of credit,
surety bond, cash collateral account, spread account, guaranteed rate agreement,
maturity liquidity facility, tax protection agreement, interest rate swap
agreement or other similar arrangement. The subordination of any series or class
to any other series or class or of the seller's interest to any series or class
will be deemed to be an Enhancement.
"Enhancement Agreement" means any agreement, instrument or document
governing the terms of any series Enhancement or pursuant to which any
Enhancement is issued or outstanding, as may be amended or modified from time to
time.
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"Enhancement Provider" means the provider of any Enhancement, other than
any certificateholders the certificates of which are subordinated to any series
or class.
"Existing Manufacturer" means:
. each Manufacturer with which DFS has entered into a business
arrangement, either through a Floorplan Agreement or another
arrangement, on or prior to the closing date,
. each Manufacturer with which DFS enters into a business arrangement
after the closing date for a series issued in 1994 so long as the
aggregate balances of the receivables relating to that Floorplan
Agreement do not exceed the lesser of (a) 1% of the Pool Balance at
the beginning of the calendar month in which the addition of the
related account occurs and (b) $25 million; and
. each Manufacturer with which DFS enters into that type a business
arrangement after the closing date for a series issued in 1994 and as
to which the Rating Agency Condition is satisfied.
"Financing Agreement" means any Wholesale Financing Agreement, Accounts
Receivable Financing Agreement, Asset Based Lending Financing Agreement or
Unsecured Receivable Financing Agreement.
"Floorplan Agreement" means an agreement, entered into by DFS or the
related Approved Affiliate and a Manufacturer, as amended or modified from time
to time, pursuant to which the Manufacturer agrees, among other matters, to
repurchase from DFS or the Approved Affiliate, as applicable, Products sold by
the Manufacturer to any of its Dealers and financed by DFS or the Approved
Affiliate under a Wholesale Financing Agreement if DFS or the Approved Affiliate
acquires possession of the Products because of a default by the Dealer under the
Wholesale Financing Agreement, voluntary surrender or other circumstances.
"Floorplan Business" means the extensions of credit made by DFS or the
related Approved Affiliate to Dealers in order to finance Products purchased by
Dealers from Manufacturers.
"Floorplan Receivables" means receivables arising from the Floorplan
Business.
"Global Certificate" means a certificate described in Exhibit A to this
prospectus.
"Ineligible Account" means an Account that at the time of determination is
not an Eligible Account.
"Ineligible Receivable" means, without duplication,
. any receivable that arises in an Eligible Account, was not an Eligible
Receivable at the time of its transfer to the trust and was
transferred to the trust,
. any receivable that, at the time of its transfer to the trust, has
been SAU or NSF for more than 30 days and
. the aggregate of receivables that, at the time of transfer of each of
the receivables to the trust, have been SAU or NSF for a period of one
to 30 days but only to the extent that the aggregate amount exceeds
0.75% of the Pool Balance at the end of the calendar month.
"Initial Account" means each individual revolving credit arrangement
established by DFS or an Approved Affiliate with a Dealer in connection with the
Floorplan Business, Accounts Receivable Business, Asset Based Lending Business
or the Unsecured Receivable Business identified in the list delivered to the
trustee on the first closing date under the pooling and servicing agreement by
the seller.
"Initial Cut-Off Date" means [ ].
"Manufacturer" means a manufacturer, distributor or other vendor engaged
generally in the business of manufacturing or distributing products for sale or
lease to Dealers in the ordinary course of business.
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"Manufacturer Overconcentration" on any determination date means the excess
of:
(a) the aggregate of all amounts of principal receivables in accounts
created pursuant to Floorplan Agreements with a single Manufacturer on
the last day of the immediately preceding calendar month, over
(b) 15% of the Pool Balance on the last day of the immediately preceding
calendar month.
"Miscellaneous Payments" means, for any calendar month, the sum of (a)
Adjustment Payments and Transfer Deposit Amounts on deposit in the Collection
Account on the related distribution date and (b) Unallocated Principal
Collections available to be treated as Miscellaneous Payments pursuant to the
pooling and servicing agreement on the distribution date.
"Non-Principal Collections" means collections of interest, all other non-
principal charges, including insurance service fees and handling fees, and
Discount Portions under the receivables; provided that all Recoveries will be
Non-Principal Collections.
"Non-Principal Receivables" for any account means all amounts billed to the
related Dealer in respect of interest and all other non-principal charges.
"Overconcentration Amount" on any determination date means the sum of the
Asset Based Receivable Overconcentration, the A/R Receivable Overconcentration,
the Dealer Overconcentrations, the Manufacturer Overconcentrations, the Product
Line Overconcentrations and the Unsecured Receivable Overconcentration on the
Determination Date.
"Overconcentration Default Amount" on any Determination Date means the
lesser of (a) the aggregate amount of receivables which became Defaulted
Receivables during the calendar month and which arose in an Account that is
included in the calculation of the Overconcentration Amount and (b) the
Overconcentration Amount on the Determination Date.
"Participation" means the undivided interest, created pursuant to a
Participation Agreement, in a receivable in which a receivable represents the
remaining undivided interest.
"Participation Agreement" means an agreement between DFS or an Approved
Affiliate and a lender pursuant to which DFS or the Approved Affiliate, as
applicable, conveys to the lender an undivided interest in certain receivables
that is pari passu in all respects, other than nonsubordinated interest strips
and fees, with the undivided interest retained by DFS or the Approved Affiliate,
as applicable.
"Pay-as-Sold" is described under "The Dealer Floorplan Financing Business
of DFS --Payment Terms."
"Pool Balance" means, as of the time of determination, (a) the aggregate of
Principal Receivables, without deducting the Discount Portion, in the trust at
the time, other than all Ineligible Receivables, multiplied by (b) 1 minus the
Discount Factor.
"Principal Collections" means collections under the receivables other than
Non-Principal Collections.
"Principal Receivables" for an Account means amounts shown on the
servicer's records as receivables, other than the amounts which represent Non-
Principal Receivables and Discount Portions, payable by the related Dealer.
["Principal Terms" means, for any series: (a) the name or designation; (b)
the initial principal amount or method for calculating the amount; (c) the
interest rate or method for the determination; (d) the payment date or dates and
the date or dates from which interest will accrue; (e) the method for allocating
collections to certificateholders; (f) the designation of any series Accounts
and the terms governing the operation of any the
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series Accounts; (g) the monthly servicing fee and the investors' servicing fee;
(h) the enhancement provider for and terms of any form of enhancement with
respect thereto; (i) the terms on which the certificates of the series may be
exchanged for certificates of another series, repurchased by the seller or
remarketed to other investors; (j) the Termination Date; (k) the number of
classes of certificates of the series and, if more than one class, the rights
and priorities of each the class; (l) the extent to which the certificates of
the series will be issuable in temporary or permanent global form (and, in the
case, the depositary for the Global Certificate or certificates, the terms and
conditions, if any, under which the Global Certificate may be exchanged, in
whole or in part, for Definitive Certificates, and the manner in which any
interest payable on a temporary or Global Certificate will be paid); (m) whether
the certificates of the series may be issued in bearer form and any limitations
imposed on those certificates; (n) the priority of the series over any other
series; (o) whether the series will be part of a group; and (p) any other terms
of the series.]
"Product Line Overconcentration" on any determination date means, for
accounts created pursuant to Wholesale Financing Agreements, the excess of:
(a) the aggregate of all amounts of principal receivables in those
accounts that represent financing for a single product line on the
last day of the calendar month immediately preceding the determination
date, over
(b) 25%, or 40% in the case of computer products, of the Pool Balance on
the last day of that immediately preceding calendar month.
"Products" means the commercial and consumer goods financed by DFS or the
related Approved Affiliate for Dealers pursuant to a Wholesale Financing
Agreement.
"Rating Agency" means, for any outstanding series or class, each
statistical rating agency selected by the seller to rate the certificates of the
series or class.
"Rating Agency Condition" means, for any action, that each Rating Agency
will have notified the seller, the servicer and the trustee in writing that the
action will not result in a reduction or withdrawal of the rating of any
outstanding series or class for which it is a Rating Agency.
"Receivables Contribution and Sale Agreement" means the agreement among
DFS, Deutsche BSC and the seller, governing the terms and conditions under which
the seller acquires receivables transferred to the trust.
"Recoveries" on any determination date means all amounts received,
including insurance proceeds, by the servicer during the calendar month
immediately preceding the determination date from receivables which have
previously become Defaulted Receivables.
"Removal Date" means [ ].
"Removal Notice" means [ ].
"Removed Account" means [ ].
"Required Participation Amount" for any date means an amount equal to the
sum of:
. the sum of the product for each series of (1) the Required
Participation Percentage for that series times (2) the initial
invested amount of that series minus the amount of any deposits into
its excess funding account in connection with a reduction in the Pool
Balance plus the amount of any withdrawals from its excess funding
account in connection with an increase in the Pool Balance; plus
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. the Trust Available Subordinated Amount on the immediately preceding
determination date, after giving effect to the allocations,
distributions, withdrawals and deposits to be made on the distribution
date following that determination date.
"Required Participation Percentage" means, for any series, the percentage
specified for that series in the related supplement; provided, however, that the
seller may, with ten days' prior notice to the trustee, each rating agency and
any Enhancement Provider, reduce the Required Participation Percentage to not
less than 100%, so long as the Rating Agency Condition has been satisfied.
"Revolving Period" is defined in the prospectus supplement.
"SAU" means, for a receivable, that if the receivable was originally
secured by a security interest in a Product, the Product has been sold and the
receivable is not paid in full.
"Scheduled Payment Plans" are defined under "The Dealer Floorplan Financing
Business of DFS -- Payment Terms."
"Seller's Participation Amount" means, at any time of determination, an
amount equal to the Pool Balance at the time minus the aggregate Invested
Amounts for all outstanding series at the time.
"Series Cut-Off Date" means, for any series, the date specified as the cut
off date in the related supplement.
"Series Issuance Date" means, for any series, the date on which the
certificates of the series are to be originally issued in accordance with the
pooling and servicing agreement and the related supplement.
"Servicer Default" refers to any of the following events:
(1) failure by the servicer to make any payment, transfer or deposit,
or to give instructions to the trustee to make any payment, transfer or
deposit or to take action under any Enhancement, on the date the servicer
is required to do so under the pooling and servicing agreement, which is
not cured within five business days after written notice from the trustee
of that failure;
(2) failure on the part of the servicer duly to observe or perform:
(a) its covenant not to create any lien on any receivable which
failure has a material adverse effect on the
certificateholders and which continues unremedied for a
period of 60 days after written notice to it; provided,
however, that a Servicer Default will not be deemed to have
occurred if the seller or the servicer will have repurchased
the related receivables or, if applicable, all the
receivables during that period in accordance with the terms
and provisions of the pooling and servicing agreement; or
(b) any other covenants or agreements of the servicer in the
pooling and servicing agreement, exclusive of breaches of
covenants in respect of which the servicer repurchases the
related receivables, as described under "--Servicer
Covenants" above, which failure has a materially adverse
effect on the certificateholders of any outstanding series
and which continues unremedied for a period of 30 days after
written notice of that failure to the servicer;
(3) any representation, warranty or certification made by the
servicer in the pooling and servicing agreement or in any certificate
delivered pursuant to the pooling and servicing agreement proves to have
been incorrect when made, which has a materially adverse effect on the
rights of the certificateholders of any outstanding series, and which
materially adverse effect continues for a period of 60 days after written
notice; provided, however, that a Servicer Default will not be deemed to
have
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occurred if the seller or the servicer will have repurchased the related
receivables or, if applicable, all the receivables during that period in
accordance with the provisions of the pooling and servicing agreement; or
(4) the occurrence of certain events of bankruptcy, insolvency or
receivership involving the servicer.
Notwithstanding the foregoing, a delay in or failure of performance
referred to under clause (1) above for a period of ten business days or referred
to under clauses (2) or (3) for a period of 60 business days, will not
constitute a servicer Default if that delay or failure was caused by an act of
God or other similar occurrence.
"Specified Dealer" means, for a Dealer, that on the last day of the
immediately preceding calendar month referred to above, any account with the
Dealer is among one of the fifteen accounts having the largest amount of all
principal receivables in all of the accounts as of that last day.
"Supplement" means, for any series, a supplement to the pooling and
servicing agreement.
"Tax Opinion" generally means, for any action, an Opinion of Counsel to the
effect that, for Federal income and Missouri state income and franchise tax
purposes, (a) the action will not adversely affect the characterization of the
certificates of any outstanding series or class as debt or as partnership
interests, (b) the action will not cause or constitute a taxable event for any
certificateholders or the trust and (c) if the action is the issuance of a new
series, each class of certificates of the new series will be characterized as
debt or as partnership interests.
"Termination Date" means, for any series, the termination date specified in
the related supplement to the pooling and servicing agreement.
"Transfer Date" means [ ].
"Transfer Deposit Amount" means, for any receivable reassigned or assigned
to the seller or the servicer, as applicable, the amounts specified in the
pooling and servicing agreement.
"Trust Available Subordinated Amount" means, at any time of determination,
the sum of the available subordinated amounts, if any, for all outstanding
series at the time.
"Trust Incremental Subordinated Amount" on any Determination Date means the
excess, if any, of (a) the Overconcentration Amount on the Determination Date
over (b) the Incremental Default Amount for the Determination Date.
"Trust Invested Amount" means, at any time of determination, the sum of the
invested amounts for all outstanding series at the time.
"Unallocated Principal Collections" means [ ].
"Wholesale Financing Agreement" means a wholesale financing agreement
entered into by DFS or the related Approved Affiliate and a Dealer in order to
finance Products purchased by the Dealer from a Manufacturer.
52
<PAGE>
Exhibit A
Global Clearance, Settlement and Tax Documentation
Procedures
In most circumstances, the certificates offered by this prospectus and the
prospectus supplement will be issued only as "global certificates" which are
registered and held by a depository. Certificate owners of the global
certificates may hold their global certificates through any of DTC, Cedel or
Euroclear. The global certificates will be tradeable 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 certificates
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, which is seven calendar day settlement.
Secondary market trading between investors holding global certificates
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 global certificates will be effected on a delivery-against-
payment basis through the respective depositaries of Cedel and Euroclear and the
DTC participants .
Non-U.S. holders of global certificates may have to pay U.S. withholding
taxes unless the holders meet the requirements for exemption from the tax and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
Initial Settlement
All global certificates will be held in book-entry form by DTC in the name
of Cede & Co., as nominee of DTC. Certificate owners' interests in the global
certificates 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 depositaries, which in turn will hold their positions in accounts as
DTC participants .
Certificate owners electing to hold their global certificates through DTC
will follow the settlement practices applicable to U.S. corporate debt
obligations. Certificate owner securities custody accounts will be credited with
their holdings against payment in same-day funds on the settlement date.
Certificate owners electing to hold their global certificates through Cedel or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global certificates 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 ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
participants will be settled using the procedures applicable to U.S. corporate
debt obligations in same-day funds.
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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
certificates 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 before settlement. Cedel or Euroclear will
instruct the respective Depositary, as the case may be, to receive the global
certificates against payment. Payment will include interest accrued on the
global certificates from and including the last coupon payment date to and
excluding the settlement date. Payment will then be made by the respective
Depositary to the DTC participant's account against delivery of the global
certificates. After settlement has been completed, the global certificates 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 global certificates credit will appear the next day
according to European time, and the cash debit will be back-valued to, and the
interest on the global certificates will accrue from, the value date. The value
date would be the preceding day when settlement occurred in New York. If the
trade fails and settlement is not completed on the intended value date, the
Cedel or Euroclear cash debit will be valued instead on 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 pre-position 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
certificates 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 pre-position
funds and instead use that credit line to make the funds necessary to process
same-day funds settlement available to the respective clearing systems. Under
this procedure, Cedel participants or Euroclear participants purchasing global
certificates would incur overdraft charges for one day, assuming they cleared
the overdraft when the global certificates were credited to their accounts.
However, interest on the global certificates would accrue from the value date.
Therefore, in many cases the investment income on the global certificates earned
during that one-day period may substantially reduce or offset the amount of the
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 certificates
to the respective Depositary 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 participant 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
certificates are to be transferred by the respective clearing system, through
the respective Depositary, 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 before settlement. In these cases, Cedel
or Euroclear will instruct the respective Depositary, as appropriate, to deliver
the bonds to the DTC participant's account against payment. Payment will include
interest accrued on the global certificates from and including the last coupon
payment date to and excluding the settlement date. 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. The
value date would be the preceding day, when settlement occurred in New York.
Should the Cedel participant or Euroclear participant have a line of credit with
its respective clearing system and elect to be in debit in anticipation of
receipt of the sale proceeds in its account, the back-valuation will extinguish
any overdraft charges incurred
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<PAGE>
over that one-day period. If the trade fails and settlement is not completed on
the intended value date, receipt of the cash proceeds in the Cedel participant's
or Euroclear participant's account would instead be valued on the actual
settlement date. Finally, day traders that use Cedel or Euroclear and that
purchase global certificates 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:
(a) 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;
(b) borrowing the global certificates in the U.S. from a DTC
participant no later than one day prior to settlement, which would give the
global certificates sufficient time to be reflected in their Cedel or Euroclear
account in order to settle the sale side of the trade; or
(c) 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.
U.S. Federal Income Tax Documentation Requirements
A beneficial owner of global certificates holding securities through Cedel
or Euroclear, or through DTC if the holder has an address outside the U.S., will
be required to pay 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 (a) each clearing system, bank or other financial
institution that holds customers' securities in the ordinary course of its trade
or business in the chain of intermediaries between that beneficial owner and the
U.S. entity required to withhold tax complies with applicable certification
requirements and (b) that beneficial owner takes one of the following steps to
obtain an exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8 or new Form W-8BEN). Beneficial
owners of global certificates that are non-U.S. Persons can obtain a complete
exemption form the withholding tax by filing a signed Form W-8--Certificate of
Foreign Status. If the information shown on Form W-8--or new Form W-8BEN--
changes a new Form W-8, or new Form W-8BEN, must be filed within 30 days of the
change.
Exemption for non-U.S. Persons with effectively connected income (Form 4224
or new 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 Form 4224--Exemption from Withholding of Tax
on Income Effectively Connected with the Conduct of a Trade or Business in the
United States--or New Form W-8ECI--Certificate of Foreign Persons Claim for
Exemption from Withholding on Income Effectively Connected with the Conduct of a
Trade or Business in the United States.
Exemption or reduced rate for non-U.S. Persons resident in treaty countries
(Form 1001 or new Form W-8BEN). Non-U.S. Persons that are beneficial owners of
Global certificates residing in a country that has a tax treaty with the United
States can obtain an exemption or reduced tax rate -- depending on the treaty
terms -- by filing Form 1001 --Ownership, Exemption or Reduced Rate Certificate,
or by filing new Form W-8BEN. If the treaty provides only for a reduced rate,
withholding tax will be imposed at that rate unless the filer alternatively
files Form W-8. Form 1001 may be filed by the certificate owner or his agent
whereas new Form W-8BEN must be filed by the beneficial owner.
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 beneficial owner of a
Global certificate or in the case of a Form 1001 or a Form 4224 filer, his
agent, files by submitting the appropriate form to the person through
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<PAGE>
whom it holds--the clearing agency, in the case of persons holding directly on
the books of the clearing agency. Form W-8 and Form 1001 are effective for three
calendar years and Form 4224 is effective for one calendar year, but Forms W-8,
1001 and 4224 will not be effective after December 31, 2000.
A new Form W-8BEN, if furnished with a taxpayer identification number
("TIN"), will remain in effect until the status of the beneficial owner changes,
or a change in circumstances makes any information on the form incorrect. A new
Form W-8BEN, if furnished without a TIN, and a new Form W-8ECI will remain in
effect for a period starting on the date the form is signed and ending on the
last day of the third succeeding calendar year, unless a change in circumstances
makes any information on the form incorrect.
The term "U.S. Person" means:
. a citizen or resident of the United States;
. a corporation or partnership organized in or under the laws of the
United States or any political subdivision of the United States ;
. an estate, the income of which is includible in gross income for United
States tax purposes, regardless of its source; or
. a trust if a U.S. court is able to exercise primary supervision over
the administration of the trust and one or more U.S. persons have the
authority to control all substantial decisions of the trust.
This summary does not deal with all aspects of U.S. Federal income tax
withholding that may be relevant to foreign holders of the Global certificates.
Certificate owners are advised to consult their own tax advisers for specific
tax advice concerning their holding and disposing of the global certificates.
In 1997, final Treasury regulations (the "New Withholding Regulations")
were issued that modify certain of the filing requirements with which non-U.S.
persons must comply in order to be entitled to an exemption from U.S.
withholding tax or a reduction to the applicable U.S. withholding tax rate.
Those persons currently required to file Form W-8 or Form 1001 will be required
to file new Form W-8BEN, while those persons currently required to file Form
4224 will be required to file new Form W-8ECI. The New Withholding Regulations
generally are effective for payments of interest due after December 31, 1999,
but Forms W-8, 1001 and 4224 filed prior to that date will continue to be
effective until the earlier of December 31, 2000 or the current expiration date
of those forms. Prospective investors should consult their tax advisors
regarding the effect of the New Withholding Regulations.
A-4
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated expenses in connection with the
offering of the certificates being registered under this Registration Statement,
other than underwriting discounts and commissions:
SEC registration fee ................................ $_________
Accounting fees and expenses......................... _________
Printing and engraving............................... _________
Legal fees and expenses.............................. _________
Trustee fees and expenses............................ _________
Blue sky fees and expenses........................... _________
Rating agency fees................................... _________
Miscellaneous........................................ _________
Total............................................ $
=========
Item 15. Indemnification of Directors and Officers.
Article NINTH of the articles of incorporation of Deutsche Floorplan
Receivables, Inc. (referred to in that Article as the "Corporation") provides
that:
The Corporation will indemnify any person who is or was a
director or officer of the Corporation, with respect to actions taken
or omitted by such person in any capacity in which such person serves
the Corporation, to the full extent authorized or permitted by law, as
now or hereafter in effect, and such right to indemnification will
continue as to a person who has ceased to be a director or officer, as
the case may be, and will inure to the benefit of such person's heirs,
executors and personal legal representatives; provided, however, that,
except for proceedings to enforce rights to indemnification, the
Corporation will not be obligated to indemnify any person in
connection with a proceeding (or part thereof) initiated by such
person unless such proceeding (or part thereof) was authorized in
advance, or unanimously consented to, by the Board of Directors of the
Corporation. Directors and officers of the Corporation will have the
right to be paid by the Corporation expenses incurred in defending or
otherwise participating in any proceeding in advance of its final
disposition. The Corporation may, to the extent authorized from time
to time by the Board of Directors, provide rights to indemnification
and to the advancement of expenses to employees and agents of the
Corporation. The rights to indemnification and to the advancement of
expenses conferred in this Section will not be exclusive of any other
right that any person may have or hereafter acquire under these
Articles of Incorporation, the By-Laws, any statute, agreement, vote
of stockholders or disinterested directors, or otherwise. Any repeal
or modification of this Section by the stockholders of the Corporation
will not adversely affect any rights to indemnification and to
advancement of expenses that any person may have at the time of such
repeal or modification with respect to any acts or omissions occurring
prior to such repeal or modification.
Section 4 of the by-laws of Deutsche Floorplan Receivables, Inc.
(referred to in that Section as the "Corporation") provides as follows:
<PAGE>
4. INDEMNIFICATION.
(a) The Corporation will indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation)
by reason of the fact that he is or was a Director, officer, employee or
agent of the Corporation, or is or was serving at the request of the
Corporation as director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit, or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, will not of itself,
create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interest of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) The Corporation will indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation to procure a judgment
in its favor by reason of the fact that he is or was a Director, officer,
employee or agent of the Corporation, or is or was serving at the request
of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the Corporation and except that no
indemnification will have been made in respect of any claim, issue or
matter as to which such person will have been adjudged to be liable to the
Corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought will determine upon
application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court will deem proper.
(c) To the extent that a Director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) or (b), or in
defense of any claim, issue or matter therein, he will be indemnified
against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) (unless ordered
by a court) will be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the Director,
officer, employee or agent is proper in the circumstances because he has
met the applicable standard of conduct set forth in subsections (a) and
(b). Such determination will be made (1) by the Board by a majority vote of
a quorum consisting of Directors who were not parties to such action, suit
or proceeding, or (2) if a quorum is not obtainable, or, even if obtainable
a quorum of disinterested Directors so directs, by independent legal
counsel in a written opinion, or (3) by the stockholders.
(e) Expenses incurred by a Director or officer in defending a civil
or criminal action, suit or proceeding may be paid by the Corporation in
advance of the final disposition of that action, suit or proceeding upon
receipt of any undertaking by or on behalf of such Director or officer to
repay such amount if it will ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized in this
Section. Such expenses incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the Board of Directors
deems appropriate.
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<PAGE>
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this Section will not be
deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any By-law, agreement,
vote of stockholders or disinterested Directors or otherwise, both as to
action in his official capacity and as to action in another capacity
holding such office.
(g) The Corporation will have power to purchase and maintain
insurance on behalf of any person who is or was a Director, officer,
employee or agent of the Corporation, or is or was serving at the request
of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability
under the provisions of this Section.
(h) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section will, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
Director, officer, employee or agent and will inure to the benefit of the
heirs, executors and administrators of such a person.
Section 78.7502 of the Nevada Revised Statutes provides that a corporation
will have the power (and that in certain circumstances a corporation is
required) to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that such person is or was a director, officer, employee or agent of the
corporation, against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement incurred in connection with the action, suit or
proceeding. Section 78.752 of the Nevada Revised Statutes provides that a
corporation may purchase and maintain insurance or make other financial
arrangements on behalf of any person who is or was a director, officer, employee
or agent of the corporation, for any liability asserted against such person and
liability and expenses incurred by such person in such person's capacity as a
director, officer, employee or agent, whether or not the corporation has the
authority to indemnify such person against such liability and expense.
Deutsche Bank AG maintains a directors and officers liability insurance
policy covering certain direct and indirect subsidiaries, including Deutsche
Floorplan Receivables, Inc. In general, the policy insures the officers and
directors of Deutsche Floorplan Receivables, Inc. against loss arising from
wrongful acts or omissions, limited by the terms and conditions contained in the
policy.
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<PAGE>
Item 16. Exhibits.
1.1 Form of Underwriting Agreement*
3.1 Form of Agreement of Limited Partnership of the Registrant*
4.1 Form of Pooling and Servicing Agreement*
4.2 Form of supplement (including forms of certificates)*
5.1 Opinion of Mayer, Brown & Platt as to legality of the Certificates*
8.1 Opinion of Mayer, Brown & Platt as to certain U.S. tax matters*
8.2 Opinion of Bryan Cave LLP as to certain Missouri tax matters*
10.1 Form of Receivables Contribution and Sale Agreement*
23.1 Consent of Mayer, Brown & Platt (included in exhibits 5.1 and 8.1
hereof)*
23.2 Consent of Bryan Cave LLP (included in exhibit 8.2 hereof)
24.1 Power of Attorney (included in Part II of the registration statement
filed on March 16, 1999.)
___________________________
* To be filed by amendment.
Item 17. Undertakings.
(a) As to Rule 415:
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement.
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price represent
no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to that information in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment will be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time will be deemed to be the initial bona
fide offering thereof.
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<PAGE>
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) As to documents subsequently filed that are incorporated
by reference:
The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of
an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement will
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such
securities at that time will be deemed to be the initial
bona fide offering thereof.
(c) As to indemnification:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the Registrant pursuant
to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
(d) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act of 1933, as amended, the information omitted
from the form of prospectus filed as part of this Registration
Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Act will be deemed to be part of
this Registration Statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under
the Securities Act of 1933, as amended, each post-effective
amendment that contains a form of prospectus will be deemed to
be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that
time will be deemed to be the initial bona fide offering
thereof.
[(e) As to qualification of trust indentures:
The undersigned Registrant hereby undertakes to file an
application for the purpose of determining the eligibility
of the trustee to act under subsection (a) of Section 310
of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under Section
305(b)(2) of the Act.]
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<PAGE>
(f) The undersigned Registrant hereby undertakes to file in a
current report a Form 8-K or in a post-effective amendment
an opinion with respect to any Federal tax consequences
material to an investor with regard to a specific series to
be issued pursuant to this Registration Statement where
such tax consequences, have not been addressed in the
prospectus or the prospectus supplement related to such
series.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 (and that the security rating requirement
will be met at the time of sale) and has duly caused this Amendment No. 1 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of St. Louis, State of Missouri on May 24, 1999.
Deutsche Floorplan Receivables, L.P.
By: Deutsche Floorplan Receivables, Inc., General Partner
By: /s/ Richard H. Schumacher
----------------------------------------------------
Name: Richard H. Schumacher
--------------------------------------------------
Title: President and Treasurer
-------------------------------------------------
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<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated below.
Signature Title Date
--------- ----- ----
* President and Treasurer May 24, 1999
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Richard H. Schumacher (Principal Executive Officer and
Principal Financial Officer)
* Senior Vice President and Controller May 24, 1999
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Stephen J. Gentry (Principal Accounting Officer)
/s/ Richard C. Goldman Director May 24, 1999
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Richard C. Goldman
* Director May 24, 1999
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C. Don Brown
* Director May 24, 1999
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Phil Stout
*IN WITNESS WHEREOF, Richard C. Goldman has signed this Amendment No. 1 to
the Registration Statement on May 24, 1999 on behalf of the officers and
directors named above as their attorney-in-fact under a power of attorney.
/s/ Richard C. Goldman
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Richard C. Goldman
II-8
