<PAGE>
As filed with the Securities and Exchange Commission on March 16, 1999
Registration No. 333-
=============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------------------
Distribution Financial Services Floorplan Master Trust
(Issuer with respect to Certificates)
------------------------------------
Deutsche Floorplan Receivables, L.P.
(Exact Name of Registrant as Specified in its Charter)
Delaware 655 Maryville Centre Drive
(State or other Jurisdiction of St. Louis, Missouri 63141
Incorporation or Organization) (314) 523-3000
88-0355652
(I.R.S. Employer
Identification Number)
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
------------------------------------
Richard C. Goldman
Senior Vice President and Chief Legal Officer
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
- ---------------------------------------------------------------------------------------------------------------------------------
<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.
------------------------------------
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 HAVE FILED A REGISTRATION STATEMENT WITH THE SECURITIES
AND EXCHANGE COMMISSION RELATING TO THESE SECURITIES. 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
$[ ] Asset Backed Certificates, Series [ ]
DEUTSCHE FLOORPLAN RECEIVABLES, L.P.
Seller
DEUTSCHE FINANCIAL SERVICES CORPORATION
Servicer
The Trust will issue [ ] classes of Certificates as listed below. 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.
Investing in the Certificates involves certain risks. You should consider the
discussion under "Risk Factors" beginning on page S-[ ] of this Prospectus
Supplement and page [ ] 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>
Class A Certificates......
Class B Certificates......
Total.....................
</TABLE>
(1) Plus accrued interest, if any, from [ ].
The Certificates are offered subject to prior sale, when, as and if issued to
and accepted by the Underwriters and subject to their right to reject orders in
whole or in part. It is expected that delivery of the 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 [ ].
<PAGE>
[Name(s) of Underwriter(s)]
[ ]
S-2
<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 will describe the specific terms of
your Series of Certificates.
If the terms of the Certificates 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 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 a listing of the pages where capitalized terms used in
this Prospectus Supplement are defined under the caption "Index of Terms"
beginning on page __ in this Prospectus Supplement.
S-3
<PAGE>
TABLE OF CONTENTS
Page
SUMMARY ..................................................................S-5
RISK FACTORS..............................................................S-10
THE ACCOUNTS..............................................................S-15
General ........................................................S-15
Description of the Trust Portfolio...............................S-16
Yield Information................................................S-19
Major Customers; Major Manufacturers.............................S-19
Delinquency Experience...........................................S-20
Loss Experience..................................................S-21
Aging Experience.................................................S-22
DEUTSCHE FINANCIAL SERVICES CORPORATION...................................S-23
General ........................................................S-23
Year 2000 Issues.................................................S-23
DEUTSCHE BUSINESS SERVICES CORPORATION....................................S-24
DEUTSCHE BANK AG..........................................................S-24
MATURITY AND PRINCIPAL PAYMENT CONSIDERATIONS.............................S-24
DESCRIPTION OF THE CERTIFICATES...........................................S-25
Interest ........................................................S-25
Principal........................................................S-27
Allocation Percentages...........................................S-27
Discount Factor..................................................S-29
Allocation of Collections; Limited Subordination
of Seller's Interest.............................................S-29
Distributions from the Collection Account; Reserve Fund..........S-33
Interest Funding Account.........................................S-36
Principal Funding Account........................................S-36
Excess Funding Account...........................................S-37
Distributions....................................................S-37
Investor Default Amount..........................................S-39
Investor Charge-Offs.............................................S-39
Optional Repurchase..............................................S-40
Early Amortization Events........................................S-40
Termination......................................................S-42
Servicing Compensation and Payment of Expenses...................S-43
Reports ........................................................S-43
FEDERAL INCOME TAX CONSIDERATIONS.........................................S-44
Treatment of the Certificates as Debt............................S-44
Interest Income to Certificateholders............................S-45
Original Issue Discount..........................................S-45
Sale or Exchange.................................................S-46
S-4
<PAGE>
Possible Classification of the Pooling and Servicing
Agreement as a Partnership or Association......................S-46
FASIT ........................................................S-47
Foreign Investors................................................S-48
STATE AND LOCAL TAX CONSEQUENCES..........................................S-49
ERISA CONSIDERATIONS......................................................S-50
General ........................................................S-50
Plan Assets and the Availability of Exemptions for Certificates..S-50
Review by Benefit Plan Fiduciaries...............................S-51
UNDERWRITING..............................................................S-51
LEGAL MATTERS.............................................................S-52
INDEX OF TERMS............................................................S-54
ANNEX I: OTHER SERIES .....................................................I-1
S-5
<PAGE>
SUMMARY
This summary highlights selected information from this document and
does not contain all of the information that you need to consider in making your
investment decision. 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.
This summary provides an overview of certain information to aid your
understanding and is qualified by the full description of such information in
this Prospectus Supplement and the accompanying Prospectus.
THE PARTIES
Trust............................. Distribution Financial Services Floorplan
Master 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 SERIES [ ] CERTIFICATES
The Trust will issue the following Series
("Series [ ]") of certificates:
o $__________ [Floating] [Fixed] Rate
Asset Backed Certificates, Series [ ],
Class A (the "Class A Certificates");
o $_________ [Floating] [Fixed] Rate
Asset Backed Certificates, Series [ ],
Class B (the "Class B Certificates"
and, together with the Class A
Certificates, the "Offered
Certificates"); and
o $__________ [Floating] [Fixed] Rate
Asset Backed Certificates, Series [ ],
Class C (the "Class C Certificates"
and, together with the Class A
Certificates and the Class B
Certificates, the "Certificates" or the
"Series [ ] 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 Offered Certificates
are being offered hereby.
CLOSING DATE
The issuance of the Certificates will take
place on or about [ ].
DISTRIBUTION DATES
S-6
<PAGE>
With respect to each calendar month (each, a
"Collection Period"), the "Distribution
Date" will be the 15th day of the following
month (or, if such 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)
define such interest payment dates as
"Interest Payment Dates".]
INTEREST PAYMENTS
o The "Certificate Rate" for each class
of Certificates is the "Interest Rate"
specified on the front cover page of
this Prospectus Supplement.
o Interest on the outstanding principal
balance of each class of Certificates
will accrue at the applicable
Certificate Rate from and including a
Distribution Date (or, in the case of
the first Distribution Date, from and
including the Closing Date) to and
including the day preceding the next
Distribution Date (each an "Interest
Period").
o Interest on the Certificates 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].
o The Trustee 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.
See "Description of the Certificates"
herein.
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 [ ] (the "Expected Final Payment
Date"). In order to accumulate funds to
pay your Certificates on the Expected
Final Payment Date, the Trust will
accumulate Principal Collections in the
Principal Funding Account during the
Accumulation Period.
If the Class A Certificates are not
fully repaid on the Expected Final
Payment Date, 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
S-7
<PAGE>
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 Expected Final Payment
Date, the Class B Certificates will
begin to amortize (after the Class A
Certificates have been fully repaid) by
means of monthly payments of Principal
Collections allocated to your Series.
Fore more information on scheduled
principal payments on the Offered
Certificates and the Accumulation
Period, see "Description of the
Certificates --Principal" in this
Prospectus Supplement.
POSSIBLE EARLY PRINCIPAL REPAYMENT OF
YOUR SERIES
The Offered Certificates may be repaid
earlier than the Expected Final Payment
Date following the occurrence of an
Early Amortization Event.
See "Description of the
Certificates--Early Amortization
Events," "--Distributions from the
Collection Account; Reserve
Fund--Principal Collections" and
"--Distributions" in this Prospectus
Supplement.
OTHER SERIES
Your Series is one of [ ] Series issued
by the Trust which are expected to be
outstanding on the Closing Date. For a
summary of the terms of such other
Series, see Annex I to this Prospectus
Supplement.
ALLOCATIONS
Your Series represents the right to a
portion of Collections on the
Receivables. Your Series will also be
allocated a portion of the Defaulted
Receivables. Non-Principal Collections
allocated to your Series will be used
to make interest payments, to pay a
portion of the fees of DFS as Servicer,
to replenish the Reserve Fund and to
cover Defaulted Receivables allocated
to your Series. Any Principal
Collections allocated to your Series in
excess of the amount owed to
Certificates of your Series on any
Distribution Date will be deposited in
the Excess Funding Account or paid to
the Seller.
For further information on allocations,
see "Description of the
Certificates--Allocation Percentages"
in this Prospectus Supplement. For
further information about the
Receivables, see "The Accounts" in this
Prospectus Supplement.
CREDIT ENHANCEMENT Credit enhancement of the Certificates
of your Series will be provided by the
subordination of the Seller's
S-8
<PAGE>
Interest to the extent of the Available
Subordinated Amount, by amounts in the
Reserve Fund, and by 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. For more information
regarding the Available Subordinated
Amount, see "Description of the
Certificates -- Allocation of
Collections; Limited Subordination of
Seller's Interest -- Available
Subordinated Amount" in this Prospectus
Supplement. For more information
regarding the Reserve Fund, see
"Description of the
Certificates--Distributions from the
Collection Account; Reserve Fund" in
this Prospectus Supplement. For more
detailed discussion of the
subordination of the Class B
Certificates to the Class A
Certificates and the subordination of
the Class C Certificates to the Class A
Certificates and the Class B
Certificates, see "Description of the
Certificates--Distributions" in this
Prospectus Supplement.
SERVICING The Servicer (initially, DFS) is
responsible for servicing, managing and
making collections on the Receivables
and, except in limited circumstances,
will deposit specified amounts of those
collections in the Collection Account
within two business days following the
date on which the Servicer records the
collection thereof on its computer file
of accounts. The Servicer then
allocates those collections as
summarized under "Description of the
Certificates--Allocation of
Collections; Limited Subordination of
Seller's Interest" in this Prospectus
Supplement.
The Servicer will receive a monthly
servicing fee and certain other amounts
as described herein as servicing
compensation from the Trust. See
"Description of the
Certificates--Servicing Compensation
and Payment of Expenses" in this
Prospectus Supplement.
OPTIONAL REPURCHASE The Seller has the option to repurchase
the interest of your Series in the
Trust once the Invested Amount of your
Series is reduced to less than 10% of
the initial outstanding principal
amount of your Series. See "Description
of the Certificates -- Optional
Redemption" in this Prospectus
Supplement.
TAX MATTERS In the opinion of Mayer, Brown & Platt,
special tax counsel for the Seller, the
Offered Certificates will be
characterized as debt for federal
income tax purposes. In the opinion of
Bryan Cave LLP, Missouri counsel for
the Seller, the Offered Certificates
will be characterized as debt for
Missouri income tax purposes. If you
purchase an Offered Certificate, you
agree to
S-9
<PAGE>
treat it as debt for tax purposes. See
"Federal Income Tax Considerations"
herein and "State and Local Tax
Consequences" herein for additional
information concerning the application
of federal and Missouri tax laws.
ERISA CONSIDERATIONS Subject to considerations described
under "ERISA Considerations" herein,
the Class A Certificates are eligible
for purchase by employee benefit plan
investors. [The Class B Certificates
may not be acquired by (a) any employee
benefit plan that is subject to ERISA,
(b) any plan or other arrangement
(including an individual retirement
account or Keogh plan) that is subject
to section 4975 of the Code or (c) any
entity whose underlying assets include
"plan assets" by reason of any such
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 subject to the foregoing
limitation. See "ERISA
Considerations."]
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
(a "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. See "Risk Factors--Ratings Are
Not Recommendations" herein.
RISK FACTORS You should consider the factors set
forth under "Risk Factors" on pages __
through __ 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.] See
"Risk Factors--Certificateholders May
Be Unable To Resell Certificates"
herein.
S-10
<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.
Certificateholders May Be There is currently no secondary market for
Unable To Resell Certificates your 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 Required to The final distribution of principal on your
Reinvest at a Lower Rate of Certificates may be made prior to may occur
Return, or You May Obtain a the Expected Final Payment Date because (i)
the Lower Than Anticipated an Early Amortization Event which would
Return, Because of initiate an Early Amortization Period, (ii)
Prepayments of Certificates Seller may exercise its option to repurchase
the interest of your Series in the Trust, or
(iii) the Seller may have to repurchase the
interests of all Series in the Trust upon
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 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. See "Maturity and
Principal Payment Considerations" herein.
Possible Delays and Economic conditions in states where Dealers
Reductions in Payments on are located may affect the delinquency and
Certificates Due to loss experience of the Trust with respect to
Geographic Concentration the Receivables. As of the Cutoff Date, the
mailing addresses of Dealers of Receivables
representing, by principal balance, [ ]%, [
]%, [ ]% and [ ]% of the Pool Balance were
located in [ ], [ ], [ ] and [ ]. 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. See "The Accounts" herein.
S-11
<PAGE>
Potential Computer Problems Many existing computer applications and
Relating to the Year 2000 systems are dependent upon calendar dates,
including dates before, on and after January
1, 2000. These applications and systems
could fail or could produce erroneous
results during the transition from the year
1999 to the year 2000 and afterwards.
[If DFS, in its capacity as the Servicer,
does not have a computer system that is year
2000 compliant in a timely manner, the
ability of DFS to service the Receivables
may be materially and adversely affected.]
If the Trustee does not have a computer
system that is year 2000 compliant in a
timely manner, the ability of the Trustee to
make distributions on your Certificates may
be materially and adversely affected. For a
description of the efforts of DFS with
respect to year 2000 issues, see "Deutsche
Financial Services Corporation-Year 2000
Issues" herein. Year 2000 issues may also
affect the ability of DTC to perform its
services. See "Description of the
Certificates--Book-Entry Registration" in
the Prospectus.
Possible Delays and The Trust will not have any significant
Reductions in Payments on assets or sources of funds other than the
Certificates Due to Limited Receivables. Your Certificates will be
Assets of the Trust 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. The Certificates do not
represent an interest in or an obligation
of, and are not insured or guaranteed by,
the Seller, DFS, Deutsche Bank AG or any
other person or entity. You will have no
recourse to the Seller, 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.
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.
S-12
<PAGE>
Possible Delays and The Receivables generally bear interest at
Reductions in Payments on rates announced by particular banks plus a
Certificates Due to Basis Risk 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 Early
Amortization Event. Some Receivables are
originated at a discount and do not bear
interest for a specified period after their
origination. [It is possible that with
respect to any Interest Period, LIBOR plus
the margin used to compute the applicable
Certificate Rate will exceed the Net
Receivables Rate for the preceding
Collection Period. In such event, interest
will accrue on your Certificates during that
Interest Period at a rate equal to the Net
Receivables Rate. A reduction in interest
rates on any Receivables, or the inclusion
of a greater proportion of non-interest
bearing Receivables in the Pool Balance,
could have the effect of reducing or
possibly eliminating the positive spread, if
any, between the Net Receivables Rate and
the applicable Certificate Rates based upon
LIBOR, with a corresponding risk of a
reduction in your yield.] While the
distribution of Carry-over Amounts would
mitigate the effect of such reduction in
yield, the Carry-over Amounts are
distributable only to the extent of the
funds available therefor as described under
"Description of the
Certificates--Distributions from the
Collection Account; Reserve Fund" herein and
there can be no assurance that Carry-over
Amounts, if any, will be distributed. See
"The Accounts--Yield Information" herein.
Possible Delays and Credit enhancement of the Certificates of
Reductions In Payments on your Series will be provided by the
Certificates Due to Limited subordination of the Seller's Interest to
Credit Enhancement the extent of the Available Subordinated
Amount as described herein, by amounts in
the Reserve Fund, and by 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 such credit enhancement is limited and
will be reduced from time to time as
described herein. If the amount available
under such credit enhancement is reduced to
zero, you will bear directly the credit and
other risks associated with your investment
in the Trust and will be more likely to
experience delays and reductions in payments
on your Certificates. See "Description of
the Certificates--Allocation of Collections;
Deposits in Collection Account; Limited
Subordination of Seller's Interest,"
"--Distributions from the Collection Amount;
Reserve Fund" and "Risk Factors--Possible
Delays and Reductions in Payments on Class B
Certificates Due to Subordination of Class B
Certificates" herein. Credit enhancement
provided to any other Series will not be
available to your Series.
S-13
<PAGE>
Possible Delays and Payment on the Class B Certificates are
Reductions in Payments on subordinated to the Class A Certificates as
Class B Certificates Due to follows. Payments of principal in respect of
Subordination of Class B the Class B Certificates will not commence
Certificates until after the Class A Invested Amount has
been paid in full. Class B Monthly Interest
accrued during the related Interest
Period(s) will not be paid on an Interest
Payment Date until accrued Class A Monthly
Interest for such Interest Payment Date has
been paid in full. Moreover, the Class B
Invested Amount is subject to reduction on
any Distribution Date if the Available
Subordinated Amount is reduced to zero, the
Class C Invested Amount is reduced to zero
and the Deficiency Amount is greater than
zero. If the Class B Invested Amount suffers
such a reduction, there will be a reduction
in the amount of collections allocable to
the Class B Certificateholders, resulting in
a possible delay or reduction in payments on
the Class B Certificates. Moreover, in the
event of a sale of the Receivables in the
Trust due to the occurrence of an insolvency
event with respect to the Seller or due to
the Invested Amount being greater than zero
on the Termination Date, the portion of the
net proceeds of such sale will be paid first
to Class A Certificateholders until 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 and then to Class B
Certificateholders until 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.
See "Description of the
Certificates--Distributions from the
Collection Account; Reserve Fund,"
"--Distributions" and "--Investor
Charge-Offs" herein.
Negative Carry If funds are deposited in the Excess Funding
Account at any time, such funds are expected
to be invested in Eligible Investments and,
as a result, would be expected to earn a
rate of return lower than the yield on a
comparable amount of Receivables.
Accordingly, any deposit of funds in the
Excess Funding Account may be expected to
reduce the amount of Non- Principal
Collections available to the Trust, until
DFS is able to generate sufficient
Receivables to permit such funds to be
released from the Excess Funding Account.
Ability to Change Discount In order to create imputed interest in
Factor respect of those Receivables that have a
non-interest-bearing period and for
uniformity in accounting for collections, a
portion of the Collections on each
Receivable that are 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
Non-Principal Collection will be equal to
the product of the balance of such
Receivable times the Discount Factor. As of
[ ] (the "Cut-off 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%. For
a discussion of how the Discount Factor may
be adjusted, see "Description of the
Certificates--Discount Factor" in the
Prospectus. Any increase in the Discount
Factor will result in a higher amount of
Non-Principal Collections on the Receivables
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.
S-14
<PAGE>
Ratings are Not It is a condition to the issuance of the
Recommendations Class A Certificates that they be rated in
the highest long-term rating category by at
least one Rating Agency. 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 is based primarily
on the credit underlying the Receivables and
the level of subordination of the Seller's
Interest. The rating of the Offered
Certificates addresses the likelihood of the
ultimate payment of principal and the timely
payment of interest, at the applicable
Certificate Rate, on the Offered
Certificates. However, a Rating Agency does
not evaluate, and the rating of the Offered
Certificates does not address, the
likelihood that any Carry-over Amount will
be paid or the likelihood that the
outstanding principal amount of the Offered
Certificates will be paid by any date,
including the Expected Final Payment Date,
other than the Termination Date. There is no
assurance that a rating will remain for any
given period of time or that a rating will
not be lowered or withdrawn entirely by a
Rating Agency if in its judgment
circumstances so warrant. A security rating
is not a recommendation to buy, sell, or
hold securities and is subject to revision
or withdrawal in the future by the assigning
rating agency. You should evaluate each
rating independently of any other rating.
S-15
<PAGE>
THE ACCOUNTS
General
The Receivables arise in the Accounts. The Accounts have been selected from
all the accounts that were Eligible Accounts (the "Eligible Portfolio") at the
dates such Accounts were added to the Trust. See "Description of the
Certificates--Eligible Accounts and Eligible Receivables" in the Prospectus.
Pursuant to the Pooling and Servicing Agreement, the Seller and, pursuant
to the Receivables Contribution and Sale Agreement, DFS have the right (subject
to certain limitations and conditions), and in some circumstances the Seller is
obligated, to designate from time to time additional qualifying Accounts to be
included as Accounts and to convey to the Trust the Receivables of such
Additional Accounts, including Receivables thereafter created. DFS will convey
the Receivables then existing, with certain exceptions, or thereafter created
under such Additional Accounts to the Seller, which will in turn convey them to
the Trust. See "Description of the Certificates--Addition of Accounts" in the
Prospectus.
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 such 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>
Floorplan Receivables.......................... $
------------ ------------- ------------- -------------
Accounts Receivable............................
------------- ------------- ------------- -------------
Asset Based Lending............................
------------- ------------- ------------- -------------
Unsecured......................................
------------- ------------- ------------- -------------
Total..................................... $
------------ ------------- ------------- =============
</TABLE>
<TABLE>
<CAPTION>
Composition of Receivables in the
Trust Portfolio by Payment Plan
[ ]
(Dollars In Millions)
Percentage of Number Percentage 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 of Number Percentage of
Receivables Receivables of Number of
Account Balance Range Balance Balances Accounts Accounts
--------------------- ------- ---------- -------- ---------
<S> <C> <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>
<TABLE>
<CAPTION>
Composition of Receivables in the Trust Portfolio by Product Type
as of [ ]
(Dollars in Millions)
Percentage of Number Percentage 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(1)...........................
Recreational Vehicles............................
Boats and Motors.................................
Industrial and Agricultural Equipment............
Motorcycles......................................
Snowmobiles......................................
Other(2).........................................
Consumer Electronics and Appliances..............
Keyboard and Other Musical Instruments...........
Total................................... $ 100.0% 100.0%
======= =======
</TABLE>
- ---------------
(1) "Accounts Receivable" includes Asset Based Receivables of $____
million.
(2) 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 of Number Percentage of
Receivables Receivables of Number of
State Balance Balances Accounts Accounts
----- ------- ---------- -------- ---------
<S> <C> <C> <C> <C>
.............................................. $
..............................................
..............................................
..............................................
..............................................
..............................................
..............................................
..............................................
..............................................
..............................................
..............................................
..............................................
Other States(1)...............................
Total................................ $ 100.0% 100.0%
====== ======
</TABLE>
(1) The percentage of the "Receivables Balance" represented by Receivables
in each state not specifically listed 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 (i) approximately ___% was attributable to
yield from the payment of interest accruing on those receivables and (ii)
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
(i) approximately ___% was attributable to yield from the payment of interest
accruing on those receivables and (ii) 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. With respect to the Receivables in the Trust, the Trust will
receive the yield attributable to the payment of interest accruing on the
Receivables (i.e., the type of yield referred to in clause (i) in the preceding
sentence), 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 (i.e., the type of yield
referred to in clause (ii) 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 Cut-off
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 Eligible
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 Eligible Accounts may be different. There can be no
assurance 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>
Aggregate Principal Balance.........
SAU/NSF 31 days or more(1)..........
Scheduled Payment Plan past due 31
days or more(2)................
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>
(1) A "SAU/NSF" Account 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.
(2) 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 Eligible Accounts will be only a portion of the
U.S. portfolio of DFS, actual loss experience with respect to the Eligible
Accounts may be different. There can be no assurance 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 such 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>
Average Principal Receivables
Balance(1).........................
Gross Losses.......................
Net Losses(2)......................
Net Losses/Liquidations............
Net Losses/Average Principal
Receivables Balance(3).............
</TABLE>
(1) The "Average Principal Receivables Balance" is the average weekly
principal balances for the twelve months ending on the last day of the
period.
(2) "Net Losses" in any period are gross losses less recoveries for such
period. Recoveries include recoveries from collateral security in addition
to recoveries from the products.
(3) The percentage indicated for the [ ] months ended [ ] 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. Because the Eligible Accounts will only be a
portion of the entire U.S. portfolio of DFS, actual age distribution with
respect to the Eligible Accounts may be different.
Age Distribution for the U.S. Portfolio(1)
(Dollars in Millions)
Receivable Balances
<TABLE>
<CAPTION>
Days As of [ ] 31As of [ ] 31, As of December 31,
- ---- ---------------------------------- -------------------
[ ] [ ] [ ] [ ] [ ] [ ]
<S> <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>
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>
(1) Excludes Asset Based Receivables and receivables secured by accounts
receivable.
S-23
<PAGE>
DEUTSCHE FINANCIAL SERVICES CORPORATION
General
DFS was incorporated in Nevada in 1975. It is an indirect, wholly-owned
subsidiary of Deutsche Bank AG. DFS 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 DFS 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. DFS is also in the business of providing
equipment loans and leases, franchisee loans, vendor finance programs and
private label retail finance programs. DFS 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 DFS and none of the
products being financed by the Receivables were made or distributed by
affiliates of DFS.
As of [ ], DFS 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.
DFS 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
DFS 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, DFS is well underway with its Year
2000 readiness program, having spent approximately $5 million to date. DFS
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 DFS to continue its general business
operations, or on its ability to perform its responsibilities as Servicer.
Currently, DFS is actively engaged in completing the following Year 2000
program initiatives:
o 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
o Develop and implement a detailed plan to address Year 2000 issues as
identified, particularly as they pertain to software and hardware
applications
o Establish a Year 2000 Program Management Office, staffed by dedicated
and experienced project managers
o Survey outside vendors to determine the degree of preparedness for the
Year 2000, to uncover potential issues arising from such business
counterparties
o Raise organizational awareness not only with top management, but also
at the staff level, and involve relevant business group leaders in
reaching solutions
o 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. Moreover, 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 DFS, include 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.
S-24
<PAGE>
In addition, DFS 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. DFS 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 DFS as to the amount of time and costs necessary to
remediate and test the computer systems of DFS. 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 DFS. 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
success attained by the business counterparties of DFS, and similar
uncertainties.
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.
DFS is an indirect, wholly-owned subsidiary of Deutsche Bank AG. DFS 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 will not be payable until the
Expected Final Payment Date unless an Early Amortization Event has occurred.
Full amortization of the Certificates by the Expected Final Payment Date depends
on, among other things, repayment by Dealers of the Receivables and may not
occur if Dealer payments are insufficient therefor. Because the Receivables are,
in large part, paid upon retail sale of the related product, the timing of such
payments is uncertain. In addition, there is no assurance 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 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 period and the denominator of which is the average aggregate principal
balances of such Receivables for such period. There can be no assurance that the
rate of Principal Collections will be similar to the historical experience set
forth below. Because the Eligible Accounts will be only a portion of the entire
U.S. portfolio of DFS, actual monthly payment rates with respect to the Eligible
Accounts may be
S-25
<PAGE>
different. 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.
Monthly Payment Rates for the U.S. Portfolio
<TABLE>
<CAPTION>
[ ] Months
ended [ ], 31 Year Ended December 31,
------------------- ---------------------------------
<S> <C>
[ ] [ ] [ ] [ ] [ ] [ ] [ ]
Highest Month........... % % % % % % %
Lowest Month............ % % % % % % %
Average of the
Months in the Period.... % % % % % % %
</TABLE>
Because (i) an Early Amortization Event may occur which would initiate
an Early Amortization Period, (ii) the Seller may exercise its option to
repurchase the interest of your Series in the Trust, or (iii) the Seller may
have to repurchase the Certificateholders' Interest upon the breach of certain
representations and warranties, the final distribution of principal on your
Certificates may be made prior to the Expected Final Payment Date. See
"Description of the Certificates--Early Amortization Events" and "--Optional
Repurchase" herein 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 your 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 respective outstanding principal balance of each class
of Certificates will accrue at the applicable Certificate Rate for such class
and will be payable to the Certificateholders on each Interest Payment Date;
provided, however, that during an Early Amortization Period, interest will be
paid on each Distribution Date; provided further, however, that unless an Early
Amortization Period has occurred prior to the Distribution Date in [ ] the first
Interest Payment Date will be [ ]. Certificateholder Non-Principal Collections
will be deposited into the Interest Funding Account and used to make interest
payments to the Certificateholders on each Interest Payment Date. Interest to be
deposited into the Interest Funding Account on each Distribution Date will
accrue during each Interest Period. Interest for any Distribution Date will be
calculated on the basis of the actual number of days in the related Interest
Period divided by 360 and interest due but not deposited into the Interest
Funding Account on any Distribution Date will be deposited into the Interest
Funding Account on the next Distribution Date. Interest payable but not paid to
Certificateholders on an Interest Payment Date will be payable on the next
Interest Payment Date together with, to the extent lawfully payable, interest on
such amount at the applicable Certificate Rate to the extent described under
"Description of
S-26
<PAGE>
the Certificates--Distributions from the Collection Account; Reserve Fund" and
"--Distributions" herein. Interest payments on the Offered Certificates will be
derived from Certificateholder Non-Principal Collections for the related
Collection Period, withdrawals, if any, from the Reserve Fund, Investment
Proceeds, if any, and, under certain circumstances, collections allocable to the
Seller.
[Interest on the outstanding principal balance of the Class A
Certificates will accrue for each Interest Period at a rate per annum equal to
the lesser of (i) [LIBOR] (calculated as described below) plus ____% per annum
and (ii) the related Net Receivables Rate (as described below) (the "Class A
Certificate Rate"). Interest on the outstanding principal balance of the Class B
Certificates will accrue for each Interest Period at a rate per annum equal to
the lesser of (i) [LIBOR] plus ____% per annum and (ii) the related Net
Receivables Rate (the "Class B Certificate Rate"). Interest on the outstanding
principal balance of the Class C Certificates will accrue for each Interest
Period at a rate per annum equal to the lesser of (i) [LIBOR] plus ____% per
annum and (ii) the related Net Receivables Rate (the "Class C Certificate Rate"
and, together with the Class A Certificate Rate and the Class B Certificate
Rate, the "Certificate Rates"). The "Net Receivables Rate" with respect to each
Distribution Date immediately following an Interest Period is (i) the weighted
average of the interest rates borne by the Receivables during the second
Collection Period preceding such Distribution Date (interest payments on the
Receivables at such rates will be due and payable in the Collection Period
preceding such Distribution Date), plus (ii) the product of (x) the Monthly
Payment Rate for the Collection Period preceding such Distribution Date, (y) the
Discount Factor for such Distribution Date and (z) twelve, less (iii) 2% per
annum, unless the Servicing Fee has been waived for such Collection Period. The
"Monthly Payment Rate" for a Collection Period is the percentage equivalent of a
fraction, the numerator of which is the Principal Collections (without deducting
therefrom the discount portion) collected during such Collection Period and the
denominator of which is the average daily aggregate principal balance of the
Receivables (without deducting therefrom the discount portion) for such
Collection Period.]
Whenever the applicable Certificate Rate for a class of Certificates
for any Distribution Date is based on the Net Receivables Rate, the "Carry-Over
Amount" for such class, which equals the excess of (a) Class A Monthly Interest,
Class B Monthly Interest or Class C Monthly Interest, as applicable, for such
Distribution Date determined as if the applicable Certificate Rate were based on
the LIBOR formula set forth below over (b) the actual Class A Monthly Interest,
Class B Monthly Interest or Class C Monthly Interest, as applicable, for such
Distribution Date, will be paid to the holders of the applicable class of
Certificates on subsequent Interest Payment Dates to the extent available from
Non-Principal Collections and Investment Proceeds after distribution of the
Monthly Interest for such Interest Payment Date. The ratings of the Offered
Certificates do not address the likelihood of the payment of any Carry-Over
Amount.
The Class B Certificates will be subordinated to fund payments of
interest (and principal) on the Class A Certificates. See "Description of the
Certificates--Distributions" herein.
"Adjustment Date" shall mean, with respect to any Interest Period, the
second London Business Day prior to the Interest Payment Date preceding such
Interest Period (and with respect to an Interest Period commencing on an
Interest Payment Date, the second London Business Day preceding such Interest
Payment Date); provided that with respect to 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.
["LIBOR" shall mean, with respect to 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
on Telerate Page 3750 as of approximately 11:00 A.M., London time, on such date
of calculation as determined by the Trustee. If at least two such 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 such
offered rates. If fewer than two such quotations appear, LIBOR with respect to
such Interest Period will be determined at approximately 11:00 A.M., London
time, on such 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 and in a principal
S-27
<PAGE>
amount equal to an amount of not less than US $1,000,000 and that is
representative for a single transaction in such market at such time. The Trustee
will request the principal London office of each of such banks to provide a
quotation of its rate. If at least two such quotations are provided, LIBOR will
be the arithmetic mean (rounded upwards as aforesaid) of such quotations. If
fewer than two quotations are provided, LIBOR with respect to such Interest
Period will be the arithmetic mean (rounded upwards as aforesaid) of the rates
quoted at approximately 11:00 A.M., New York City time, on such Adjustment Date
by three major banks in New York, New York selected by the Trustee 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 such market at such time; provided,
however, that if the banks selected as aforesaid are not quoting as mentioned in
this sentence, 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" shall equal one
month.]
["London Business Day" shall mean any business day on which dealings in
deposits in United States dollars are transacted in the London interbank
market.]
Principal
No principal payments will be made on your Certificates until the
Expected Final Payment Date or, upon the occurrence of an Early Amortization
Event, until the first Distribution Date following such event. On each
Distribution Date with respect to the Revolving Period, Principal Collections
allocable to your Series, subject to certain limitations, will either be (a)
allocated to the Excess Funding Account as described herein, or (b) paid to the
Seller. See "--Allocation Percentages" and "--Distributions from the Collection
Account; Reserve Fund--Principal Collections" below.
Unless and until an Early Amortization Event shall have occurred and
until the outstanding principal balance of the Certificates is paid in full, on
each Distribution Date with respect to the Accumulation Period, Principal
Collections allocable to your Series monthly in an amount up to the Controlled
Distribution Amount for each such Distribution Date will be deposited in the
Principal Funding Account. The funds on deposit in the Principal Funding Account
(including any amounts deposited therein from the Excess Funding Account) will
be used to pay the outstanding principal balance of the Certificates on the
Expected Final Payment Date. If on such date the amount in the Principal Funding
Account is less than the outstanding principal balance of the Certificates, the
amounts in such accounts will nevertheless be distributed to Certificateholders
on such date, the Early Amortization Period will commence and on each
Distribution Date thereafter the Certificateholders will receive distributions
of Monthly Principal and Monthly Interest until the outstanding principal
balance of the Certificates has been paid in full or the Termination Date has
occurred.
It is expected that the final principal payment with respect to the
Offered Certificates will be made on the Expected Final Payment Date, but the
principal of the Certificates may be paid earlier or later. See "Risk Factors"
and "Maturity and Principal Payment Considerations" herein and "Risk Factors" in
the Prospectus.
The Class B Certificates will be subordinated to fund payments of
principal (and interest) on the Class A Certificates. See "Description of the
Certificates--Distributions" herein.
Allocation Percentages
Allocation to Your Series. The Servicer will allocate amounts to your
Series for each Collection Period as follows:
(i) Non-Principal Collections and the Defaulted Amount will be
allocated to your Series based on the Floating Allocation Percentage;
(ii) during the Revolving Period, Principal Collections will
be allocated to your Series based on the Floating Allocation Percentage
(subject to the following sentence);
S-28
<PAGE>
(iii) during the Accumulation Period and any Early
Amortization Period, Principal Collections will be allocated to your
Series based on the Principal Allocation Percentage (subject to the
following sentence); and
(iv) Miscellaneous Payments will at all times be allocated to
your Series on the basis of the Series [ ] Allocation Percentage.
If the sum of (i) the sum of the floating allocation percentages
(including the Floating Allocation Percentage, if applicable) for each Series in
its revolving period and (ii) 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 such Collection Period will be allocated among the
Series pari passu and pro rata on the basis of such 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.
"Class A Initial Invested Amount" for any date means the initial
principal amount of the Class A Certificates, which is $__________, plus (x) the
product of (i) the Class A Percentage multiplied by (ii) the amount of any
withdrawals from the Excess Funding Account in connection with an increase in
Pool Balance since the Closing Date, minus (y) the product of (i) the Class A
Percentage multiplied by (ii) the amount of any additions to the Excess Funding
Account in connection with a reduction in the Pool Balance since the Closing
Date.
"Class A Invested Amount" for any date means an amount equal to the sum
of (a)(i) the Class A Initial Invested Amount, minus (ii) the aggregate amount
of principal payments made to Class A Certificateholders prior to such date,
minus (iii) the aggregate amount of all unreimbursed Class A Investor
Charge-Offs.
"Class A Percentage" means the percentage equivalent of a fraction 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 Initial Invested Amount" for any date means the initial
principal amount of the Class B Certificates, which is $__________, plus (x) the
product of (i) the Class B Percentage multiplied by (ii) the amount of any
withdrawals from the Excess Funding Account in connection with an increase in
Pool Balance since the Closing Date, minus (y) the product of (i) the Class B
Percentage multiplied by (ii) the amount of any additions to the Excess Funding
Account in connection with a reduction in the Pool Balance since the Closing
Date.
"Class B Invested Amount" for any date means an amount equal to the sum
of (a)(i) the Class B Initial Invested Amount, minus (ii) the aggregate amount
of principal payments made to Class B Certificateholders prior to such date,
minus (iii) the aggregate amount of all unreimbursed Class B Investor
Charge-Offs.
"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 Initial Invested Amount" for any date means the initial
principal amount of the Class C Certificates, which is $__________, plus (x) the
product of (i) the Class C Percentage multiplied by (ii) the amount of any
withdrawals from the Excess Funding Account in connection with an increase in
Pool Balance since the Closing Date, minus (y) the product of (i) the Class C
Percentage multiplied by (ii) the amount of any additions to the Excess Funding
Account in connection with a reduction in the Pool Balance since the Closing
Date.
"Class C Invested Amount" for any date means an amount equal to the sum
of (a) (i) the Class C Initial Invested Amount, minus (ii) the aggregate amount
of principal payments made to Class C
S-29
<PAGE>
Certificateholders prior to such date, minus (iii) the aggregate amount of all
unreimbursed Class C Investor Charge-Offs.
"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.
"Floating Allocation Percentage" for any Collection Period means the
percentage equivalent (which shall never exceed 100%) of a fraction, the
numerator of which is the Invested Amount as of the last day of the immediately
preceding Collection Period and the denominator of which is the Pool Balance as
of such last day; provided, however, that, with respect to the first Collection
Period, the Floating Allocation Percentage shall 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 Cut-Off Date.
"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.
"Miscellaneous Payments" for any Collection Period means the sum of (a)
Adjustment Payments and Transfer Deposit Amounts received with respect to such
Collection Period and (b) Unallocated Principal Collections on such Distribution
Date available to be treated as Miscellaneous Payments as described below under
"Description of the Certificates--Allocations Among Series" in the Prospectus.
"Principal Allocation Percentage" for any Collection Period means the
percentage equivalent (which shall 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 Collection Period; provided, however, that with
respect to that portion of any Collection Period that falls after the date on
which any Early Amortization Event occurs (unless, in limited circumstances with
respect to the addition of Accounts, such Early Amortization Event shall have
been cured), the Principal Allocation Percentage shall be reset using the Pool
Balance as of the close of business on the date on which such Early Amortization
Event shall have occurred and Principal Collections shall be allocated for such
portion of such Collection Period using such reset Principal Allocation
Percentage.
"Series [ ] Allocation Percentage" means, for any Collection Period,
the percentage equivalent of a fraction, the numerator of which is the Invested
Amount as of the last day of the immediately preceding Collection Period and the
denominator of which is the Trust Invested Amount as of such last day.
"Trust Available Subordinated Amount" means the sum of the Available
Subordinated Amount and the aggregate available subordinated amounts for all
other outstanding Series.
"Trust Invested Amount" means, with respect to any Collection Period,
the sum of the Invested Amount and the invested amounts for all other
outstanding Series.
The Floating Allocation Percentage and the Principal Allocation
Percentage will be adjusted for any Collection Period in which Additional
Accounts are designated to reflect the additional Receivables added to the
Trust.
Discount Factor
As of the Cut-Off Date, the Discount Factor was ___%. The Discount
Factor is subject to adjustment as described in "Description of the
Certificates-Discount Factor" in the Prospectus.
Allocation of Collections; Limited Subordination of Seller's Interest
In respect of any date on which collections are made, the Servicer will
distribute directly to the Seller an amount equal to (a) the Excess Seller's
Percentage for the related Collection Period of Non-Principal
S-30
<PAGE>
Collections for such date and (b) the Excess Seller's Percentage for the related
Collection Period of Principal Collections for such date, if the Seller's
Participation Amount (determined after giving effect to any Principal
Receivables transferred to the Trust on such date) exceeds the Trust Available
Subordinated 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 such Determination Date). In
addition, during the Revolving Period, subject to certain limitations, the
Servicer will distribute directly to the Seller in respect of each such date an
amount equal to the Available Seller's Principal Collections for such date, if
the Seller's Participation Amount (determined after giving effect to any
Principal Receivables transferred to the Trust on such date) exceeds the Trust
Available Subordinated 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 such date).
"Available Seller's Collections" for any date means the sum of
(a) the Available Seller's Non-Principal Collections for such date and
(b) the Available Seller's Principal Collections for such date;
provided, however, that the Available Seller's Collections will be zero
for any Collection Period with respect to which the Available
Subordinated Amount is zero on the Determination Date immediately
following the end of such Collection Period.
"Available Seller's Non-Principal Collections" for any date
means an amount equal to the result obtained by multiplying (a) the
excess of (i) the Seller's Percentage for the related Collection Period
over (ii) the Excess Seller's Percentage for such Collection Period by
(b) Non-Principal Collections for such date.
"Available Seller's Principal Collections" for any date means
an amount equal to the product of (a) the excess of (i) the Seller's
Percentage for the related Collection Period over (ii) the Excess
Seller's Percentage for such Collection Period and (b) Principal
Collections for such date.
"Excess Seller's Percentage" for any Collection Period means a
percentage (which percentage shall never be less than 0% nor more than
100%) equal to (a) when used with respect to Non-Principal Collections
and Defaulted Receivables, 100% minus the sum of (i) the aggregate of
the floating allocation percentages for each outstanding Series with
respect to such Collection Period and (ii) 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 such Collection Period (after giving
effect to the allocations, distributions, withdrawals and deposits to
be made on the Distribution Date immediately following such
Determination Date), and the denominator of which is the Pool Balance
as of the last day of the immediately preceding Collection Period and
(b) when used with respect to Principal Collections, 100% minus the sum
of (i) the sum of the aggregate of the principal allocation percentages
for each outstanding Series in its amortization, accumulation or early
amortization period with respect to such Collection Period and the
aggregate of the floating allocation percentages for each outstanding
Series in its revolving period with respect to such Collection Period
and (ii) the percentage described in clause (a) (ii) above for such
Collection Period.
"Seller's Participation Amount" for any date means an amount
equal to the Pool Balance on such date minus the aggregate of invested
amounts for all outstanding Series on such date minus certain
adjustments by the Servicer to Receivables described in the first
sentence of the last paragraph under "Description of the
Certificates--Defaulted Receivables and Recoveries" in the Prospectus.
"Seller's Percentage" means 100% minus (a) when used with
respect to Non-Principal Collections and Defaulted Receivables, the
aggregate of the floating allocation percentages for each outstanding
Series (including the Certificates), and (b) when used with respect to
Principal Collections, the sum of (i) the aggregate of the floating
allocation percentages for each outstanding Series (including the
Certificates, if applicable) in its revolving period and (ii) the
aggregate of the principal allocation percentages for each outstanding
Series (including the Certificates, if applicable) in its amortization,
accumulation or early amortization period, but in each case shall not
be less than 0%.
S-31
<PAGE>
Deficiency Amount. On each Determination Date, the Servicer will
determine for your Series the amount (the "Deficiency Amount"), if any, by which
(a) the sum of (i) Monthly Interest for the following Distribution Date, (ii)
any Monthly Interest for any prior Distribution Dates required to be but not
deposited in the Interest Funding Account on a prior Distribution Date, (iii)
Additional Interest, if any, for such 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, (iv) the Monthly Servicing Fee for such
Distribution Date, (v) the Investor Default Amount for such Distribution Date,
and (vi) the amount of any Adjustment Payment allocated to your Series for such
Distribution Date that has not been deposited in the Collection Account as
required under the Pooling and Servicing Agreement exceeds (b) the sum of
Investor Non-Principal Collections for such Distribution Date, plus any
Investment Proceeds, if any, with respect to such Distribution Date. The lesser
of the Deficiency Amount and the Available Subordinated Amount is the "Required
Subordination Draw Amount."
Monthly Interest. "Monthly Interest" for any Distribution Date shall
mean an amount equal to the sum of the Class A Monthly Interest, the Class B
Monthly Interest and the Class C Monthly Interest.
"Class A Monthly Interest" on any Distribution Date shall be
an amount equal to the product of (i) the Class A Certificate Rate,
(ii) 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
(iii) (A) 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 such preceding Distribution Date, if any) or (B)
with respect to the first Distribution Date, the initial principal
amount of the Class A Certificates.
"Class B Monthly Interest" on any Distribution Date shall be
an amount equal to the product of (i) the Class B Certificate Rate,
(ii) 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
(iii) (A) 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 such preceding Distribution Date, if any) or (B)
with respect to the first Distribution Date, the initial principal
amount of the Class B Certificates.
"Class C Monthly Interest" on any Distribution Date shall be
an amount equal to the product of (i) the Class C Certificate Rate,
(ii) 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
(iii) (A) 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 such preceding Distribution Date, if any) or (B)
with respect to the first Distribution Date, the initial principal
amount of the Class C Certificates.
Additional Interest. "Additional Interest" for any Distribution Date
shall mean an amount equal to the sum of the Class A Additional Interest, the
Class B Additional Interest and the Class C Additional Interest.
On the Determination Date preceding each Interest Payment Date, the
Servicer shall determine the excess, if any (the "Class A Interest Shortfall"),
of (x) the sum of (i) the Class A Monthly Interest for the Interest Period
applicable to such Interest Payment Date plus (ii) 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 with respect
to the first Interest Payment Date, after the Closing Date) over (y) the amount
which will be available to be paid to the Class A Certificateholders from the
Interest Funding Account on such Interest Payment Date in respect thereof. If,
as of any Interest Payment Date, an amount covering any Class A Interest
Shortfall for any prior Distribution Date shall not have been deposited into the
Interest Funding Account, then an additional amount ("Class A Additional
Interest") equal to the product of (i) the Class A Certificate Rate, (ii) a
fraction the numerator of which is the actual number of days in the period from
and including such prior Interest Payment Date to but excluding the current
Interest Payment Date and the
S-32
<PAGE>
denominator of which is 360, and (iii) such Class A Interest Shortfall (or the
portion thereof which has not been paid or deposited in the Interest Funding
Account) shall be payable as described herein with respect to the Class A
Certificates. See "--Distributions from the Collection Account; Reserve Fund --
Non-Principal Collections" below. Class A Additional Interest shall be payable
to the Interest Funding Account or distributed to Class A Certificateholders
only to the extent permitted by applicable law.
On the Determination Date preceding each Interest Payment Date, the
Servicer shall determine the excess, if any (the "Class B Interest Shortfall"),
of (x) the sum of (i) the Class B Monthly Interest for the Interest Period
applicable to such Interest Payment Date plus (ii) 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 with respect
to the first Interest Payment Date, after the Closing Date) over (y) the amount
which will be available to be paid to the Class B Certificateholders from the
Interest Funding Account on such Interest Payment Date in respect thereof. If,
as of any Interest Payment Date, an amount covering any Class B Interest
Shortfall for any prior Distribution Date shall not have been deposited into the
Interest Funding Account, then an additional amount ("Class B Additional
Interest") equal to the product of (i) the Class B Certificate Rate, (ii) a
fraction the numerator of which is the actual number of days in the period from
and including such prior Interest Payment Date to but excluding the current
Interest Payment Date and the denominator of which is 360, and (iii) such Class
B Interest Shortfall (or the portion thereof which has not been paid or
deposited in the Interest Funding Account) shall be payable as described herein
with respect to the Class B Certificates. See "--Distributions from the
Collection Account; Reserve Fund -- Non-Principal Collections" below. Class B
Additional Interest shall be payable to the Interest Funding Account or
distributed to Class B Certificateholders only to the extent permitted by
applicable law.
On the Determination Date preceding each Interest Payment Date, the
Servicer shall determine the excess, if any (the "Class C Interest Shortfall"),
of (x) the sum of (i) the Class C Monthly Interest for the Interest Period
applicable to such Interest Payment Date plus (ii) 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 with respect
to the first Interest Payment Date, after the Closing Date) over (y) the amount
which will be available to be paid to the Class C Certificateholders from the
Interest Funding Account on such Interest Payment Date in respect thereof. If,
as of any Interest Payment Date, an amount covering any Class C Interest
Shortfall for any prior Distribution Date shall not have been deposited into the
Interest Funding Account, then an additional amount ("Class C Additional
Interest") equal to the product of (i) the Class C Certificate Rate, (ii) a
fraction the numerator of which is the actual number of days in the period from
and including such prior Interest Payment Date to but excluding the current
Interest Payment Date and the denominator of which is 360, and (iii) such Class
C Interest Shortfall (or the portion thereof which has not been paid or
deposited in the Interest Funding Account) shall be payable as described herein
with respect to the Class C Certificates. See "--Distributions from the
Collection Account; Reserve Fund -- Non-Principal Collections" below. Class C
Additional Interest shall be payable to the Interest Funding Account or
distributed to Class C Certificateholders only to the extent permitted by
applicable law.
Available Subordinated Amount. The "Available Subordinated Amount" for
a Determination Date is equal to (i) the result of (x) a fraction, the numerator
of which is the Invested Amount on the last day of the immediately preceding
Collection Period (or with respect to the first Determination Date, the Invested
Amount on the Closing Date), and the denominator of which is the Pool Balance on
such last day multiplied by (y) the Trust Incremental Subordinated Amount, minus
(ii) with certain limitations, the aggregate of the Required Subordination Draw
Amounts for all preceding Distribution Dates.
"Incremental Default Amount" on any Determination Date equals (a) the
Overconcentration Default Amount on such Determination Date minus (b) the full
amount of any Defaulted Receivables included in the definition of
Overconcentration Default Amount which are subject to a reassignment or
assignment to the Seller or the Servicer in accordance with the terms of the
Pooling and Servicing Agreement (but not less than zero); provided, however,
that, if certain events of bankruptcy, insolvency or receivership have occurred
with respect to the Seller, the amount of such Defaulted Receivables which are
subject to reassignment to the Seller will not
S-33
<PAGE>
be so subtracted and, if certain events of bankruptcy, insolvency or
receivership have occurred with respect to the Servicer, the amount of such
Defaulted Receivables which are subject to assignment to the Servicer will not
be so subtracted.
"Overconcentration Default Amount" on any Determination Date means the
lesser of (a) the aggregate amount of Receivables which became Defaulted
Receivables during such Collection Period and which arose in an Account that is
included in the calculation of the Overconcentration Amount and (b) the
Overconcentration Amount on such Determination Date.
"Trust Incremental Subordinated Amount" on any Determination Date
equals the excess, if any, of (a) the Overconcentration Amount on such
Determination Date over (b) the Incremental Default Amount for such
Determination Date.
Distributions from the Collection Account; Reserve Fund
Non-Principal Collections. On each Distribution Date, the Trustee will
apply Certificateholder Non-Principal Collections and Investment Proceeds, if
any, deposited into the Collection Account in respect the related Collection
Period to make the following distributions in the following order of priority:
(i) an amount equal to Class A Monthly Interest for such
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 such prior Distribution Dates (plus, but only
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), shall be
deposited to the Interest Funding Account;
(ii) an amount equal to Class B Monthly Interest for such
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 such prior Distribution Dates (plus, but only
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), shall be
deposited to the Interest Funding Account;
(iii) an amount equal to Class C Monthly Interest for such
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 such prior Distribution Dates (plus, but only
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), shall be
deposited to the Interest Funding Account;
(iv) an amount equal to the Monthly Servicing Fee for such
Distribution Date shall be distributed to the Servicer (unless such
amount has been netted against deposits to the Collection Account as
described above or waived as described below);
(v) an amount equal to the Reserve Fund Deposit Amount, if
any, for such Distribution Date shall be deposited in the Reserve Fund;
(vi) an amount equal to the Investor Default Amount, if any,
for such Distribution Date shall be treated as a portion of Available
Certificateholder Principal Collections for such Distribution Date;
S-34
<PAGE>
(vii) an amount required to reimburse unreimbursed Class A
Investor Charge-Offs, Class B Investor Charge-Offs and Class C Investor
Charge-Offs (as described below) shall be treated as a portion of
Investor Principal Collections for such Distribution Date;
(viii) any Class A Carry-over Amount, Class B Carry-over
Amount or Class C Carry-over Amount not previously distributed shall be
deposited to the Interest Funding Account; and
(ix) the balance, if any, shall constitute "Excess Servicing".
If Certificateholder Non-Principal Collections and Investment Proceeds
are not sufficient to make the entire distributions required by clauses (i),
(ii), (iii), (iv) and (vi), the Servicer will direct the Trustee to withdraw
funds from the Reserve Fund and apply such funds, to the extent available, to
complete the distributions pursuant to such clauses in the numerical order
thereof.
If there is a Required Subordination Draw Amount for such Distribution
Date, the Servicer will apply or direct the Trustee to apply the Available
Seller's Collections on deposit in the Collection Account on such 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 (i) - (iv) and
(vi) above and that have not been made through the application of funds from the
Reserve Fund described above. Any such Available Seller's Collections remaining
after the application thereof pursuant to the preceding sentence will be treated
as a portion of Available Certificateholder Principal Collections for such
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 such Distribution Date, the Available Subordinated Amount will
be further reduced in accordance with clause (ii) of the definition of Available
Subordinated Amount in an amount equal to such Available Seller's Collections.
If for such 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 such Distribution Date, then such Available Seller's
Collections will be allocated to your Series and the other Series pro rata on
the basis of such required subordination draw amounts (including the Required
Subordination Draw Amount).
"Certificateholder Non-Principal Collections" for any
Distribution Date means the portion of Non-Principal Collections for
the related Collection Period allocated to your Series as described
under "Description of the Certificates--Allocation
Percentages--Allocation to Your Series" herein.
"Excess Servicing" for any Distribution Date means the amount
described in clause (ix) above.
"Investment Proceeds" for any Distribution Date means an
amount equal to the sum of (a) the net investment earnings credited to
the Collection Account on the related Determination Date with respect
to funds held in the Interest Funding Account, the Principal Funding
Account, the Excess Funding Account and the Reserve Fund and (b) the
Series [ ] Allocation Percentage of net investment earnings credited to
the Collection Account on the related Determination Date with respect
to funds held in the Collection Account.
Reserve Fund. An Eligible Deposit Account will be established and
maintained in the name of the Trustee for the benefit of your Series (the
"Reserve Fund"). On the Closing Date, the Seller will cause to be deposited with
the Trustee, and the Trustee will deposit in the Reserve Fund, funds in an
amount equal to [ ]% of the aggregate initial principal balance of the
Certificates of your Series. The "Reserve Fund Required Amount" means an amount
which upon any Distribution Date will equal the product of [ ]% and the
aggregate outstanding balance of the Certificates of your Series as of such
Distribution Date (after giving effect to any change therein on such
Distribution Date). 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 shall deposit any remaining Certificateholder
Non-Principal Collections and Investment Proceeds (to the extent available
pursuant to clause (v) under "--Non-Principal Collections" above) for the
related Collection Period into the Reserve Fund until the amount in the
S-35
<PAGE>
Reserve Fund is equal to such Reserve Fund Required Amount. The "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. 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 with respect to the Collection Period immediately preceding
such 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, shall be distributed to the Seller.
Principal Collections. On each Distribution Date, the Servicer will
allocate Available Certificateholder Principal Collections as follows:
(a) for each Distribution Date with respect to the Revolving
Period, all Available Certificateholder Principal Collections will be
allocated, first, if (i) the Pool Balance at the end of the preceding
Collection Period is less than the Pool Balance at the end of the
second preceding Collection Period and (ii) the Pool Balance at the end
of the preceding Collection Period is less than the Required
Participation Amount for such 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 such 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
such 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; and
(b) for each Distribution Date (x) with respect to the
Accumulation Period or (y) any Early Amortization Period (if a
responsible officer of the Trustee has actual knowledge thereof): (i)
an amount equal to Monthly Principal for such Distribution Date will be
deposited to the Principal Funding Account; and (ii) during the
Accumulation Period, the balance, if any, will be allocated to Excess
Principal Collections.
In the event that 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.
"Available Certificateholder Principal Collections" for any
Distribution Date means the sum of (a) the product of (i) the Floating
Allocation Percentage, with respect to the Revolving Period, or the
Principal Allocation Percentage, with respect to the Accumulation
Period or any Early Amortization Period, for the related Collection
Period (or any partial Collection Period which occurs as the first
Collection Period during an Early Amortization Period) and (ii)
Principal Collections for the related Collection Period (or any partial
Collection Period which occurs as the first Collection Period during an
Early Amortization Period), (b) the amount, if any, of Non-Principal
Collections, funds in the Reserve Fund as described above, Excess
Servicing and Available Seller's Collections, allocated in each case to
cover the Investor Default Amount or reimburse Investor Charge-Offs and
(c) the Series [ ] Allocation Percentage of Miscellaneous Payments with
respect to such Distribution Date.
S-36
<PAGE>
"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 therein
on such 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 (i) the product of the Controlled Amortization
Amount and the number of Distribution Dates with respect to the
Accumulation Period through and including such Distribution Date over
(ii) 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 such accounts on such Distribution Date.
"Monthly Principal" with respect to any Distribution Date
relating to the Accumulation Period or any Early Amortization Period
will equal the Available Certificateholder Principal Collections for
such Distribution Date; provided, however, that for each Distribution
Date with respect to the Accumulation Period, Monthly Principal may not
exceed the Controlled Distribution Amount for such Distribution Date;
and provided, further, that Monthly Principal will not exceed the
aggregate outstanding principal balances of the Certificates.
Interest Funding Account
The Servicer will establish and maintain in the name of the Trustee, 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 such
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 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 such Distribution Date.
Principal Funding Account
The Servicer will establish and maintain in the name of the Trustee, 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 with respect to the required addition of Accounts, such
Early Amortization Event shall have been cured), the Principal Funding Account
Balance (as defined below) shall 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 such
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 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."
S-37
<PAGE>
Excess Funding Account
The Servicer will establish and maintain an Eligible Deposit Account in
the name of the Trustee, on behalf of the Trust, for the benefit of your Series
(the "Excess Funding Account"). On each Distribution Date during the Revolving
Period, if (a) the Pool Balance at the end of the preceding Collection Period is
less than the Pool Balance at the end of the second preceding Collection Period
and (b) the Pool Balance at the end of the preceding Collection Period is less
than the Required Participation Amount for such 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 such Distribution Date), then certain Available Certificateholder Principal
Collections will be deposited in the Excess Funding Account on such Distribution
Date. If (i) on any Determination Date during the Revolving Period there are any
funds in the Excess Funding Account and (ii) the Pool Balance at the end of the
preceding Collection Period is greater than the Pool Balance at the end of the
second preceding Collection Period, then, the Invested Amount and the invested
amounts (but, in each case, not in excess of the initial principal amount of
such Series) for all other outstanding Series that provide for an excess funding
account or similar arrangement and are in their revolving periods shall be
increased such that, after giving effect to such increases, the Required
Participation Amount is at least equal to the Pool Balance. On such
Determination Date, the Servicer shall notify the Trustee of the amount, if any,
of such increase in the Invested Amount and the Trustee shall 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 such increase in the Invested Amount. To the extent that 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 such other Series' invested amount,
as applicable, shall be reduced by the amount of such payment. In addition, any
increase in the Invested Amount is subject to the condition that after giving
effect to such increase the Pool Balance equals or exceeds the sum of (A) the
Required Participation Amount (exclusive of the amount in clause (b) of the
definition thereof), (B) the sum of the Available Subordinated Amount and the
sum of the required subordinated amounts for all other Series (or, if such other
Series shall have no required subordinated amounts, the available subordinated
amounts with respect to such Series) and (C) the sum of any subordinated amounts
supporting any Enhancement for all other Series. Under certain circumstances,
such 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 such 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) 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 at the direction of the Servicer in investments rated in the highest
short-term category of each Rating Agency or in such other investments that are
acceptable to each Rating Agency. Such 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 herein. 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 shall instruct the Trustee to apply
S-38
<PAGE>
the funds on deposit in the Interest Funding Account, the Principal Funding
Account and the Excess Funding Account and shall instruct the Trustee 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
shall be distributed in the following order of priority:
(i) to the Class A Certificateholders, an amount equal
to (x) the sum of Class A Monthly Interest for such
Distribution Date, plus the Class A Monthly Interest for any
prior Distribution Date, if any, occurring after the
immediately preceding Interest Payment Date (or with respect
to the first Interest Payment Date, after the Closing Date),
plus (y) any amount determined on any prior Interest Payment
Date pursuant to clause (x) that was not distributed on any
prior Interest Payment Date, plus (z) 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;
(ii) to the Class B Certificateholders, an amount equal
to (x) the sum of Class B Monthly Interest for such
Distribution Date, plus the Class B Monthly Interest for any
prior Distribution Date, if any, occurring after the
immediately preceding Interest Payment Date (or with respect
to the first Interest Payment Date, after the Closing Date),
plus (y) any amount determined on any prior Interest Payment
Date pursuant to clause (x) that was not distributed on any
prior Interest Payment Date, plus (z) 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;
(iii) to the Class C Certificateholders, an amount equal
to (x) the sum of Class C Monthly Interest for such
Distribution Date, plus the Class C Monthly Interest for any
prior Distribution Date, if any, occurring after the
immediately preceding Interest Payment Date (or with respect
to the first Interest Payment Date, after the Closing Date),
plus (y) any amount determined on any prior Interest Payment
Date pursuant to clause (x) that was not distributed on any
prior Interest Payment Date, plus (z) 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;
(iv) to the Class A Certificateholders, the sum of any
Class A Carryover Amount for such Interest Payment Date plus
any Class A Carry-over Amount for each other Distribution
Date, if any, occurring after the immediately preceding
Interest Payment Date (or with respect to the first Interest
Payment Date, after the Closing Date);
(v) to the Class B Certificateholders, the sum of any
Class B Carryover Amount for such Interest Payment Date plus
any Class B Carry-over Amount for each other Distribution
Date, if any, occurring after the immediately preceding
Interest Payment Date (or with respect to the first Interest
Payment Date, after the Closing Date); and
(vi) to the Class C Certificateholders, the sum of any
Class C Carryover Amount for such Interest Payment Date plus
any Class C Carry-over
S-39
<PAGE>
Amount for each other Distribution Date, if any, occurring
after the immediately preceding Interest Payment Date (or with
respect to the first Interest Payment Date, after the Closing
Date).
(b) On each Distribution Date during an Early Amortization
Period (if a responsible officer of the Trustee has actual knowledge of
such 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 paragraph (a) above) any amounts in the Interest
Funding Account shall be distributed to the Certificateholders in the
following order of priority: (A) first, to the Class A
Certificateholders until the outstanding principal balance of the Class
A Certificates has been reduced to zero; (B) second, to the Class B
Certificateholders until the outstanding principal balance of the Class
B Certificates has been reduced to zero; and (C) 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 such date
shall not exceed the excess of (x) the sum of the outstanding principal
balance of the Class A, Class B and Class C Certificates, as
applicable, over (y) the sum of unreimbursed Class A, Class B and Class
C Investor Charge-Offs, each on such date.
Distributions on the Certificates 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, with respect to the
Offered Certificates) at the close of business on the day preceding such
Distribution Date (or, if Definitive Certificates are issued, on the last day of
the preceding calendar month) (each a "Record Date"). However, the final
distribution on the Certificates will be made only upon presentation and
surrender of the Certificates.
Investor Default Amount
A portion of the Defaulted Amount equal to the product of (x) the
Defaulted Amount for such Collection Period and (y) the Floating Allocation
Percentage for such Collection Period will be allocated to the
Certificateholders. The portion of the Defaulted Amount allocated to your Series
is referred to as the "Investor Default Amount." See "Description of the
Certificates--Defaulted Receivables and Recoveries" in the Prospectus for
information regarding the Defaulted Amount.
Investor Charge-Offs
If on any Distribution Date (after giving effect to the allocations,
distributions, withdrawals and deposits to be made on such Distribution Date),
(i) the Available Subordinated Amount for the related Determination Date is
zero, (ii) the balance of the Reserve Fund on such Distribution Date is zero and
(iii) the Deficiency Amount is greater than zero, then the Class C Invested
Amount will be reduced by the amount of the excess of such Deficiency Amount
over any remaining Available Subordinated Amount on such Determination Date, but
not by more than the Investor Default Amount for the related Collection Period
(a "Class C Investor Charge-Off"). In the event that any such reduction of the
Class C Invested Amount would cause the Class C Invested Amount to be a negative
number, the Class C Invested Amount will be maintained at or reduced to zero,
and the Class B Invested Amount will be reduced by the aggregate amount of such
excess, but not more than the remaining Investor Default Amount for such
Collection Period (a "Class B Investor Charge-Off"). In the event that any such
reduction of the Class B Invested Amount would cause the Class B Invested Amount
to be a negative number, the Class B Invested Amount will be maintained at or
reduced to zero, and the Class A Invested Amount will be reduced by the
aggregate amount of such excess, but not more than the remaining Investor
Default Amount for such Collection Period (a "Class A Investor Charge-Off").
Class A Investor Charge-Offs, Class B Investor Charge-Offs and Class C Investor
Charge-Offs will thereafter be reimbursed (in that order) and the Class A
Invested Amount, Class B Invested Amount and Class C Invested Amount increased
S-40
<PAGE>
(in that order) (but not by an amount in excess of the aggregate unreimbursed
Class A Investor Charge-Offs, Class B Investor Charge-Offs and Class C Investor
Charge-Offs, as the case may be) on any Distribution Date by the sum of (a) the
Series [ ] Allocation Percentage of Miscellaneous Payments with respect to such
Distribution Date and (b) the amount of Excess Servicing allocated and available
for that purpose as described above.
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, subject to certain conditions, to repurchase the interest of
your Series in the Trust. The purchase price will be equal to such outstanding
Invested Amount plus accrued and unpaid interest on the Certificates 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 such option. Following
any such purchase, the Certificateholders of your Series will have no further
rights with respect 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 such purchase price, payments will continue to
be made to your Series as described under "--Distributions" above.
Early Amortization Events
Commencing on the first Distribution Date following the Collection
Period in which an Early Amortization Event has occurred, Principal Collections
allocable to the your Series will no longer be deposited in the Excess Funding
Account or paid to the Seller but instead will be distributed to
Certificateholders monthly on each Distribution Date, except as described below,
and the Controlled Distribution Amount will no longer apply to distributions of
principal on the Certificates. For purposes of your Series, the "Early
Amortization Events" consist of (i) the "Early Amortization Events" which are
set forth in the Pooling and Servicing Agreement and (ii) the additional "Early
Amortization Events" which are set forth in the Supplement for your Series (the
"Additional Early Amortization Events"). 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 set forth in the Supplement for your Series).
With respect to your Series and every other Series, "Early Amortization
Event" includes any of the following events:
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 such Receivables pursuant to the Pooling and
Servicing Agreement;
2. failure on the part of the Seller, the Servicer or DFS, as
applicable, (i) 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 such payment or deposit is required to be made therein;
or (ii) 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 such failure); (iii) 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 shall not be deemed to have
occurred if the Seller shall have repurchased the related Receivables
or, if applicable, all the Receivables during such period in accordance
with the provisions of the Pooling and Servicing Agreement; or (iv) 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
S-41
<PAGE>
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 such 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 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); provided, however, that an Early Amortization Event shall
not be deemed to occur thereunder if the Seller has repurchased the
related Receivables or all such Receivables, if applicable, during such
period in accordance with the provisions of the Pooling and Servicing
Agreement;
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
such Distribution Date);
2. on any Determination Date, the average of the Monthly
Payment Rates for the three preceding Collection Periods, where the
Monthly Payment Rate for a Collection Period is the percentage obtained
by dividing the aggregate of the Receivables balances (without
deducting therefrom the discount portion) collected during such
Collection Period by the average daily aggregate Receivables balance
(without deducting therefrom the discount portion) for such Collection
Period, is less than [ ]%;
3. the failure to pay the outstanding principal amount of the
Certificates by the Expected Final Payment Date;
4. the ratio (expressed as a percentage) of (i) the average
for each month of the net losses on the Receivables (exclusive of the
Ineligible Receivables) owned by the Trust (i.e., gross losses less
recoveries on any such 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 (ii) the average of the
month-end aggregate balances of such Receivables (without deducting
therefrom the discount portion) for such three-month period, exceeds [
]% on an annualized basis; provided, that this clause 4. may be amended
or waived with the consent of the Seller and each Rating Agency and
without the consent of any Certificateholder;
S-42
<PAGE>
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 Date next
succeeding each such respective Determination Date; or
6. on any Distribution Date, the balance of the Reserve Fund
is less than [ ]% of the aggregate outstanding principal balance of the
Certificates, in each case after giving effect to all deposits and
distributions on such Distribution Date.
Upon the occurrence of any event described above, an Early Amortization
Event will be deemed to have occurred without any notice or other action on the
part of any other party immediately upon the occurrence of such event. 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 Collection
Period 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 with respect to 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 such
insolvency event or such violation, as applicable, the Seller will immediately
cease to transfer Receivables to the Trust and promptly give notice to the
Trustee of such insolvency event or violation, as applicable, and the Trust will
be deemed to have terminated, subject to the liquidation, winding up and
dissolution procedures described below. Under the terms of the Pooling and
Servicing Agreement (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 upon the occurrence of an insolvency event
with respect to the Seller), within 15 days the Trustee will publish a notice of
such insolvency event or violation stating that the Trustee intends to sell,
liquidate or otherwise dispose of the Receivables in a commercially reasonable
manner and on commercially reasonable terms, unless 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 such Series
(or, with respect to any Series with two or more classes, the certificates of
each such class) and each person holding a Supplemental Certificate, instruct
the Trustee not to sell, liquidate or dispose of the Receivables and to continue
transferring Receivables as before such insolvency event or violation, as
applicable. If the portion of such 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, Certificateholders of your Series 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 in full plus accrued and unpaid interest thereon.
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 ________, 20__
Distribution Date (the "Termination Date"). In the event that the Invested
Amount is greater than zero on the Termination Date, the Trustee will sell or
cause to be sold (and apply the proceeds to the extent necessary to pay such
remaining amounts to all Certificateholders) an interest in the Receivables or
certain Receivables, as specified in the Pooling and Servicing Agreement, in an
amount equal to the sum of (a) 110% of the Invested Amount (after giving effect
to deposits and distributions otherwise to be made on the Termination Date) and
(b) the Available Subordinated Amount on the preceding Determination
S-43
<PAGE>
Date (after giving effect to allocations to be made on the Distribution Date
following such Determination Date); provided, however, that in no event shall
such amount exceed the Series [ ] Allocation Percentage of Receivables on such
Termination Date. The net proceeds of such 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 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 with respect to the Receivables for its
servicing activities and reimbursement for its expenses will be a monthly
servicing fee (the "Servicing Fee") in an amount payable in arrears on each
Distribution Date prior to the Termination Date generally equal to one-twelfth
of the product of (a) 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 (the "Servicing Fee Rate"), and (b) the Series [ ] Allocation
Percentage of the Pool Balance as of the last day of the second preceding
Collection Period. The share of the Servicing Fee allocable to the
Certificateholders with respect to any Distribution Date (the "Monthly Servicing
Fee") will generally be equal to one-twelfth of the product of (a) the Servicing
Fee Rate and (b) the Invested Amount as of the last day of the second preceding
Collection Period. The remainder of the Servicing Fee shall be paid by the
Seller and the certificateholders of other Series. The Monthly Servicing Fee
shall 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 Monthly Servicing Fee relating to such waived Servicing Fee, in which case
the Servicing Fee and the Monthly Servicing Fee for such Distribution Date shall
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
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 (including the Expected Final Payment Date),
the Trustee 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 (the "Distribution Date Statement") prepared by the Servicer
setting forth the following information: (a) the aggregate amount of
collections, the aggregate amount of Non-Principal Collections and the aggregate
amount of Principal Collections processed during the immediately preceding
Collection Period and the amount on deposit in the Collection Account; (b) the
Series [ ] Allocation Percentage, the Floating Allocation Percentage and the
Principal Allocation Percentage for such Collection Period; (c) the total
amount, if any, distributed on the Certificates; (d) the amount of such
distribution allocable to principal on each class of Certificates; (e) the
amount of such distribution allocable to interest on each class of Certificates;
(f) the Investor Default Amount for such Distribution Date; (g) the Required
Subordination Draw Amount, if any, for the preceding Collection Period; (h) the
amount of the Class A, Class B and Class C Investor Charge-Offs and the amounts
of reimbursements thereof for the preceding Collection Period; (i) the amount of
the Monthly Servicing Fee for the preceding Collection Period; (j) the
Controlled Distribution Amount; (k) the Invested
S-44
<PAGE>
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 for such distribution (after giving effect to all
distributions which will occur on such Distribution Date); (l) the "pool factor"
for each class of Certificates as of the Determination Date with respect to such
Distribution Date (consisting of an eleven-digit decimal expressing the Invested
Amount of each class as of such Determination Date (determined after taking into
account any reduction in the Invested Amount for such class which will occur on
such Distribution Date) as a portion of the initial principal balance of such
class); (m) the Available Subordinated Amount for such Determination Date; (n)
the Reserve Fund balance for such date; and (o) the Principal Funding Account
Balance and the Interest Funding Account Balance with respect to such date.
On or before January 31 of each calendar year, the Trustee 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 such preceding calendar year or the applicable portion thereof during which
such person was a Certificateholder, together with such other customary
information as is necessary to enable the Certificateholders to prepare their
tax returns. Moreover, 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. See "Federal Income Tax Considerations" and "State and Local Tax
Consequences" herein.
FEDERAL INCOME TAX CONSIDERATIONS
Set forth below is a discussion of the material federal income tax
consequences generally applicable to holders of the Offered Certificates, which
has been prepared based on the advice of Mayer, Brown & Platt ("Tax Counsel").
In the opinion of Tax Counsel such discussion, to the extent it includes matters
of law or legal conclusions with respect thereto, is accurate in all material
respects. This discussion does not purport to deal with all aspects of federal
income taxation that may be relevant to holders of the Offered Certificates in
light of their personal investment circumstances, nor to certain types of
holders subject to special treatment under the federal income tax laws (for
example, banks, life insurance companies and tax-exempt organizations).
Prospective investors are advised to consult their own tax advisors with regard
to the federal income tax consequences of holding and disposing of the Offered
Certificates, as well as the tax consequences arising under the laws of any
state, foreign country or other jurisdiction. This discussion is based upon
present provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), the regulations promulgated thereunder, and judicial or ruling
authority, all of which are subject to change, which change may be retroactive.
No ruling on any of the issues discussed below will be sought from the Internal
Revenue Service (the "IRS").
Treatment of the Certificates as Debt
The Seller and the Certificateholders will express in the Pooling and
Servicing Agreement the intent that, for federal, state and local income tax
purposes and franchise taxes (imposed on or measured by income), the Offered
Certificates will be debt secured by the Receivables. The Seller, by initially
entering into the Pooling and Servicing Agreement, and each Certificateholder,
by the acceptance of an Offered Certificate, will agree to treat the Offered
Certificates as debt for federal, state and local income tax purposes and
franchise taxes (imposed on or measured by income). However, the Pooling and
Servicing Agreement generally refers to the transfer of the Receivables as a
"sale", and because different criteria are used in determining the non-tax
accounting treatment of the transaction, the Seller will treat the Pooling and
Servicing Agreement, for certain non-tax purposes, as effecting a transfer of an
ownership interest in the Receivables and not as creating a debt obligation.
A basic premise of federal income tax law is that the economic
substance of a transaction generally determines the tax consequences. The form
of a transaction, while a relevant factor, is not conclusive evidence of its
economic substance. In appropriate circumstances, the courts have allowed
taxpayers, as well as the IRS,
S-45
<PAGE>
to treat a transaction in accordance with its economic substance, as determined
under federal income tax law, even though the participants in the transaction
have characterized it differently for non-tax purposes.
The determination of whether the economic substance of a property
transfer is a sale or a loan secured by the transferred property has been made
by the IRS and the courts on the basis of numerous factors designed to determine
whether the transferor has relinquished (and the transferee has obtained)
substantial incidents of ownership in the property. Among those factors, the
primary factors examined are whether the transferee has the opportunity to gain
if the property increases in value, and has the risk of loss if the property
decreases in value. Based upon its analysis of such factors, Tax Counsel is of
the opinion that the Offered Certificates will properly be characterized for
federal income tax purposes as debt that is secured by the Receivables and that
the Trust will not be treated as an association (or publicly traded partnership)
taxable as a corporation.
Interest Income to Certificateholders
Assuming the Certificateholders are holders of debt obligations for
federal income tax purposes, interest thereon will be taxable as ordinary income
for federal income tax purposes when received by Certificateholders utilizing
the cash basis method of accounting and when accrued by Certificateholders
utilizing the accrual method of accounting. Interest received on the Offered
Certificates may also constitute "investment income" for purposes of certain
limitations of the Code concerning the deductibility of investment interest
expense. In addition, a Certificateholder who buys an Offered Certificate for
less than its principal amount (assuming the Offered Certificate is issued
without OID) will be subject to the "market discount" rules of the Code, and a
Certificateholder who buys an Offered Certificate for more than its principal
amount will be subject to the premium amortization rules of the Code. See
"--Original Issue Discount" below for a description of the federal income tax
consequences if the Offered Certificates are issued with OID.
The Trustee will be required to report annually to the IRS, and to each
Certificateholder of record, the amount of interest paid (and OID accrued, if
any) on the Offered Certificates (and the amount of interest withheld for
federal income taxes, if any) for each calendar year, except as to exempt
holders (generally, holders that are corporations, tax-exempt organizations,
qualified pension and profit-sharing trusts, individual retirement accounts, or
nonresident aliens who provide certification as to their status as
nonresidents). As long as the only "Certificateholder" of record is Cede, as
nominee for DTC, Certificateholders and the IRS will receive tax and other
information only from Participants and Indirect Participants rather than from
the Trustee. Accordingly, each nonexempt Certificateholder will be required to
provide, under penalties of perjury, a certificate on IRS Form W-9 containing
such holder's name, address, federal taxpayer identification number and a
statement that such holder is not subject to backup withholding. Should a
nonexempt Certificateholder fail to provide the required certification, the
Trustee (or the Participants or Indirect Participants) will be required to
withhold (or cause to be withheld) 31% of the interest (and principal) otherwise
payable to the holder, and remit the withheld amounts to the IRS as a credit
against the holder's federal income tax liability.
Original Issue Discount
The following summary is a general discussion of the United States
federal income tax consequences to Certificateholders who are United States
persons owning Offered Certificates issued with original issue discount ("OID
Certificates" and "OID", respectively).
In general, the OID with respect to any OID Certificate will equal the
difference between the principal amount of the Certificate and its issue price
(defined as the first price to the public at which a substantial amount of the
OID Certificates have been sold), if such excess is 0.25% or more of the OID
Certificate's principal amount multiplied by the number of complete years to its
maturity (the "de minimis amount"). Even if such excess is less than the de
minimis amount, because a failure to pay interest currently on the Offered
Certificate is not a default, it is possible that all stated interest could be
treated as principal for this purpose (and for purposes of the computations
described below) with the result that the Offered Certificates could be viewed
as OID Certificates. Tax Counsel is unable to opine as to whether the Offered
Certificates will be treated as issued with OID. Holders of OID Certificates
(including holders of Offered Certificates that report income on
S-46
<PAGE>
the cash method of accounting) must include OID in income for United States
federal income tax purposes as it accrues under a method that takes account of
the compounding of interest, in advance of receipt of the related cash payments.
In general, each Certificateholder of an OID Certificate, whether such
Certificateholder uses the cash or accrual method of accounting for tax
purposes, will be required to include in ordinary gross income the sum of the
"daily portions" of OID on the Certificate for each day during the taxable year
that the Certificateholder owns the Offered Certificate. The daily portion of
OID on an OID Certificate is determined by allocating to each day in any
"accrual period" a ratable portion of the original issue discount allocable to
that accrual period. The term accrual period means the period between
Distribution Dates or the shorter period from the date of issue to the first
Distribution Date. In the case of an initial Certificateholder, the amount of
original issue discount on an OID Certificate allocable to each accrual period
is determined by (i) multiplying the "adjusted issue price" (as defined below)
of the Offered Certificate by a fraction, the numerator of which is the annual
yield to maturity of such Certificate and the denominator of which is the number
of accrual periods in a year, and (ii) subtracting from the product the amount
of interest paid during that accrual period. The "adjusted issue price" of an
OID Certificate at the beginning of any accrual period will be the sum of its
issue price and the amount of OID allocable to all prior accrual periods, minus
the amount of all payments (other than payments of interest) previously made
with respect to the OID Certificate. As a result of such "constant yield" method
of including OID income, the amounts so includible in income are lower in the
early years and greater in the later years than the amounts that would be
includible on a straight-line basis.
If an Early Amortization Event occurs, the early payments of principal
as a result of either such event could result in acceleration of income
corresponding to a portion of the unaccrued OID.
In the event that a Certificateholder purchases an OID Certificate at
an "acquisition premium," i.e., at a price in excess of the Certificate's issue
price, plus the OID accrued prior to acquisition and minus any principal
payments made with respect to the OID Certificate prior to acquisition, the
amount includible in income in each taxable year as OID will be reduced by that
portion of the premium properly allocable to such year. Moreover, a
Certificateholder who purchases an OID Certificate at a price less than the
price described in the preceding sentence will be subject to the market discount
rules of the Code.
Sale or Exchange
A Certificateholder's tax basis in an Offered Certificate generally
will be the Certificateholder's cost increased by any interest (including OID)
included in income (and market discount, if any, if the Certificateholder has
elected to include accrued market discount in income on a current basis) and
decreased by the amount of any principal payment received with respect to the
Certificate. Gain or loss on the sale, exchange or redemption of an Offered
Certificate generally will be long-term capital gain or loss if the Offered
Certificate has been held for more than a year (assuming that the Offered
Certificate is held as a capital asset) except to the extent that such gain
represents market discount not previously included in the Certificateholder's
income. Capital losses generally may 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.
The Code currently provides for a top marginal tax rate applicable to
ordinary income of individuals of 39.6% while maintaining a maximum marginal
rate for long-term capital gains of individuals of 28%. The maximum tax rate on
both ordinary income and long-term capital gains of corporate taxpayers is 35%.
Possible Classification of the Pooling and Servicing Agreement as a Partnership
or Association
Although, as described above, it is the opinion of Tax Counsel that the
Offered Certificates will properly be characterized as debt for federal income
tax purposes, such opinion is not binding on the IRS and thus no assurance can
be given that such a characterization will prevail. If the IRS were to contend
successfully that the Offered Certificates were not debt for federal income tax
purposes, the arrangement among the Seller, the Certificateholders and any other
holder of investor certificates might be classified for federal income tax
S-47
<PAGE>
purposes as a partnership, an association taxable as a corporation or a
"publicly traded partnership" taxable as a corporation.
If the Offered Certificates are treated as interests in such a
partnership, the partnership could be treated as a "publicly traded
partnership". Regulations published by the Treasury Department on December 4,
1995 (the "Regulations") could cause the Trust to constitute a publicly traded
partnership even if all holders of interests in the publicly offered
Certificates are treated as holding debt. If the Trust were classified as a
publicly traded partnership, whether by reason of the treatment of publicly
offered Certificates as equity or by reason of the Regulations, it would avoid
taxation as a corporation if its income was not derived in the conduct of a
"financial business;" however, whether the income of the Trust would be so
classified is unclear.
Under the Code and the Regulations, a partnership will be classified as
a publicly traded partnership if equity interests therein are traded on an
"established securities market," or are "readily tradable" on a "secondary
market" or its "substantial equivalent." The Seller intends to take measures
designed to reduce the risk that the Trust could be classified as a publicly
traded partnership by reason of interests in the Trust other than the publicly
traded Certificates. Although the Seller expects such measures will ultimately
be successful, certain of the actions that may be necessary for avoiding the
treatment of such interests as "readily tradable" on a "secondary market" or its
"substantial equivalent" are not fully within the control of the Seller. As a
result, there can be no assurance that the measures the Seller intends to take
will in all circumstances be sufficient to prevent the Trust from being
classified as a publicly traded partnership under the Regulations.
If the partnership were not taxable as a corporation (because of an
exception for an entity whose income is interest income that is not derived in
the conduct of a financial business) it would not be subject to federal income
tax. Rather, each item of income, gain, loss, deduction and credit generated
through the ownership of the Receivables by the partnership would be passed
through to the partners in the partnership (including the Certificateholders)
according to their respective interests therein. Tax Counsel is unable to opine
as to whether the Trust would qualify for the exception for an entity whose
income is interest income not derived in the conduct of a financial business.
The income reportable by the Certificateholder as partners in such a
partnership could differ from the income reportable by the Certificateholders as
holders of debt. If the Certificateholders were treated as partners, a cash
basis Certificateholder might be required to report income when it accrues to
the partnership rather than when it is received by the Certificateholder.
Moreover, if the Offered Certificates are interests in a partnership, an
individual's share of expenses of the partnership would be miscellaneous
itemized deductions that in the aggregate are allowed only to the extent they
exceed two percent of the individual's adjusted gross income (and are subject to
certain other limitations), meaning that the individual might be taxed on a
greater amount of income than the stated interest on the Certificates. Finally,
if the Offered Certificates are interests in a partnership, any taxable income
allocated to a Certificateholder 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" generally taxable to
the holder under the Code.
If, alternatively, the arrangement created by the Pooling and Servicing
Agreement were treated as either an association or a "publicly traded
partnership" taxable as a corporation, the resulting entity would be subject to
federal income taxes at corporate tax rates on its taxable income generated by
ownership of the Receivables. Moreover, distributions by the entity would
probably not be deductible in computing the entity's taxable income and all or
part of distributions to Certificateholders would probably be treated as
dividend income to the Certificateholders. Such an entity-level tax could result
in reduced distributions to Certificateholders and the Certificateholders could
be liable for a share of such a tax.
Because the Offered Certificates will be treated as indebtedness for
federal income tax purposes, the Trustee (and Participants and Indirect
Participants) will not comply with the tax reporting requirements that would
apply under these alternative characterizations of the Offered Certificates.
S-48
<PAGE>
FASIT
The "Small Business Job Protection Act of 1996," H.R. 3448 (the "Job
Protection Act of 1996") created a new type of entity for federal income tax
purposes called a "financial asset securitization investment trust" or "FASIT."
The Job Protection Act of 1996 enables certain arrangements similar to the Trust
to elect to be treated as a FASIT. Under the FASIT provisions of the Job
Protection Act of 1996, a FASIT generally would avoid federal income taxation
and could issue securities substantially similar to the Certificates, and those
securities would be treated as debt for federal income tax purposes. Upon
satisfying certain conditions set forth in the Pooling and Servicing Agreement
or the Supplement with respect to your Series, the Seller and Servicer will be
permitted to amend the Pooling and Servicing Agreement or the Supplement with
respect to 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 such modifications to the Pooling and Servicing Agreement
or the Supplement with respect to your Series as may be permitted by reason of
the making of such an election. However, there can be no assurance that the
Seller will or will not cause any permissible FASIT election to be made with
respect to the Trust or amend the Pooling and Servicing Agreement or the
Supplement with respect to your Series in connection with any election. In
addition, if such an election is made, it may cause a holder to recognize gain
(but not loss) with respect to any Certificates held by it, even though Tax
Counsel will deliver its opinion that an Offered Certificate will be treated as
debt for federal income tax purposes without regard to the election and the
Offered Certificate would be treated as debt following the election.
Additionally, any such election and any related amendments to the Pooling and
Servicing Agreement or the Supplement with respect to 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 such election and any permitted related amendments on them in their
particular circumstances.
Foreign Investors
Tax Counsel has given its opinion that the Offered Certificates will
properly be classified as debt for federal income tax purposes. If the Offered
Certificates are treated as debt:
(a) interest paid to a nonresident alien or foreign
corporation or partnership would be exempt from U.S. withholding taxes
(including backup withholding taxes), provided the holder complies with
applicable identification requirements (and does not actually or
constructively own 10% or more of the voting stock of the Seller and is
not a controlled foreign corporation with respect to the Seller).
Applicable identification requirements will be satisfied if there is
delivered to a securities clearing organization (or bank or other
financial institution that holds the Certificates on behalf of the
customer in the ordinary course of its trade or business) (i) IRS Form
W-8 signed under penalties of perjury by the beneficial owner of such
Certificates stating that the holder is not a U.S. person and providing
such holder's name and address, (ii) IRS Form 1001 signed by the
beneficial owner of such Certificates or such owner's agent claiming
exemption from withholding under an applicable tax treaty, or (iii) IRS
Form 4224 signed by the beneficial owner of such Certificates of such
owner's agent claiming exemption from withholding of tax on income
connected with the conduct of a trade or business in the United States;
provided in any such case (x) the applicable form is delivered pursuant
to applicable procedures and is properly transmitted to the United
States entity otherwise required to withhold tax and (y) none of the
entities receiving the form has actual knowledge that the holder is a
U.S. person or that any certification on the form is false;
(b) a holder of an Offered Certificate who is a nonresident
alien or foreign corporation will not be subject to United States
federal income tax on gain realized on the sale, exchange or redemption
of such Certificate, provided that (i) such gain is not effectively
connected to a trade or business carried on by the holder in the United
States, (ii) in the case of a holder that is an individual, such holder
is not present in the United States for 183 days or more during the
taxable year in which such sale, exchange or redemption occurs and
(iii) in
S-49
<PAGE>
the case of gain representing accrued interest, the conditions
described in clause (a) are satisfied; and
(c) an Offered Certificate held by an individual who at the
time of death is a nonresident alien will not be subject to United
States federal estate tax as a result of such individual's death if,
immediately before his death, (i) the individual did not actually or
constructively own 10% or more of the voting stock of the Seller and
(ii) the holding of such Certificate was not effectively connected with
the conduct by the decedent of a trade or business in the United
States.
If the IRS were to contend successfully that the Offered Certificates
are interests in a partnership (not taxable as a corporation), a
Certificateholder that is a nonresident alien or foreign corporation or
partnership might be adversely affected. If the Offered Certificates are
recharacterized as interests in an association taxable as a corporation or a
"publicly traded partnership" taxable as a corporation, to the extent
distributions on the Offered Certificates were treated as dividends, a
nonresident alien individual or foreign corporation would generally be taxed on
the gross amount of such dividends (and subject to withholding) at a rate of 30%
unless such rate were reduced by an applicable treaty.
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 upon the
net income of corporations, partnerships and other entities doing business in
the State of Missouri. This discussion is based upon present provisions of
Missouri statutes and the regulations promulgated thereunder, and applicable
judicial or ruling authority, all of which are subject to 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 Offered 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 subject to the Missouri income tax and
Certificateholders not otherwise subject to Missouri tax would not become
subject to such tax solely because of their mere ownership of the Offered
Certificates. Certificateholders already subject to taxation 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 subject to 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 subject to taxation in Missouri to pay Missouri
income tax on income beyond that derived from the Offered 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
subject to the Missouri income tax. Such taxes could result in reduced
distributions to Certificateholders. A Certificateholder not otherwise subject
to tax in Missouri would not become subject to Missouri income tax as a result
of its mere ownership of such an interest.
Notwithstanding the foregoing, regardless of the treatment of the
Offered Certificates or the arrangement for federal income tax purposes, a
Certificateholder could be subject to Missouri income tax if such
Certificateholder participated in the negotiation of the Pooling and Servicing
Agreement or otherwise developed a taxable nexus to Missouri.
S-50
<PAGE>
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 subject to 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 subject to tax. Certificateholders are
urged to consult their own tax advisors with respect to state and local income
and franchise taxes.
DUE TO THE COMPLEXITY OF THESE 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
REGARDING THE TAX TREATMENT OF THEIR ACQUISITION, OWNERSHIP AND DISPOSITION OF
THE CERTIFICATES.
ERISA CONSIDERATIONS
General
Section 406 of 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 with respect to the plan. A
violation of these "prohibited transaction" rules may generate excise tax and
other liabilities under ERISA and the Code for such person. For example, a
prohibited transaction would arise, unless an exemption (such as one of the
class exemptions described below) were available, if the Seller were a
disqualified person or party in interest with respect to a plan that acquired
Certificates. By its acceptance of a Class A Certificate or an interest therein,
each Class A Certificateholder and owner of any beneficial interest therein 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.
Moreover, 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 subject to ERISA or the Code, 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 such 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 with respect to the recent 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 (i) freely
transferable, (ii) part of a class of securities that is held, upon completion
of the public offering made hereby, by 100 or more investors
S-51
<PAGE>
independent of the Trust and of one another and (iii) either is (A) part of a
class of securities registered under Section 12(b) or 12(g) of 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 and the
class of securities of which such security is a part is registered under the
Exchange Act within 120 days (or such later time as may be allowed by the
Commission) after the end of the fiscal year of the issuer during which the
offering of such 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
independent persons at the conclusion of the offering, although no assurance can
be given, and no monitoring or other measures will be taken to ensure, that such
condition will be met with respect to the Class A Certificates; there are no
restrictions imposed on the transfer of the Class A Certificates; and the Class
A Certificates will be sold as part of an offering pursuant to an effective
registration statement under the Securities Act, and then will be timely
registered under the Exchange Act.
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" with respect to such plans
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 the Certificates
by such plan could constitute a prohibited transaction. There are five class
exemptions issued by the DOL that may apply in such event: DOL Prohibited
Transaction 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). There is no assurance
that these exemptions, even if all of the conditions specified therein 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 such 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 that is subject to ERISA, (b)
any plan or other arrangement (including an individual retirement account or
Keogh plan) that is subject to section 4975 of the Code or (c) any entity whose
underlying assets include "plan assets" under the Publicly-Offered Securities
Exemption by reason of any such 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 subject to the
foregoing limitation.
Review by Benefit Plan Fiduciaries
Due to the complexity of these rules and the penalties imposed upon
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 with respect to 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.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement (the "Underwriting Agreement"), the Seller has agreed to cause the
Trust to sell to each of the underwriters listed below (the "Underwriters"), and
each of the Underwriters for whom [ ] is acting as the representative (the
S-52
<PAGE>
"Representative"), has severally agreed to purchase the principal amount of
Offered Certificates set forth opposite the name below.
<TABLE>
<CAPTION>
Aggregate Principal Aggregate Principal
Amount of Class A Amount of Class B
Underwriter Certificates to be Purchased Certificates to be Purchased
- ----------- ---------------------------- ----------------------------
<S> <C> <C>
$ $
$ $
$ $
$ $
$ $
Total............................... $ $
</TABLE>
In the Underwriting Agreement, the several Underwriters have agreed,
subject to the terms and conditions set forth therein, to purchase all of the
Offered Certificates offered hereby if any of the Offered Certificates are
purchased. In the event of a default by any Underwriter, the Underwriting
Agreement provides that, in certain circumstances, purchase commitments of the
nondefaulting Underwriters may be increased or the Underwriting Agreement may be
terminated.
The Seller has been advised by the Representative that the several
Underwriters propose initially to offer the Offered Certificates to the public
at the public offering price set forth on the cover page of this Prospectus, and
to certain dealers at such price less a concession not in excess of [ ]% of the
principal amount of the Offered Certificates. The Underwriters may allow and
such dealers may reallow to other dealers a discount not in excess of [ ]% of
such principal amount. After the initial public offering, such public offering
price, concession and reallowance may be changed.
The Underwriting Agreement provides that the Seller will indemnify the
Underwriters against certain liabilities, including liabilities under applicable
securities laws, or contribute to payments the Underwriters may be required to
make in respect thereof. The Underwriting Agreement provides that DFS will
indemnify the Underwriters against certain liabilities, including liabilities
under applicable securities laws, or contribute to payments the Underwriters may
be required to make in respect thereof.
[With respect to 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 upon
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 upon for the Seller by Mayer, Brown & Platt, Chicago,
Illinois. Certain legal matters and certain Missouri income tax matters will be
passed upon for the Seller by Bryan Cave LLP, St. Louis, Missouri. Certain legal
matters will be passed upon for the Underwriter(s) by [ ].
S-53
<PAGE>
INDEX OF TERMS
accrual period ..............................................S-46
acquisition premium.............................................S-46
Additional Early Amortization Events............................S-41
Additional Interest.............................................S-31
adjusted issue price............................................S-46
Adjustment Date ..............................................S-26
Available Certificateholder Principal Collections...............S-35
Available Seller's Collections..................................S-30
Available Seller's Non-Principal Collections....................S-30
Available Seller's Principal Collections........................S-30
Available Subordinated Amount...................................S-32
Benefit Plans ..............................................S-50
Carry-Over Amount ..............................................S-26
Certificate Rates ..............................................S-26
Certificateholder ..............................................S-45
Certificateholder Non-Principal Collections.....................S-34
Certificates ...............................................S-5
Class A Additional Interest.....................................S-31
Class A Certificate Rate........................................S-26
Class A Certificates.............................................S-5
Class A Initial Invested Amount.................................S-28
Class A Interest Shortfall......................................S-31
Class A Invested Amount.........................................S-28
Class A Investor Charge-Off.....................................S-39
Class A Monthly Interest........................................S-31
Class A Percentage..............................................S-28
Class B Additional Interest.....................................S-32
Class B Certificate Rate........................................S-26
Class B Certificates.............................................S-5
Class B Initial Invested Amount.................................S-28
Class B Interest Shortfall......................................S-32
Class B Invested Amount.........................................S-28
Class B Investor Charge-Off.....................................S-39
Class B Monthly Interest........................................S-31
Class B Percentage..............................................S-28
Class C Additional Interest.....................................S-32
Class C Certificate Rate........................................S-26
Class C Certificates.............................................S-5
Class C Initial Invested Amount.................................S-28
Class C Interest Shortfall......................................S-32
Class C Invested Amount.........................................S-28
Class C Investor Charge-Off.....................................S-39
Class C Monthly Interest........................................S-31
Class C Percentage..............................................S-29
Closing Date.....................................................S-5
Code ..............................................S-44
Collection Period................................................S-6
constant yield ...............................................S-6
Controlled Amortization Amount..................................S-36
Controlled Distribution Amount..................................S-36
Cut-off Date....................................................S-13
daily portions ..............................................S-46
de minimis amount ..............................................S-45
Deficiency Amount ..............................................S-31
Depositor ...............................................S-5
disqualified persons............................................S-50
Distribution Date................................................S-6
Distribution Date Statement.....................................S-43
DOL ..............................................S-50
Early Amortization Events.......................................S-40
Eligible Portfolio..............................................S-15
S-54
<PAGE>
equity interest ..............................................S-50
established securities market...................................S-47
Excess Funding Account..........................................S-36
Excess Seller's Percentage......................................S-30
Excess Servicing ..............................................S-34
Expected Final Payment Date......................................S-6
FASIT ..............................................S-47
financial asset securitization investment trust.................S-47
financial business..............................................S-47
Floating Allocation Percentage..................................S-29
Incremental Default Amount......................................S-32
Index Maturity ..............................................S-26
Interest Funding Account........................................S-36
Interest Funding Account Balance................................S-36
Interest Payment Dates...........................................S-6
Interest Period ...............................................S-6
Invested Amount ..............................................S-29
investment income ..............................................S-45
Investment Proceeds.............................................S-34
Investor Default Amount.........................................S-39
IRA ..............................................S-50
IRS ..............................................S-44
Job Protection Act of 1996......................................S-47
LIBOR ..............................................S-26
London Business Day.............................................S-27
market discount ..............................................S-45
Miscellaneous Payments..........................................S-29
Missouri Tax Counsel............................................S-49
Monthly Interest ..............................................S-31
Monthly Payment Rate............................................S-26
Monthly Principal ..............................................S-36
Monthly Servicing Fee...........................................S-43
Net Receivables Rate............................................S-26
Offered Certificates.............................................S-5
OID ..............................................S-45
OID Certificates ..............................................S-45
Overconcentration Default Amount................................S-33
parties in interest.............................................S-50
partnership ..............................................S-49
plan assets ..............................................S-50
Plan Assets Regulation..........................................S-50
pool factor ..............................................S-43
Principal Allocation Percentage.................................S-29
Principal Funding Account.......................................S-36
Principal Funding Account Balance...............................S-36
prohibited transaction..........................................S-50
publicly traded partnership.....................................S-46
Publicly-Offered Securities Exception...........................S-50
publicly-offered security.......................................S-50
Rating Agency ...............................................S-9
readily tradable ..............................................S-47
Record Date ..............................................S-39
Regulations ..............................................S-46
Representative ..............................................S-51
Required Subordination Draw Amount..............................S-31
Reserve Fund ..............................................S-34
Reserve Fund Deposit Amount.....................................S-35
Reserve Fund Required Amount....................................S-34
sale ..............................................S-44
SAU/NSF ..............................................S-20
secondary market ..............................................S-47
Seller's Participation Amount...................................S-30
Seller's Percentage.............................................S-30
Series [ ]...................................................S-5
S-55
<PAGE>
Series [ ] Allocation Percentage............................S-29
Series [ ] Certificates......................................S-5
Servicing Fee ..............................................S-43
Servicing Fee Rate..............................................S-43
Small Business Job Protection Act of 1996.......................S-47
substantial equivalent..........................................S-47
Tax Counsel ..............................................S-44
Termination Date ..............................................S-42
Trust Available Subordinated Amount.............................S-29
Trust Incremental Subordinated Amount...........................S-33
Trust Invested Amount...........................................S-29
Trust Portfolio ..............................................S-15
Underwriters ..............................................S-51
Underwriting Agreement..........................................S-51
unrelated business taxable income...............................S-47
S-56
<PAGE>
ANNEX I
OTHER SERIES
This Annex I sets forth certain characteristics of Series [ ].
Initial principal balance ..................$[ ]
Scheduled interest payment dates........... The fifteenth day of each month (or,
if such 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 Commencement
Date (which day could be [ ])
and (ii) the business day
immediately preceding an Early
Amortization Period.
Expected Final Payment Date................ [ ] Distribution Date
Termination Date........................... [ ] Distribution Date
12331270.5
I-1
<PAGE>
Prospectus
DISTRIBUTION FINANCIAL SERVICES FLOORPLAN MASTER TRUST
DEUTSCHE FLOORPLAN RECEIVABLES, L.P.
Seller
DEUTSCHE FINANCIAL SERVICES CORPORATION
Servicer
ASSET BACKED CERTIFICATES
- -----------------------------------------------------------------------------
Consider carefully the discussion under "Risk Factors" beginning on page __ 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 of entity.
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 --
o may periodically issue asset backed certificates in one or more series
with one or more classes; and
o will own --
o 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;
o payments due on those receivables; and
o other property described in this Prospectus and in the accompanying
Prospectus Supplement.
THE CERTIFICATES --
o will represent interests in the trust and will be paid only from the trust
assets;
o may have one or more forms of enhancement; and
o 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 will describe the specific terms of your Series of
certificates.
If the terms of a particular 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.
You can find a listing of the pages where capitalized terms used in this
Prospectus are defined under the caption "Index of Terms" beginning on page __
in this Prospectus.
<PAGE>
TABLE OF CONTENTS
Page
SUMMARY............................................................1
RISK FACTORS.......................................................5
DEUTSCHE FLOORPLAN RECEIVABLES, L.P.
AND DEUTSCHE FLOORPLAN RECEIVABLES, INC......................12
Deutsche Floorplan Receivables, L.P..........................12
Deutsche Floorplan Receivables, Inc..........................12
THE TRUST.........................................................12
USE OF PROCEEDS...................................................13
THE DEALER FLOORPLAN FINANCING BUSINESS OF DFS....................13
General......................................................13
Credit Underwriting Process..................................14
Creation of Receivables......................................14
Payment Terms................................................15
Floorplan Agreements with Manufacturers......................16
Billing Procedures...........................................16
Dealer Monitoring............................................16
Realization on Receivables...................................17
Asset Based Receivables......................................17
Unsecured Receivables........................................18
Private Label Programs.......................................18
Participation Arrangements...................................18
DESCRIPTION OF THE CERTIFICATES...................................19
General......................................................19
Principal and Interest on the Certificates...................19
Book-Entry Registration......................................20
Definitive Certificates......................................24
Supplemental Certificates....................................24
New Issuances................................................25
Representations and Warranties...............................26
Eligible Accounts and Eligible Receivables...................27
The Overconcentration Amounts................................29
Addition of Accounts.........................................30
Removal of Accounts; Transfers of Participations.............32
Collection Account...........................................32
Allocations Among Series.....................................33
Discount Factor..............................................33
Allocation of Collections; Deposits in Collection Account....34
Defaulted Receivables and Recoveries.........................35
Termination..................................................36
Indemnification..............................................36
Collection and Other Servicing Procedures....................36
Servicer Covenants...........................................37
i
<PAGE>
Servicing Compensation.......................................37
Certain Matters Regarding the Servicer.......................37
Servicer Default.............................................38
Evidence as to Compliance....................................39
Amendments...................................................39
List of Certificateholders...................................40
The Trustee..................................................40
DESCRIPTION OF THE RECEIVABLES CONTRIBUTION AND SALE AGREEMENT....41
Sale or Transfer of Receivables..............................41
Representations and Warranties...............................41
Certain Covenants............................................42
Termination..................................................42
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES..........................42
Transfer of Receivables......................................42
Certain Matters Relating to Bankruptcy.......................44
LEGAL MATTERS.....................................................45
REPORTS TO CERTIFICATEHOLDERS.....................................46
WHERE YOU CAN FIND MORE INFORMATION...............................46
INDEX OF TERMS....................................................47
ii
<PAGE>
SUMMARY
This summary highlights selected information from this document and does
not contain all of the information that you need to consider in making your
investment decision. To understand all of the terms of an offering of the
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.
This summary provides an overview of certain information to aid your
understanding and is qualified by the full description of such information in
this Prospectus and the accompanying Prospectus Supplement.
THE PARTIES
Seller.................................. Deutsche Floorplan Receivables, L.P.
(the "Seller"), a Delaware limited
partnership, the general partner of
which is Deutsche Floorplan
Receivables, Inc., a wholly-owned
subsidiary of Deutsche Financial
Services Corporation ("DFS"), and the
limited partner of which is DFS.
Servicer................................ DFS (or, in its capacity as servicer,
the "Servicer"), a wholly-owned
indirect subsidiary of Deutsche Bank
AG.
Trustee................................. ___________________________ (the
"Trustee").
The Trust............................... Distribution Financial Services
Floorplan Master Trust (the "Trust").
The Trust was formed pursuant to a
Pooling and Servicing Agreement among
the Seller, the Servicer and the
Trustee (as amended from time to time,
the "Pooling and Servicing Agreement").
The Trust is a master trust and will
engage in the following activities:
o acquiring and holding Accounts and
related assets;
o issuing and making payment on the
certificates; and
o activities which are incidental to or
relating to the foregoing.
See "The Trust" herein.
THE CERTIFICATES We will describe in each Prospectus
Supplement the certificates we are
offering at that time. The offered
certificates will include one or more
classes of certificates issued pursuant
to a supplement (a "Supplement") to the
Pooling and Servicing Agreement. We
sometimes refer to the certificates
issued pursuant to a Supplement as a
"Series". We may not offer all classes
of a Series pursuant to this
Prospectus. Instead, we may retain one
or more classes and we may sell one or
more classes in private placements.
In general, each class of certificates
will have a principal amount (which may
change from time to time as described
in the related Prospectus Supplement)
and will bear interest at a rate or
rates (such interest rate or rates with
respect to each class of certificates,
the "Certificate Rate"). The
Certificate Rate for each class of
certificates, or the method for
determining the Certificate Rate, will
be specified in the related Prospectus
Supplement. Each class of certificates
may have a different Certificate Rate,
which may be fixed, variable or
adjustable, or any
1
<PAGE>
combination of these. Each class of
certificate may also provide for
principal payments to be made at
different times and in different
amounts.
If a Series includes two or more
classes of certificates, each class may
differ as to the timing and priority of
payments of principal and interest and
allocations of losses. Some classes of
certificates may be subordinated to
other classes of certificates of the
same Series as described in the related
Prospectus Supplement.
Each Prospectus Supplement will specify
the ratings upon which the issuance of
the related offered certificates will
be conditioned.
The certificate evidencing the Seller's
interest in the Trust is not being
offered by this Prospectus or any
Prospectus Supplement. Unless otherwise
expressly stated in this Prospectus or
the Prospectus Supplement, references
to a "certificate" or "certificates"
refer to certificates issued as part of
a Series pursuant to a Supplement.
THE TRUST ASSETS 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. See "The
Trust" and "Description of the
Certificates--Addition of Accounts" in
this Prospectus and "The Accounts" in
the Prospectus Supplement.
The assets of the Trust also include
all of the Seller's right, title and
interest in:
o all security interests purporting to
secure payment of the Receivables,
and all agreements or arrangements
supporting or securing payment of the
Receivables (collectively,
"Collateral Security");
o all documents, books, records and
information relating to the
Receivables; and
o monies due or to become due with
respect to the foregoing.
The Seller may remove, subject to
certain limitations and conditions,
Accounts that it transferred to the
Trust. See "Description of the
Certificates--Removal of Accounts" in
this Prospectus.
The Trust's assets will be allocated
among the certificateholders of all
Series (the interests of all of the
Series in the Trust being referred to
collectively as the
"Certificateholders' Interest") and the
Seller (the ownership interest of the
Seller in the Trust being referred to
as the "Seller's Interest").
If so provided in the related
Prospectus Supplement, a Series will
have the benefit of one or more
"Enhancements," which may include a
letter of credit, surety bond, cash
collateral account, spread account,
2
<PAGE>
guaranteed rate agreement, maturity
liquidity facility, tax protection
agreement, interest rate swap agreement
or other similar arrangements.
THE ACCOUNTS The "Accounts" pursuant to which the
Receivables have been or will be
generated are revolving credit
arrangements entered into with DFS by
dealers, manufacturers or distributors
(collectively, "Dealers"). The
Accounts are selected from such credit
arrangements of DFS or its affiliate,
Deutsche Business Services Corporation
("Deutsche BSC"). In the future the
Trust may include Receivables from
Accounts originated by other affiliates
of DFS. (Unless otherwise specified,
references in this Prospectus to
Receivables originated or conveyed by
DFS include those originated or
conveyed by Deutsche BSC or any such
other affiliate.) See "The Accounts"
in the Prospectus Supplement and
"Description of the
Certificates--Addition of Accounts" and
"--Removal of Accounts; Transfers of
Participations" in this Prospectus.
THE RECEIVABLES The "Receivables" have arisen or will
arise in the Accounts, and consist of
advances made or to be made by DFS to
dealers located in the United States to
finance their consumer and commercial
product inventory or to manufacturers
or distributors located in the United
States to finance their inventory,
finished parts or other assets. In
some cases, advances to Dealers are
used by Dealers to finance the accounts
receivable that arise from sales of
their products. Some of the
Receivables are not secured by
collateral. See "The Dealer Floorplan
Financing Business of DFS" in this
Prospectus.
The Seller has entered into a
Receivables Contribution and Sale
Agreement among the Seller, as
purchaser, and DFS and Deutsche BSC as
sellers (as amended from time to time,
the "Receivables Contribution and Sale
Agreement"). Pursuant to the
Receivables Contribution and Sale
Agreement, DFS and Deutsche BSC have
sold and will sell to the Seller all of
their respective right, title and
interest in and to all Receivables
meeting certain eligibility criteria.
The Seller has assigned to the Trust
its rights with respect to the
Receivables under the Receivables
Contribution and Sale Agreement. See
"Description of the Receivables
Contribution and Sale Agreement"
herein.
All new Receivables arising under the
Accounts during the term of the Trust
will be sold by Deutsche BSC and sold
or contributed by DFS to the Seller and
transferred by the Seller to the Trust.
Accordingly, the aggregate amount of
Receivables in the Trust will fluctuate
from day to day as new Receivables are
generated and as existing Receivables
are collected, charged off as
uncollectible or otherwise adjusted.
TAX STATUS For information concerning the
application of the federal income tax
laws, including whether the
certificates of a Series will be
characterized as debt for federal
income tax purposes, see "Federal
Income Tax Considerations" in the
accompanying Prospectus Supplement.
3
<PAGE>
ERISA CONSIDERATIONS For information
concerning whether the certificates of
a Series are eligible for purchase by
employee benefit plans, see "ERISA
Considerations" in the related
Prospectus Supplement.
RISK FACTORS You should consider the factors
set forth under "Risk Factors" on pages
__ through __ of this Prospectus.
4
<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.
Prior Interests in Receivables Could The Seller has transferred the
Result in Losses or Delays in Receivables to the Trust. However, a
Payments on the Certificates court could conclude that other persons
or entities have an interest in such
Receivables with priority over the
Trust's interest. Claims of such other
persons or entities could reduce or
delay the collections on the Receivables
available for distribution to you. See
"Certain Legal Aspects of the
Receivables--Transfer of Receivables"
herein. Under the Receivables
Contribution and Sale Agreement, DFS has
warranted to the Seller and, under the
Pooling and Servicing Agreement, the
Seller has warranted to the Trust that
the Receivables have been or will be
transferred free and clear of the lien
of any third party (exclusive of any
Participation of a third party). Each of
DFS and the Seller has also covenanted
that it will not sell, pledge, assign,
transfer or grant any lien on any
Receivable or, except as described
herein under "Description of the
Certificates--Supplemental
Certificates," the Seller's Certificate
(or any interest therein) other than to
the Trust or in the form of a
Participation. With respect to
participations of third parties in the
Receivables, see "The Dealer Floorplan
Financing Business of DFS--Participation
Arrangements" herein.
Bankruptcy of DFS, Deutsche BSC or Each of DFS and Deutsche BSC has
the Seller Could Result in Losses warranted to the Seller in the
or 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. In
addition, DFS, Deutsche BSC and the
Seller have agreed to treat the
transactions described herein as a sale
or contribution of the Receivables to
the Seller and DFS and Deutsche BSC have
and have agreed to take all actions that
are required under Missouri law and
Georgia law, respectively, to perfect
the Seller's ownership interest in the
Receivables. See "Certain Legal Aspects
of the Receivables--Transfer of
Receivables" in this Prospectus.
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 such debtor or
such debtor itself were to take the
position that the sale or contribution
of Receivables to the Seller should be
recharacterized as a pledge of such
Receivables to secure a borrowing of
such debtor, then delays in payments of
collections of Receivables to the Seller
could occur and (should the court rule
in favor of any such trustee, debtor or
creditor) delays in such payments or
reductions in the amount of such
payments could result. If the transfer
of Receivables to the Seller is
recharacterized as a pledge, a tax or
government lien on the property of DFS
or Deutsche BSC arising before
Receivables originated by it come into
existence may have priority over the
Seller's interest in such
5
<PAGE>
Receivables. See "Certain Legal Aspects
of the Receivables--Certain Matters
Relating to Bankruptcy" herein.
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 the certificates 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 such debtor or such 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 the
certificates could result.
The Seller has warranted in the Pooling
and Servicing Agreement that the
transfer of the Receivables to the Trust
is a valid sale of the Receivables to
the Trust. The Seller has agreed to take
all actions that are required under
Missouri law to perfect the Trust's
interest in the Receivables and the
Seller has warranted that the Trust will
at all times have a first priority
perfected ownership interest therein
and, with certain exceptions, in the
proceeds thereof. However, the transfer
of the Receivables to the Trust could be
deemed to create a security interest
therein. If the transfer of the
Receivables to the Trust were deemed to
create a security interest therein under
the UCC as in effect in Missouri, a tax
or statutory lien on property of DFS,
Deutsche BSC or the Seller arising
before a Receivable is transferred to
the Trust may have priority over the
Trust's interest in such Receivables. If
the Seller were to become a debtor in a
bankruptcy case and a bankruptcy trustee
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
such Receivables, then delays in
payments on the certificates could
result or, should the bankruptcy court
rule in favor of any such trustee,
debtor in possession or creditor, delays
and reductions in payments on the
certificates could result.
If certain events relating to the
bankruptcy of DFS or the Seller were to
occur, then an Early Amortization Event
would occur. See "Description of the
Certificates--Early Amortization Events"
in the Prospectus Supplement. Pursuant
to the terms of the Pooling and
Servicing Agreement, additional
Receivables would not be transferred to
the Trust. See "Certain Legal Aspects of
the Receivables--Transfer of
Receivables" and "--Certain Matters
Relating to Bankruptcy" in this
Prospectus.
6
<PAGE>
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 such
payments are made within one year prior
to the filing of a bankruptcy case in
respect of DFS or the Seller.
Commingling by the Servicer May The Servicer, no later than two business
Result in Delays or Reductions in days after the processing date, will
Payments on the Certificates deposit all collections received with
respect to the Receivables (excluding,
with certain exceptions, certain
portions thereof allocable to the
Seller) in each Collection Period into
the Collection Account. However, under
certain conditions, DFS need not deposit
collections into the Collection Account
until the related Distribution Date, at
which time DFS will make such deposits
in an amount equal to the net amount of
such deposits and withdrawals which
would have been made had the conditions
referred to in this sentence not
applied. See "Description of the
Certificates--Allocation of Collections;
Deposits to Collection Account" in this
Prospectus.
Until the Servicer deposits such
payments on the Receivables into the
Collection Account, the Servicer may use
such funds for its own benefit and will
not segregate such funds from its own
assets, and the proceeds of any
investment of such 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 funds representing
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 the certificates.
Effect of Insolvency Laws on Application of federal and state
Enforceability of Receivables bankruptcy and debtor relief laws could
result in Receivables being written off
as uncollectible or result in delays in
payments due on such Receivables. See
"Description of the
Certificates--Defaulted Receivables and
Recoveries" in this Prospectus. Such
writeoffs or delays could result in
reductions or delays in payments on the
certificates.
Lack of Security Interest Could The Seller has represented and warranted
Result in Delays or Reductions in in the Pooling and Servicing Agreement
Payments on the Certificates that each Receivable, other than
Unsecured Receivables, is at the time of
creation generally secured by a first
priority perfected security interest in
the related product, account receivable
or other asset; provided that such
perfected security interest need not be
of a first priority in the case of
Receivables arising in an Account for
which the payment terms are on a
scheduled payment plan basis and whose
maximum credit limit does not exceed
$250,000, if such Account was designated
for the Trust on or before March 23,
1994 (the "Series 1994-1 Closing Date").
Claims of secured parties with first
priority perfected security interests in
such accounts, accounts receivable or
other assets could reduce the amount of
collections on the related Receivables
available
7
<PAGE>
for distribution to certificateholders.
Generally, under applicable state laws,
a security interest in goods or accounts
receivable which secure wholesale
financing obligations may be perfected
by the filing of UCC financing
statements. DFS endeavors to take all
actions necessary under applicable state
laws to perfect DFS's security interest
in the goods or accounts receivable.
However, at the time a product is sold,
DFS's security interest in the product
will terminate. Therefore, if a Dealer
is not required to remit, or fails to
remit, to DFS amounts owed with respect
to products that have been sold, the
related Receivables will no longer be
secured by such products. As a result,
delays or reductions in the amounts of
collections on such Receivables could
occur and, in turn, delays and
reductions in payments on the
certificates could occur.
Effect of Timing of Origination of, Receivables arising from the purchase of
and Payments on, Receivables inventory financed by DFS are generally
payable by Dealers either upon 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.
Moreover, the relative portions of the
Trust's pool of Receivables made up of
Receivables secured by products,
Receivables secured by accounts
receivable, Receivables secured by other
assets and Unsecured Receivables 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. In
addition, we cannot assure 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 is dependent on Dealer
repayments, and Collections during the
Accumulation Period may not be
sufficient to fully amortize the
certificates on the Expected Final
Payment Date referred to in the
Prospectus Supplement. See "The Dealer
Floorplan Financing Business of DFS" in
this Prospectus and "Maturity and
Principal Payment Considerations" in the
Prospectus Supplement. In addition, a
significant decline in the amount of
Receivables generated could cause an
Early Amortization Event. See
"Description of the Certificates--Early
Amortization Events" in the Prospectus
Supplement for a description of the
events which might lead to the
occurrence of an Early Amortization
Period.
In addition, because a portion of the
Receivables do not bear interest until a
period of time has elapsed from their
origination, the Receivables will be
sold to the Trust at a discount, which
is received as Receivables are
collected, in order to generate imputed
interest collections. As a result,
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. Under
certain circumstances,
8
<PAGE>
typically those involving a Dealer in
default or about to become in default,
DFS may change the due date or offer the
Dealer extended payment terms. See also
"Risk Factors--Ability of the Servicer
to Change Payment Terms" below.
Potential Delays or Reductions in The Seller expects, and in some cases
Payments on Certificates Due to will be obligated, to designate
Addition of Accounts Additional Accounts, the Receivables in
which will be conveyed to the Trust.
Such Additional Accounts may include
Accounts with Dealers originated by DFS
under criteria different from those
which were applied to the Dealers on
previously designated Additional
Accounts, because such Accounts were
originated at a different date. Such
Accounts may also provide financing for
products of types different from those
included in the Trust at the time that
your Series is issued. We cannot assure
you that Additional Accounts designated
in the future will be the same credit
quality, or will 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,
if applicable, 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 the
certificates could result. The
designation of Additional Accounts will
be subject to the satisfaction of
conditions described herein under
"Description of the
Certificates--Addition of Accounts."
Trust's Relationship to DFS DFS is not obligated to make any
payments in respect of the certificates
or the Receivables (other than the
obligation of DFS to purchase certain
Receivables from the Trust due to the
failure to comply with certain covenants
or representations and warranties, as
described herein under "Description of
the Certificates--Servicer Covenants"
and "Description of the Receivables
Contribution and Sale
Agreement--Representations and
Warranties"). However, the Trust is
completely dependent upon DFS for the
generation of new Receivables. We cannot
assure you that DFS will continue to
generate Receivables at the same rate as
in prior years. See "--Social, Economic
and Other Factors; Competition" below.
Moreover, if an insolvency event were to
occur with respect to DFS, (i)
Receivables would no longer be
transferred to the Seller or the Trust
and an Early Amortization Event would
occur and (ii) any Delayed Funding
Receivables that had not yet been funded
may not become funded and may be
executory contracts subject to
disaffirmance by DFS's
trustee-in-bankruptcy, in which case the
related Dealers would no longer be
obligated to pay such Delayed Funding
Receivables, which the Trust has already
paid for. In addition, if DFS were to
cease acting as Servicer, delays in
processing payments on the Receivables
and information in respect thereof could
occur and result in delays in payments
to you.
Social, Economic and Other Factors; DFS's ability to generate new
Competition Receivables, and a Dealer's ability to
make payments on the Receivables owned
by the Trust, will depend
9
<PAGE>
upon the sales of the products relating
to such Receivables. The level of sales
of such products will be affected by a
variety of social and economic factors,
including national and regional
unemployment levels and levels of
economic activity in general, interest
rates and consumer perceptions of
economic conditions. In addition, DFS
competes with various other financing
sources, including independent finance
companies, manufacturer-affiliated
finance companies and banks, which are
in the business of providing floorplan
financing arrangements to dealers.
Limited Control of Trust Actions 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 with respect to 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 Supplemental
certificate) will be required 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.
Amendments Without the Consent of The Seller, the Servicer and the Trustee
Certificateholders may amend the Pooling and Servicing
Agreement or the Supplement for your
Series without your consent in the
circumstances described under
"Description of the
Certificates--Amendments" herein.
Issuance of Additional Series by the The Trust is expected to issue
Trust May Affect the Timing and additional Series (which may be
Amounts of Payments on Certificates represented by different classes within
a Series) from time to time without your
consent. The terms of any additional
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, the terms of a
new Series could result in delays or
reductions in payments on your Series.
See "Description of the
Certificates--New Issuances" herein.
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.
Ability of the Servicer to Change DFS, as Servicer, will have the right to
Payment Terms change the terms of the Receivables
(including payment terms, finance
charges and the other fees it charges),
subject to the conditions described
under "Description of the
Certificates--Collection and other
Servicing
10
<PAGE>
Procedures" herein. Changes in relevant
law, changes in the marketplace or
prudent business practice could cause
DFS to change the terms of the
Receivables, which could result in
delays or reductions in payments on the
certificates.
11
<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. ("Deutsche FRI") 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 and transferring such
receivables to third parties and any activities incidental to and necessary or
convenient for the accomplishment of such 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 ("Insolvency Laws") will not result in
consolidation of the assets and liabilities of the Seller with those of DFS.
These steps include the creation of Deutsche FRI as a separate, limited-purpose
subsidiary pursuant to articles of incorporation containing certain limitations
(including restrictions on the nature of Deutsche FRI's business and a
restriction on the Seller's ability to commence a voluntary case or proceeding
under any Insolvency Law without the unanimous affirmative vote of all of its
directors). Deutsche FRI's articles of incorporation includes a provision that
requires Deutsche FRI to have not less than two directors who qualify under the
Articles of Incorporation as an "Independent Director." No assurance can be
given, however, that such steps will be sufficient to prevent the consolidation
of the Seller and DFS.
If Additional Accounts are added to the Trust, DFS may make additional
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 on October 22, 1993. Deutsche FRI 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 such 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 such
purposes. The principal executive offices of Deutsche FRI are located at Bank of
America Plaza, 300 South Fourth Street, Suite 1100, Las Vegas, Nevada 89101. The
telephone number of such offices is (702) 385-1668.
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 conveyed
and will convey to the Trust, without recourse, the Receivables arising under
the Accounts. The property of the Trust will consist of the Receivables existing
in the Accounts on the Initial CutOff Date, all Receivables generated in the
Accounts from time to time thereafter during the term of the Trust as well as
Receivables generated in any Accounts added to the Trust from time to time (less
Receivables paid or charged off and excluding (i) Receivables in any Accounts
that are removed from the Trust from time to time and (ii) any undivided
interest in the Receivables in certain Accounts that has been transferred to a
third party as described herein under "The Dealer Floorplan Financing Business
of DFS--Participation Arrangements"), an
12
<PAGE>
assignment of all the Seller's rights and remedies under the Receivables
Contribution and Sale Agreement, all funds collected or to be collected in
respect of the Receivables, all funds on deposit in certain accounts of the
Trust, a security interest in the Collateral Security and rights of the Seller
with respect to the financed inventory under the Floorplan Agreements. See
"Description of the Certificates--Addition of Accounts" herein.
The property of the Trust may include Enhancements for the benefit of
certificateholders of a particular Series. Your Series will not have any
interest in any Enhancements provided for the benefit of the certificateholders
of other Series. Pursuant to the Pooling and Servicing Agreement the Seller will
be allowed (subject to certain limitations and conditions), and in some
circumstances will be obligated, to designate from time to time Additional
Accounts to be included as Accounts and to convey to the Trust the Receivables
of such Additional Accounts, and to designate from time to time certain Accounts
to be removed and to require the Trustee to convey receivables in such Removed
Accounts to the Seller. The Seller may, but is not obligated to, cause the Trust
to convey to it an interest in certain Receivables, which the Seller may
transfer or participate to others.
Prior to its formation the Trust had no assets or obligations. The
Trust will not engage in any business activity other than acquiring and holding
the Receivables and the other assets of the Trust and proceeds therefrom,
issuing the certificates and the Seller's Certificate (and any Supplemental
Certificates), issuing additional Series and making payments thereon and related
activities. As a consequence, the Trust is not expected to have any source of
resources other than the assets of the Trust.
USE OF PROCEEDS
The net proceeds from the sale of each Series of certificates will be
paid to the Seller as consideration for the transfer of the Receivables to the
Trust. The Seller will use such proceeds for general operating purposes
(including the distribution thereof 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 (i) Dealers of
certain consumer and commercial products in order to enable such Dealers to
acquire inventory (the "Floorplan Business") and (ii) Dealers to finance their
accounts receivable arising from the sales of their products (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, 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. The receivables arising from the Floorplan
Business are herein called the "Floorplan Receivables" and receivables arising
from the Accounts Receivable Business are called the "A/R Receivables."
Occasionally, specific transactions under the Accounts Receivable Business are
documented as sales of receivables by the originator thereof to DFS. Asset Based
Receivables and Unsecured Receivables, which have been sold to the Trust and may
be sold to the Trust, are described below.
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 the accounts receivable
owed to the Dealer against which such
13
<PAGE>
extension of credit was made and, in limited cases, by other personal property
of such borrowers, 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, subject to satisfaction of the Rating Agency Condition.
References in this Prospectus to originations by DFS will be deemed to include
originations by Deutsche BSC and any such other affiliate.
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 such 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 such 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 upon a weighing of the above factors. The
Dealer credit underwriting process of DFS also involves the use of its Expert
Credit System ("ECS"), which employs artificial intelligence technology to
simulate the analytical approach of senior underwriting personnel. By utilizing
a standardized review process to analyze credit information, ECS adds greater
consistency to underwriting decisions across geographic areas and product lines.
While all Dealer applications are processed through ECS, DFS does not use ECS 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.
Extensions of credit lines in excess of $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; and 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 (i) prior to any increase in such credit
limit, (ii) generally every 12 to 18 months and (iii) upon 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. Such agreements are generally for an unspecified period of
time and create discretionary lines of credit, which DFS may terminate at any
time in its sole discretion, subject, however, to 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 such Dealer cannot be accelerated,
even if the line of credit is
14
<PAGE>
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 such Dealer's program with DFS, as described below.
With respect to the Floorplan Receivables, advances made for the
purchase of inventory are most commonly arranged in the following manner: The
Dealer will contact the manufacturer, distributor or other vendor (each, a
"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 with
respect to such purchase order. Upon such request, DFS will determine whether
(i) the Manufacturer is in compliance with its Floorplan Agreement, (ii) the
Dealer is in compliance with its program with DFS and (iii) such 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 such 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. Any such receivable that is funded on a delayed basis (a "Delayed
Funding Receivable") will be sold to and paid for by the Trust on the date of
the invoice, even though such receivable is not funded by DFS until a later time
(i.e., 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 upon receipt of such 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.
Asset Based Receivables and Unsecured Receivables are discussed under
"--Asset Based Receivables" and "--Unsecured Receivables" below.
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 with respect to any particular item of inventory financed by
DFS is due and payable only upon the sale of such 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 a unit is subject to curtailment payments, the outstanding balance with
respect to such unit will remain fully payable if such 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 upon 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 upon schedule, regardless of when the item of inventory is actually sold.
15
<PAGE>
With respect to 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 of such
collections. With respect to Asset Based Receivables, interest is payable
monthly, while principal is payable upon 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. With respect to Unsecured
Receivables, interest is payable monthly, while principal may be payable either
on Pay-as-Sold or Scheduled Payment Plan terms.
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 floorplanning agreement (the
"Floorplan Agreement") with the Manufacturer of such product. Pursuant to the
Floorplan Agreement, the Manufacturer will agree, among other matters, to
purchase from DFS those products sold by such Manufacturer to a Dealer and
financed by DFS if DFS acquires possession of such 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 such repurchase obligations 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 thereof. On occasion, different terms may be negotiated. Such 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 shall apply. Certain Floorplan Agreements may also eliminate the
repurchase obligation or reduce the purchase price payable by the Manufacturer,
depending upon 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 such 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 in excess of $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
such statement by the 15th of such 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
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. These
floorchecks are performed by field service representatives ("FSRs") who are
specially trained to audit Dealer inventory. DFS has developed the "Field Audit
System," a computerized field audit communications network providing FSRs 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 an FSR, are promptly reported to regional office management.
16
<PAGE>
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, FSRs 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
Upon any default by a Dealer of its obligations to DFS under the
related financing agreement and expiration of any and all applicable notice and
cure periods that may have been agreed to between DFS and such Dealer, DFS may
declare such Dealer's obligations immediately due and payable and enforce all of
its legal rights and remedies, including commencement of proceedings to realize
upon any collateral, subject to prevailing standards of commercial
reasonableness and good faith. Upon learning of such a 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, such disputes may be submitted to arbitration. If DFS determines that
such 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 Unsecured Receivables or A/R
Receivables. In the case of A/R Receivables, DFS attempts to collect directly
from the obligors on the accounts receivable (with respect to certain 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. DFS repossesses, stores and then attempts to sell all
other salable collateral in a commercially reasonable manner. See "The
Accounts--Loss Experience" in the Prospectus Supplement.
Asset Based Receivables
Other receivables ("Asset Based Receivables") that may be transferred
to the Seller (and by the Seller to the Trust) arise from asset based revolving
credit facilities provided to certain Dealers. 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 such line of credit or a specifically negotiated loan availability
amount. The loan availability amount is determined by multiplying agreed upon
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.
17
<PAGE>
Unsecured Receivables
Certain receivables ("Unsecured Receivables") constitute unsecured
advances to Dealers that are made in the same manner as in the case of Floorplan
Receivables.
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
such 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 ("Participations"). 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
such facility in exchange for an agreed upon interest rate. Occasionally, fees
and other charges may also be shared with the participant. In certain cases, DFS
will advise a borrower that the size of its credit facility is expressly
conditioned upon the availability of participants in the facility. In those
situations, if no participants can be found, or if such participants cease to
participate, the size of the credit facility may be reduced. In other
circumstances, there will be no such condition and DFS may be obligated to
maintain a credit facility notwithstanding its expectation that a portion of it
would be participated. 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, subject to
substantially the same limitations that apply to the removal of Accounts, the
Seller may cause the Trust to transfer an interest in certain Receivables to the
Seller, which may thereafter transfer such 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
18
<PAGE>
such 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 in excess
of) the amounts required to make payments of interest on and principal of the
certificates pursuant to the Pooling and Servicing Agreement.
Each class of certificates offered by this Prospectus and the related
Prospectus Supplement (the "Offered Certificates") will initially be represented
by one or more certificates registered in the name of the nominee of DTC
(together with any successor depository selected by the Seller, the
"Depository"), except as set forth below. The Offered Certificates will be
available for purchase in minimum denominations of $1,000 and integral multiples
thereof in book-entry form. The Seller has been informed by DTC that DTC's
nominee will be Cede & Co. ("Cede"). Accordingly, Cede is expected to be the
holder of record of the Offered Certificates. No Certificate Owner will be
entitled to receive a certificate representing such person's beneficial interest
in the Offered Certificates. Unless and until Definitive Certificates are issued
under the limited circumstances described herein, all references herein to
actions by certificateholders shall refer to actions taken by DTC upon
instructions from its Participants (as defined below), and all references herein
to distributions, notices, reports and statements to certificateholders shall
refer to distributions, notices, reports and statements to Cede, as the
registered holder of the Offered Certificates. See "--Book-Entry Registration"
and "--Definitive Certificates" below.
Principal and Interest on the Certificates
The timing and priority of payment, seniority, Certificate 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
(each, a "Distribution Date"), 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 such Series, as described in the related
Prospectus Supplement. To the extent provided in the related Prospectus
Supplement, a Series may include one or more classes of certificates ("Strip
Certificates") entitled to (i) principal payments with disproportionate, nominal
or no interest payments or (ii) interest payments with disproportionate, nominal
or no principal payments. Each class of certificates may have a different
Certificate Rate, which may be a fixed, variable or adjustable Certificate Rate
(and which may be zero for certain classes of Strip Certificates), or any
combination of the foregoing. The related Prospectus Supplement will specify the
Certificate Rate or the method for determining the Certificate 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 such class (if any), and any schedule or
formula or other provisions applicable to the determination thereof, will be set
forth in the related Prospectus Supplement.
19
<PAGE>
To the extent specified 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 such Series.
To the extent specified in the related Prospectus Supplement, one or
more classes of the related 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
DTC 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 UCC and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participating organizations ("Participants") and facilitate
the clearance and settlement of securities transactions between Participants
through electronic computerized book-entry changes in their accounts, thereby
eliminating the need for physical movement of certificates. Participants include
the Underwriters, securities brokers and dealers, banks, trust companies and
clearing corporations and may include certain other organizations. Indirect
access to the DTC system also is available to others such as brokers and
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly ("Indirect
Participants"). The rules applicable to DTC and its Participants are on file
with the Commission.
Purchases of Offered Certificates under the DTC system must be made by
or through 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 Participants' and Indirect Participants'
records. Certificate Owners will not receive written confirmation from DTC of
their purchase, but Certificate Owners are expected to receive written
confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the 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 Participants acting on behalf of Certificate
Owners. Certificate Owners will not receive certificates representing their
ownership interest in Offered Certificates, except in the event that use of the
book-entry system for the Offered Certificates is discounted.
To facilitate subsequent transfers, all Offered Certificates deposited
by Participants with DTC are registered in the name of DTC's partnership
nominee, Cede. The deposit of Offered Certificates with DTC and their
registration in the name of Cede effects no change in beneficial ownership. DTC
has no knowledge of the actual Certificate Owners; DTC's records reflect only
the identity of the Participants to whose accounts such Offered Certificates are
credited, which may or may not be the Certificate Owners. The Participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by DTC to Participants,
by Participants to Indirect Participants, and by Participants and Indirect
Participants to Certificate Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
Neither DTC nor Cede will consent or vote with respect to 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
20
<PAGE>
Cede's consenting or voting rights to those Participants to whose accounts the
Offered Certificates are credited on the record date (identified in a listing
attached thereto).
Principal and interest payments on the Offered Certificates will be
made to DTC. DTC's practice is to credit 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 such Distribution Date. Payments by Participants to Certificate
Owners will be governed by standing instructions and customary practices, as is
the case with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of such Participant
and not of DTC, the Trustee or the Seller, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of
principal and interest to DTC is the responsibility of the Trustee, disbursement
of such payments to Participants shall be the responsibility of DTC, and
disbursement of such payments to the Certificate Owners shall be the
responsibility of Participants and Indirect Participants.
Under a book-entry format, certificateholders of Offered Certificates
will receive payments after the applicable Distribution Date because, while
payments are required to be forwarded to Cede, as nominee for DTC, on each such
date, DTC will forward such payments to its Participants which thereafter will
be required to forward them to Indirect Participants or such certificateholders.
It is anticipated that the only certificateholder of Offered Certificates (as
such terms are used in the Pooling and Servicing Agreement) will be Cede, as
nominee of DTC, and that Certificate Owners will not be recognized by the
Trustee as certificateholders of Offered Certificates under the Pooling and
Servicing Agreement.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Certificate
Owner to pledge Offered Certificates to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
Offered Certificates, may be limited due to the lack of a physical certificate
for such Offered Certificates.
DTC may discontinue providing its services as securities depository
with respect to the Offered Certificates at any time by giving reasonable notice
to the Seller or the Trustee. Under such circumstances, in the event that a
successor securities depository is not obtained, Definitive Certificates are
required to be printed and delivered.
Cedel Bank is incorporated under the laws of Luxembourg as a
professional depository. Cedel Bank holds securities for its participating
organizations ("Cedel Participants") and facilitates the clearance and
settlement of securities transactions between Cedel Participants through
electronic book-entry changes in accounts of Cedel Participants, thereby
eliminating the need for physical movement of certificates. Cedel Bank provides
to its Cedel Participants, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. Cedel Bank interfaces with domestic
markets in several countries. As a professional depository, Cedel Bank is
subject to regulation by the Luxembourg Monetary Institute. Cedel Participants
are recognized financial institutions around the world, including underwriters,
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations. Indirect access to Cedel Bank is also available
to others, such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Cedel Participant, either
directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of
Euroclear ("Euroclear Participants") and to clear and settle transactions
between Euroclear Participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities and
cash. Euroclear includes various other services, including securities lending
and borrowing and interfaces with domestic markets in several countries
generally similar to the arrangements for cross-market transfers with DTC
described above. Euroclear is operated by the Brussels,
21
<PAGE>
Belgium office of Morgan Guaranty Trust Company of New York (the "Euroclear
Operator"), under contract with Euroclear Clearance Systems S.C., a Belgian
cooperative corporation (the "Cooperative"). All operations are conducted by the
Euroclear Operator, and all Euroclear securities clearance accounts and
Euroclear cash accounts are accounts with the Euroclear Operator, not the
Cooperative. The Cooperative establishes policy for Euroclear on behalf of
Euroclear Participants. Euroclear Participants include banks (including central
banks), securities brokers and dealers and other professional financial
intermediaries. Indirect access to Euroclear is also available to other firms
that clear through or maintain a custodial relationship with a Euroclear
Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission. Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of Euroclear and
the related Operating Procedures of the Euroclear System and applicable Belgian
law (collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities and
cash from Euroclear, and receipts of payments with respect to securities in
Euroclear. All securities in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the Terms and Conditions only on behalf of
Euroclear Participants, and has no record of or relationship with persons
holding through Euroclear Participants.
Distributions with respect to the Offered Certificates held through
Cedel Bank 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. Such
distributions will be subject to tax reporting in accordance with relevant
United States tax laws and regulations. See "Federal Income Tax Considerations"
and "State and Local Tax Consequences" in the Prospectus Supplement. Cedel Bank
or the Euroclear Operator, as the case may be, will take any other action
permitted to be taken by a holder of an Offered Certificate under the Pooling
and Servicing Agreement on behalf of a Cedel Participant or Euroclear
Participant only in accordance with its relevant rules and procedures and
subject to its Depositary's ability to effect such actions on its behalf through
DTC.
Holders of Offered Certificates may hold their Offered Certificates
through DTC (in the United States) or Cedel Bank or Euroclear (in Europe) if
they are participants of such systems, or indirectly through organizations which
are participants in such systems.
The Offered Certificates will initially be registered in the name of
Cede & Co., the nominee of DTC. Cedel Bank and Euroclear will hold omnibus
positions on behalf of their participants through customers' securities accounts
in Cedel Bank's and Euroclear's names on the books of their respective
depositories which in turn will hold such positions in customers' securities
accounts in the depositories' names on the books of DTC. Citibank, N.A.
("Citibank") will act as depositary for Cedel Bank and Morgan Guaranty Trust
Company of New York ("Morgan") will act as depositary for Euroclear (in such
capacities, individually the "Depositary" and collectively the "Depositaries").
Transfers between Participants will occur in accordance with DTC rules.
Transfers between Cedel Participants and Euroclear Participants will occur in
accordance with their respective rules and operating procedures.
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 in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by its Depositary; however, such cross-market transactions will
require delivery of instructions to the relevant
22
<PAGE>
European international clearing system by the counterparty in such 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
the Depositaries.
Because of time zone differences, credits of securities received in
Cedel Bank or Euroclear as a result of a transaction with a Participant will be
made during subsequent securities settlement processing and dated the business
day following the DTC settlement date. Such credits or any transactions in such
securities settled during such processing will be reported to the relevant
Euroclear or Cedel Participants on such business day. Cash received in Cedel
Bank or Euroclear as a result of sales of securities by or through a Cedel
Participant or Euroclear Participant to a Participant will be received with
value on the DTC settlement date but will be available in the relevant Cedel
Bank or Euroclear cash account only as of the business day following settlement
in DTC.
Although DTC, Cedel Bank and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Offered Certificates among
participants of DTC, Cedel Bank and Euroclear, they are under no obligation to
perform or continue to perform such procedures and such procedures may be
discontinued at any time.
DTC management is aware that some computer applications, systems, and
processing data ("Systems") that are dependent upon 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
(the "Industry") that it has developed and is implementing a program so that
DTC's Systems, as the same relate to the timely payment of distributions
(including principal and income payments) to securityholders, book-entry
deliveries, and settlement of trades within DTC, continue to function
appropriately.
DTC's ability to perform properly its services is also dependent upon
other parties, including but not limited to issuers and their agents, as well as
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, among
others. DTC has informed the Industry that it is contacting (and will continue
to contact) third party vendors from whom DTC acquires services to: (i) impress
upon them the importance of such services being Year 2000 compliant; and (ii)
determine the extent of their efforts for Year 2000 remediation (and, as
appropriate, testing) of their services. In addition, DTC is in the process of
developing such contingency plans as it deems appropriate.
According to DTC, the foregoing information with respect to DTC has
been provided to the Industry for informational purposes only and is not
intended to serve as a representation, warranty, or contract modification of any
kind.
Definitive Certificates
Offered Certificates will be issued in fully registered, certificated
form to Certificate Owners or their nominees ("Definitive Certificates"), rather
than to DTC or its nominee, only if (i) the Seller advises the Trustee in
writing that DTC is no longer willing or able to properly discharge its
responsibilities as Depository with respect to the Offered Certificates, as
applicable, and the Trustee or the Seller is unable to locate a qualified
successor, (ii) the Seller, at its option, elects to terminate the book-entry
system through DTC with respect to such class or (iii) after the occurrence of a
Servicer Default, certificateholders, as applicable, representing not less than
50% of the aggregate unpaid principal amount of such certificates advise the
Trustee
23
<PAGE>
and DTC through Participants in writing that the continuation of a book-entry
system through DTC (or a successor thereto) is no longer in the best interests
of such certificateholders.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, DTC is required to notify all Participants of the
availability through DTC of Definitive Certificates for the Offered
Certificates. Upon surrender by DTC of the certificate or certificates
representing the outstanding certificates and instructions for re-registration,
the Trustee will issue such certificates, as applicable, in the form of
Definitive Certificates, and thereafter the Trustee will recognize the holders
of such Definitive Certificates as certificateholders under the Pooling and
Servicing Agreement ("Holders"). In the event that Definitive Certificates are
issued or DTC ceases to be the clearing agency for the certificates, the Pooling
and Servicing Agreement provides that the certificateholders will be notified of
such event.
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 herein 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 such 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 upon presentation and surrender of
such certificate on the final payment date at such office or agency as is
specified in the notice of final distribution to certificateholders. The Trustee
will provide such notice to registered certificateholders not later than the
fifth day of the month of the final distribution. The Trustee shall pay to the
Seller any monies held by it for the payment of principal or interest that
remain unclaimed for two years after such notice. After such 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 shall initially be __________________________. No
service charge will be imposed 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 (the
"Seller's Certificate") for another certificate (a "Supplemental Certificate")
for transfer or assignment to a person designated by the Seller upon the
execution and delivery of a supplement to the Pooling and Servicing Agreement
(which supplement shall be subject to 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 (a) the Seller shall after giving effect
thereto have an interest in the Pool Balance of not less than 2% of the Pool
Balance, (b) the Seller shall have delivered to the Trustee, each Rating Agency
and any Enhancement Provider a Tax Opinion with respect to such exchange and (c)
the Seller shall have delivered to the Trustee evidence of satisfaction of the
Rating Agency Condition. Any subsequent transfer or assignment of a Supplemental
Certificate is also subject to the conditions described in clauses (b) and (c)
in the preceding sentence.
24
<PAGE>
New Issuances
The Pooling and Servicing Agreement provides that the Trust will issue
two types of certificates: (i) one or more Series of investor certificates which
are transferable and have the characteristics described below and (ii) the
Seller's Certificate (and any Supplemental Certificate) which will evidence the
Seller's Interest and will be transferable only upon the satisfaction of certain
conditions described above under "--Supplemental Certificates." 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, with
respect to any Series: (a) its name or designation, (b) its initial principal
amount, (c) its certificate rate (or the method for determining its certificate
rate), (d) a date on which it will begin its amortization period or controlled
amortization period, if any, (e) the method for allocating principal and
interest to certificateholders, (f) the percentage used to calculate monthly
servicing fees, (g) the issuer and terms of any Enhancement with respect thereto
or the level of subordination provided by the Seller's Interest, (h) the terms
on which the certificates of such Series may be exchanged for certificates of
another Series, be subject to repurchase, optional redemption or mandatory
redemption by the Seller or be remarketed by any remarketing agent, (i) the
series termination date and (j) any other terms permitted by the Pooling and
Servicing Agreement (all such terms, the "Principal Terms" of such Series). The
Seller may offer any Series under a prospectus or other disclosure document in
transactions either registered under the Securities Act 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.
The Pooling and Servicing Agreement provides that the Seller may
specify Principal Terms of a new Series such that each Series has 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. Moreover, 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. The Pooling and Servicing Agreement
also provides that the Seller may specify different certificate rates and
monthly servicing fees with respect to 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 upon which a Series (or classes within a Series) may be repurchased by the
Seller.
A new Series may be issued upon the satisfaction of the conditions
specified in the Pooling and Serving Agreement. The Seller may cause the
issuance of a new Series by notifying the Trustee at least five business days in
advance of the applicable Series Issuance Date. The Pooling and Servicing
Agreement provides that the Trustee will issue any such Series only upon
delivery to it of the following: (i) a Supplement in form satisfactory to the
Trustee signed by the Seller and the Servicer and specifying the Principal Terms
of such Series, (ii) the form of any Enhancement and any related agreement,
(iii) an opinion of counsel to the effect that, for federal income and Missouri
income tax purposes, (x) such issuance will not adversely affect the
characterization of the certificates of any outstanding Series or class as debt
or as partnership interests, (y) such issuance will not cause a taxable event to
any certificateholders (an opinion of counsel to the effect referred to in
clauses (x) and (y) with respect to any action is referred to herein as a "Tax
Opinion") and (z) such new Series will be characterized as debt or as
partnership interests and (iv) evidence of satisfaction of the Rating Agency
Condition. Such issuance is also subject to the conditions that (a) the Seller
shall have represented and warranted that such issuance shall not, in the
reasonable belief of the Seller, cause an Early Amortization Event to occur and
(b) after giving effect to such issuance, the Seller's interest in the Pool
Balance shall not be less than 2% of the Pool Balance. In addition, it will be a
condition to the issuance of any new Series that all of the conditions listed in
the preceding sentence would be satisfied if the Delayed Funding Receivables in
the Trust were not in the Trust; provided that this condition will be eliminated
if the Seller has received evidence of
25
<PAGE>
satisfaction of the Rating Agency Condition. Upon satisfaction of all such
conditions, the Trustee will issue such Series. The "Rating Agency Condition"
with respect to a particular action will be satisfied if the rating agencies
which have rated the outstanding Series have indicated that the particular
action will not result in a reduction or withdrawal of their ratings of the
outstanding 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 (a) as of the
Initial Cut-Off Date and the date of issuance of any Series (a "Series Issuance
Date") (or, in the case of an Additional Account, as of the cut-off date for
such Additional Account (the "Additional Cut-Off Date") and the date the related
Receivables are transferred to the Trust (an "Addition Date")), each Account or
Additional Account was or is an Eligible Account or, if it was or is an
Ineligible Account on such date, such Account is being removed from the Trust in
accordance with the requirements of the Pooling and Servicing Agreement, (b) 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 the date any future Receivable is generated
(a "Transfer Date"), each Receivable conveyed to the Trust is an Eligible
Receivable or, if such Receivable is not an Eligible Receivable, such Receivable
is conveyed to the Trust as described below under "--Eligible Accounts and
Eligible Receivables," (c) 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 (d) all appropriate consents and governmental
authorizations required to be obtained by the Seller in connection with the
conveyance of each such Receivable or Collateral Security have been duly
obtained. If the Seller breaches any representation and warranty described in
this paragraph and such breach remains uncured for 30 days or such longer period
as may be agreed to by the Trustee, after the earlier to occur of the discovery
of such breach by the Seller or the Servicer or receipt of written notice of
such breach by the Seller or the Servicer, and such breach has a material
adverse effect on the Certificateholders' Interest in any Receivable or Account,
such Receivable or, in the case of a breach relating to an Account, all
Receivables in the related Account ("Ineligible Receivables") will be reassigned
to the Seller on the terms and conditions set forth below and such Account shall
no longer be included as an Account.
Each such Receivable shall be reassigned to the Seller on or before the
end of the Collection Period in which such reassignment obligation arises by the
Seller directing the Servicer to deduct the principal balance of such Receivable
(discounted by the Discount Factor for the Collection Period preceding such
Determination Date) from the Pool Balance. In the event that such 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 such Determination Date), on the date on which such 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 (the amount of
any such deposit being referred to herein as a "Transfer Deposit 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
Amount and any principal balance not so deducted will not be reassigned and will
remain part of the Trust. The reassignment of any such 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 with respect to such 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 (a) it
is duly organized as a limited partnership and in good standing, it has
26
<PAGE>
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 (b) 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 (i) the
Receivables and the Collateral Security, whether then existing or thereafter
created, (ii) the Receivables Contribution and Sale Agreement, and (iii) the
proceeds thereof (including proceeds in any of the accounts established for the
benefit of the certificateholders) and upon the 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, upon the creation
thereof the Trust, shall have a perfected ownership interest in such property.
In the event that the breach of any of the representations and warranties
described in this 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 issuer or provider of any
Enhancement (an "Enhancement Provider") if given by certificateholders), may
direct the Seller to accept the reassignment of the Certificateholders' Interest
within 60 days of such notice, or within such longer period specified in such
notice. The Seller will be obligated to accept the reassignment of the
Certificateholders' Interest on a Distribution Date occurring within such 60-day
period. Such reassignment will not be required to be made, however, if at the
end of such applicable period, the representations and warranties shall then be
true and correct in all material respects and any material adverse effect caused
by such breach shall have been cured. The portion of the price for such
reassignment will be equal to the sum of the amounts specified therefor with
respect to each outstanding Series in the related Supplement for such 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. The portion of such funds allocable to the Certificateholders'
Interest will be distributed upon 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 such 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.
Eligible Accounts and Eligible Receivables
As stated elsewhere in this Prospectus, references to DFS in connection
with the origination or conveyance of Receivables include Deutsche BSC in its
origination and conveyance of Receivables and each other affiliate of DFS that
may originate or convey Receivables in the future (subject to satisfaction of
the Rating Agency Condition).
An "Eligible Account" is defined to mean each arrangement to provide a
revolving extension of credit by DFS to a Dealer (i) in order to finance the
purchase by a Dealer of consumer and commercial product inventory, (ii) as a
credit facility secured by the accounts receivable owned by such Dealer, (iii)
as a line of credit secured by unencumbered assets of such Dealer or (iv) as an
unsecured line of credit, which extension of credit, as of the date of
determination thereof (a) is established by DFS in the ordinary course of
business pursuant to a floorplan, accounts receivable, asset based or unsecured
lending financing agreement, (b) is in favor of a Dealer doing business in the
United States which is an eligible Dealer (which excludes Dealers subject to
voluntary or involuntary bankruptcy proceedings or voluntary or involuntary
liquidation), (c) is in existence and maintained and serviced by DFS and (d) 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" herein.
Receivables arising in Accounts in which another lender participates include
only DFS's undivided interest in the related advance and not the undivided
interest therein of the other lender.
27
<PAGE>
An "Eligible Receivable" is defined to mean each Receivable: (a) which
was originated or acquired by DFS in the ordinary course of business, (b) which
arose under an Account that at such time was an Eligible Account, (c) which is
owned by DFS at the time of sale or contribution by DFS to the Seller, (d) which
represents the obligation of a Dealer to repay an advance made to or on behalf
of such Dealer, (e) which at the time of creation and at the time of transfer to
the Trust is, except in the case of an Unsecured Receivable, 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 (except
that such 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 such Account was designated as an Account as of the Series
1994-1 Closing Date) and the perfection of such security interest is governed by
the laws of one or more of the States of the United States, the District of
Columbia or, if acceptable to each Rating Agency, a territory or possession of
the United States, (f) 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, (g) with respect to which all consents and governmental
authorizations required to be obtained by DFS or the Seller in connection with
the creation of such Receivable or the transfer thereof to the Trust or the
performance by DFS of the floorplan, accounts receivable, asset based lending or
unsecured receivable financing agreement pursuant to which such Receivable was
created, have been duly obtained and are in full force and effect, (h) as to
which at all times following the transfer of such 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, (i) which has been the subject
of a valid transfer and assignment from the Seller to the Trust of all the
Seller's interest therein (including any proceeds thereof), (j) which will at
all times be the legal and assignable payment obligation of the Dealer relating
thereto, enforceable against such Dealer in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy or other similar
laws, (k) which at the time of transfer to the Trust is not subject to any right
of rescission, setoff, or any other defense (including defenses arising out of
violations of usury laws) of the Dealer, (l) as to which, at the time of
transfer of such Receivable to the Trust, DFS and the Seller have satisfied all
their respective obligations with respect to such Receivable required to be
satisfied at such time, (m) as to which, at the time of transfer of such
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
therein, (n) 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 (the financing agreement giving rise to said Receivable may, however,
be subject by its terms, or by judicial interpretation, to the laws of other
states), (o) which was transferred to the Trust with all applicable governmental
authorizations and (p) if such Receivable has the benefit of a Floorplan
Agreement with a Manufacturer, such Floorplan Agreement provides, subject to the
specific terms thereof and any limitations therein (which may vary among
Floorplan Agreements), that the Manufacturer is obligated to repurchase the
products securing the Receivable upon the Servicer's repossession thereof upon
the related Dealer's default. For a description of the various terms of the
Floorplan Agreements, see "The Dealer Floorplan Financing Business of
DFS--Floorplan Agreements." Notwithstanding the foregoing, together with the
Ineligible Receivables referred to under "--Representations and Warranties"
above, (i) all Receivables that, at the time of its transfer to the Trust, have
been SAU or NSF for more than 30 days will also be "Ineligible Receivables," and
(ii) the aggregate of Receivables that, at the time of transfer of each such
Receivable to the Trust, have been SAU or NSF for a period of one to 30 days
will also be "Ineligible Receivables" to the extent that such aggregate amount
exceeds 0.75% of the Pool Balance at the end of such Collection Period. All
Ineligible Receivables will be transferred to the Trust, but the "Pool Balance"
will for all purposes be calculated by excluding all Ineligible Receivables from
the Receivables. Delayed Funding Receivables will be Eligible Receivables, but,
unless the required statement from each Rating Agency is received as described
under "--New Issuances" above, Delayed Funding Receivables will be deemed not to
be part of the Pool Balance for purposes of determining whether a new Series of
certificates may be issued. Once a Receivable that was initially a
28
<PAGE>
Delayed Funding Receivable is funded by DFS, then such Receivable will no longer
be considered to be a Delayed Funding Receivable for purposes of the Pooling and
Servicing Agreement. In addition, Delayed Funding Receivables (including any
Collections thereon and Defaulted Amounts in respect thereof) will cease to be
included in the Trust on the day, if any, on which an Insolvency Event in
respect of DFS occurs.
It is not required or anticipated that the Trustee will 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. In addition, it is not anticipated or required that
the Trustee will 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. The Servicer, however,
will deliver to the Trustee on or before April 30 of each calendar year a
certificate with respect to its performance under the Pooling and Servicing
Agreement and each Supplement.
The Overconcentration Amounts
The Available Subordinated Amount shall be adjusted to reflect, on each
Determination Date, the aggregate principal amount of Receivables in the Trust
on such Distribution Date which are A/R Receivable Overconcentrations, Asset
Based Receivable Overconcentrations, Dealer Overconcentrations, Manufacturer
Overconcentrations, Product Line Overconcentrations and Unsecured Receivable
Overconcentrations (the "Overconcentration Amount") allocable to the
Certificateholders' Interest.
"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 Collection Period
immediately preceding such Determination Date over (b) 20% of the Pool
Balance on the last day of such immediately preceding Collection
Period.
"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 Collection Period
immediately preceding such Determination Date over (b) 15% of the Pool
Balance on the last day of such immediately preceding Collection
Period.
"Dealer Overconcentration" on any Determination Date means,
(i) with respect to any Account with a Dealer other than a Specified
Dealer, the excess of (a) the aggregate amount of Principal Receivables
in such Account on the last day of the Collection Period immediately
preceding such Determination Date over (b) 2% of the Pool Balance on
the last day of such immediately preceding Collection Period; and (ii)
with respect to any Account with a Specified Dealer, the excess of (a)
the aggregate amount of Principal Receivables in such Account on the
last day of the Collection Period immediately preceding such
Determination Date over (b) 3% of the Pool Balance as of such
immediately preceding Collection Period. As used in this paragraph,
"Specified Dealer" means, with respect to a Dealer, that on the last
day of such immediately preceding Collection Period any Account with
such Dealer is among one of the fifteen Accounts having the largest
amount of all Principal Receivables in all of the Accounts as of such
last day.
"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 Collection Period
29
<PAGE>
immediately preceding such Determination Date over (b) 15% of the Pool
Balance on the last day of such immediately preceding Collection
Period.
"Product Line Overconcentration" on any Determination Date
means, with respect to Accounts created pursuant to Wholesale Financing
Agreements, the excess of (a) the aggregate of all amounts of Principal
Receivables in such Accounts that represent financing for a single
product line on the last day of the Collection Period immediately
preceding such Determination Date over (b) 25% (40% in the case of
computer products) of the Pool Balance on the last day of such
immediately preceding Collection Period.
"Unsecured Receivable Overconcentration" on any Determination
Date means, without duplication, the sum of (i) the excess of (a) the
aggregate of all amounts of Principal Receivables in Accounts created
pursuant to Unsecured Receivable Financing Agreements on the last day
of the Collection Period immediately preceding such Determination Date
over (b) 3% of the Pool Balance on the last day of such immediately
preceding Collection Period and (ii) the aggregate of the Individual
Unsecured Receivable Overconcentrations for such Determination Date.
The "Individual Unsecured Receivable Overconcentration" on any
Determination Date means, with respect to any Account for Unsecured
Receivables, the excess of (i) the aggregate of all amounts of
Principal Receivables in such Account on the last day of the Collection
Period immediately preceding such Determination Date over (ii) (a) in
the case of a Dealer whose unsecured debt is rated at least A- or its
equivalent, 1% of the Pool Balance on the last day of such immediately
preceding Collection Period and (b) in the case of a Dealer whose
unsecured debt is rated less than A- or its equivalent or is not rated,
0.5% of such Pool Balance.
Notwithstanding the above, in the case of each such Overconcentration, the
percentage in clause (b) (in the case of an Individual Unsecured Receivable
Concentration, both clause (a) and clause (b) and in the case of a Dealer
Overconcentration, the percentage in clause (i)(b) or (ii)(b)) may be increased
by the Seller, without the consent of any certificateholder, to a level
acceptable to each Rating Agency as long as the Rating Agency Condition is
satisfied. See "Description of the Certificates--Allocation of Collections;
Limited Subordination of Seller's Interest--Available Subordinated Amount" in
the Prospectus Supplement.
Addition of Accounts
Subject to the conditions described below, the Seller has the right to
designate from time to time additional accounts to be included as Accounts (the
"Additional Accounts"). In addition, the Seller is required to add the
Receivables of Additional Accounts if either (i) the Pool Balance (exclusive of
Delayed Funding Receivables) on the last day of any Collection Period is less
than the Required Participation Amount as of the following Distribution Date or
(ii) 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 such last day. In either case, unless certain
insolvency events have occurred with respect to the Seller, the Seller under the
Pooling and Servicing Agreement will be required to transfer and assign to the
Trust, within 10 business days after the end of such Collection Period,
interests in all Receivables arising in such Additional Accounts, whether such
Receivables are then existing or thereafter created. Any designation of
Additional Accounts is subject to the following conditions, among others: (i)
each such Additional Account must be an Eligible Account; (ii) the Seller shall
represent and warrant that the addition of such Additional Accounts shall not,
in the reasonable belief of the Seller, cause an Early Amortization Event to
occur; (iii) the Seller shall not select such Additional Accounts in a manner
that it believes is adverse to the interests of the certificateholders or any
Enhancement Provider; (iv) the Seller shall deliver a Tax Opinion,
30
<PAGE>
other than in the case of a required addition, and certain other opinions of
counsel with respect to the addition of such Additional Accounts to the Trustee
and any Enhancement Provider and (v) if the Automatic Addition Condition is not
satisfied, the Rating Agency Condition has been satisfied. If the Automatic
Addition Condition is satisfied and the Account being added will contain
Receivables which represent a type of product not previously financed by DFS or
is supported by a Manufacturer that is not an Existing Manufacturer, then such
addition is subject to satisfaction of the Rating Agency Condition.
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 the initial
Accounts.
"Automatic Addition Condition" shall mean, with respect to the
addition of Accounts that (i) during the calendar quarter in which such
addition occurs, the number of new Accounts for Dealers that are
financing products of the type already being financed by DFS and
purchasing such products from Existing Manufacturers does not exceed 5%
of the number of all Accounts at the end of the preceding calendar
quarter, (ii) during the twelve months ending at the beginning of such
calendar quarter, the number of such new Accounts does not exceed 20%
of the number of all Accounts at the beginning of such twelve month
period, (iii) the average for the three months preceding the month of
such 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 such addition,
and (iv) the annualized average for such 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 such
addition.
"Existing Manufacturer" shall mean (i) each Manufacturer with
which DFS has entered into a business arrangement, either through a
Floorplan Agreement or another arrangement, on or prior to the Series
1994-1 Closing Date, (ii) each Manufacturer with which DFS enters into
such a business arrangement after the Series 1994-1 Closing Date so
long as the aggregate balances of the Receivables subject to such
Floorplan Agreement do not exceed the lesser of (a) 1% of the Pool
Balance at the beginning of the Collection Period in which the addition
of the related Account occurs and (b) $25 million and (iii) each
Manufacturer with which DFS enters into such a business arrangement
after the Series 1994-1 Closing Date and as to which the Rating Agency
Condition is satisfied.
"Required Participation Amount" for any date will mean an
amount equal to the sum of (a) the sum of the product for each Series
of (i) the Required Participation Percentage for such Series times (ii)
the initial invested amount of such 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
(b) 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 such Determination Date).
"Required Participation Percentage" means, with respect to any
Series, the percentage specified therefor in the related Supplement;
provided, however, that the Seller may, upon 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.
31
<PAGE>
Removal of Accounts; Transfers of Participations
The Seller shall 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 in respect of the Eligible Accounts to be
removed. To remove any Eligible Account and such amounts, the Seller (or the
Servicer on its behalf) shall, among other things, (a) on or before the fifth
business day prior to the date of removal (the "Removal Date"), furnish to the
Trustee, any Enhancement Provider, and each Rating Agency a written notice (the
"Removal Notice") specifying the Removal Date; (b) on or before the fifth
business day after the Removal Date, the Seller shall have furnished to the
Trustee a computer file, microfiche list or other list of the Accounts (the
"Removed 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 such Removed Account and the aggregate amount of
Receivables therein; (c) represent and warrant that the removal of any such
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; (d) 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; (e)
obtain evidence that the Rating Agency Condition has been satisfied; and (f) on
or before the related Removal Date, deliver to the Trustee and any Enhancement
Provider an officers' certificate confirming the items set forth in clauses (c),
(d) and (e) above and a Tax Opinion with respect to such removal.
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 such Account), the Seller will commence the
removal of such Account from the Trust. However, all Receivables existing in any
such 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 subject to the same
limitations described above with respect to 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
such 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"). "Eligible Deposit Account" means either (a) a segregated account with
an Eligible Institution or (b) 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 (a) the corporate trust department of the Trustee
or (b) 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 (i) has either (x) a long-term unsecured debt
rating acceptable to each Rating Agency or (y) a certificate of deposit rating
acceptable to each Rating Agency and (ii) is a member of the FDIC. Funds in the
Collection Account generally will be
32
<PAGE>
invested in investments acceptable to each such Rating Agency as being
consistent with the then-current rating of the certificates (collectively,
"Eligible Investments"). 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
Collections of Non-Principal Receivables and Principal Receivables,
Defaulted Receivables and Miscellaneous Payments will be allocated to each
Series from and after the related Series Cut-Off Date as specified in the
related Supplement, and amounts so allocated to any Series will not, except as
specified in the related Supplement, be available to any other Series.
Allocations thereof between the Certificateholders' Interest and the Seller's
Interest, among the Series in any group and among the classes in any Series
shall be set forth in the related Supplement or Supplements.
On each Distribution Date, (a) the Servicer shall allocate Excess
Principal Collections (as described below) to each Series as set forth in the
related Supplement and (b) the Servicer shall instruct the Trustee to withdraw
from the Collection Account and pay to the Seller (i) an amount equal to the
excess, if any, of (x) 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" with respect to such
Distribution Date over (y) the aggregate amount, if any, for all outstanding
Series which the related Supplements specify are "Principal Shortfalls" with
respect to such Distribution Date and, without duplication, (ii) 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 with
respect to such Distribution Date; provided, however, that, in the case of
clauses (i) and (ii), such amounts shall be paid to the Seller only if the Pool
Balance for such Distribution Date (determined after giving effect to any
Principal Receivables transferred to the Trust on such 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") shall 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 the Distribution Date immediately following such
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 shall be deemed to be "Miscellaneous Payments".
Discount Factor
While finance charges are payable on the Receivables generally, 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 such 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 such Receivable is collected will be equal to the product
of the balance of such Receivable times the discount factor (the "Discount
Factor") in effect at the time of the collection of such Receivable.
Each Prospectus Supplement will specify the Discount Factor in effect
as of the date set forth in such Prospectus Supplement. However, the Discount
Factor will be adjusted as and to the extent described in this
33
<PAGE>
paragraph. If on any Distribution Date the Net Receivables Rate for such
Distribution Date less (i) the weighted average of the certificate rates (as
determined below in this paragraph) for all outstanding Series of certificates
for such Distribution Date less (ii) the annualized Net Loss Rate (as defined in
the Pooling and Servicing Agreement) for the preceding twelve Collection Periods
is less than 1%, then the Discount Factor for such Distribution Date shall 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 (i) less the rate in clause (ii) shall be equal to 1%; and the Discount
Factor shall remain at such 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 shall 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 shall be the percentage (which shall 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, (i) if a certificate rate is calculated as the lesser of (x)
a fixed rate or a formula rate and (y) the Net Receivables Rate, then such
certificate rate shall be the rate in clause (x) and (ii) if an interest rate
swap agreement provides the interest distributable on a Series or Class of
certificates then the certificate rate for such Series or Class of certificates
shall be the interest rate payable to the related swap counterparty.
Allocation of Collections; Deposits in Collection Account
The Servicer, no later than two business days after the processing
date, will deposit all collections received with respect to the Receivables
(excluding, with certain exceptions, certain portions thereof allocable to the
Seller) in each Collection Period into the Collection Account. Notwithstanding
the foregoing requirement for daily deposits, for so long as (i) DFS remains the
Servicer under the Pooling and Servicing Agreement, (ii) no Servicer Default has
occurred and is continuing and (iii) (x) DFS arranges for and maintains a letter
of credit or other form of Enhancement in respect of 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 (y) DFS
otherwise obtains each Rating Agency confirmation described below, then, subject
to any limitations in the confirmations referred to below, DFS need not deposit
collections into the Collection Account on the day indicated in the preceding
sentence until the business day immediately preceding the date on which such
funds are required to be distributed to investors, at which time DFS will make
such deposits in an amount equal to the net amount of such deposits and
withdrawals which would have been made had the conditions of this sentence not
applied; provided, however, that prior to ceasing daily deposits as described
above the Seller shall have delivered to the Trustee evidence that the Rating
Agency Condition has been satisfied. Until such Collections are deposited into
the Collection Account, such funds may be used by the Servicer for its own
benefit, and the proceeds of any short-term investment of such funds will accrue
to the Servicer. During such times as the Servicer holds collections and is
permitted to use such funds for its own benefit, the certificateholders are
subject 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 Collection Period 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 such Collection Period
and if, at any time prior to such 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 such excess from the
34
<PAGE>
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 on such date. However, the Servicer will account for such deposits,
distributions and payments as if they were made individually.
Defaulted Receivables and Recoveries
"Defaulted Receivables" on any Determination Date are (i) all
Receivables (other than all Ineligible Receivables) which were charged off as
uncollectible in respect of the immediately preceding Collection Period and (ii)
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 such Receivables to the Trust and which remained outstanding for any
six consecutive Determination Dates thereafter. 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" herein), receivables which
are coded as SAU/NSF are charged off at the end of the month in which such
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.
The "Defaulted Amount" for any Determination Date will be an amount
(which shall not be less than zero) equal to (a) 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 Collection Period less (b) the full amount (exclusive of
such discounted portion) of any Defaulted Receivables subject to reassignment to
the Seller or purchase by the Servicer for such Collection Period unless certain
events of bankruptcy, insolvency, or receivership have occurred with respect to
either of the Seller or the Servicer, in which event the Defaulted Amount will
not be reduced for those Defaulted Receivables. 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.
If the Servicer adjusts the amount of any Receivable because of a
rebate, refund, credit adjustment or billing error to a Dealer, or because such
Receivable was created in respect of inventory which was refused or returned by
a Dealer, the Seller's Participation Amount will be reduced by the amount of the
adjustment. Furthermore, if following such 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 such Determination Date), the Seller will be required to deposit a
cash amount equal to such deficiency (up to the amount of such Adjustment) into
the Collection Account in immediately available funds (an "Adjustment Payment")
on the day on which such adjustment occurs.
Termination
The Trust will terminate on the earlier to occur of (a) 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 such time, and
(b) December 31, 2014. Upon 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.
35
<PAGE>
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; provided that the Trust or the
Trustee will not be so indemnified if such 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.
The Pooling and Servicing Agreement provides that, except as described
above and with certain other exceptions, 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. However, neither the Seller,
the Servicer, Deutsche FRI nor any of their directors, officers, employees or
agents will be protected against any liability which would otherwise be imposed
by reason of willful misfeasance, bad faith or gross negligence of any such
person in the performance of their duties or by reason of reckless disregard of
their obligations and duties thereunder.
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 such legal action which it may deem necessary or desirable for the
benefit of certificateholders with respect to 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 (i) in the Servicer's
reasonable judgment, no Early Amortization Event will occur as a result of the
change and (ii) 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 with respect to 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.
36
<PAGE>
Servicer Covenants
In the Pooling and Servicing Agreement the Servicer covenants that: (a)
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; (b) it will not permit any rescission or cancellation of a
Receivable except as ordered by a court of competent jurisdiction or other
government authority; (c) it will do nothing to impair the rights of the
certificateholders in the Receivables; and (d) 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
such noncompliance has not been cured within 30 days thereafter (or such 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 such Receivable or all Receivables in such Account, as
applicable. Such 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 such
Receivable plus accrued and unpaid interest thereon in the Collection Account.
The amount of such deposit shall be deemed a "Transfer Deposit Amount." The
purchase by the Servicer constitutes the sole remedy available to the
certificateholders if such covenant or warranty of the Servicer is not satisfied
and the Trust's interest in any such purchased Receivables shall be
automatically assigned to the Servicer.
Servicing Compensation
The Servicer's compensation with respect to each Series for its
servicing activities and reimbursement for its expenses will be a monthly
servicing fee (the "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 Servicer may not resign from its obligations and duties under the
Pooling and Servicing Agreement, except upon determination that such duties are
no longer permissible under applicable law. No such resignation 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.
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 thereof and appoint a new Servicer (a "Service
Transfer"). The rights and interest of the Seller under the Pooling and
Servicing Agreement in the Seller's Interest will not be affected by
37
<PAGE>
any Service Transfer. The Trustee shall as promptly as possible appoint a
successor Servicer and if no successor Servicer has been appointed by the
Trustee and has accepted such 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 shall pass to and be vested in the Trustee.
Prior to any Service Transfer, 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 in excess of the Servicing Fee plus certain excess amounts
payable to the Seller.
A "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 such failure;
2. failure on the part of the Servicer duly to observe or
perform (i) 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 shall not be deemed
to have occurred if the Seller or the Servicer shall have repurchased
the related Receivables or, if applicable, all the Receivables during
such period in accordance with the terms and provisions of the Pooling
and Servicing Agreement or (ii) 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 thereof 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 shall not be
deemed to have occurred if the Seller or the Servicer shall have
repurchased the related Receivables or, if applicable, all the
Receivables during such period in accordance with the provisions of the
Pooling and Servicing Agreement; or
4. the occurrence of certain events of bankruptcy, insolvency
or receivership with respect to 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, shall not
constitute a Servicer Default if such delay or failure was caused by an act of
God or other similar occurrence. Upon the occurrence of any such event, the
Servicer shall not be relieved from using its best efforts to perform its
obligations in a timely manner in accordance with the terms of the Pooling and
Servicing Agreement and the Servicer shall provide the Trustee, any Enhancement
Provider, the Seller and the certificateholders prompt notice of such failure or
delay by it, together with a description of its efforts to so perform its
obligations. The Servicer shall immediately notify the Trustee in writing of any
Servicer Default.
38
<PAGE>
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 such obligation, 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 such action shall 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 upon satisfaction of the Rating Agency Condition. 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 such provisions as 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
adopted as final regulations after the date hereof, and to the extent that such
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 any such 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 such election, which may include elimination of the sale of
Receivables upon the occurrence of an insolvency event with respect to the
Seller 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 such 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 any
such amendment occurs while Series 1996-1 issued by the Trust is outstanding an
opinion of counsel for the Seller, addressed and delivered to the Trustee, shall
be required providing that such amendment will not adversely affect in any
material respect the interests of any investor certificateholders of Series
1996-1 issued by the Trust.
39
<PAGE>
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. No such amendment, however, may (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 such Series or class or (e) reduce the aforesaid percentage of
the unpaid principal amount of certificates the holders of which are required to
consent to any such amendment, in the case of (a), (b) and (c) without the
consent of the holder of such certificate and, in the case of (e), without the
consent of all certificateholders of the adversely affected Series. Promptly
following the execution of any such amendment (other than an amendment described
in the preceding paragraph), the Trustee will furnish written notice of the
substance of such amendment to each certificateholder.
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
Upon written request of any three or more certificateholders of record
the Trustee will afford such certificateholders access during business hours to
the current list of certificateholders for purposes of communicating with other
certificateholders with respect to their rights under the Pooling and Servicing
Agreement. See "--Book-Entry Registration" and "--Definitive Certificates"
above.
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. In addition, for purposes of meeting the legal requirements of
certain local jurisdictions, the Trustee shall have the power to appoint a
co-trustee or separate trustees of all or a part of the Trust. In the event of
such appointments, all rights, powers, duties and obligations shall be conferred
or imposed upon the Trustee and such separate trustee or co-trustee jointly, or
in any jurisdiction in which the Trustee shall be incompetent or unqualified to
perform certain acts singly upon such separate trustee or co-trustee, who shall
exercise and perform such 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 such under the
Pooling and Servicing Agreement or if the Trustee becomes insolvent. In such
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.
40
<PAGE>
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, such other affiliates will become parties to
the Receivables Contribution and Sale Agreement and make representations,
warranties and covenants similar to those described below with respect to 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.
Representations and Warranties
Each of DFS and Deutsche BSC has or will make certain 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 (a) 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, such Additional Account is an Eligible Account and (b) on the Initial
Closing Date, each Additional Cut-Off Date and on each Transfer Date, each
Receivable conveyed on such date is an Eligible Receivable or, if such
Receivable is not an Eligible Receivable, such Receivable is conveyed to the
Seller. In the event of a breach of any representation and warranty set forth in
this paragraph which results in a transfer of such Receivable to the Seller
pursuant to the Pooling and Servicing Agreement, then DFS or Deutsche BSC, as
the case may be, shall repurchase such Receivable from the Seller on the date of
such retransfer. The purchase price for such Ineligible Receivable shall be the
face amount thereof 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 (a) the Receivables
Contribution and Sale Agreement constitutes a legal, valid and binding
obligation of DFS or Deutsche BSC, as the case may be, and (b) 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 upon the creation thereof. If the breach of any of the
representations and warranties described in this paragraph 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 such retransfer.
41
<PAGE>
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 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 such 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
such 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 such 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 (in the case of Deutsche
42
<PAGE>
BSC, Georgia). If the Receivables are deemed to be chattel paper and the
transfer thereof 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 (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
therein. If the Receivables are treated as accounts and the transfer thereof 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 therein under the UCC in Missouri (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 (in the case of Deutsche BSC,
Georgia) in order to perfect the Trust's security interest. If a transfer of
general intangibles is deemed to be a sale, then the UCC as in effect in
Missouri (in the case of Deutsche BSC, Georgia) is not applicable and no further
action under the UCC is required to protect the Trust's interest from third
parties. Financing statements covering the Receivables have been filed under the
UCC as in effect in Missouri (in the case of Deutsche BSC, Georgia) by both the
Seller and the Trust to perfect their respective interests in the Receivables
and continuation statements will be filed as required to continue the perfection
of such interests. In connection with the contribution and sale of the
Receivables to the Seller by DFS and the transfer of the Receivables by the
Seller to the Trust, DFS indicated in their books and records, which may include
computer records, that the Receivables in the Accounts and the related
Collateral Security had been conveyed to the Trust. DFS has retained and will
retain and will not deliver to the Trustee records or agreements relating to the
Receivables. Except as set forth in the second preceding sentence, 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 subject to the rights
and defenses (including rights of setoff) of the applicable Dealer against DFS
or Deutsche BSC, as the case may be.
There are certain limited circumstances under the UCC and applicable
federal law in which prior or subsequent transferees of Receivables could have
an interest in such 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 (i.e., the chattel paper) in the
ordinary course of such 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 such Receivable. Under the Receivables Contribution and
Sale Agreement, each of DFS and Deutsche BSC has warranted to the Seller, and
under the Pooling and Servicing Agreement the Seller has warranted to the Trust,
that the Receivables have been transferred free and clear of the lien of any
third party. Each of DFS, Deutsche BSC and the Seller has also covenanted that
it will not sell, pledge, assign, transfer or grant any lien on any Receivable
or, except as described herein under "Description of the
Certificates--Supplemental Certificates," the Seller's Certificate (or any
interest therein) other than to 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 subject to bankruptcy proceedings, the certificateholders might
incur a loss with respect to 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" herein.
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 therein and, with certain exceptions, proceeds thereof.
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 such Receivable.
43
<PAGE>
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 such exercise of a right of set-off may take the form of not
funding a Delayed Funding Receivable owned by the Trust and applying such funds
toward an obligation of the Manufacturer in respect of a receivable owned by DFS
or one of its affiliates. The Dealer obligated under such 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 such 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
herein 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
such debtor or such debtor itself were to take the position that the sale of
Receivables from such debtor to the Seller should be recharacterized as a pledge
of such Receivables to secure a borrowing from such debtor, then delays in
payments of collections of Receivables to the Seller could occur or (should the
court rule in favor of any such trustee, debtor in possession or creditor)
reductions in the amount of such 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 such debtor or such
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 such creditor, trustee-in-bankruptcy or such debtor, reductions in
such payments could result.
With respect to a Delayed Funding Receivable, if DFS were to become a
debtor in a bankruptcy case prior to funding such Receivable, its
trustee-in-bankruptcy or its creditors may assert that such Delayed Funding
Receivable is an executory contract and such trustee-in-bankruptcy may disaffirm
DFS's obligation to fund such Receivable. Such a disaffirmance would discharge
the obligation of the Dealer on such Delayed Funding Receivable to pay such
Receivable and the Trust would suffer a loss in respect of such Receivable.
A limited partnership (such as the Seller) could become insolvent upon
the insolvency of its general partner (which, in the case of the Seller, is
Deutsche FRI). Deutsche FRI's certificate of incorporation provides that, under
certain circumstances, Deutsche FRI is required to have two independent
directors (as defined therein) in which event it shall not file a voluntary
application for relief under Title 11 of the United States Code (the "Bankruptcy
Code") without the affirmative vote of both independent directors. 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. In addition, certain other steps
will be taken to avoid the Seller's and Deutsche FRI's becoming a debtor in a
bankruptcy case. Notwithstanding such steps, 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 such Receivables, then delays in
payments on the certificates or (should the court rule in favor of any such
trustee, debtor in possession or creditor) reductions in the amount of such
payments could result.
44
<PAGE>
The Seller and Deutsche FRI do not intend to file, and DFS has agreed
that it will not cause Deutsche FRI to file, a voluntary application for relief
under the Bankruptcy Code or any similar applicable state law so long as the
Seller or Deutsche FRI, as applicable, is solvent and does not foresee becoming
insolvent.
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 such circumstances, the Servicer is obligated to
allocate all Principal Collections to the oldest principal balance first. If
such 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 with respect to 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 such
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 such
Receivables and at the time of any transfers were insolvent. However, each of
DFS and Deutsche BSC believes that it will receive reasonably equivalent value
or fair consideration for the Receivables and that it will not be insolvent at
the time of such transfers.
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 such payments are made within one year prior to the filing of a
bankruptcy case in respect of DFS.
LEGAL MATTERS
Certain legal matters relating to each Series will be passed upon for
the Seller by Richard C. Goldman, Esq., Chief Legal Officer of the Servicer.
Certain legal matters and certain federal income tax matters relating to each
Series will be passed upon for the Seller by Mayer, Brown & Platt, Chicago,
Illinois. Certain legal matters and certain Missouri income tax matters relating
to each Series will be passed upon for the Seller by Bryan Cave LLP, St. Louis,
Missouri.
REPORTS TO CERTIFICATEHOLDERS
The Servicer will prepare monthly and annual unaudited reports that
will contain information about the Trust. Such 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 The Depository Trust
Company 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.
45
<PAGE>
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, upon 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.
46
<PAGE>
INDEX OF TERMS
A/R Receivable Overconcentration...........................29
A/R Receivables .........................................13
Accounts ..........................................3
Accounts Receivable Business...............................13
Addition Date .........................................26
Additional Accounts........................................30
Additional Cut-Off Date....................................26
Adjustment Payment.........................................35
Asset Based Receivable Overconcentration...................29
Asset Based Receivables....................................17
Automatic Addition Condition...............................31
Bankruptcy Code .........................................45
Cede .........................................19
Cedel Participants.........................................21
Certificate Rate ..........................................1
Certificateholders' Interest................................2
Citibank .........................................22
Collateral Security.........................................2
Collection Account.........................................32
Cooperative .........................................22
curtailments .........................................15
Dealer Overconcentration...................................29
Dealers ..........................................3
Defaulted Amount .........................................35
Defaulted Receivables......................................35
Definitive Certificates....................................24
Delayed Funding Receivable.................................15
Depositaries .........................................22
Depositary .........................................22
Depository .........................................19
Deutsche BSC ..........................................3
Deutsche FRI .........................................12
DFS ..........................................1
Discount Factor .........................................34
Distribution Date .........................................19
DTC ........................................A-1
ECS .........................................14
Eligible Account .........................................27
Eligible Deposit Account...................................32
Eligible Institution.......................................33
Eligible Investments.......................................33
Eligible Receivable........................................28
Enhancement Provider.......................................27
Enhancements ..........................................2
Euroclear Operator.........................................22
Euroclear Participants.....................................22
Excess Principal Collections...............................33
Existing Manufacturer......................................31
Field Audit System.........................................16
47
<PAGE>
Floorplan Agreement........................................16
Floorplan Business.........................................13
Floorplan Receivables......................................13
FSRs .........................................16
Holders .........................................24
Indirect Participants......................................20
Individual Unsecured Receivable Overconcentration..........30
Ineligible Receivables.....................................26
Insolvency Laws .........................................12
Manufacturer .........................................15
Manufacturer Overconcentration.............................30
Miscellaneous Payments.....................................33
Morgan .........................................22
NSF .........................................35
Offered Certificates.......................................19
Overconcentration Amount...................................29
Participants .........................................20
Participations .........................................18
Pay-as-Sold .........................................15
Pool Balance .........................................29
Pooling and Servicing Agreement.............................1
Principal Shortfalls.......................................33
Principal Terms .........................................25
Private Label .........................................18
Product Line Overconcentration.............................30
Rating Agency Condition....................................26
Receivables ..........................................3
Receivables Contribution and Sale Agreement.................3
Removal Date .........................................32
Removal Notice .........................................32
Removed Accounts .........................................32
Required Participation Amount..............................31
Required Participation Percentage..........................32
SAU .........................................35
Scheduled Payment Plans....................................15
Seller ..........................................1
Seller's Interest ..........................................2
Seller's Certificate.......................................24
Series ..........................................1
Series 1994-1 Closing Date..................................7
Series Issuance Date.......................................26
Service Transfer .........................................38
Servicer ..........................................1
Servicer Default .........................................38
Servicing Fee .........................................37
Specified Dealer .........................................29
Strip Certificates.........................................19
Supplement ..........................................1
Supplemental Certificate...................................24
Tax Opinion .........................................25
Terms and Conditions.......................................22
48
<PAGE>
Transfer Date .........................................26
Transfer Deposit Amount....................................26
Trust ..........................................1
Trustee ..........................................1
Unallocated Principal Collections..........................33
Unsecured Receivable Overconcentration.....................30
Unsecured Receivables......................................18
49
<PAGE>
EXHIBIT A
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered
certificates (the "Global Securities") will be available only in book-entry
form. Investors in the Global Securities may hold such Global Securities through
any of The Depository Trust Company ("DTC"), Cedel Bank or Euroclear. The Global
Securities will be tradeable as home market instruments in both the European and
U.S. domestic markets. Initial settlements and all secondary trades will settle
in same-day funds.
Secondary market trading between investors holding Global Securities
through Cedel Bank and Euroclear will be conducted in the ordinary way in
accordance with their normal rules and operating procedures and in accordance
with conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations and prior asset backed certificates issues.
Secondary cross-market trading between Cedel Bank or Euroclear and DTC
Participants holding certificates will be effected on a delivery-against-payment
basis through the respective Depositaries of Cedel Bank and Euroclear (in such
capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be
subject to U.S. withholding taxes unless such holders meet certain requirements
and deliver appropriate U.S. tax documents to the securities clearing
organizations or their participants.
Initial Settlement
All Global Securities will be held in book-entry form by DTC in the
name of CEDE & CO. as nominee of DTC. Investors' interests in the Global
Securities will be represented through financial institutions acting on their
behalf as direct and indirect Participants in DTC. As a result, Cedel Bank and
Euroclear will hold positions on behalf of their participants through their
respective Depositaries, which in turn will hold such positions in accounts as
DTC Participants.
Investors electing to hold their Global Securities through DTC will
follow the settlement practices applicable to prior asset backed certificates
issues. Investor securities custody accounts will be credited with their
holdings against payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through Cedel Bank
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 Securities will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
Secondary Market Trading
Since the purchaser determines the place of delivery, it is important
to establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
A-1
<PAGE>
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to prior asset
backed certificates issues in same-day funds.
Trading between Cedel Bank 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 Bank or Euroclear purchaser. When
Global Securities are to be transferred from the account of a DTC Participant to
the account of a Cedel Participant or a Euroclear Participant, the purchaser
will send instructions to Cedel Bank or Euroclear through a Cedel Participant or
Euroclear Participant at least one business day prior to settlement. Cedel Bank
or Euroclear will instruct the respective Depositary, as the case may be, to
receive the Global Securities against payment. Payment will include interest
accrued on the Global Securities from and including the last coupon payment date
to and excluding the settlement date, on the basis of a calendar year consisting
of twelve 30-day calendar months. Payment will then be made by the respective
Depositary of the DTC Participant's account against delivery of the Global
Securities. After settlement has been completed, the Global Securities will be
credited to the respective clearing system and by the clearing system, in
accordance with its usual procedures, to the Cedel Participant's or Euroclear
Participant's account. The securities credit will appear the next day (European
time) and the cash debt will be back-valued to, and the interest on the Global
Securities will accrue from, the value date (which would be the preceding day
when settlement occurred in New York). If settlement is not completed on the
intended value date (i.e., the trade fails), the Cedel Bank or Euroclear cash
debt will be valued instead as of the actual settlement date.
Cedel Participants and Euroclear Participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most direct means of doing so is to preposition
funds for settlement, either from cash on hand or existing lines of credit, as
they would for any settlement occurring within Cedel Bank or Euroclear. Under
this approach, they may take on credit exposure to Cedel Bank or Euroclear until
the Global Securities are credited to their accounts one day later.
As an alternative, if Cedel Bank or Euroclear has extended a line of
credit to them, Cedel Participants or Euroclear Participants can elect not to
preposition funds and allow that credit line to be drawn upon the finance
settlement. Under this procedure, Cedel Participants or Euroclear Participants
purchasing Global Securities would incur overdraft charges for one day, assuming
they cleared the overdraft when the Global Securities were credited to their
accounts. However, interest on the Global Securities would accrue from the value
date. Therefore, in many cases the investment income on the Global Securities
earned during that one-day period may substantially reduce or offset the amount
of such overdraft charges, although this result will depend on each Cedel
Participant's or Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours,
DTC Participants can employ their usual procedures for sending Global Securities
to the respective 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 Bank or Euroclear seller and DTC purchaser. Due
to time zone differences in their favor, Cedel Participants and Euroclear
Participants may employ their customary procedures for transactions in which
Global Securities are to be transferred by the respective clearing system,
through the respective Depositary, to a DTC Participant. The seller will send
instructions to Cedel Bank or Euroclear through a Cedel Participant or Euroclear
Participant at least one business day prior to settlement. In these cases, Cedel
Bank or Euroclear will instruct the respective Depositary, as appropriate, to
deliver the Global Securities to the DTC Participant's account against payment.
Payment will include interest accrued on the
A-2
<PAGE>
Global Securities from and including the last coupon payment to and excluding
the settlement date on the basis of a calendar year consisting of twelve 30-day
calendar months. The payment will then be reflected in the account of the Cedel
Participant or Euroclear Participant the following day, and receipt of the cash
proceeds in the Cedel Participant's or Euroclear Participant's account would be
back-valued to the value date (which would be the preceding day, when settlement
occurred in New York). Should the Cedel Participant or Euroclear Participant
have a line of credit with its respective clearing system and elect to be in
debt in anticipation of receipt of the sale proceeds in its account, the
back-valuation will extinguish any overdraft incurred over that one-day period.
If settlement is not completed on the intended value date, (i.e., the trade
fails), receipt of the cash proceeds in the Cedel Participant's or Euroclear
Participant's account would instead be valued as of the actual settlement date.
Finally, day traders that use Cedel Bank or Euroclear and that purchase
Global Securities from DTC Participants for delivery to Cedel Participants or
Euroclear Participants should note that these trades would automatically fail on
the sale side unless affirmative action were taken. At least three techniques
should be readily available to eliminate this potential problem:
(a) borrowing through Cedel Bank or Euroclear for one day
(until the purchase side of the day trade is reflected in their Cedel
Bank or Euroclear accounts) in accordance with the clearing system's
customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC
Participant no later than one day prior to settlement, which would give
the Global Securities sufficient time to be reflected in their Cedel
Bank 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.
Certain U.S. Federal Income Tax Documentation Requirements
A beneficial owner of Global Securities holding securities through
Cedel Bank or Euroclear (or through DTC if the holder has an address outside the
U.S.) will be subject to the 30% U.S. withholding tax that generally applies to
payments of interest (including original interest discount) on registered debt
issued by U.S. Persons, unless (i) 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 such beneficial owner and the
U.S. entity required to withhold tax complies with applicable certification
requirements and (ii) such 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). Beneficial owners
of Global Securities that are non-U.S. Persons (and each of which does
not actually or constructively own 10% or more of the voting stock of
the Seller and is not a controlled foreign corporation with respect to
the Seller) can obtain a complete exemption from the withholding tax by
filing a signed Form W-8 (Certificate of Foreign Status). If the
information shown on Form W-8 changes, a new Form W-8 must be filed
within 30 days of such change.
Exemption for non-U.S. Persons with effectively connected
income (Form 4224). A non-U.S. Person, including a non-U.S.
corporation or bank with a U.S. branch, for which the interest income
is effectively connected with its conduct of a trade or business in the
United States, can obtain an exemption from the withholding tax by
filing Form 4224 (Exemption
A-3
<PAGE>
from Withholding of Tax on Income Effectively Connected with the
Conduct of a Trade or Business in the United States).
Exemption or reduced rate for non-U.S. Persons resident in
treaty countries (Form 1001). Non-U.S. Persons that are Certificate
Owners residing in a country that has a tax treaty with the United
States can obtain an exemption or reduced tax rate (depending on the
treaty terms) by filing Form 1001 (Ownership, Exemption or Reduced Rate
Certificate). If the treaty provides 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.
Exemption of 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 Certificate
Owner of a Global Security or, in the case of a Form 1001 or a Form
4224 filer, his agent, files by submitting the appropriate form to the
person through whom it holds (the clearing agency, in the case of
persons holding directly on the books of the clearing agency). Form W-8
and Form 1001 are effective for three calendar years and Form 4224 is
effective for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of the
United States or any political subdivision thereof or (iii) an estate or trust
the income of which is includible in gross income for United States tax
purposes, regardless of its source. 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 Securities. Investors are advised to consult their own tax
advisors for specific tax advice concerning their holding and disposing of the
Global Securities.
A-4
<PAGE>
Distribution Financial Services Floorplan Master Trust
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 with respect to their unsold allotments or
subscriptions.
I-2
<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 therein as the "Corporation") provides that:
The Corporation shall 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 shall
continue as to a person who has ceased to be a director or officer, as
the case may be, and shall 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 shall 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 shall 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 shall 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
shall 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.
II-1
<PAGE>
Section 4 of the by-laws of Deutsche Floorplan Receivables, Inc.
(referred to therein as the "Corporation") provides as follows:
4. INDEMNIFICATION.
(a) The Corporation shall 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, shall 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 shall 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 shall
have been made in respect of any claim, issue or matter as to which
such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery or the court
in which such action or suit was brought shall determine 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 shall 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
shall 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) shall 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 shall 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 such 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.
II-2
<PAGE>
(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 such action, suit or
proceeding upon receipt of any undertaking by or on behalf of such
Director or officer to repay such amount if it shall 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.
(f) The indemnification and advancement of expenses provided
by, or granted pursuant to, the other subsections of this Section shall
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 shall 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 shall, unless otherwise
provided when authorized or ratified, continue as to a person who has
ceased to be a Director, officer, employee or agent and shall 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 shall 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 with respect to 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, subject to the terms and conditions contained in the
policy.
II-3
<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 this Part II)
- ---------------------------
* 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 such
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 shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-4
<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 shall be deemed to be a new
registration statement relating to the
securities offered therein, and the offering of
such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(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
shall 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 shall be deemed to be a new
Registration Statement relating to the securities
offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona
fide offering thereof.
II-5
<PAGE>
(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.
(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.
II-6
<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
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of St. Louis, State of Missouri on March 16, 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
----------------------------------
II-7
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Richard H. Schumacher, Richard C.
Goldman, Stephen J. Gentry, W. Steven Culp and Naran U. Burchinow, and each of
them, his/her true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for and in his/her name, place and stead, in
any and all capacities, to sign any or all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as might or could be done in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their substitute or substitutes may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in their
capacities as officers and directors of Deutsche Floorplan Receivables, Inc. in
the capacities and on the dates indicated below.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Richard H. Schumacher President and Treasurer March 16, 1999
- -------------------------------------- (Principal Executive Officer and
Richard H. Schumacher Principal Financial Officer)
/s/ Stephen J. Gentry Senior Vice President and Controller March 16, 1999
- -------------------------------------- (Principal Accounting Officer)
Stephen J. Gentry
/s/ Richard C. Goldman Director March 16, 1999
- --------------------------------------
Richard C. Goldman
/s/ C. Don Brown Director March 16, 1999
- --------------------------------------
C. Don Brown
/s/ Phil Stout Director March 16, 1999
- --------------------------------------
Phil Stout
</TABLE>
II-8
