<PAGE> 1
THE INFORMATION IN THIS PRELIMINARY 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 PRELIMINARY 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.
Filed pursuant to Rule 424(b)(5)
Registration No. 333-74457
Registration No. 333-74457-01
PRELIMINARY PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED APRIL 20, 2000
DISTRIBUTION FINANCIAL SERVICES FLOORPLAN MASTER TRUST
ISSUER
$1,193,750,000 FLOATING RATE ASSET BACKED CERTIFICATES, SERIES 2000-3, CLASS A
$37,500,000 FLOATING RATE ASSET BACKED CERTIFICATES, SERIES 2000-3, CLASS B
DEUTSCHE FLOORPLAN RECEIVABLES, L.P.
SELLER
DEUTSCHE FINANCIAL SERVICES CORPORATION
SERVICER
The certificates represent interests in the trust only and do not represent
obligations of or interests in, and are not guaranteed by, Deutsche Floorplan
Receivables, L.P., Deutsche Financial Services Corporation, Deutsche Bank AG or
any other person. This prospectus supplement and the accompanying prospectus
together constitute the full prospectus for your series of certificates.
INVESTING IN THE CERTIFICATES INVOLVES RISKS. YOU SHOULD CONSIDER THE
DISCUSSION UNDER "RISK FACTORS" BEGINNING ON PAGE S-12 OF THIS PROSPECTUS
SUPPLEMENT AND PAGE 3 OF THE ACCOMPANYING PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
EXPECTED UNDERWRITING NET
PRINCIPAL INTEREST FINAL PRICE TO DISCOUNTS AND PROCEEDS TO
AMOUNT RATE PAYMENT DATE PUBLIC COMMISSIONS SELLER
-------------- -------- ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Class A
certificates....... $1,193,750,000 (1) July 15, 2002 % % %
Class B
certificates....... 37,500,000 (2) July 15, 2002 % % %
Total................ $1,231,250,000 $ $ $
</TABLE>
------------
(1) Lesser of (a) LIBOR plus 0. % per annum and (b) the net receivables rate.
(2) Lesser of (a) LIBOR plus 0. % per annum and (b) the net receivables rate.
DEUTSCHE BANC ALEX. BROWN
BANC OF AMERICA SECURITIES LLC
BANC ONE CAPITAL MARKETS, INC.
J.P. MORGAN & CO.
THE DATE OF THIS PRELIMINARY PROSPECTUS SUPPLEMENT IS JULY 10, 2000
<PAGE> 2
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We tell you about the certificates in two separate documents that
progressively provide more detail: (a) the accompanying prospectus, which
provides general information, some of which may not apply to your certificates,
and (b) this prospectus supplement, which describes specific terms of your
series of certificates.
IF THE TERMS OF THE CERTIFICATES OF YOUR SERIES VARY BETWEEN THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION IN
THIS PROSPECTUS SUPPLEMENT.
You should rely only on the information provided in this prospectus
supplement and the accompanying prospectus including the information
incorporated by reference. We have not authorized anyone to provide you with
other or different information. We are not offering the certificates in any
state or other jurisdiction where the offer is not permitted. We do not assert
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 offered
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 definitions of some terms used in this prospectus supplement
under the caption "Glossary" beginning on page S-59 in this prospectus
supplement or under the caption "Glossary" beginning on page 50 in the
accompanying prospectus.
The Class C certificates of your series are not being offered by this
prospectus supplement or the prospectus.
Application will be made to list the Class A and Class B certificates on
the Luxembourg Stock Exchange. We cannot assure you (a) as to the timing of such
application or (b) that such application will be successful.
To the best knowledge of the seller, having taken all reasonable care to
ensure that such is the case, the information contained in this prospectus
supplement and the accompanying prospectus is accurate and there are no
omissions likely to affect the meaning of the facts presented in this prospectus
supplement or the prospectus. The seller is responsible for the information in
this prospectus supplement and the prospectus.
S-2
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY..................................................... S-6
The Parties............................................ S-6
The Securities......................................... S-7
Credit Enhancement..................................... S-9
Servicing.............................................. S-9
Servicer Advances...................................... S-9
Optional Repurchase.................................... S-10
Tax Matters............................................ S-10
ERISA Considerations................................... S-10
Offered Certificate Ratings............................ S-10
Risk Factors........................................... S-11
Absence of Market...................................... S-11
RISK FACTORS................................................ S-12
You May Be Unable to Resell Your Certificates.......... S-12
You May Be Adversely Affected if Your Certificates are
Repaid Faster or Slower Than You Expect............... S-12
Possible Delays and Reductions in Payments on
Certificates Due to Geographic Concentration.......... S-12
Possible Delays and Reductions in Payments on
Certificates Due to Limited Assets of the Trust....... S-13
Possible Delays and Reductions in Payments on
Certificates Due to Basis Risk........................ S-13
Possible Delays and Reductions In Payments on
Certificates Due to Limited Credit Enhancement........ S-14
Possible Delays and Reductions in Payments on
Certificates Due to Reduction in Invested Amount...... S-15
Possible Delays and Reductions in Payments on Class B
Certificates Due to Subordination of Class B
Certificates.......................................... S-15
Deposits of Funds in the Excess Funding Account Will
Reduce the Amount of Non-Principal Collections that
are Available to the Trust............................ S-15
Ability to Change Discount Factor May Result in Delays
or Reductions in Payments on Certificates............. S-16
Ratings are Not Recommendations........................ S-16
Tax and ERISA Matters.................................. S-17
THE ACCOUNTS................................................ S-18
General................................................ S-18
Description of the Trust Portfolio..................... S-18
Yield Information...................................... S-21
Major Customers; Major Manufacturers................... S-21
Delinquency Experience................................. S-21
Loss Experience........................................ S-22
Aging Experience....................................... S-23
Certain Payment Plan Information....................... S-24
DEUTSCHE FINANCIAL SERVICES CORPORATION..................... S-24
DEUTSCHE BANK AG............................................ S-25
MATURITY AND PRINCIPAL PAYMENT CONSIDERATIONS............... S-25
</TABLE>
S-3
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DESCRIPTION OF THE CERTIFICATES............................. S-26
Interest............................................... S-26
Principal.............................................. S-27
Distributions on the Certificates and Other
Information........................................... S-27
Allocations of Collections, Defaulted Amounts and
Miscellaneous Payments to the Dealer Overconcentration
Series................................................ S-29
Allocations of Collections, Defaulted Amounts and
Miscellaneous Payments to Your Series................. S-30
Discount Factor........................................ S-31
Distributions from The Collection Account; Reserve
Fund.................................................. S-31
Interest Funding Account............................... S-34
Principal Funding Account.............................. S-34
Excess Funding Account................................. S-34
Servicer Advances...................................... S-36
Distributions.......................................... S-36
Optional Repurchase.................................... S-37
Revolving Period....................................... S-38
Accumulation Period.................................... S-38
Early Amortization Period.............................. S-39
Early Amortization Events.............................. S-39
Termination of Your Series............................. S-43
Servicing Compensation and Payment of Expenses......... S-43
Reports................................................ S-44
FEDERAL INCOME TAX CONSIDERATIONS........................... S-45
Overview............................................... S-45
Characterization of the Certificates and the Trust..... S-45
Taxation of Interest Income of Certificateholders...... S-46
Disposition of a Certificate........................... S-47
Possible Classification as a Partnership or as an
Association Taxable as a Corporation.................. S-48
FASIT Legislation...................................... S-49
Foreign Investors...................................... S-49
Backup Withholding..................................... S-51
STATE AND LOCAL TAX CONSEQUENCES............................ S-51
ERISA CONSIDERATIONS........................................ S-53
General................................................ S-53
Plan Assets and the Availability of Exemptions for
Certificates.......................................... S-53
Review by Benefit Plan Fiduciaries..................... S-54
UNDERWRITING................................................ S-55
LEGAL MATTERS............................................... S-56
</TABLE>
S-4
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
LISTING AND GENERAL INFORMATION............................. S-57
Listing on the Luxembourg Stock Exchange............... S-57
Authorization.......................................... S-57
Litigation............................................. S-57
No Material Adverse Change............................. S-57
Availability of Documents.............................. S-57
Clearing Systems....................................... S-58
Miscellaneous.......................................... S-58
Ratings of Certificates................................ S-58
GLOSSARY.................................................... S-59
ANNEX I
OTHER SERIES........................................... I-1
</TABLE>
S-5
<PAGE> 6
SUMMARY
This summary highlights selected information from this document. This
summary does not contain all of the information that you need to consider in
making your investment decision and is qualified by the more complete
descriptions contained in this prospectus supplement and the accompanying
prospectus. To understand all of the terms of the certificates, you should read
carefully this entire prospectus supplement and the accompanying prospectus,
including the information under "Risk Factors" in this prospectus supplement and
the accompanying prospectus.
THE PARTIES
Trust......................... Distribution Financial Services Floorplan
Master Trust.
The assets of the trust include receivables
generated from time to time under accounts that
have been designated for that purpose as well
as receivables generated under any accounts
designated for that purpose from time to time.
"Account" is the term that Deutsche Financial
Services Corporation ("DFS") uses to describe a
credit arrangement between DFS and a dealer,
manufacturer or distributor. DFS may have
multiple accounts with a particular dealer,
manufacturer or distributor. The accounts are
not transferred by DFS to the seller or by the
seller to the trust. The accounts are
identified in a computer file or microfiche or
written list delivered from time to time to the
trustee of the trust in accordance with the
pooling and servicing agreement.
All references to DFS in its capacity as
originator of receivables should be understood
to include a reference to any affiliate of DFS
that is an "approved affiliate" as defined in
the Glossary of the prospectus. As of the date
of this prospectus supplement, no affiliate of
DFS is an "approved affiliate."
The receivables arise from extensions of credit
made by DFS to dealers, manufacturers or
distributors of various types of products. The
products may include, among other types of
products:
- computers and related equipment;
- manufactured housing;
- recreational vehicles;
- boats and boat motors;
- consumer electronics and appliances;
- keyboards and other musical instruments;
- industrial and agricultural equipment;
- snowmobiles; and
- motorcycles.
The types of products may change from time to
time.
S-6
<PAGE> 7
The seller may add or remove accounts from time
to time.
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...................... DFS.
Trustee....................... The Chase Manhattan Bank.
Agent......................... It is anticipated that if the Class A and Class
B certificates are listed on the Luxembourg
Stock Exchange, Kredietbank S.A.
Luxembourgeoise will act as an additional
paying agent and transfer agent for the Class A
and Class B certificates.
THE SECURITIES................ THE CERTIFICATES OF YOUR SERIES
Your series will consist of the following
classes of certificates:
- $1,193,750,000 Floating Rate Asset Backed
Certificates, Series 2000-3, Class A;
- $37,500,000 Floating Rate Asset Backed
Certificates, Series 2000-3, Class B; and
- $18,750,000 Floating Rate Asset Backed
Certificates, Series 2000-3, Class C.
The Class C certificates are not being offered
by this prospectus supplement or the
prospectus.
CLOSING DATE
The issuance of the certificates of your series
will take place on or about July , 2000.
DELIVERY OF CERTIFICATES
We expect that delivery of the certificates
will be made in book-entry form only through
the facilities of The Depository Trust Company,
Clearstream, Luxembourg and Morgan Guaranty
Trust Company of New York, Brussels office, as
operator of the Euroclear system, on or about
the closing date for your series.
DISTRIBUTION DATES
The trust will make distributions on the
certificates of your series to the extent of
available funds received during each calendar
month. The distribution date will be the 15th
day of the following calendar month--or, if
that day is not a business day, the next
business day--commencing on August 15, 2000.
S-7
<PAGE> 8
INTEREST PAYMENTS
- The interest rate for the offered
certificates is specified on the front cover
page of this prospectus supplement.
- Interest on the outstanding principal
balance of each class of certificates of
your series will accrue at the applicable
interest rate during each period that we
call an "interest period". Each interest
period will begin on a distribution
date--or, in the case of the first
distribution date, will begin on the closing
date--and will end on the day preceding the
next distribution date.
- Interest on the certificates of your series
will be calculated on the basis of the
actual number of days in the related
interest period divided by 360.
- The trustee of the trust will distribute
accrued interest on each class of
certificates of your series on each
distribution date to the extent of available
funds allocated to your series. 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.
EXPECTED PRINCIPAL PAYMENTS AND POTENTIAL LATER
PAYMENTS
The trust expects to pay the entire principal
amount of your certificates in one payment on
the Expected Final Payment Date. In order to
accumulate funds to pay your certificates in
full on the Expected Final Payment Date, the
trust will accumulate principal collections in
a deposit account that we call the principal
funding account, during a period that we call
the accumulation period.
POSSIBLE EARLY PRINCIPAL REPAYMENT OF YOUR
SERIES
The certificates of your series may be repaid
earlier than expected as a result of any of the
following:
- the occurrence of an event that we call an
early amortization event;
- the seller exercises its option to
repurchase the interest of your series in
the trust; or
- the seller is required to repurchase the
interest of your series in the trust.
S-8
<PAGE> 9
TERMINATION DATE
The distribution date in July 2004 is the
termination date for your series.
OTHER SERIES
In addition to your series of certificates,
other series issued by the trust are expected
to be outstanding on the closing date for your
series. Annex I to this prospectus supplement
summarizes some of the terms of those series,
other than the Dealer Overconcentration Series.
For a description of the Dealer
Overconcentration Series, see "Description of
the Certificates--Allocations of Collections,
Defaulted Amounts and Miscellaneous Payments to
the Dealer Overconcentration Series" in this
prospectus supplement. No class or series is
being offered by this prospectus supplement or
the prospectus other than the Class A
certificates and Class B certificates of your
series.
ALLOCATIONS
Your series represents the right only to a
portion of collections on the receivables. Your
series will also be allocated a portion of the
defaulted receivables.
CREDIT ENHANCEMENT............ Credit enhancement of the certificates of your
series will be provided by:
- amounts in a deposit account that we call
the reserve fund;
- 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; and
- application of non-principal collections as
described in priorities (6) and (7) under
"Description of the
Certificates--Distributions from the
Collection Account; Reserve Fund" in this
prospectus supplement.
The amount of the credit enhancement is limited
and may not prevent you from suffering a loss.
SERVICING..................... DFS is the initial servicer. The servicer is
responsible for administering the receivables
and making collections on the receivables.
The servicer will receive a monthly servicing
fee as servicing compensation from the trust.
SERVICER ADVANCES............. Once a month, the servicer will deposit in the
trust collection account as an advance an
amount equal to the amount of interest that is
due but unpaid on a receivable, but only if the
servicer reasonably expects to recover the
advance from future payments on that
receivable. This
S-9
<PAGE> 10
advance is called a servicer advance. The
servicer will be entitled to reimbursement of
servicer advances from future payments on all
of the receivables. Those reimbursements will
be made out of available funds prior to the
deposit of those funds in the collection
account.
OPTIONAL REPURCHASE........... The seller has the option to repurchase the
interest of your series in the trust once an
amount that we refer to as the invested amount
of your series is reduced to less than 10% of
the initial principal amount of your series.
TAX MATTERS................... In the opinion of Mayer, Brown & Platt, special
tax counsel for the seller, the Class A and
Class B certificates will be characterized as
debt for federal income tax purposes.
In the opinion of Bryan Cave LLP, Missouri
counsel for the seller, the Class A and Class B
certificates will be characterized as debt for
Missouri income tax purposes.
If you purchase a Class A or Class B
certificate, you agree to treat it as debt for
tax purposes.
For further information concerning the
application of federal and Missouri tax laws,
see "Federal Income Tax Considerations" and
"State and Local Tax Consequences" in this
prospectus supplement.
ERISA CONSIDERATIONS.......... It is anticipated that the Class A certificates
will meet the criteria for treatment as
"publicly-offered securities." If so, taking
into account important considerations described
under "ERISA Considerations" in this prospectus
supplement, the Class A certificates will be
eligible for purchase by persons investing
assets of employee benefit plans.
Pension plans and other investors to which
ERISA applies cannot acquire Class B
certificates. Prohibited investors include:
- any employee benefit plans to which ERISA
applies;
- any plan or other arrangement to which
section 4975 of the U.S. Internal Revenue
Code applies; and
- any entity whose underlying assets may be
deemed to include "plan assets" under ERISA
by reason of any plan's investment in the
entity.
By purchasing any Class B certificates, you
certify that you are not within any of those
categories.
For further information regarding the
application of ERISA, see "ERISA
Considerations" in this prospectus supplement.
OFFERED CERTIFICATE RATINGS... The Class A certificates will be rated at the
time of issuance in the highest long-term
rating category by at least one rating agency.
The Class B certificates will be
S-10
<PAGE> 11
rated at the time of issuance in one of the
three highest long-term rating categories by at
least one rating agency.
A security rating is not a recommendation to
buy, sell or hold securities and may be revised
or withdrawn at any time by the assigning
rating agency. Each rating should be evaluated
independently of any other rating.
RISK FACTORS.................. You should consider the matters set forth under
"Risk Factors" on pages S-12 through S-17 of
this prospectus supplement.
ABSENCE OF MARKET............. The certificates of your series 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 United
States securities exchange or quote your
certificates in the automated quotation system
of a registered securities association.
Application will be made to list the Class A
and Class B certificates on the Luxembourg
Stock Exchange. We cannot assure you (a) as to
the timing of such application or (b) that such
application will be successful.
S-11
<PAGE> 12
RISK FACTORS
In addition to the other information contained in this prospectus
supplement and the prospectus, you should consider the following risk
factors--and the "Risk Factors" set forth in the prospectus--in deciding whether
to purchase certificates. The disclosures below and the "Risk Factors" set forth
in the accompanying prospectus summarize material risks of investing in the
certificates. The summary does not purport to be complete; to fully understand
and evaluate it, you should also read the rest of this prospectus supplement and
the accompanying prospectus.
You May Be Unable to Resell
Your
Certificates There is currently no secondary market for 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 Adversely Affected
if
Your Certificates are Repaid
Faster
or Slower Than You Expect You may receive repayment of your certificates
earlier or later than expected.
- If your certificates are repaid faster than
you expect, you may be unable to reinvest
principal received on your certificates at a
yield that is equal to the yield on your
certificates. If you acquire certificates at
a premium, repayment of principal at a rate
that is faster than the rate anticipated
will result in a yield to you that is lower
than you anticipated.
- If your certificates are repaid later than
you expect, you will be unable to use the
principal amount of your investment at the
time that you expected, and you may miss
opportunities to reinvest the money in other
investments. Also, if you acquire your
certificates at a discount, the repayment of
principal of your certificates later than
you anticipated will result in a lower than
anticipated yield.
- Numerous factors may result in your
certificates being repaid faster or slower
than you expect; we cannot assure you that
your certificates will be repaid on any
particular date. Additional discussion of
these issues is set forth under "Maturity
and Principal Payment Considerations" in
this prospectus supplement.
Possible Delays and Reductions
in
Payments on Certificates Due
to
Geographic Concentration You may suffer delays and reductions in
payments on your certificates because of
economic conditions in states where dealers are
located.
- As of May 31, 2000 (calculated as if the
June 2000 Addition of Accounts described
under "The Accounts" in this prospectus
supplement had occurred as of May 31, 2000),
according to their mailing addresses in the
records of DFS, dealers owing receivables
representing, by principal balance, 9.9%,
6.7%, 6.6%, and 5.2% of the receivables in
the trust, were located in California,
Texas, Florida and Arizona, respectively.
S-12
<PAGE> 13
- An economic downturn in one or more of the
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 delay and
reduce payments to you.
Possible Delays and Reductions You may experience delays and reductions in
in Payments on Certificates Due payments on your certificates because the trust
to Limited Assets of the Trust will not have any significant assets or sources
of funds other than the receivables.
- Your certificates will be payable only from
the assets of the trust.
- You must rely for repayment upon payments on
the receivables and, if and to the extent
available, amounts on deposit in the reserve
fund. However, amounts to be deposited in
the reserve fund are limited in amount. If
the reserve fund is exhausted, the trust
will depend solely on current collections on
the receivables to make payments on your
certificates.
If losses or delinquencies occur with respect
to receivables which are not covered by
payments on other receivables or by the reserve
fund, you may experience delays and reductions
in payments on your certificates.
The certificates do not represent an interest
in or an obligation of, and are not insured or
guaranteed by, the seller, servicer, DFS,
Deutsche Bank AG or any other person. You will
have no recourse to the seller, servicer, DFS,
Deutsche Bank AG or any other person in the
event that proceeds of the assets of the trust
are insufficient or otherwise unavailable to
make payments on your certificates.
Possible Delays and Reductions You could suffer delays or reductions in
in Payments on Certificates Due payments on your certificates because of the
to Basis Risk way the receivables bear or do not bear
interest and the way in which interest is
calculated on your certificates.
- The receivables generally bear interest at
rates announced by particular banks plus a
margin. DFS may reduce the interest rates
applicable to any of the receivables if, in
the reasonable judgment of DFS, no early
amortization event will result from that
reduction. Some receivables do not bear
interest for a specified period after their
origination.
S-13
<PAGE> 14
- The interest rate on your certificates is
calculated as the lesser of (a) LIBOR plus a
margin and (b) a rate that reflects the
weighted average of the interest rates on
the receivables. If LIBOR plus the margin
used to compute the interest rate for your
certificates exceeds the component of the
formula that reflects the interest rates on
the receivables, then interest will accrue
on your certificates during the applicable
interest period at a rate based on the
weighted average interest rates of the
receivables. A reduction in interest rates
on any receivables, or the inclusion of a
greater proportion of non-interest bearing
receivables in the trust, will increase the
likelihood that you will receive lower
interest payments, based on the interest
rate on the receivables, than you would if
you were receiving interest payments based
on LIBOR.
- If the Class A monthly interest, Class B
monthly interest or Class C monthly interest
for any distribution date, determined as if
the interest rate were based on LIBOR plus
the applicable margin, exceeds the
applicable monthly interest determined on
the basis of the related Net Receivables
Rate, the servicer will direct the trustee
of the trust to withdraw funds from the
yield supplement account, to the extent
available, and apply those funds to deposit
the amount of such excess into the interest
funding account first, for the benefit of
the Class A certificates, second, for the
benefit of the Class B certificates, and
third, for the benefit of the Class C
certificates. We cannot assure you that any
funds will be on deposit in the yield
supplement account at any time. Any funds on
deposit in the yield supplement account at
the beginning of the Accumulation Period or
upon the occurrence of an Early Amortization
Event will be deposited in the principal
funding account, and no funds will be
deposited in the yield supplement account
thereafter.
- In addition to reducing the interest rate on
your certificates, a reduction in interest
rates on the receivables will also reduce
the amount of non-principal collections
available to fund payment of interest on
your certificates and to fund other items
set forth under "Description of the
Certificates--Distributions from the
Collection Account; Reserve
Fund--Non-Principal Collections."
Possible Delays and Reductions Credit enhancement of the certificates of your
in Payments on Certificates Due series will be provided by:
to Limited Credit Enhancement
- amounts in the reserve fund, if any;
- the subordination of the Class B
certificates and the Class C certificates
for the benefit of each class of
S-14
<PAGE> 15
certificates of your series with an earlier
alphabetical designation; and
- application of non-principal collections as
described in priorities (6) and (7) under
"Description of the
Certificates--Distributions from the
Collection Account; Reserve Fund" in this
prospectus supplement.
The amount of the credit enhancement is limited
and will be reduced from time to time as
described in this prospectus supplement. If the
amount of credit enhancement is reduced to
zero, you will likely experience delays and
reductions in payments on your certificates.
Credit enhancement for any other series will
not be available to your series.
Possible Delays and Reductions The term "invested amount" is an important
in Payments on Certificates Due concept that is defined in the Glossary to this
to Reduction in Invested Amount prospectus supplement. The invested amount of
your series affects, among other things:
- the floating allocation percentage for your
series;
- the principal allocation percentage for your
series;
- whether the seller may exercise an option to
repurchase the interest of your series in
the trust, as well as the amount of that
repurchase; and
- the amount that would be paid on
certificates of your series if the trustee
of the trust sells receivables in order to
make payments on certificates of your series
after the termination date for your series.
The invested amount of your series will be
reduced by the allocation of defaulted
receivables to your series. If those
allocations are not reimbursed, then the
invested amount of your series will be less
than the outstanding principal amount of the
certificates of your series, and delays and
reductions in payments on your certificates
will occur.
Possible Delays and Reductions Payments on the Class B certificates are
in Payments on Class B subordinated to the Class A certificates as
Certificates Due to described in this prospectus supplement.
Subordination of Class B Accordingly, if you acquire a Class B
Certificates certificate, you may suffer delays and
reductions in payments on your certificates
even though payments are being made on the
Class A certificates.
Deposits of Funds in the Pursuant to the supplement for your series, the
Excess Funding Account Will servicer will establish a deposit account that
Reduce the Amount of Non- we call the excess funding account. Any funds
Principal Collections that deposited in the excess funding account will
are Available to the Trust likely 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 will reduce the amount of
non-principal collections available to the
trust and could result in a delay and reduction
in payments to you.
S-15
<PAGE> 16
Ability to Change Discount You may be adversely affected because the
Factor May Result in Delays or discount factor may be changed without your
Reductions in Payments on consent.
Certificates
- This transaction uses the terms principal
collections and non-principal collections in
a way that may not be familiar to you. For
purposes of calculating non-principal
collections, this transaction treats some
principal payments on the receivables as if
they were interest or other non-principal
charges relating to the receivables.
- Pursuant to the pooling and servicing
agreement, the product of principal payments
on each receivable times a percentage that
we call the discount factor will be deemed
to be non-principal collections.
- As of the date of this prospectus
supplement, the discount factor was 0.50%.
The discount factor may be adjusted upwards
or downwards, without your consent, but may
in no event exceed 1%.
- Any increase in the discount factor will
result in a higher amount of non-principal
collections and a lower amount of principal
collections than would otherwise occur.
Conversely, any decrease in the discount
factor would result in a lower amount of
non-principal collections and a higher
amount of principal collections than would
otherwise occur.
- Changes in the amount of principal
collections or non-principal collections
could result in a delay and reduction in
payments to you.
Ratings are Not Recommendations Any rating of your certificates by a rating
agency indicates the rating agency's view on
the likelihood of the ultimate payment of
principal and the timely payment of interest,
at the applicable interest rate, on your
certificates.
Among the things a rating will not indicate
are:
- the likelihood that principal will be paid
on a scheduled date;
- the likelihood that an early amortization
event will occur;
- the likelihood that any amount that we refer
to as a carry-over amount will be paid;
- whether or not the discussion under "Federal
Income Tax Considerations" "State and Local
Tax Consequences" in this prospectus
supplement is adequate, or the likelihood
that a United States withholding tax will be
imposed on non-U.S. certificateholders;
- whether or not the discussion under "ERISA
Considerations" in this prospectus
supplement is adequate, or whether a
"prohibited transaction" will occur;
S-16
<PAGE> 17
- the marketability of your certificates;
- the market price of your certificates; or
- whether your certificates are an appropriate
investment for you.
A rating is not a recommendation to buy, sell,
or hold your certificates. A rating may be
lowered or withdrawn at any time. You should
evaluate each rating independently of any other
rating.
The seller will request at least two rating
agencies to rate the Class A certificates; it
is a condition to the issuance of the Class A
certificates that they be rated in the highest
long-term rating category by at least one
rating agency. The seller will request at least
two rating agencies to rate the Class B
certificates; it is a condition to the issuance
of the Class B certificates that they be rated
in one of the three highest long-term rating
categories by at least one rating agency. A
rating agency other than those requested could
assign a rating to your certificates, and its
rating could be lower than any rating assigned
by a rating agency chosen by the seller.
The reduction or withdrawal of any rating on
your certificates could make it more difficult
for you to resell your certificates, and, if
you are able to resell your certificates, could
reduce the price that you would receive in that
sale.
Tax and ERISA Matters You may be adversely affected by matters
pertaining to tax laws and ERISA. For a
discussion of tax and ERISA matters, see
"Federal Income Tax Considerations," "State and
Local Tax Consequences" and "ERISA
Considerations."
For definitions of some of the terms used in this prospectus supplement,
see the Glossary in this prospectus supplement.
S-17
<PAGE> 18
THE ACCOUNTS
GENERAL
The receivables arise under revolving credit arrangements between:
- a dealer, manufacturer or distributor of products; and
- Deutsche Financial Services Corporation ("DFS") or an affiliate of DFS.
For additional discussion of the origination of the receivables, see "The
Dealer Financing Business of DFS" in the prospectus.
For purposes of convenience, this prospectus supplement and the
accompanying prospectus may refer to dealers, manufacturers and distributors
collectively as "dealers" and individually as a "dealer."
DFS refers to its revolving credit arrangements with dealers as "accounts."
DFS may have multiple accounts with a single dealer. Accordingly, the numbers of
accounts listed in the tables set forth below do not equal the number of
applicable dealers.
Accounts may be added or removed from time to time. See "Description of the
Certificates--Addition of Accounts" and "Description of the
Certificates--Removal of Accounts; Transfers of Participations" in the
prospectus. As of June 1, 2000, the seller added 2,249 accounts to the list of
accounts that is used to determine the receivables relating to the trust, and
those accounts related to receivables having an aggregate outstanding principal
amount as of May 31, 2000 of $880.1 million (the "June 2000 Addition of
Accounts").
As of May 31, 2000, $5,140.7 million of receivables were in the total U.S.
portfolio of DFS. $4,343.7 million of receivables were included in the trust as
of May 31, 2000, calculated as if the June 2000 Addition of Accounts had
occurred as of May 31, 2000. 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. Unless otherwise
indicated below, all references to the "total U.S. portfolio" of DFS include all
Accounts Receivable, A/R Receivables and Floorplan Receivables serviced by DFS,
whether or not those receivables are in the trust. All references to the "total
U.S. portfolio" of DFS also include accounts designated as part of the June 2000
Addition of Accounts and the receivables relating to those accounts.
The tables set forth below under the heading "--Description of the Trust
Portfolio" contain information with respect to the receivables in the trust
(collectively, the "Trust Portfolio") as of May 31, 2000, calculated in each
case as if the June 2000 Addition of Accounts had occurred as of May 31, 2000.
The information in each table pertaining to periods prior to 1999 includes
receivables originated by Deutsche Business Services Corporation, an affiliate
of DFS which ceased to be active in 1998.
The sum in any column in the tables set forth below may not equal the
indicated total due to rounding.
DESCRIPTION OF THE TRUST PORTFOLIO
The following table sets forth the composition of the Trust Portfolio, as
of May 31, 2000, by business line, calculated as if the June 2000 Addition of
Accounts had occurred as of May 31, 2000. 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-18
<PAGE> 19
COMPOSITION OF RECEIVABLES IN THE TRUST PORTFOLIO BY BUSINESS LINE
AS OF MAY 31, 2000
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
RECEIVABLES RECEIVABLES NUMBER OF NUMBER OF
BUSINESS LINE BALANCE BALANCES ACCOUNTS ACCOUNTS
------------- ----------- ------------- --------- -------------
<S> <C> <C> <C> <C>
Floorplan Receivables........................ $3,803.8 87.6% 10,256 99.0%
Accounts Receivable.......................... 117.9 2.7 42 0.4
Asset Based Receivables...................... 422.0 9.7 60 0.6
-------- ----- ------ -----
Total................................... $4,343.7 100.0% 10,358 100.0%
======== ===== ====== =====
</TABLE>
The following tables set forth the composition of the receivables in the
Trust Portfolio as of May 31, 2000 by account balance, product type and
geographic distribution of such receivables, calculated as if the June 2000
Addition of Accounts had occurred as of May 31, 2000. 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 ACCOUNT BALANCE
AS OF MAY 31, 2000
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
RECEIVABLES RECEIVABLES NUMBER OF NUMBER OF
ACCOUNT BALANCE RANGE BALANCE BALANCES ACCOUNTS ACCOUNTS
--------------------- ----------- ------------- --------- -------------
<S> <C> <C> <C> <C>
$1 to $999,999.99............................ $1,629.4 37.5% 9,609 92.8%
$1,000,000 to $2,499,999.99.................. 741.8 17.1 500 4.8
$2,500,000 to $4,999,999.99.................. 519.4 12.0 150 1.4
$5,000,000 to $9,999,999.99.................. 441.7 10.2 62 0.6
Over $10,000,000.00.......................... 1,011.4 23.2 37 0.4
-------- ----- ------ -----
Total................................... $4,343.7 100.0% 10,358 100.0%
======== ===== ====== =====
</TABLE>
S-19
<PAGE> 20
COMPOSITION OF RECEIVABLES IN THE TRUST PORTFOLIO BY PRODUCT TYPE
AS OF MAY 31, 2000
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
RECEIVABLES RECEIVABLES NUMBER OF NUMBER OF
PRODUCT TYPE BALANCE BALANCES ACCOUNTS ACCOUNTS
------------ ----------- ------------- --------- -------------
<S> <C> <C> <C> <C>
Boats and Boat Motors........................ $ 753.0 17.3% 1,335 12.9%
Recreational Vehicles........................ 750.2 17.3 666 6.4
Industrial and Agricultural Equipment........ 541.9 12.5 364 3.5
Accounts Receivable.......................... 539.9 12.4 102 1.0
Computers and Related Equipment.............. 506.4 11.7 638 6.2
Manufactured Housing......................... 490.0 11.3 1,167 11.3
Motorcycles.................................. 322.5 7.4 1,715 16.5
Keyboard and Other Musical Instruments....... 143.0 3.3 1,008 9.7
Snowmobiles.................................. 95.2 2.2 981 9.5
Consumer Electronics and Appliances.......... 21.8 0.5 58 0.6
Other........................................ 179.8 4.1 2,324 22.4
-------- ----- ------ -----
Total................................... $4,343.7 100.0% 10,358 100.0%
======== ===== ====== =====
</TABLE>
The "Accounts Receivable" category in the preceding table includes Asset
Based Receivables of $422.0 million. The "Other" category in the preceding table
includes, among other product types, heating, ventilating, and air conditioning
equipment, and irrigation systems.
GEOGRAPHIC DISTRIBUTION OF RECEIVABLES IN THE TRUST PORTFOLIO
AS OF MAY 31, 2000
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
RECEIVABLES RECEIVABLES NUMBER OF NUMBER OF
STATE BALANCE BALANCES ACCOUNTS ACCOUNTS
----- ----------- ------------- --------- -------------
<S> <C> <C> <C> <C>
California........................... $ 430.9 9.9% 749 7.2%
Texas................................ 289.3 6.7 605 5.8
Florida.............................. 285.2 6.6 594 5.8
Arizona.............................. 227.3 5.2 216 2.1
New York............................. 204.8 4.7 442 4.3
Wisconsin............................ 195.2 4.5 370 3.6
Washington........................... 185.5 4.3 214 2.1
Illinois............................. 151.0 3.5 675 6.5
Michigan............................. 146.4 3.4 502 4.8
Oregon............................... 145.4 3.3 181 1.7
Other States......................... 2,082.7 47.9 5,810 56.1
-------- ----- ------ -----
Total........................... $4,343.7 100.0% 10,358 100.0%
======== ===== ====== =====
</TABLE>
The "Percentage of Receivables Balances" represented by receivables in each
state not specifically listed in the preceding table is less than 3%. The
information as to states in the preceding table is based on the mailing
addresses of the applicable Dealers in the records of DFS.
S-20
<PAGE> 21
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 or banks referred to
therein. Some receivables do not bear interest for a specified period after
their origination.
For 1998, the receivables in the Trust Portfolio had a yield of 9.78% per
annum, of which (a) approximately 7.96% was attributable to the rates at which
interest accrued on those receivables, without regard to the timing or amount of
interest collections, and (b) approximately 1.82% was attributable to
non-principal collections produced by the application of the discount factor.
For 1999, the receivables in the Trust Portfolio had a yield of 9.47% per annum,
of which (a) approximately 7.74% was attributable to the rates at which interest
accrued on those receivables, without regard to the timing or amounts of
interest collections, and (b) approximately 1.73% was attributable to
non-principal collections produced by the application of the discount factor.
The decrease in yield described in this paragraph reflects competitive pricing
pressures as well as a lower prime rate during 1999 as compared with 1998. As
reported by Bloomberg, the average daily prime rate in 1999 was 8.00% and in
1998 was 8.35%. As of the date of this prospectus supplement, the discount
factor was 0.50%. The discount factor may change from time to time as described
in the definition of "Discount Factor" in the Glossary of the prospectus.
The yield on the receivables in the trust will be affected by the interest
rates borne by receivables, the discount factor and the rate at which the
receivables balances are paid.
MAJOR CUSTOMERS; MAJOR MANUFACTURERS
At May 31, 2000 no one Dealer (other than a Manufacturer) accounted for
more than 1.7% of the aggregate balance of the receivables in the trust
(assuming, for this purpose, that the June 2000 Addition of Accounts had
occurred as of May 31, 2000). At May 31, 2000 (assuming, for this purpose, that
the June 2000 Addition of Accounts had occurred as of May 31, 2000), no one
Manufacturer was obligated under Floorplan Agreements relating to receivables in
the trust aggregating more than 5.7% of the aggregate balance of the receivables
in the trust. 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 Financing Business
of DFS--Floorplan Agreements with Manufacturers" in the prospectus.
DELINQUENCY EXPERIENCE
The following table sets forth the delinquency experience as of the dates
indicated for the total U.S. portfolio of DFS. Because the accounts from which
the receivables in the trust will be generated constitute only a portion of the
total U.S. portfolio of DFS, the actual delinquency experience with respect to
the accounts in the trust may be different than the experience set forth in the
table below. We cannot assure you that the delinquency experience for the
receivables in the future will be similar to the experience shown below.
S-21
<PAGE> 22
DELINQUENCY EXPERIENCE FOR THE TOTAL U.S. PORTFOLIO
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
AS OF AS OF DECEMBER 31,
MAY 31, ----------------------------------------------------
2000 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Receivables Balance..................................... $5,140.7 $5,557.2 $5,332.2 $4,834.5 $4,169.0 $4,124.0
SAU/NSF past due 31 days or more........................ $ 7.3 $ 10.9 $ 10.7 $ 7.9 $ 5.1 $ 2.4
Scheduled Payment Plan past due 31 days or more......... $ 15.3 $ 29.8 $ 17.7 $ 14.7 $ 2.8 $ 13.7
Total............................................... $ 22.6 $ 40.7 $ 28.4 $ 22.6 $ 7.9 $ 16.1
SAU/NSF past due 31 days or more/Receivables Balance.... 0.14% 0.20% 0.20% 0.16% 0.12% 0.06%
Scheduled Payment Plan past due 31 days or
more/Receivables Balance.............................. 0.30% 0.54% 0.33% 0.30% 0.07% 0.33%
Total SAU/NSF and Scheduled Payment Plan past due 31
days or more/Receivables Balance...................... 0.44% 0.73% 0.53% 0.47% 0.19% 0.39%
</TABLE>
For information as to the coding of receivables as SAU or NSF, see "The
Dealer Financing Business of DFS--Charge-Off Policy" in the prospectus.
LOSS EXPERIENCE
The following table sets forth the average Receivables Balance and loss
experience for each of the periods shown with respect to the total U.S.
portfolio of DFS. Because the accounts in the trust will be only a portion of
the total U.S. portfolio of DFS, actual loss experience with respect to the
accounts in the trust may be different than the experience set forth in the
table below. We cannot assure you that the loss experience for the receivables
in the future will be similar to the historical experience set forth below. 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 Financing Business of DFS--Floorplan Agreements
with Manufacturers." If Manufacturers do not perform those obligations in the
future, the loss experience in respect of the receivables would be adversely
affected.
LOSS EXPERIENCE FOR THE TOTAL U.S. PORTFOLIO
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
FIVE MONTHS
ENDED YEAR ENDED DECEMBER 31,
MAY 31, ----------------------------------------------------
2000 1999 1998 1997 1996 1995
----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Average Receivables Balance......................... $5,411.0 $5,749.0 $5,315.0 $4,474.0 $4,181.0 $4,014.0
Gross Losses........................................ $ 8.6 $ 29.3 $ 31.7 $ 6.0 $ 8.3 $ 13.5
Net Losses.......................................... $ 6.9 $ 27.6 $ 28.5 $ 3.2 $ 2.7 $ 7.9
Net Losses/Liquidations............................. 0.07% 0.08% 0.09% 0.02% 0.02% 0.03%
Net Losses/Average Receivables Balance.............. 0.13% 0.48% 0.54% 0.07% 0.06% 0.20%
</TABLE>
The "Average Receivables Balance" referred to in the preceding table is the
average weekly Receivables Balance for the twelve months ended on the last day
of the period, except that the "Average Receivables Balance" for the five months
ended May 31, 2000 is the average weekly Receivables Balance for the five months
ended on May 31, 2000. "Net Losses" in any period referred to in the preceding
table are gross losses less recoveries for such period. The percentages
indicated for the five months ended May 31, 2000 in the preceding table are not
annualized.
S-22
<PAGE> 23
AGING EXPERIENCE
The following table provides the age distribution of Floorplan Receivables
in the total U.S. portfolio of DFS, by Receivables Balances and as a percentage
of Receivables Balances of Floorplan Receivables in the total U.S. portfolio of
DFS outstanding at the date indicated. The following table excludes Asset Based
Receivables and A/R Receivables. For purposes of the following table, aging
commences on the date of the applicable invoice provided by the applicable
Manufacturer to DFS and ends on the date that the receivable has been paid in
full. Because the Floorplan Receivables in the trust do not include all of the
Floorplan Receivables in the total U.S. portfolio of DFS, the actual age
distribution of Floorplan Receivables in the trust may be different than the
distribution shown below.
AGE DISTRIBUTION OF FLOORPLAN RECEIVABLES IN THE TOTAL U.S. PORTFOLIO(1)
(DOLLARS IN MILLIONS)
RECEIVABLES BALANCES
<TABLE>
<CAPTION>
AS OF AS OF DECEMBER 31,
MAY 31, ----------------------------------------------------
DAYS 2000 1999 1998 1997 1996 1995
---- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
1-30............................. $1,135.2 $1,310.0 $1,348.5 $ 978.2 $1,127.7 $1,052.3
31-60............................ 630.6 706.8 710.2 785.7 619.2 767.3
61-90............................ 427.9 445.7 397.4 352.1 359.7 364.6
91-120........................... 291.5 391.6 317.1 256.8 276.7 275.6
121-180.......................... 427.5 477.2 397.4 425.9 297.5 291.6
181-270.......................... 527.1 382.6 334.0 340.6 280.2 222.6
Over 270......................... 891.4 787.8 722.9 687.7 498.1 391.3
-------- -------- -------- -------- -------- --------
Total....................... $4,331.2 $4,501.7 $4,227.5 $3,827.0 $3,459.1 $3,365.3
======== ======== ======== ======== ======== ========
</TABLE>
PERCENTAGE OF RECEIVABLES BALANCES
<TABLE>
<CAPTION>
AS OF AS OF DECEMBER 31,
MAY 31, -------------------------------------
DAYS 2000 1999 1998 1997 1996 1995
---- ------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
1-30........................................ 26.2% 29.1% 31.9% 25.6% 32.6% 31.3%
31-60....................................... 14.5 15.7 16.8 20.5 17.9 22.8
61-90....................................... 9.9 9.9 9.4 9.2 10.4 10.8
91-120...................................... 6.7 8.7 7.5 6.7 8.0 8.2
121-180..................................... 9.9 10.6 9.4 11.1 8.6 8.7
181-270..................................... 12.2 8.5 7.9 8.9 8.1 6.6
Over 270.................................... 20.6 17.5 17.1 18.0 14.4 11.6
----- ----- ----- ----- ----- -----
Total.................................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== ===== =====
</TABLE>
------------
(1) Excludes Asset Based Receivables and A/R Receivables.
S-23
<PAGE> 24
CERTAIN PAYMENT PLAN INFORMATION
DFS's Floorplan Business provides two basic payment terms to dealers:
Pay-as-Sold or Scheduled Payment Plan. See "The Dealer Financing Business of
DFS--Payment Terms" in the prospectus. As of May 31, 2000, the Floorplan
Receivables in the total U.S. portfolio of DFS, by number of accounts, consisted
of 78.4% Pay-as-Sold receivables, and 21.6% Scheduled Payment Plan receivables.
Because the Floorplan Receivables in the trust do not include all of the
Floorplan Receivables in the total U.S. portfolio of DFS, the actual
distribution of Floorplan Receivables in the trust by payment plan may be
different than the distribution described in the previous sentence.
DEUTSCHE FINANCIAL SERVICES CORPORATION
DFS was incorporated in Nevada in 1969. 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 related equipment;
- manufactured housing;
- recreational vehicles;
- boats and boat 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. 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 that office is (314) 523-3000.
As of the date of this prospectus supplement, 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 the date of this prospectus
supplement, DFS was providing inventory financing, accounts receivable financing
or asset-based lending to over 13,000 dealers in the United States and its
approved U.S. manufacturer/distributor list exceeded 1,000.
DFS is a wholly owned subsidiary of Deutsche Bank Americas Holding Corp.,
and 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.
We cannot assure you that DFS will continue to be a wholly-owned subsidiary
of Deutsche Bank AG. We cannot assure you that DFS will continue to be the
limited partner of the seller and the parent of Deutsche FRI, the general
partner of the seller. We cannot assure you that Deutsche FRI will continue to
be the general partner of the seller.
S-24
<PAGE> 25
Deutsche Bank AG is exploring opportunities to reduce its equity interest
in DFS. There can be no assurance that any transaction or other opportunity will
occur or be pursued, and there can be no assurance as to what form any
transaction or other opportunity may take or as to the timing of any transaction
or other opportunity.
DEUTSCHE BANK AG
Deutsche Bank AG is the largest banking institution in the Federal Republic
of Germany, with total assets at December 31, 1999 in excess of 839 billion
euros. 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.
MATURITY AND PRINCIPAL PAYMENT CONSIDERATIONS
Principal with respect to the certificates of your series will not be
payable until the Expected Final Payment Date unless an Early Amortization Event
has occurred. Full amortization of the certificates of your series by the
Expected Final Payment Date depends on, among other things, repayment by dealers
of the receivables and may not occur if dealers do not fully repay the
receivables. Because a significant amount of the receivables are paid upon
retail sale of the related product, the timing of payments on the receivables is
uncertain. In addition, we cannot assure you that DFS will generate additional
receivables under the accounts or that any particular pattern or amount of
payments will occur. See "The Dealer Financing Business of DFS" in the
prospectus.
The amount of new receivables generated in any month and monthly payment
rates on the receivables may vary because of, among other things:
- seasonal variations in product sales and inventory levels;
- retail incentive programs provided by product manufacturers; and
- various economic factors affecting product sales generally.
The following table sets forth the highest and lowest Monthly Payment Rates
for the receivables in the Trust Portfolio during any month in the periods
shown, and the average of the Monthly Payment Rates for the receivables in the
Trust Portfolio for all months during the periods shown.
We cannot assure you that the rate of collections on the receivables will
be similar to the historical experience set forth below. DFS believes that the
decrease in payment rates since 1996 is due in part to a shift in the portfolio
mix.
MONTHLY PAYMENT RATES FOR THE TRUST PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Highest Month............................................... 41% 41% 42% 54% 52%
Lowest Month................................................ 31% 32% 34% 40% 42%
Average of the Months in the Period......................... 36% 37% 39% 47% 47%
</TABLE>
For January, February, March, April and May 2000, the Monthly Payment Rates
for the receivables in the Trust Portfolio were 31%, 30%, 35%, 33% and 37%,
respectively, without taking into consideration the June 2000 Addition of
Accounts. If the accounts designated in the June 2000 Addition of Accounts, and
the receivables relating to those accounts, had been
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in the trust since January 1, 2000, then the Monthly Payment Rates for the Trust
Portfolio for January, February, March, April and May 2000 would have been 31%,
29%, 34%, 32% and 36%, respectively.
The final distribution of principal on certificates of your series may
occur earlier than expected because:
- an Early Amortization Event may occur which would initiate an Early
Amortization Period;
- the seller may exercise its option to repurchase the interest of your
series in the trust; or
- the seller may have to repurchase the interest of the outstanding series
in the trust because of the breach of certain representations and
warranties.
See "Description of the Certificates--Optional Repurchase" and "--Early
Amortization Events" 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
certificates of your series at a yield at least equal to the yield on those
certificates. If you acquire a certificate at a discount, the repayment of
principal of your certificate later than you anticipated will result in a lower
than anticipated yield. In addition, if you acquire certificates at a premium,
repayment of principal at a rate that is faster than the rate you anticipated
will result in a yield that is lower than you anticipated.
DESCRIPTION OF THE CERTIFICATES
The certificates of your series will be issued pursuant to an amended and
restated pooling and servicing agreement dated as of April 1, 2000 and a series
supplement, dated as of July 1, 2000. The following summary describes certain
terms of the pooling and servicing agreement and the supplement for your series,
but it does not purport to be complete and is qualified in its entirety by
reference to the pooling and servicing agreement and the supplement. See also
"Description of the Certificates" in the prospectus.
INTEREST
Interest on the outstanding principal balance of each class of certificates
of your series will be payable on the 15th day of each month, or if such day is
not a business day, on the next succeeding business day beginning on August 15,
2000. Interest will accrue from and including each distribution date (or, in the
case of the first distribution date, from and including the closing date) to but
excluding the next distribution date and will be calculated on the basis of the
actual number of days in the related interest period divided by 360.
The interest rate for the Class A certificates is referred to as the "Class
A interest rate"; the interest rate for the Class B certificates is referred to
as the "Class B interest rate"; and the interest rate for the Class C
certificates is referred to as the "Class C interest rate". For more information
as to these interest rates, see the Glossary.
For a description of the priorities in which interest will be paid on the
certificates of your series, see "Description of the
Certificates--Distributions" and "--Termination of Your Series."
Calculation of LIBOR. On the second business day preceding the start of
each Interest Period, the trustee of the trust will determine LIBOR for that
period as described in the Glossary.
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Publication of Interest Rates. If the Class A and Class B certificates are
listed on the Luxembourg Stock Exchange, then, on or prior to each distribution
date, the Listing Agent will notify the Luxembourg Stock Exchange of the
interest rates applicable to the Class A and Class B certificates for the
Interest Period beginning on that date.
Calculations to be Final. The determination of LIBOR by the trustee of the
trust and the trustee's calculation of the interest rates of the Class A and
Class B certificates will be, in the absence of manifest error, final and
binding.
PRINCIPAL
We expect that no principal payments will be made on the certificates of
your series until the Expected Final Payment Date. However, principal payments
on the certificates of your series may be made earlier or later. See "Risk
Factors" and "Maturity and Principal Payment Considerations" in this prospectus
supplement and "Risk Factors" in the prospectus. Principal payments on the
certificates of your series will be made, to the extent of available funds, in
the priorities described below under "Description of the
Certificates--Distributions" and "--Termination of Your Series."
If a payment of principal is to be made on a Class A or Class B certificate
that is listed on the Luxembourg Stock Exchange and the rules of such exchange
so require, the trustee of the trust will cause a notice of such principal
payment to be published in a daily newspaper of general circulation (the
"Authorized Newspaper") in Luxembourg (or if publication is not practical in
Luxembourg, in Europe), at least one business day prior to the applicable
distribution date and will inform the Luxembourg Stock Exchange of such
principal payment one business day prior to making the payment. The Authorized
Newspaper is expected to be the Luxemburger Wort. For as long as the Class A and
Class B certificates are listed on the Luxembourg Stock Exchange, the Luxembourg
Stock Exchange will be informed of the principal amounts outstanding on the
Class A and Class B certificates as soon as possible after their determination
but no later than the distribution date on which a payment of principal is made.
DISTRIBUTIONS ON THE CERTIFICATES AND OTHER INFORMATION
Distributions. Distributions of interest and, to the extent applicable,
principal on the Class A and Class B certificates will be made on each
distribution date to holders in whose names the certificates were registered at
the close of business on the related Record Date. For so long as the Class A and
Class B certificates are maintained in book-entry form, distributions of
interest and principal on the Class A and Class B certificates will be made
through DTC, as described in the prospectus under "Description of the
Certificates--Book-Entry Registration." It is DTC's practice to credit its
participants' accounts on the applicable distribution date in accordance with
their respective holdings shown on DTC's records, unless DTC has reason to
believe that it will not receive payments on that distribution date. Payments by
DTC participants to certificate owners will be governed by standing
instructions, customary practices and any statutory or regulatory requirements
as may be in effect from time to time.
The Class A and Class B certificates represent fractional undivided
interests in the trust, having, with respect to your series, the right to
receive pari passu, to the extent necessary to make the distributions on the
certificates of your series at the times and in the amounts described in this
prospectus supplement, the portion of collections and other amounts allocable to
certificates of your series.
Transfers. Transfers of Class A and Class B certificates in book-entry
form will be made as described under "Description of the
Certificates--Book-Entry Registration" in the prospectus. Transfers between
participants on the DTC system will occur in accordance with DTC
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rules. Transfers between participants on the Clearstream, Luxembourg system and
participants on the Euroclear System will occur in accordance with their rules
and operating procedures.
Listing Agent. For so long as the Class A or Class B certificates are
listed on the Luxembourg Stock Exchange, an additional paying agent and transfer
agent for these certificates will be maintained in Luxembourg. If the Class A
and Class B certificates are listed on the Luxembourg Stock Exchange, it is
anticipated that Kredietbank S.A. Luxembourgeoise will be appointed by the
trustee of the trust to act as Listing Agent for the Class A and Class B
certificates. If the Listing Agent resigns or is removed and a successor is
appointed, notice of such appointment will be given by publication in an
authorized newspaper. Such authorized newspaper is expected to be the
Luxemburger Wort.
Redemption. The Expected Final Payment Date for the Class A and Class B
certificates is the distribution date in July, 2002. The Termination Date for
the Class A and Class B certificates is the distribution date in July 2004. The
circumstances under which distributions of principal will be made on Class A or
Class B certificates are described below. Circumstances under which Class A or
Class B certificates may be repaid in full prior to the Expected Final Payment
Date are described below under "--Optional Repurchase," "--Early Amortization
Period" and "--Early Amortization Events" below and under "Description of the
Certificates--Representations and Warranties" in the prospectus.
Notices. For so long as the Class A or Class B certificates are listed on
the Luxembourg Stock Exchange and so long as the rules of such exchange so
require, notices to the holders of Class A and Class B certificates will also be
given by publication in an authorized newspaper. Such authorized newspaper is
expected to be the Luxemburger Wort.
Final Distribution. Not later than the fifth day of the month in which the
final distribution on the Class A and Class B certificates is distributable, the
trustee of the trust will give notice to each Class A and Class B
certificateholder specifying (1) the date on which such final distribution will
be made upon presentation of the certificates at the office of the trustee
specified in such notice and (2) the amount of the final distribution. If not
all certificateholders surrender their certificates for cancellation within six
months after the date specified in the notice of the final distribution, the
trustee of the trust will give notice a second time. If within one year after
the date specified in the second notice not all certificateholders have
surrendered their certificates, the trustee may take steps to contact the
remaining certificateholders (at such certificateholders' expense). Any amounts
remaining unclaimed by certificateholders two years after the date of the first
notice of final distribution will be paid to the seller, after which time
holders of Class A and Class B certificates must look to the seller as general
creditors unless applicable abandoned property law designates another party.
Governing Law. The certificates, the pooling and servicing agreement and
the series supplement are governed by the laws of the state of New York, without
reference to that state's conflict of law provisions. The seller, the servicer
and the trustee of the trust have irrevocably submitted to the non-exclusive
jurisdiction of the courts of the state of New York, the courts of the United
States for the Southern District of New York and the applicable appellate
courts.
Restrictions on Transfer. Transfer of the Class A and Class B certificates
is restricted as described under "ERISA Considerations" in this prospectus
supplement.
Net Proceeds. The net proceeds to the seller of the sale of the Class A
and Class B certificates are set forth on the front cover page of this
prospectus supplement.
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ALLOCATIONS OF COLLECTIONS, DEFAULTED AMOUNTS AND MISCELLANEOUS PAYMENTS TO THE
DEALER OVERCONCENTRATION SERIES
Concurrently with the issuance of your series, the trust is issuing a
series to be known as the "Dealer Overconcentration Series." The Dealer
Overconcentration Series will be an uncertificated series that will be issued to
the seller. We cannot assure you that the seller will continue to hold the
Dealer Overconcentration Series. The supplement for the Dealer Overconcentration
Series will not assign to the Dealer Overconcentration Series any accumulation
or early amortization period. The Dealer Overconcentration Series will not bear
interest.
If Dealer Overconcentrations exist, the Dealer Overconcentration Series
will be allocated a percentage of principal collections, non-principal
collections, and the Defaulted Amount as well as a portion of Miscellaneous
Payments relating to receivables of Overconcentrated Dealers.
- A "Dealer Overconcentration" will exist with respect to a dealer (an
"Overconcentrated Dealer") if the aggregate amount of the principal
receivables owed by such dealer exceeds the applicable Dealer
Concentration Limit.
- The "Dealer Concentration Limit" is a dollar amount calculated as a
percentage of the Pool Balance as of the end of each calendar month (the
"Concentration Limit Percentage"). If the dealer is among the fifteen
dealers owing the largest amount of principal receivables as of the end
of a calendar month (the "Top 15 Dealers"), the Concentration Limit
Percentage currently is 3%. If the dealer is not among the Top 15
Dealers, the Concentration Limit Percentage currently is 2%. The
Concentration Limit Percentage for Top 15 Dealers, as well as the
Concentration Limit Percentage for the other dealers, may be increased
or decreased from time to time without your consent if the Rating Agency
Condition has been satisfied in connection with that increase or
decrease.
For purposes of the definitions of Dealer Overconcentration,
Overconcentrated Dealer and Top 15 Dealers, a dealer and all of its Affiliates
that are dealers will be considered to be a single dealer.
Principal and non-principal collections, as well as Defaulted Amounts and
Miscellaneous Payments, will be allocated for any Overconcentrated Dealer
between (a) the Dealer Overconcentration Series and (b) the seller and the
outstanding series (other than the Dealer Overconcentration Series). The
percentage of principal and non-principal collections, as well as Defaulted
Amounts and Miscellaneous Payments for each Overconcentrated Dealer to be
allocated to the Dealer Overconcentration Series will be referred to as the
Overconcentration Percentage; the percentage allocated to the seller and the
outstanding series (other than the Dealer Overconcentration Series) will be
referred to as the Unconcentrated Percentage.
- The "Overconcentration Percentage" for each Overconcentrated Dealer will
be determined by the servicer after the end of each calendar month and
will be equal to a fraction, expressed as a percentage,
- the numerator of which is the aggregate amount of principal
receivables in all accounts of that Overconcentrated Dealer as of the
end of the preceding calendar month minus the product of (i) the
Concentration Limit Percentage for that Overconcentrated Dealer and
(ii) the Unconcentrated Pool Balance as of the end of that preceding
calendar month, and
- the denominator of which is the aggregate amount of principal
receivables in all accounts of that Overconcentrated Dealer as of the
end of that preceding calendar month.
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- The "Unconcentrated Percentage" for each Overconcentrated Dealer will be
equal to 100% minus the Overconcentration Percentage for that
Overconcentrated Dealer.
- The "Unconcentrated Pool Balance" means, as of the end of any calendar
month, the lesser of:
- (1) the Pool Balance at the end of that calendar month, and
- (2)(a)(i) the Pool Balance minus (ii) the sum of the principal
receivables in all accounts of all Overconcentrated Dealers at the end
of that calendar month, divided by
(b)(i) 100% minus (ii) the sum of (x) the product of (A) the number of
Overconcentrated Dealers as to which the applicable Concentration
Limit Percentage is 3% and (B) 3%, (y) the product of (A) the number
of Overconcentrated Dealers as to which the applicable Concentration
Limit Percentage is 2% and (B) 2%, and (z) the product of (A) the
number of Overconcentrated Dealers as to which the applicable
Concentration Limit Percentage is other than 3% or 2%, and (B) in each
case, that applicable Concentration Limit Percentage.
The supplement for the Dealer Overconcentration Series will not designate a
separate "floating allocation percentage" or "principal allocation percentage"
for the Dealer Overconcentration Series.
ALLOCATIONS OF COLLECTIONS, DEFAULTED AMOUNTS AND MISCELLANEOUS PAYMENTS TO YOUR
SERIES
After giving effect to the allocation to the Dealer Overconcentration
Series as described above under "--Allocations of Collections, Defaulted Amounts
and Miscellaneous Payments to the Dealer Overconcentration Series", the servicer
will allocate amounts to your series for each calendar month as follows, unless
otherwise provided in the next sentence:
- during the Revolving Period, the Accumulation Period and any Early
Amortization Period, non-principal collections will be allocated to your
series based on the Floating Allocation Percentage;
- during the Revolving Period, principal collections will be allocated to
your series based on the Floating Allocation Percentage;
- during the Accumulation Period and any Early Amortization Period,
principal collections will be allocated to your series based on the
Principal Allocation Percentage;
- during the Revolving Period, the Accumulation Period and any Early
Amortization Period, the Defaulted Amount will be allocated to your
series based on the Floating Allocation Percentage;
- during the Revolving Period, the Accumulation Period and any Early
Amortization Period, Miscellaneous Payments will be allocated to your
series on the basis of the Series Allocation Percentage for your series.
However, if for any distribution date the sum of:
- the sum of the floating allocation percentages, including the Floating
Allocation Percentage, if applicable, for each series in its revolving
period, and
- the sum of the principal allocation percentages, including the Principal
Allocation Percentage, if applicable, for each series in its
accumulation or early amortization period,
exceeds 100%, then, after giving effect to allocations to the Dealer
Overconcentration Series, principal collections for the applicable calendar
month will be allocated among the other
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series, pari passu and pro rata on the basis of the floating allocation
percentages and principal allocation percentages. Amounts not allocated to your
series as described above will be allocated to the seller and the other
outstanding series, if any.
DISCOUNT FACTOR
This transaction creates additional non-principal collections by treating a
portion of the principal payments on a receivable as a non-principal collection.
This is done by multiplying the principal payments on a receivable by a
percentage that we call the discount factor. As of the date of this prospectus
supplement, the discount factor was 0.50%. The discount factor is subject to
adjustment as described in "Description of the Certificates--Discount Factor" in
the prospectus.
DISTRIBUTIONS FROM THE COLLECTION ACCOUNT; RESERVE FUND
Non-Principal Collections. On each distribution date, the trustee of the
trust will apply non-principal collections allocated to your series (after
giving effect to repayment to the servicer of any Servicer Advances from any
previous distribution dates) for the related calendar month, the Investment
Proceeds, if any, and the Servicer Advance, if any, for that distribution date,
to make the following distributions in the following order of priority:
(1) the following amount relating to the Class A certificates will be
deposited in the interest funding account:
- Class A monthly interest for that distribution date; plus
- the amount of any Class A monthly interest for any prior distribution
dates not previously distributed to the Class A certificateholders;
plus
- to the extent permitted under applicable law, the amount of any Class
A Additional Interest for the current distribution date and, without
duplication, any Class A Additional Interest previously due but not
distributed to the Class A certificateholders;
(2) the following amount relating to the Class B certificates will be
deposited in the interest funding account:
- Class B monthly interest for that distribution date; plus
- the amount of any Class B monthly interest for any prior distribution
dates not previously distributed to the Class B certificateholders;
plus
- to the extent permitted under applicable law, the amount of any Class
B Additional Interest for the current distribution date and, without
duplication, any Class B Additional Interest previously due but not
distributed to the Class B certificateholders;
(3) the following amount relating to the Class C certificates will be
deposited in the interest funding account:
- Class C monthly interest for that distribution date; plus
- the amount of any Class C monthly interest for any prior distribution
dates not previously distributed to the Class C certificateholders;
plus
- to the extent permitted under applicable law, the amount of any Class
C Additional Interest for the current distribution date and, without
duplication, any Class C Additional Interest previously due but not
distributed to the Class C certificateholders;
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(4) so long as DFS is not the servicer, an amount equal to the
Certificateholders' Monthly Servicing Fee for your series for that
distribution date will be distributed to the servicer, unless that amount
has been netted against deposits to the collection account;
(5) an amount equal to the Reserve Fund Deposit Amount, if any, for
that distribution date will be deposited in the reserve fund;
(6) an amount equal to the Investor Default Amount, if any, for that
distribution date will be treated as Available Certificateholder Principal
Collections for that distribution date;
(7) an amount required to reimburse unreimbursed Class A Investor
Charge-Offs, Class B Investor Charge-Offs and Class C Investor Charge-Offs
will be treated as Available Certificateholder Principal Collections for
that distribution date;
(8) so long as DFS is the servicer, an amount equal to the
Certificateholders' Monthly Servicing Fee for your series for that
distribution date will be distributed to the servicer, unless that amount
has been netted against deposits to the collection account by DFS or waived
as described below under "--Servicing Compensation and Payment of
Expenses";
(9) any unpaid Class A Carry-over Amount, Class B Carry-over Amount or
Class C Carry-over Amount for any previous distribution date, plus to the
extent permitted under applicable law, the amount of any Class A Carry-over
Amount Additional Interest, Class B Carry-over Amount Additional Interest
and Class C Carry-over Amount Additional Interest for the current
distribution date and, without duplication, any Class A Carry-over Amount
Additional Interest, Class B Carry-over Amount Additional Interest and
Class C Carry-over Amount Additional Interest previously due but not
distributed to the Class A certificateholders, Class B certificateholders
and Class C certificateholders, respectively, will be deposited in the
interest funding account;
(10) if that distribution date occurs prior to the beginning of the
Accumulation Period and prior to the occurrence of an Early Amortization
Event, an amount equal to the Yield Supplement Account Deposit Amount, if
any, for that distribution date will be deposited in the yield supplement
account; and
(11) the balance, if any, will constitute "Excess Servicing" for that
distribution date.
Reserve Fund. The trustee of the trust, for the benefit of your series,
will establish and maintain an Eligible Deposit Account that we call the
"reserve fund". On the closing date, the seller will cause to be deposited with
the trustee of the trust, for deposit in the reserve fund, funds in an amount
equal to 3.5% of the aggregate initial principal balance of the certificates of
your series.
On each distribution date, the trustee of the trust will deposit
non-principal collections allocable to your series and Investment Proceeds, if
any--to the extent available pursuant to clause (5) under "--Non-Principal
Collections" above--into the reserve fund in an amount equal to the Reserve Fund
Deposit Amount, if any, for that distribution date.
If non-principal collections allocated to your series, Investment Proceeds,
if any, plus the amount of the Servicer Advance, if any, for that distribution
date are not sufficient to make the entire distributions required by clauses
(1), (2), (3), (4), (6) and (8) under "--Non-Principal Collections" above, the
servicer will direct the trustee of the trust to withdraw funds from the reserve
fund, to the extent available, and apply those funds to complete the
distributions pursuant to those clauses in the numerical order of those clauses.
At the direction of the servicer, funds in the reserve fund will be
invested in Eligible Investments. On each distribution date, all interest or
other investment earnings, net of losses and investment expenses, on funds on
deposit in the reserve fund and received prior to that distribution date will be
applied as set forth under "--Non-Principal Collections" above. After
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the payment in full of the Invested Amount of the certificates of your series
and accrued and unpaid interest on those certificates, any funds remaining on
deposit in the reserve fund will be paid to the seller.
Yield Supplement Account. The trustee of the trust, for the benefit of
your series, will establish and maintain an Eligible Account that we call the
"yield supplement account". No funds will be deposited in this account on the
closing date.
On each distribution date prior to the beginning of the Accumulation Period
and prior to the occurrence of an Early Amortization Event, the trustee of the
trust will deposit non-principal collections allocable to your series and
Investment Proceeds, if any--to the extent available pursuant to clause (10)
under "--Non-Principal Collections" above--into the yield supplement account in
an amount equal to the Yield Supplement Account Deposit Amount, if any, for that
distribution date.
If the Class A monthly interest, Class B monthly interest or Class C
monthly interest for any distribution date, determined as if the interest rate
were based on LIBOR plus the applicable margin, exceeds the applicable monthly
interest determined on the basis of the related Net Receivables Rate, the
servicer will direct the trustee of the trust to withdraw funds from the yield
supplement account, to the extent available, and apply those funds to deposit
the amount of such excess into the interest funding account first, for the
benefit of the Class A certificates, second, for the benefit of the Class B
certificates, and third, for the benefit of the Class C certificates.
At the direction of the servicer, funds in the yield supplement account
will be invested in Eligible Investments. On each distribution date, all
interest or other investment earnings, net of losses and investment expenses, on
funds on deposit in the yield supplement account and received prior to that
distribution date will be applied as set forth above under "--Non-Principal
Collections". Any funds on deposit in the yield supplement account for your
series at the beginning of the Accumulation Period or upon the occurrence of an
Early Amortization Event will be deposited in the principal funding account.
Excess Servicing. On each distribution date, the servicer will allocate
Excess Servicing for that 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 below
under "--Servicing Compensation and Payment of Expenses" will be
distributed to the servicer; and
(b) the balance, if any, will be distributed to the seller.
Principal Collections. On each distribution date, the servicer will apply
Available Certificateholder Principal Collections as follows.
For each distribution date relating to the Revolving Period, all Available
Certificateholder Principal Collections will be applied:
- first, if
(1) the Pool Balance at the end of the preceding calendar month is less
than the Pool Balance at the end of the second preceding calendar
month, and
(2) the Pool Balance at the end of the preceding calendar month is less
than the Required Participation Amount for that distribution date,
calculated before giving effect to any deposits to be made on that
distribution date to the excess funding account for your series and
any excess funding account for any other series in their revolving
periods,
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then the servicer will direct the trustee of the trust to deposit
Available Certificateholder Principal Collections into the excess funding
account for your series in an amount which will reduce the Invested
Amount such that, together with the deposits to the excess funding
accounts--and any resulting reductions in the invested amounts--for other
outstanding series in their revolving periods for that distribution date,
the Pool Balance is equal to the Required Participation Amount; and
- second, to "Excess Principal Collections" as described under
"Description of the Certificates--Allocations Among Series" in the
prospectus.
For each distribution date relating to the Accumulation Period or any Early
Amortization Period for your series, if a responsible officer of the trustee of
the trust has actual knowledge thereof, an amount equal to Available
Certificateholder Principal Collections will be distributed in the following
priority:
- an amount equal to Monthly Principal for the distribution date will be
deposited into the principal funding account; and
- for each distribution date with respect to the Accumulation Period, the
balance, if any, will be allocated to "Excess Principal Collections" as
described under "Description of the Certificates--Allocations Among
Series" in the prospectus.
INTEREST FUNDING ACCOUNT
The trustee of the trust will establish and maintain for the benefit of
your series an Eligible Deposit Account that we call 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."
At the direction of the Servicer, funds on deposit in the interest funding
account will be invested in Eligible Investments. On each distribution date,
interest and other investment earnings, net of losses and investment expenses,
on funds on deposit in the interest funding account and received prior to that
distribution date will be applied as set forth above under "--Distributions from
the Collection Account; Reserve Fund--Non-Principal Collections."
PRINCIPAL FUNDING ACCOUNT
The trustee of the trust will establish and maintain for the benefit of
your series an Eligible Deposit Account that we call the "principal funding
account". On each distribution date relating to the Accumulation Period or the
Early Amortization Period for your series, funds will be deposited in the
principal funding account as provided above under "--Distributions from the
Collection Account; Reserve Fund--Principal Collections."
At the direction of the Servicer, funds on deposit in the principal funding
account will be invested in Eligible Investments. On each distribution date,
interest and other investment earnings, net of losses and investment expenses,
on funds on deposit in the principal funding account and received prior to that
distribution date will be applied as provided above under "--Distributions from
the Collection Account; Reserve Fund--Non-Principal Collections." Payments will
be made from the principal funding account to certificateholders of your series
as described below under "--Distributions."
EXCESS FUNDING ACCOUNT
The trustee of the trust will establish and maintain an Eligible Deposit
Account for the benefit of your series that we call the "excess funding
account".
On each distribution date during the Revolving Period, if:
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- the Unconcentrated Pool Balance at the end of the preceding calendar
month is less than the Unconcentrated Pool Balance at the end of the
second preceding calendar month; and
- the Unconcentrated Pool Balance at the end of the preceding calendar
month is less than the Required Participation Amount for that
distribution date--calculated before giving effect to any deposits to be
made on that distribution date to the excess funding account for your
series and any excess funding account for any other series in its
revolving period,
then Available Certificateholder Principal Collections will be deposited in the
excess funding account on the distribution date in an amount which will reduce
the Invested Amount so that, together with the deposits to the excess funding
accounts, if any, for other outstanding series in their revolving periods for
that distribution date, and any resulting reductions in the invested amounts of
those series, the Unconcentrated Pool Balance is equal to the Required
Participation Amount. The deposit of amounts into the excess funding account for
your series and the excess funding accounts 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.
The servicer may elect to make withdrawals from the excess funding account
for your series and the excess funding accounts or similar arrangements for
other series on a daily or weekly basis.
If:
- on any determination date during the Revolving Period there are any
funds in the excess funding account for your series; and
- the Unconcentrated Pool Balance at the end of the preceding calendar
month is greater than the Unconcentrated Pool Balance at the end of the
second preceding calendar month,
then the Invested Amount and the invested amounts--but, in each case, not more
than the initial principal amounts--for all other outstanding series that
provide for an excess funding account or similar arrangement and are in their
revolving periods will be increased so that, after giving effect to the
increases, the Required Participation Amount is at least equal to the
Unconcentrated Pool Balance.
On each determination date, the servicer will notify the trustee of the
trust of the amount, if any, of the increase in the Invested Amount and the
trustee of the trust will withdraw from the excess funding account for your
series and pay to the seller or allocate to one or more other series, on the
immediately succeeding distribution date, an amount equal to the amount of the
increase in the Invested Amount. Any increase in the Invested Amount is subject
to the condition that after giving effect to that increase the Unconcentrated
Pool Balance equals or exceeds the Required Participation Amount.
Any funds on deposit in the excess funding account for your series at the
beginning of the Accumulation Period or upon the occurrence of an Early
Amortization Event will be deposited in the principal funding account. In
addition, no funds will be deposited in the excess funding account for your
series during the Accumulation Period or any Early Amortization Period.
At the direction of the Servicer, funds on deposit in the excess funding
account will be invested in Eligible Investments. On each distribution date, all
interest and investment earnings, net of losses and investment expenses, on
funds on deposit in the excess funding account and received prior to that
distribution date will be applied as described above under "--Distributions from
the Collection Account; Reserve Fund--Non-Principal Collections."
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SERVICER ADVANCES
On or before each distribution date, the servicer will deposit into the
collection account as an advance (a "Servicer Advance") an amount equal to the
amount of interest due but unpaid on any receivable for the related calendar
month (but only to the extent that the servicer reasonably expects to recover
that Servicer Advance from subsequent payments on that delinquent receivable).
No Servicer Advance will be made by the servicer for the principal portion of
the receivables or for defaulted receivables. The reimbursement of Servicer
Advances will be made on subsequent determination dates or distribution dates
out of funds collected on all receivables prior to the deposit of funds in the
collection account.
DISTRIBUTIONS
Distributions from the Interest Funding Account. On each distribution
date, available amounts on deposit in the interest funding account will be
distributed in the following order of priority:
(1) to the Class A certificateholders, an amount equal to
(A) the Class A monthly interest for the current distribution date,
plus
(B) any Class A monthly interest that was not distributed on any prior
distribution date to the Class A certificateholders, plus
(C) to the extent permitted under applicable law, the amount of any
Class A Additional Interest for the current distribution date and,
without duplication, any Class A Additional Interest previously due
but not distributed to the Class A certificateholders;
(2) to the Class B certificateholders, an amount equal to
(A) the Class B monthly interest for the current distribution date,
plus
(B) any Class B monthly interest that was not distributed on any prior
distribution date to the Class B certificateholders, plus
(C) to the extent permitted under applicable law, the amount of any
Class B Additional Interest for the current distribution date and,
without duplication, any Class B Additional Interest previously due
but not distributed to the Class B certificateholders;
(3) to the Class C certificateholders, an amount equal to
(A) the Class C monthly interest for the current distribution date,
plus
(B) any Class C monthly interest that was not distributed on any prior
distribution date to the Class C certificateholders, plus
(C) to the extent permitted under applicable law, the amount of any
Class C Additional Interest for the current distribution date and,
without duplication, any Class C Additional Interest previously due
but not distributed to the Class C certificateholders;
(4) to the Class A certificateholders, any Class A Carry-over Amount for
the current distribution date plus any unpaid Class A Carry-over
Amount for any previous distribution date plus to the extent
permitted under applicable law, the amount of any Class A Carry-over
Amount Additional Interest for the current distribution date and,
without duplication, any Class A Carry-over Amount Additional
Interest previously due but not distributed to the Class A
certificateholders;
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(5) to the Class B certificateholders, any Class B Carry-over Amount for
the current distribution date plus any unpaid Class B Carry-over
Amount for any previous distribution date plus to the extent
permitted under applicable law, the amount of any Class B Carry-over
Amount Additional Interest for the current distribution date and,
without duplication, any Class B Carry-over Amount Additional
Interest previously due but not distributed to the Class B
certificateholders; and
(6) to the Class C certificateholders, any Class C Carry-over Amount for
the current distribution date plus any unpaid Class C Carry-over
Amount for any previous distribution date plus to the extent
permitted under applicable law, the amount of any Class C Carry-over
Amount Additional Interest for the current distribution date and,
without duplication, any Class C Carry-over Amount Additional
Interest previously due but not distributed to the Class C
certificateholders.
Different priorities of distributions will apply if the Invested Amount is
greater than zero on the Termination Date and if the trustee of the trust sells
receivables or interests in receivables, as described below under "--Termination
of Your Series."
Distributions from the Principal Funding Account. On each distribution
date with respect to an Early Amortization Period--if a responsible officer of
the trustee of the trust has actual knowledge of that Early Amortization
Period--other than an Early Amortization Period that has ended as described in
clause (c) in the definition of Early Amortization Period, and on the Expected
Final Payment Date, the amount on deposit in the principal funding account will
be distributed to the certificateholders of your series in the following order
of priority:
- first, to the Class A certificateholders until the outstanding principal
balance of the Class A certificates has been reduced to zero;
- second, to the Class B certificateholders until the outstanding
principal balance of the Class B certificates has been reduced to zero;
and
- third, to the Class C certificateholders until the outstanding principal
balance of the Class C certificates has been reduced to zero;
provided, however, that the maximum amount distributed pursuant to this
paragraph on any distribution date will not exceed the excess, if any, of (A)
the sum of the outstanding principal balance of the Class A, Class B and Class C
certificates over (B) the sum of unreimbursed Class A Investor Charge-Offs,
Class B Investor Charge-Offs and Class C Investor Charge-Offs, each on that
distribution date.
Distributions on the certificates of your series will be made on each
applicable distribution date to the holders of certificates in whose names the
certificates were registered--expected to be Cede & Co., as nominee of DTC--at
the close of business on the day preceding that distribution date--or, if
definitive certificates are issued, on the last day of the preceding calendar
month. However, the final distribution on the certificates of your series will
be made only at the time of presentation and surrender of the certificates.
OPTIONAL REPURCHASE
On any distribution date occurring after the Invested Amount is reduced to
less than 10% of the initial principal amount of the certificates of your series
on the closing date for your series, the seller will have the option to
repurchase the interest of your series in the trust. The purchase price will be
equal to the sum of (a) the outstanding Invested Amount, (b) accrued and unpaid
interest on the certificates of your series through the day preceding the
distribution date on which the repurchase occurs and (c) to the extent permitted
by applicable law, the amount of Additional Interest, if any, for that
distribution date. The purchase price
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will be deposited in the collection account in immediately available funds on
the distribution date on which the seller exercises that option.
Notice of optional repurchase of the interest of your series will be
published in an Authorized Newspaper at least ten business days prior to the
date of repurchase for so long as the Class A or Class B certificates are listed
on the Luxembourg Stock Exchange (so long as the rules thereof so require) and
will be given by first-class mail, postage prepaid, mailed not less than ten
business days prior to the applicable repurchase date, to each holder of Class A
and Class B certificates at the holder's address in the register maintained by
the trustee of the trust under the pooling and servicing agreement.
Following that repurchase, the certificateholders of your series will have
no further rights relating to the trust, other than the right to receive the
final distribution on the certificates of your series. In the event that the
seller fails for any reason to deposit the purchase price as described above,
payments will continue to be made to your series as described in this prospectus
supplement.
REVOLVING PERIOD
"Revolving Period" for your series means the period beginning on the
closing date for your series and ending on the earlier of:
- the close of business on the day immediately preceding the Accumulation
Period Commencement Date, and
- the close of business on the day an Early Amortization Period for your
series commences;
- however, if any Early Amortization Period ends as described in clause
(c) of the definition of Early Amortization Period, the Revolving Period
will recommence as of the close of business on the day that Early
Amortization Period ends.
ACCUMULATION PERIOD
"Accumulation Period" means, unless an Early Amortization Event has
occurred prior thereto (other than an Early Amortization Event which has
resulted in an Early Amortization Period which has ended as described in clause
(c) of the definition of Early Amortization Period), the period beginning on the
Accumulation Period Commencement Date and ending on the earlier of (a) the
commencement of an Early Amortization Period for your series and (b) the
Expected Final Payment Date.
"Accumulation Period Commencement Date" means the first day of the calendar
month which is the fourth calendar month prior to the calendar month in which
the Expected Final Payment Date occurs; provided, however, that upon written
notice to the trustee of the trust, the servicer may elect to postpone the
Accumulation Period Commencement Date so that the number of months included in
the Accumulation Period will equal or exceed the Accumulation Period Length;
provided further, however, that the servicer's election will only be permitted
if the Accumulation Period Length is less than four months; provided further,
however, that the Accumulation Period Commencement Date will not be postponed
beyond the first day of the calendar month which is the second calendar month
prior to the calendar month in which the Expected Final Payment Date occurs.
"Accumulation Period Length" means, as determined by the servicer on each
determination date, beginning with the determination date occurring in the
calendar month which is the fifth calendar month prior to the calendar month in
which the Expected Final Payment Date occurs, the number of calendar months that
the servicer expects to be required so that sufficient funds are on deposit in
the principal funding account for your series no later than
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the Expected Final Payment Date to pay the outstanding principal balances of the
certificates of your series, based on
- the expected monthly collections of principal receivables expected to be
distributable to the certificateholders of your series assuming a
principal payment rate no greater than the lowest Monthly Payment Rate
on the receivables for the preceding three months, so that, for example,
if the lowest Monthly Payment Rate for that preceding three month period
is 50% or more, the number of calendar months required would be two; if
the lowest Monthly Payment Rate for that preceding three month period is
between 33.33% and 50%, the number of calendar months required would be
three; and if the lowest Monthly Payment Rate for that preceding three
month period is between 25% and 33.33%, the number of calendar months
required would be four; and
- the amount of principal expected to be distributable to
certificateholders of other series which are expected to be in their
accumulation or amortization periods during the Accumulation Period for
your series.
EARLY AMORTIZATION PERIOD
The "Early Amortization Period" for any series will begin at the close of
business on the business day preceding the occurrence of an Early Amortization
Event for that series--that is, either
- one of the Early Amortization Events set forth in the pooling and
servicing agreement that applies to all series, or
- one of the Early Amortization Events that applies to that particular
series and is set forth in the supplement for that series. The Early
Amortization Events applicable to your series are listed under
"Description of the Certificates--Early Amortization Events."
The Early Amortization Period for any series will end on the earliest to
occur of:
(a) the payment in full of the invested amount for that series, or in the
case of your series, the Invested Amount,
(b) the date specified as a termination date in the supplement for that
series, which in the case of your series is the Termination Date, and
(c) the end of the first calendar month during which the seller cured an
Early Amortization Event relating to the failure of the seller to
convey receivables in Additional Accounts to the trust within five
business days after the day on which it is required to convey those
receivables pursuant to the pooling and servicing agreement--so long
as no other Early Amortization Event has occurred relating to that
series and the scheduled termination of the revolving period for that
series has not occurred.
EARLY AMORTIZATION EVENTS
For purposes of your series, the "Early Amortization Events" consist of
both:
- the "Early Amortization Events" which are set forth in the pooling and
servicing agreement; and
- the additional "Early Amortization Events" which are set forth in the
supplement for your series.
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The supplement for each other series will also set forth additional Early
Amortization Events applicable to that series--which may be the same as or
different from the additional Early Amortization Events for your series
described below.
As set forth in the pooling and servicing agreement, "Early Amortization
Event" means 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 those receivables pursuant to the pooling and servicing
agreement, as described under "Description of the Certificates--Addition of
Accounts" in the prospectus; or
2. any Specified Party files a petition commencing a voluntary case
under any chapter of the Federal bankruptcy laws; or any Specified Party
files a petition or answer or consent seeking reorganization, arrangement,
adjustment, or composition under any other similar applicable Federal law,
or consents to the filing of any such petition, answer, or consent; or any
Specified Party appoints, or consents to the appointment of, a custodian,
receiver, liquidator, trustee, assignee, sequestrator or other similar
official in bankruptcy or insolvency or receivership of it or of any
substantial part of its property; or any Specified Party makes an
assignment for the benefit of creditors, or any Specified Party admits in
writing its inability to pay its debts generally as they become due; or
3. any order for relief against any Specified Party has been entered
by a court having jurisdiction in the premises under any chapter of the
Federal bankruptcy laws, and that order has continued undischarged or
unstayed for a period of 60 days; or a decree or order by a court having
jurisdiction in the premises has been entered approving as properly filed a
petition seeking reorganization, arrangement, adjustment, or composition of
any Specified Party under any other similar applicable Federal law, and
that decree or order has continued undischarged or unstayed for a period of
120 days; or a decree or order of a court having jurisdiction in the
premises for the appointment of a custodian, receiver, liquidator, trustee,
assignee, sequestrator, or other similar official in bankruptcy or
insolvency or receivership of any Specified Party or of any substantial
part of its property or for the winding up or liquidation of its affairs,
has been entered, and that decree or order has remained in force
undischarged or unstayed for a period of 120 days; or
4. failure on the part of the seller, the servicer or DFS, as
applicable,
- to make any payment or deposit required by the pooling and servicing
agreement or the receivables contribution and sale agreement,
including but not limited to any Transfer Deposit Amount or
Adjustment Payment, on or before the date occurring five business
days after the date that payment or deposit is required to be made;
or
- to deliver a distribution date statement for any series within ten
business days after notice from the trustee of the trust of that
failure; or
- in the case of the seller, to observe or perform in any material
respect its covenant not to create or suffer to exist any lien on a
receivable which failure has a material adverse effect on the
interest of the certificateholders and which continues unremedied for
a period of 60 days after written notice; provided, however, that an
Early Amortization Event will not be deemed to have occurred if the
seller will have repurchased the related receivables or, if
applicable, all the receivables during that period in accordance with
the provisions of the pooling and servicing agreement; or, if
applicable, all the receivables during that period in accordance with
the provisions of the pooling and servicing agreement; or
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- to observe or perform in any material respect any other covenants or
agreements set forth in the pooling and servicing agreement or the
receivables contribution and sale agreement, which failure has a
material adverse effect on the interests of the certificateholders
and which continues unremedied for a period of 45 days after written
notice of that failure; or
5. 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 contained in a computer file or
microfiche or written list required to be delivered by the seller to the
trustee of the trust to identify the accounts,
- proves to have been incorrect in any material respect when made and
continues to be incorrect in any material respect for a period of 60
days after written notice; and
- as a result of that incorrectness, the interests of the
certificateholders of all series are materially and adversely
affected (excluding, however, if the pooling and servicing agreement
constitutes the grant of a security interest in the receivables and
Collateral Security, any representation or warranty made by the
seller that the pooling and servicing agreement or the applicable
assignment constitutes 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);
- however, an Early Amortization Event as described in this paragraph 5
will not be deemed to occur if the seller has repurchased the related
receivables, if applicable, during that period in accordance with the
provisions of the pooling and servicing agreement; or
6. the trust or the seller becomes an investment company within the meaning
of the Investment Company Act of 1940, as amended.
Pursuant to the supplement for your series, the additional "Early
Amortization Events" which are Early Amortization Events for purposes of your
series consist of any of the following events:
1. on any distribution date, the balance of the reserve fund for your series
is less than 3.5% of the aggregate outstanding principal balance of the
certificates of your series, in each case after giving effect to all
deposits, withdrawals and distributions on the distribution date; or
2. any Servicer Default occurs; or
3. a Class A Carry-over Amount, Class B Carry-over Amount or Class C
Carry-over Amount is outstanding on six consecutive distribution
dates--after giving effect to the distributions on each of those
distribution dates; or
4. on any determination date, the average of the Monthly Payment Rates for
the three preceding calendar months is less than 25% or a lower
percentage if the Rating Agency Condition has been satisfied with respect
to that lower percentage; or
5. the outstanding principal amount of the certificates of your series is
not fully repaid on the Expected Final Payment Date; or
6. the Three Month Net Loss Ratio exceeds 5% on an annualized basis;
however, the percentage in this clause may be changed, or any Early
Amortization Event relating to this clause may be waived, without the
consent of any certificateholder upon satisfaction of the Rating Agency
Condition; or
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7. the sum of all Eligible Investments and amounts on deposit in the
excess funding account for your series and any excess funding accounts for
any other series represents more than 50% of the total assets of the trust
on each of six or more consecutive determination dates, after giving effect
to all payments made or to be made on the distribution dates relating to
those determination dates; or
8. the Overconcentration Amount exceeds zero for a period of five
business days after any distribution date, unless the Rating Agency
Condition has been satisfied with respect to the existence of the
Overconcentration Amount. See "Description of the Certificates--The
Overconcentration Amount" in the prospectus.
If any of the above events occur:
- an Early Amortization Event will be deemed to have occurred without any
notice or other action immediately on the occurrence of that event; and
- the Early Amortization Period will commence.
In addition, if an insolvency event occurs with respect to the seller, or
the seller violates its covenant not to create or suffer to exist any lien on
any receivable, then, on the day of that insolvency event or that violation, as
applicable:
- the seller will immediately cease to transfer receivables to the trust
and promptly give notice to the trustee of the trust of that insolvency
event or violation, as applicable; and
- the trust will be deemed to have terminated, subject to the liquidation,
winding up and dissolution procedures described below.
Following the receipt of that notice by the trustee of the trust (unless,
in the case of an insolvency event with respect to the seller, the provisions of
the pooling and servicing agreement have been amended, as described under
"Description of the Certificates--Amendments" in the prospectus, to eliminate
the provisions relating to the sale of receivables following the occurrence of
an insolvency event relating to the seller):
- the trustee of the trust will publish a notice of that insolvency event
or violation stating that the trustee of the trust intends to sell,
liquidate or otherwise dispose of the receivables in a commercially
reasonable manner and on commercially reasonable terms;
- however, the trustee will refrain from that action if within a specified
period of time holders of certificates of each series representing more
than 50% of the aggregate outstanding principal amount of the
certificates of each series--or, for any series with two or more
classes, the certificates of each class--and each person holding a
certificate issued in exchange for the seller's certificate, notify the
trustee of the trust that they disapprove of that sale, disposition or
liquidation of the receivables and that they wish to continue, having
receivables transferred to the trust as before that insolvency event or
violation, as applicable.
If the portion of those proceeds allocated to your series and the proceeds
of any collections on the receivables in the collection account allocable to
your series are not sufficient to pay the aggregate unpaid principal balance of
the certificates in full plus accrued and unpaid interest thereon, you will
incur a loss. Notwithstanding the above, if the sale, disposition or liquidation
is being made solely on account of the violation of the covenant not to create a
lien or suffer to exist a lien on any receivable, the trust will not sell the
receivables unless the proceeds are sufficient to pay the sum of (a) accrued and
unpaid interest on each outstanding series plus (b) the excess of the
outstanding principal balance of each outstanding series over the unreimbursed
investor charge-offs, if applicable, for such series.
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TERMINATION OF YOUR SERIES
In the event that the Invested Amount is greater than zero on the
Termination Date, the trustee of the trust will sell or cause to be sold
receivables or interests in receivables in an amount sufficient to pay the
Invested Amount after giving effect to deposits and distributions otherwise to
be made on that distribution date, plus accrued and unpaid interest on the
certificates of your series.
However, the amount will not exceed the lesser of (a) the product of (i)
the Series Allocation Percentage for your series on the Termination Date and
(ii) the aggregate unpaid balance of the Principal Receivables on the
Termination Date and (b) 110% of that Invested Amount.
The net proceeds of that sale, and all other amounts on deposit in the
interest funding account for your series and the principal funding account for
your series on the applicable distribution date, will be paid:
- first to Class A certificateholders, in an amount equal to the sum of
(x) the Class A monthly interest for the current distribution date and,
without duplication, any unpaid Class A monthly interest for any
previous distribution date, (y) to the extent permitted by applicable
law, any Class A Additional Interest for the current distribution date
and, without duplication, any unpaid Class A Additional Interest for any
previous distribution date, and (z) the Class A Invested Amount;
- second to Class B certificateholders, in an amount equal to the sum of
(x) the Class B monthly interest for the current distribution date and,
without duplication, any unpaid Class B monthly interest for any
previous distribution date, (y) to the extent permitted by applicable
law, any Class B Additional Interest for the current distribution date
and, without duplication, any unpaid Class B Additional Interest for any
previous distribution date, and (z) the Class B Invested Amount; and
- third to Class C certificateholders, in an amount equal to the sum of
(x) the Class C monthly interest for the current distribution date and,
without duplication, any unpaid Class C monthly interest for any
previous distribution date, (y) to the extent permitted by applicable
law, any Class C Additional Interest for the current distribution date
and, without duplication, any unpaid Class C Additional Interest for any
previous distribution date, and (z) the Class C Invested Amount.
No Class A Carry-over Amount, Class B Carry-over Amount, Class C Carry-over
Amount, Class A Carry-over Amount Additional Interest, Class B Carry-over Amount
Additional Interest or Class C Carry-over Amount Additional Interest will be
paid as part of this distribution.
Any remaining funds will be paid to the seller.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The servicer will be entitled to receive a Monthly Servicing Fee for your
series as compensation for its servicing activities and reimbursement for its
expenses. The Monthly Servicing Fee for your series will be payable in arrears
on each distribution date in an amount equal to one-twelfth of the product of:
- 2%; and
- the product of (a) the Series Allocation Percentage and (b) the Pool
Balance as of the last day of the second preceding calendar month.
The share of the Monthly Servicing Fee allocable to the certificateholders
of your series for any distribution date (the "Certificateholders' Monthly
Servicing Fee") will be equal to one-twelfth of the product of:
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- 2%; and
- the Invested Amount as of the last day of the second preceding calendar
month--or, in the case of the first distribution date for your series,
the Invested Amount on the closing date for your series.
The remainder of the Monthly Servicing Fee will be paid by the seller.
The servicer will be permitted to waive its right to receive the Monthly
Servicing Fee for your series on any distribution date, in whole or in part, so
long as it reasonably believes that sufficient non-principal collections will be
available on a future distribution date to pay the waived portion of the Monthly
Servicing Fee. If the servicer is DFS, and payment of any portion of the Monthly
Servicing Fee to DFS on a distribution date would require a withdrawal from the
reserve fund, then, absent affirmative notice to the trustee of the trust by DFS
to the contrary, DFS will be deemed to have waived payment of that portion on
that distribution date; provided that a deemed waiver described in this sentence
will not occur on more than two distribution dates in any twelve month period
and will not occur on any two consecutive distribution dates.
The servicer will pay from its servicing compensation certain expenses
incurred by the servicer in connection with its activities under the pooling and
servicing agreement including fees and expenses which are not expressly stated
in the pooling and servicing agreement to be payable by the seller, the trust or
the certificateholders; provided that the servicer will not be responsible for
paying federal, state and local income and franchise taxes, if any, of the trust
or the certificateholders.
REPORTS
On each distribution date, the trustee of the trust will forward, or cause
to be forwarded, to each certificateholder of record--which in the case of your
series is expected to be Cede & Co., as nominee for DTC, unless definitive
certificates are issued--a statement prepared by the servicer setting forth
information specified in an exhibit to the supplement for your series. That
information is expected to include:
- the aggregate amount of collections, the aggregate amount of
non-principal collections and the aggregate amount of principal
collections processed during the immediately preceding calendar month;
- the Series Allocation Percentage, the Floating Allocation Percentage and
the Principal Allocation Percentage relating to that calendar month;
- the total amount, if any, distributed on the certificates of your
series;
- the amount of that distribution allocable to principal on each class of
certificates of your series;
- the amount of that distribution allocable to interest on each class of
certificates of your series;
- the Investor Default Amount for that distribution date;
- the amount of the Class A, Class B and Class C Investor Charge-Offs and
the amounts of reimbursements thereof for the preceding calendar month;
- the amount of the Monthly Servicing Fee for the preceding calendar
month;
- the Controlled Deposit Amount, if any, for that distribution date;
- the Class A, Class B and Class C Invested Amounts, the excess funding
account balance and the outstanding principal balance of each class of
certificates of your
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series for that distribution--after giving effect to all distributions
which will occur on that distribution date;
- the "pool factor" for each class of certificates of your series as of
the determination date relating to that distribution date, which
consists of a number carried out to eleven decimals representing the
ratio of (a) the outstanding principal balance of each class as of that
determination date--determined after taking into account any reduction
in the outstanding principal balance of that class which will occur on
that distribution date, to (b) the initial principal balance of that
class;
- the reserve fund balance, the principal funding account balance and the
interest funding account balance.
On or before January 31 of each calendar year, the trustee of the trust
will furnish, or cause to be furnished, to each person who at any time during
the preceding calendar year was a certificateholder of record of your
series--which is expected to be Cede & Co., as nominee for DTC, unless
definitive certificates are issued--a statement containing the information
required to be provided by an issuer of indebtedness under the Code for the
preceding calendar year, together with other customary information as is
necessary to enable the certificateholders to prepare their tax returns.
In addition, as long as the certificateholder of record is Cede & Co., as
nominee for DTC, certificate owners will receive tax and other information from
participants and indirect participants rather than from the trustee of the
trust. See "Federal Income Tax Considerations" and "State and Local Tax
Consequences" in this prospectus supplement.
FEDERAL INCOME TAX CONSIDERATIONS
OVERVIEW
The following is a summary of material U.S. Federal income tax consequences
of the purchase, ownership and disposition of the Class A certificates and the
Class B certificates, or the "offered certificates". This summary is based on
current provisions of the Internal Revenue Code of 1986, called the "Code",
proposed, temporary and final Treasury regulations promulgated under the Code,
and published rulings and court decisions. The current tax laws and the current
regulations, rulings and court decisions may be changed or reversed, possibly
retroactively. The parts of this summary which relate to matters of law or legal
conclusions, represent the opinion of Mayer, Brown & Platt, special Federal tax
counsel for the seller, and are qualified in this summary. We have not sought
and will not seek any rulings from the Internal Revenue Service (the "IRS") with
respect to any of the Federal income tax consequences we discuss. The IRS could
take positions contrary to those we discuss.
CHARACTERIZATION OF THE CERTIFICATES AND THE TRUST
In the opinion of Mayer, Brown & Platt, the trust will not be classified as
an association or publicly traded partnership taxable as a corporation for
Federal income tax purposes. Mayer, Brown & Platt is also of the opinion that,
based on the substantive terms of the offered certificates, the Class A and
Class B certificates will be treated as indebtedness for Federal income tax
purposes.
In general, whether for Federal income tax purposes a transaction
constitutes a sale of property or a loan which is secured by the property is a
question of fact and is based on the economic substance of the transaction
rather than its form or label. The primary factor in determining whether the
substance of a transaction is a sale or a loan is whether the person who has
purchased the property or made the loan secured by the property has assumed the
risk of loss with respect to the property and has obtained the benefits of
ownership of the
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property. The intention of the parties is another important factor in
determining whether a transaction will be treated as a sale or a loan for
Federal income tax purposes. The seller expresses in the pooling and servicing
agreement its intent that the offered certificates will be indebtedness for
Federal, state and local income and franchise tax purposes (and for purposes of
any other taxes imposed on or measured by income). Further, the seller, the
servicer and each initial and subsequent investor, by acquiring an interest in
an offered certificate, agrees or will be deemed to agree to treat the offered
certificates as indebtedness for Federal, state and local income and franchise
tax purposes (and for purposes of any other taxes imposed on or measured by
income).
Based on its analysis of the substance of the transaction contemplated in
this prospectus supplement and in the prospectus, the parties' intentions, and
the assumption that the parties will comply with the terms of the transaction,
Mayer, Brown & Platt has concluded that the purchasers of the Class A and Class
B certificates will be treated as making a loan to the seller secured by the
receivables. Therefore, Mayer, Brown & Platt is of the opinion that the Class A
and Class B certificates will be treated as debt for Federal income tax
purposes. Based on its analysis of the substance of the transaction contemplated
in this prospectus supplement and in the prospectus, the parties' intentions,
and the assumption that the parties will comply with the terms of the
transaction, including statements to be made by purchasers of Class C
certificates in their respective representation letters which they will execute
in connection with their purchase of Class C certificates, Mayer, Brown & Platt
is of the opinion that the Class C certificates will be treated as either
indebtedness or as interests in a partnership for Federal income tax purposes.
However, no transaction closely comparable to that contemplated in this
prospectus has been the subject of any Treasury regulation, revenue ruling or
judicial decision. Prospective investors should also be aware that opinions of
counsel are not binding on the IRS, and the IRS could successfully challenge
treatment of the offered certificates as indebtedness for Federal income tax
purposes.
Except as otherwise expressly indicated, the remaining discussion assumes
that the offered certificates will be treated as debt for Federal income tax
purposes and that payments on the offered certificates are denominated in U.S.
dollars.
TAXATION OF INTEREST INCOME OF CERTIFICATEHOLDERS
If the offered certificates are not treated as issued with "original issue
discount" or "OID", investors will be required to include the stated interest on
the offered certificates in income either when received or accrued, according to
their method of tax accounting. The offered certificates will not be treated as
issued with OID if (1) the interest payable on the offered certificates meets
the requirements for "qualified stated interest" under Treasury regulations
relating to OID, and (2) any excess of the principal amount of the offered
certificates over the issue price of the offered certificates does not exceed a
de minimis amount. Qualified stated interest generally includes interest that is
payable unconditionally at least annually at a single fixed rate that
appropriately takes into account the length of time between payments. It is
uncertain whether interest payable on the offered certificates will be treated
as qualified stated interest. A de minimis amount is defined by Treasury
regulations as 1/4% of the principal amount of the offered certificates
multiplied by the number of full years included in their term.
Qualified stated interest generally is interest that is unconditionally
payable in cash or property (other than debt instruments of the issuer) at fixed
intervals of one year or less during the entire term of the instrument at
specified rates. The IRS could take the position based on Treasury regulations
that the rate of the interest payable on the certificates is not
"unconditionally payable" because the interest rate on the certificates is
capped at the Net Receivables Rate, such that if the LIBOR interest rate on the
certificates rose above the relevant Net Receivables Rate, payment of such
excess could be deferred. Holders of
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certificates should consult their own tax advisors concerning the impact to them
in their particular circumstances of deferral of payment of such excess. The
seller intends to take the position that interest on the certificates
constitutes qualified stated interest.
If the offered certificates are treated as issued with OID, then the excess
of the payments other than "qualified stated interest" over the original issue
price for the offered certificates will constitute OID. The original issue price
for the offered certificates will be the initial offering price at which a
substantial amount of the offered certificates are sold to the public. The owner
of an offered certificate must include OID, if any, in income as interest over
the term of the certificate under a constant yield method. In general, OID must
be included in income in advance of the receipt of cash representing that
income. Further, under the Code, special rules relating to OID, market discount
and acquisition premium apply to debt obligations which may be accelerated due
to prepayments of obligations securing the debt obligation. It is uncertain
whether these special rules apply to the offered certificates. If they were to
apply, the seller would calculate and report OID, if any, based on a reasonable
prepayment assumption.
The Federal income tax treatment of a subsequent investor who purchases an
offered certificate for less than or more than the principal amount, or in the
case of a certificate issued with OID, the adjusted issue price of that offered
certificate will be governed by special rules. A subsequent investor who
purchases an offered certificate for less than the principal amount, or in the
case of a certificate issued with OID, the adjusted issue price of the offered
certificate, is treated as having purchased that certificate at a market
discount, and if the discount is greater than a de minimis amount, the character
and potential timing of the income attributable to that discount would be
governed by the "market discount" rules of the Code. These rules provide, in
part, that gain generally will be treated as ordinary income on the receipt of
partial principal payments or on the sale or disposition of the offered
certificate to the extent of the accrued market discount. These rules also
provide for the deferral of interest deductions related to debt incurred or
maintained to acquire or carry the offered certificate. An investor who
purchases an offered certificate for more than the sum of all amounts payable on
the certificate after the purchase date other than qualified stated interest,
which excess is referred to as a premium, may generally elect to annually offset
an amortized amount of the premium against interest income from the offered
certificate over the remaining term of the offered certificate pursuant to
Section 171 of the Code.
A subsequent investor who purchases a certificate issued with OID is
treated as having purchased that certificate at an acquisition premium if the
investor purchases the certificate for an amount that is greater than the
certificate's adjusted issue price and less than or equal to the sum of all
amounts payable on the certificate after the date of purchase other than
payments of qualified stated interest (generally, the principal amount). In
general, acquisition premium ratably reduces OID inclusions in income.
DISPOSITION OF A CERTIFICATE
An investor who disposes of an offered certificate by sale, exchange,
redemption or otherwise will recognize gain or loss equal to the difference
between the amount of cash and the fair market value of any property received,
other than amounts attributable to, and taxable as, accrued interest, and the
investor's adjusted tax basis in the offered certificate. In general, the
adjusted tax basis of an offered certificate will equal the investor's cost for
the offered certificate, increased by any OID or market discount previously
included in income by the investor and decreased by any deductions previously
allowed for amortizable bond premium and by any payment reflecting principal or
OID on the offered certificate. Any gain or loss will generally be long-term
capital gain or loss, provided that the offered certificate was held as a
capital asset for more than one year. The maximum ordinary income tax rate for
individuals exceeds the maximum long-term capital gains rate for individuals.
Any realized capital losses
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may generally be used by a corporate taxpayer only to offset capital gains and
by an individual taxpayer only to the extent of capital gains plus $3,000 of
other income.
POSSIBLE CLASSIFICATION AS A PARTNERSHIP OR AS AN ASSOCIATION TAXABLE AS A
CORPORATION
The opinions of Mayer, Brown & Platt that the trust will not be treated as
an association or publicly traded partnership taxable as a corporation, that the
Class A and Class B certificates will be treated as debt and that the Class C
certificates will be treated either as debt or as interests in a partnership are
not binding on the courts or the IRS. Further, the IRS could assert that, for
purposes of the Code, the transactions contemplated in this prospectus
supplement constitute a sale of the receivables, or an interest in the
receivables, to the investors and that the legal relationship between the seller
and some or all of the investors resulting from the transactions is a
partnership, including a publicly traded partnership taxable as a partnership,
or a publicly traded partnership taxable as a corporation. The seller currently
does not intend to comply with the Federal income tax reporting requirements
that would apply if any offered certificates were treated as interests in a
partnership or a publicly traded partnership taxable as a corporation.
If a partnership, other than a publicly traded partnership taxable as a
corporation, between the seller and investors were held to exist, the
partnership itself would not be required to pay Federal income tax. Rather, the
partners of the partnership, including the investors, would individually
recognize their respective distributive shares of the partnership's income,
gain, loss, deductions and credits. Therefore, the amount and timing of
recognition of items of income and deductions by an investor could differ if the
offered certificates were held to constitute partnership interests rather than
debt. In addition, unless the partnership were treated as engaged in a trade or
business, an individual investor's share of expenses of the partnership would be
treated as miscellaneous itemized deductions that, in the aggregate, are allowed
as deductions only to the extent they exceed two percent of the individual's
adjusted gross income and could be reduced under Section 68 of the Code if the
individual's adjusted gross income exceeded specified limits. Furthermore, these
deductions would be eliminated altogether for purposes of the alternative
minimum tax. As a result, that individual might be taxed on a greater amount of
income than the stated rate on the offered certificates. Finally, if a
partnership were held to exist, all or a portion of any taxable income allocated
to an investor that is a pension, profit-sharing or employee benefit plan or
other tax-exempt entity, including an individual retirement account, may
constitute "unrelated business taxable income" which generally would be taxable
to the tax-exempt investor under the Code.
If it were determined that a transaction created an entity classified as a
publicly traded partnership taxable as a corporation, the trust would be
required to pay Federal income tax at corporate income tax rates on its income
and may have to pay certain state and local taxes, which would reduce the
amounts available for distribution to the investors. If the offered certificates
were treated as partnership interests in a publicly traded partnership taxable
as a corporation, distributions to the investors generally would not be
deductible in computing the taxable income of the publicly traded partnership.
Also, cash distributions to the investors generally would be treated as
dividends for tax purposes, but possibly without the benefit of a dividends
received deduction.
To reduce the likelihood that the trust will be treated as a "publicly
traded partnership" (as defined in Section 7704 of the Code) if the Class C
certificates are treated as partnership interests, the supplement for your
series includes limitations on the initial purchase and subsequent transfer of
the Class C certificates. These limitations provide that, among other things,
the Class C certificates may not be transferred or sold to any person, if, for
the purposes of Section 7704 of the Code and the Treasury regulations
promulgated thereunder, after such transfer the trust would be treated as having
more than 100 partners.
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FASIT LEGISLATION
Federal legislation created a new type of entity for Federal income tax
purposes called a "financial asset securitization investment trust" or "FASIT."
Arrangements similar to the trust may elect to be treated as a FASIT. A FASIT
election would enable the trust to avoid Federal income taxation and to issue
securities, similar to the offered certificates, which would be treated as debt
for Federal income tax purposes. The seller and servicer will be permitted to
amend the pooling and servicing agreement or the supplement for your series in
order to enable all or a portion of the trust to qualify as a FASIT and to
permit a FASIT election to be made with respect thereto, and to make any
modifications to the pooling and servicing agreement or the supplement for your
series as may be permitted by reason of the making of a FASIT election.
We cannot assure you that the seller will or will not cause any permissible
FASIT election to be made regarding the trust or amend the pooling and servicing
agreement or the supplement for your series in connection with any election. In
addition, if a FASIT election is made, it may cause a holder to recognize gain,
but not loss on any certificates of your series held by it, even though tax
counsel for the seller 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 FASIT election and any related amendments to the
pooling and servicing agreement or the supplement involving your series may have
other tax and non-tax consequences to certificateholders. Accordingly,
prospective certificateholders should consult their tax advisors with regard to
the effects of any FASIT election and any permitted related amendments on them
in their particular circumstances.
Although the FASIT legislation was effective as of September 1, 1997, many
technical issues have not been addressed by Treasury regulations. Transition
rules permit an entity in existence on or after August 31, 1997, like the trust,
to elect FASIT status. However, it is not clear how outstanding interests of an
electing entity would be treated after an election. Thus, it is not clear how
the certificates of your series would be treated if the trust made a FASIT
election. Further, while proposed regulations regarding FASITs were issued on
February 7, 2000, the proposed regulations are generally proposed to be
effective only after publication of final regulations. Accordingly, it is
uncertain when the proposed regulations would be effective and whether the
proposed regulations will be finalized in the form proposed.
Prospective investors should consult their tax advisors about how a FASIT
election may affect them.
FOREIGN INVESTORS
The following information describes the U.S. Federal income tax treatment
of investors that are Foreign Investors if the offered certificates are treated
as debt. The term "Foreign Investor" means any person who is a beneficial holder
of an offered certificate and who is not:
(1) a citizen or resident of the United States,
(2) a corporation or partnership or other entity treated for Federal
income tax purposes as a corporation or a partnership created or
organized in or under the laws of the United States, any State
thereof or the District of Columbia,
(3) an estate, the income of which is subject to United States Federal
income tax, regardless of its source, or
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(4) a trust if a U.S. court is able to exercise primary supervision over
the administration of the trust and one or more U.S. persons have the
authority to control all substantial decisions of the trust.
Notwithstanding the preceding sentence, to the extent provided in Treasury
regulations, certain trusts in existence on August 20, 1996, and treated as
United States persons under the Code and applicable Treasury regulations prior
to that date, that elect to continue to be treated as United States persons
under the Code or applicable Treasury regulations will not be Foreign Investors.
Except as noted below, the balance of this discussion describes the consequences
to Foreign Investors of holding Class A and Class B certificates that are
treated as indebtedness for Federal income tax purposes.
Tax would be withheld from payments of interest, including OID, paid to a
Foreign Investor at a rate of 30% unless (1) the income is "effectively
connected" with the conduct by the Foreign Investor of a trade or business in
the United States as evidenced by an IRS Form 4224 or new IRS Form W-8ECI,
signed by the investor or its agent; (2) the Foreign Investor delivers an IRS
Form 1001 or new IRS Form W-8BEN, signed by the investor or its agent, claiming
exemption from withholding or a reduced rate of withholding under an applicable
tax treaty; or (3) the Foreign Investor and each securities clearing
organization, bank, or other financial institution that holds the Class A or
Class B certificates on behalf of the customer in the ordinary course of its
trade or business, in the chain between the investor and the United States
person otherwise required to withhold the United States tax, complies with
applicable identification requirements, and the investor does not actually or
constructively own 10% or more of the voting stock of the seller and is not a
controlled foreign corporation of the seller. Applicable identification
requirements generally will be satisfied if there is delivered to a securities
clearing organization and to the United States entity otherwise required to
withhold tax an IRS Form W-8 or new IRS Form W-8BEN signed under penalties of
perjury by the investor, stating that the investor is not a United States person
and providing the investor's name and address. In the case of (1), (2) or (3)
above, the appropriate form will be effective provided, that (a) the applicable
form is delivered as required by applicable procedures and is properly
transmitted to the United States entity otherwise required to withhold tax, and
(b) none of the entities receiving the form has actual knowledge that the
investor is a United States person.
An investor that is a nonresident alien or foreign corporation will not be
liable for United States Federal income tax on gain realized on the sale,
exchange, or redemption of a Class A or Class B certificate, if (1) this gain is
not effectively connected with the conduct of a trade or business in the United
States, (2) in the case of an individual foreign investor, the investor is not
present in the United States for 183 days or more during the taxable year of the
sale, exchange, or redemption, and (3) in the case of gain representing accrued
interest, the conditions described in the last paragraph are satisfied.
If the trust were reclassified as a partnership that is not taxable as a
corporation, a Foreign Investor might be required to file a United States
Federal income tax return and pay tax on its share of partnership income at
regular United States rates, including the branch profits tax in the case of a
Foreign Investor that is a corporation. Withholding tax, at the current rate of
39.6% in the case of individuals and 35% in the case of corporations would also
be deducted from a Foreign Investor's share of the partnership's "effectively
connected taxable income." If the offered certificates were recharacterized as
equity interests in a publicly traded partnership taxable as a corporation, tax
would be withheld from distributions on the offered certificates treated as
dividends generally at a rate of 30% unless reduced by an applicable treaty or
other exemption.
New Withholding Regulations. The Treasury Department has issued new
withholding regulations containing modifications to the withholding, backup
withholding and information
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reporting rules described in this prospectus supplement. For example, persons
currently required to file Form W-8 or Form 1001 will be required to file new
Form W-8BEN and persons currently required to file Form 4224 will be required to
file new Form W-8ECI. The new withholding regulations will generally be
effective for payments made after December 31, 2000, but Forms W-8, 1001 and
4224 filed before that date will continue to be effective until the earlier of
December 31, 2000 or their current expiration date. Prospective investors are
advised to consult their tax advisors regarding the new withholding regulations.
BACKUP WITHHOLDING
Backup withholding taxes will be imposed on payments to any investor, other
than an exempt holder such as a corporation, tax-exempt organization, qualified
pension and profit sharing trust, individual retirement account or nonresident
alien who provides certification of his or her status as nonresident, at the
rate of 31% of the interest paid, and original issue discount accrued, if any,
on the offered certificates if the investor, at the time of issuance, fails to
supply the trustee of the trust or its broker with a certified statement, under
penalties of perjury, containing the investor's name, address, correct taxpayer
identification number and a statement that backup withholding is not required.
In addition, upon the sale or disposition of a certificate to (or through) a
broker, the broker must withhold 31% of the entire purchase price, unless either
(i) the broker determines that the seller is a corporation or other exempt
recipient or (ii) the seller provides certain identifying information and, in
the case of a Foreign Investor, certifies that the seller is a Foreign Investor
(and certain other conditions are met). Information returns will be sent
annually to the IRS and to each investor stating the amount of interest paid,
and original issue discount accrued, if any, on the offered certificates and the
amount of tax withheld from payments on the certificates. We advise investors to
consult with their tax advisors about their eligibility for, and the procedure
for obtaining, exemption from backup withholding.
STATE AND LOCAL TAX CONSEQUENCES
The activities to be undertaken by the servicer in servicing and collecting
the receivables may be considered to take place in Missouri. The State of
Missouri imposes a state income tax which is based partially on the net income
of corporations, partnerships and other entities doing business in the State of
Missouri. This discussion is based on present provisions of Missouri statutes
and the regulations promulgated thereunder, and applicable judicial or ruling
authority, all of which may change, which change may be retroactive. No ruling
on any of the issues discussed below will be sought from the Missouri Department
of Revenue.
In the opinion of Bryan Cave LLP ("Missouri Tax Counsel") the
characterization of Certificates for federal income tax purposes will also apply
for purposes of the Missouri state income tax. Therefore, if the Class A and
Class B Certificates are treated as debt for federal income tax purposes, they
will be treated as debt for Missouri income tax purposes. Pursuant to this
treatment, the trust will not be required to pay Missouri income tax, and
certificateholders not otherwise required to pay Missouri tax would not be
required to pay that tax solely because of their mere ownership of the Class A
and Class B certificates. Class A and Class B certificateholders already being
taxed in Missouri, however, could be required to pay tax on the income generated
from ownership of these 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 resulting constructive entity
could be required to pay Missouri income taxes. Those taxes could result in
reduced distributions to certificateholders. A certificateholder not otherwise
required to pay income tax in Missouri would not be required to pay Missouri
income tax as a result of its mere ownership of that interest.
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Notwithstanding the foregoing, regardless of the treatment of the Class A
and Class B certificates or the arrangement for federal income tax purposes, a
certificateholder could be required to pay Missouri income tax if that
certificateholder participated in the negotiation of the pooling and servicing
agreement or otherwise developed a taxable nexus to Missouri.
In the opinion of Missouri Tax Counsel, if the trust is not treated as an
association taxable as a corporation for federal income tax purposes, the trust
will not be required to pay any Missouri franchise tax imposed under Chapter 147
of the Revised Statutes of Missouri.
Because each state's income tax laws vary, it is impossible to predict the
income tax consequences to the certificateholders in all of the state taxing
jurisdictions in which they are already required to pay tax. We recommend that
you consult your own tax advisors regarding state and local income and franchise
taxes.
DUE TO THE COMPLEXITY OF FEDERAL, STATE, LOCAL AND FOREIGN RULES AND THE
CURRENT UNCERTAINTY AS TO THE MANNER OF THEIR APPLICATION TO THE TRUST AND
CERTIFICATEHOLDERS, IT IS PARTICULARLY IMPORTANT THAT POTENTIAL INVESTORS
CONSULT THEIR OWN TAX ADVISORS ABOUT THE FEDERAL, STATE, LOCAL, FOREIGN AND ANY
OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
CERTIFICATES. FOR EXAMPLE, THIS PROSPECTUS SUPPLEMENT DOES NOT DISCUSS TAX
CONSEQUENCES TO VARIOUS INVESTORS, INCLUDING BANKS AND THRIFTS, INSURANCE
COMPANIES, REGULATED INVESTMENT COMPANIES, DEALERS IN SECURITIES, HOLDERS THAT
WILL HOLD THE OFFERED CERTIFICATES AS A POSITION IN A "STRADDLE" FOR TAX
PURPOSES OR AS A PART OF A "SYNTHETIC SECURITY" OR "CONVERSION TRANSACTION" OR
OTHER INTEGRATED INVESTMENT COMPRISED OF THE OFFERED CERTIFICATES AND ONE OR
MORE OTHER INVESTMENTS, FOREIGN INVESTORS, TRUSTS AND ESTATES AND PASS-THROUGH
ENTITIES WITH ANY OF THESE TYPES OF INVESTORS AS EQUITY HOLDERS. FURTHER, WE DO
NOT FURNISH INFORMATION IN THIS PROSPECTUS SUPPLEMENT IN THE LEVEL OF DETAIL OR
WITH THE ATTENTION TO AN INVESTOR'S SPECIFIC TAX CIRCUMSTANCES THAT WOULD BE
PROVIDED BY AN INVESTOR'S OWN TAX ADVISOR. ADDITIONALLY, THE DISCUSSION IS
LIMITED TO THE TAX CONSEQUENCES TO INITIAL INVESTORS AND NOT TO PURCHASERS IN
THE SECONDARY MARKET.
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ERISA CONSIDERATIONS
GENERAL
Section 406 of the Employee Retirement Income Security Act of 1974
("ERISA"), and Section 4975 of the Code, prohibit a pension, profit-sharing or
other employee benefit plan from engaging in certain transactions involving
"plan assets" with persons that are "parties in interest" under ERISA or
"disqualified persons" under the Code. A violation of these "prohibited
transaction" rules may generate excise tax and other liabilities under ERISA and
the Code for that person. For example, if a plan were to acquire certificates, a
prohibited transaction would arise, unless an exemption, like one of the class
exemptions described below, were available, if the seller were a disqualified
person or party in interest. By its acceptance of a Class A or Class B
certificate or an interest in a Class A or Class B certificate, each Class A and
Class B certificateholder and owner of any beneficial interest in a Class A, or
Class B certificate will be deemed to represent and warrant that its purchase
and holding of the certificate will not result in a nonexempt prohibited
transaction under Section 406 of ERISA or Section 4975 of the Code.
Additional prohibited transactions could arise if the assets of the trust
were deemed to constitute assets of any plan that owned certificates. The
Department of Labor ("DOL") has issued a final regulation (the "Plan Assets
Regulation") concerning the definition of what constitutes the "plan assets" of
an employee benefit plan to which ERISA or the Code applies, or an individual
retirement account ("IRA") (collectively referred to as "Benefit Plans"). Under
the Plan Assets Regulation the assets and properties of certain corporations,
partnerships and certain other entities in which a Benefit Plan acquires an
"equity interest" could be deemed to be assets of the Benefit Plan in certain
circumstances. Accordingly, if Benefit Plans purchase certificates, the trust
could be deemed to hold plan assets of that Benefit Plan unless one of the
exceptions under the Plan Assets Regulation is applicable to the Trust.
Purchasers which are insurance companies should consult with their counsel
regarding a United States Supreme Court decision interpreting the fiduciary
responsibility rules of ERISA, John Hancock Mutual Life Insurance Co. v. Harris
Bank and Trust (114 S.Ct. 517). In John Hancock, the Supreme Court ruled that
assets held in an insurance company's general account may be deemed to be "plan
assets" for ERISA purposes under certain circumstances. Prospective purchasers
should determine whether that decision affects their ability to make purchases
of the certificates.
PLAN ASSETS AND THE AVAILABILITY OF EXEMPTIONS FOR CERTIFICATES
The Plan Assets Regulation contains an exception (the "Publicly-Offered
Securities Exception") that provides that if a Benefit Plan acquires a
"publicly-offered security", the issuer of the security is not deemed to hold
plan assets. A publicly-offered security is a security that is
- freely transferable;
- part of a class of securities that is held, on completion of the public
offering made hereby, by 100 or more investors independent of the trust
and of one another; and
- either is (A) part of a class of securities registered under Section
12(b) or 12(g) of the Securities Exchange Act of 1934 (the "Exchange
Act") or (B) sold to the plan as part of an offering of securities to
the public pursuant to an effective registration statement under the
Securities Act of 1933 (the "Securities Act") and the class of
securities of which that security is a part is registered under the
Exchange Act within 120 days, or any later time as may be allowed by the
Securities and Exchange Commission, after
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the end of the fiscal year of the issuer during which the offering of
those securities to the public occurred.
It is anticipated that the Class A certificates will meet the criteria of
the Publicly-Offered Securities Exception as set forth above, although no one
can assure you, and no monitoring or other measures will be taken to ensure,
that the 100 independent person requirement will be satisfied.
If the certificates fail to meet the criteria of the Publicly-Offered
Securities Exception and the trust's assets are deemed to include assets of
Benefit Plans that are holders of certificates, transactions involving the trust
and "parties in interest" or "disqualified persons" might be prohibited under
Section 406 of ERISA and Section 4975 of the Code unless an ERISA prohibited
transaction exemption is applicable. Thus, for example, if a participant in any
Benefit Plan is an obligor or guarantor of one of the receivables, under DOL
interpretations the purchase of certificates by that plan could constitute a
prohibited transaction. There are five class exemptions issued by the DOL that
may apply in that event:
- DOL Prohibited Transaction Class Exemption 84-14--Class Exemption for
Plan Asset Transactions Determined by Independent Qualified Professional
Asset Managers;
- 91-38--Class Exemption for Certain Transactions Involving Bank
Collective Investment Funds;
- 90-1--Class Exemption for Transactions Involving Insurance Company
Pooled Separate Accounts;
- 95-60--Class Exemption for Certain Transactions Involving Insurance
Company General Accounts; and
- 96-23--Class Exemption for Plan Asset Transactions Determined by an
In-House Asset Manager.
No one can assure you that these exemptions, even if all of the conditions
specified in those exemptions are satisfied, will apply to all transactions
involving the trust's assets.
The underwriters currently do not expect that the Class B certificates will
be held by at least 100 independent persons and, therefore, do not expect that
the Class B certificates will qualify as publicly-offered securities under the
Publicly-Offered Securities Exemption. Accordingly, the Class B certificates may
not be acquired by:
(a) any employee benefit plan to which ERISA applies;
(b) any plan or other arrangement--including an individual retirement
account or Keogh plan--to which section 4975 of the Code applies; or
(c) any entity whose underlying assets include "plan assets" under the
Plan Assets Regulation by reason of any plan's investment in the entity.
By its acceptance of a Class B certificate or an interest therein, each
Class B certificateholder and owner of a beneficial interest in the Class B
certificates will be deemed to have represented and warranted that it is not an
employee benefit plan, plan or arrangement to which Section 4975 of the Code
applies, or other type of entity covered by clause (a), (b) or (c) of the
preceding sentence.
REVIEW BY BENEFIT PLAN FIDUCIARIES
Due to the complexity of these rules and the penalties imposed on persons
involved in prohibited transactions, it is especially important that any Benefit
Plan fiduciary who proposes to cause a Benefit Plan to purchase certificates
should consult with its own counsel regarding the potential consequences under
ERISA and the Code of the Benefit Plan's acquisition and ownership of
certificates. Assets of a Benefit Plan should not be invested in the
certificates unless it is clear that the assets of the trust will not be plan
assets.
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<PAGE> 55
UNDERWRITING
The seller has agreed to sell, and Deutsche Bank Securities Inc. and the
other underwriters listed below have agreed to purchase, the principal amount of
the Class A and Class B certificates listed in the table below. The terms of
these purchases are governed by an underwriting agreement dated April 20, 2000,
as supplemented by a terms agreement dated July , 2000, between the seller and
Deutsche Bank Securities Inc., for itself and as representative of all
underwriters.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
UNDERWRITERS CLASS A CERTIFICATES
------------ --------------------
<S> <C>
Deutsche Bank Securities Inc................................ $
Banc of America Securities LLC.............................. $
Banc One Capital Markets, Inc............................... $
J.P. Morgan Securities Inc.................................. $
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
UNDERWRITERS CLASS B CERTIFICATES
------------ --------------------
<S> <C>
Deutsche Bank Securities Inc................................ $
Banc of America Securities LLC.............................. $
Banc One Capital Markets, Inc............................... $
J.P. Morgan Securities Inc.................................. $
</TABLE>
The underwriters have agreed to purchase all of the offered certificates if
any of the offered certificates are purchased.
Deutsche Bank Securities Inc., as representative of the underwriters, has
advised the seller that the underwriters propose initially to offer the Class A
certificates to the public at the public offering price stated on the cover page
of this prospectus supplement, and to some dealers at that price, less a
concession of up to % for each Class A certificate. The underwriters may
allow, and those dealers may reallow, concessions of up to % of the
principal amount of the Class A certificates to some brokers and dealers. The
underwriting discounts and commissions of the underwriters will be % of the
principal amount of the Class A certificates.
Deutsche Bank Securities Inc., as representative of the underwriters, has
advised the seller that the underwriters propose initially to offer the Class B
certificates to the public at the public offering price stated on the cover page
of this prospectus supplement, and to some dealers at that price, less a
concession of up to % for each Class B certificate. The underwriters may
allow, and those dealers may reallow, concessions of up to % of the principal
amount of the Class B certificates to some brokers and dealers. The underwriting
discounts and commissions of the underwriters will be % of the principal
amount of the Class B certificates.
Additional offering expenses are estimated to be $ .
The seller and DFS will indemnify the underwriters against liabilities
caused by (1) any untrue statement or alleged untrue statement of a material
fact contained in this prospectus supplement, the prospectus or the related
registration statement or (2) any omission or alleged omission to state a
material fact required to be stated in this prospectus supplement, the
prospectus or the registration statement or necessary to make the statements in
this prospectus supplement, the prospectus or the related registration statement
not misleading. The seller and DFS will not, however, indemnify the underwriters
against liabilities caused by any untrue statement or omission, real or alleged,
made in reliance on and in conformity with information relating to and provided
by any underwriter for use in this prospectus supplement, the prospectus and the
registration statement.
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<PAGE> 56
The underwriters may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids for the offered
certificates in accordance with Regulation M under the Exchange Act.
- Over-allotment transactions involve syndicate sales exceeding the
offering size, which creates a syndicate short position.
- Stabilizing transactions permit bids to purchase the offered
certificates so long as the stabilizing bids do not exceed a specified
maximum.
- Syndicate covering transactions involve purchases of the offered
certificates in the open market after the distribution has been
completed in order to cover syndicate short positions.
- Penalty bids permit the underwriters to reclaim a selling concession
from a syndicate member when the offered certificates originally sold by
that syndicate member are purchased in a syndicate covering transaction.
These transactions may cause the prices of the offered certificates to be
higher than they would otherwise be in the absence of those transactions.
Neither the seller nor any of the underwriters represent that the underwriters
will engage in any of those transactions or that those transactions, once
commenced, will not be discontinued without notice at any time.
Some or all of the net proceeds of the sale of the certificates of your
series may be used to repay some or all of the outstanding amount of Series
1999-1 issued by the trust. Some of the underwriters are affiliated with banks
that are standby purchasers in Series 1999-1 and are agents for investors in
Series 1999-1. For a brief summary of Series 1999-1, see Annex I to this
prospectus supplement.
Deutsche Bank Securities Inc. 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 Deutsche Bank Securities Inc. are the sole
responsibility of Deutsche Bank Securities Inc. and do not create any obligation
on the part of any affiliate of Deutsche Bank Securities Inc.
This prospectus supplement is to be used by Deutsche Bank Securities Inc.
in connection with offers and sales from time to time related to market-making
transactions in the certificates in which Deutsche Bank Securities Inc. acts as
principal. Deutsche Bank Securities Inc. also may act as agent in market-making
transactions. Deutsche Bank Securities Inc. will make sales at negotiated prices
determined at the time of sale. Deutsche Bank Securities Inc. has no obligation
to make a market in the certificates and may discontinue its market-making
activities at any time without notice, in its sole discretion.
LEGAL MATTERS
Certain legal matters relating to the certificates will be passed on for
the seller by Naran U. Burchinow, Esq., General Counsel of DFS, and by Mayer,
Brown & Platt, Chicago, Illinois. Certain federal income tax matters will be
passed on for the seller by Mayer, Brown & Platt, Chicago, Illinois. Certain
legal matters and certain Missouri income tax matters will be passed on for the
seller by Bryan Cave LLP, St. Louis, Missouri. Certain legal matters will be
passed on for the underwriters by Brown & Wood LLP, Washington, D.C.
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<PAGE> 57
LISTING AND GENERAL INFORMATION
LISTING ON THE LUXEMBOURG STOCK EXCHANGE
Application will be made to list the Class A and Class B certificates on
the Luxembourg Stock Exchange. We cannot assure you (a) as to the timing of such
listing or (b) that such application will be successful. Prior to the listing, a
legal notice ("Notice Legale") relating to the issuance of the certificates,
together with certain documents relating to the Seller and the trust, will be
deposited with the Chief Registrar of the District of Luxembourg ("Greffier en
Chef du Tribunal d'Arrondissement de et a Luxembourg"), where copies thereof may
be obtained, free of charge, upon request.
AUTHORIZATION
The seller expects that all authorizations, consents and approvals required
to be obtained by the seller or the trustee of the trust in connection with the
issuance and sale of the Class A and Class B certificates will be obtained prior
to the closing date for your series.
LITIGATION
To the best knowledge of the seller, no legal or arbitration proceedings
are pending or threatened against the trust or the trustee, nor have the trust
or the trustee been involved with any legal or arbitration proceedings, which
may have or have had since the date of the accompanying prospectus any material
adverse effect on the financial position of the trust.
NO MATERIAL ADVERSE CHANGE
To the best knowledge of the seller, since the date of the accompanying
prospectus there has been no material adverse change, or any development
reasonably likely to involve any material adverse change, in the condition
(financial or otherwise) of the trust.
AVAILABILITY OF DOCUMENTS
For so long as the Class A or Class B certificates are listed on the
Luxembourg Stock Exchange and the rules of the Luxembourg Stock Exchange so
require:
(a) the following documents will be available for inspection during
regular business hours at the specified office of the Listing
Agent in Luxembourg:
(1) an executed copy of the amended and restated pooling and
servicing agreement;
(2) an executed copy of the series supplement for your series;
(3) an executed copy of the agreement between the trustee of the
trust and the Listing Agent; and
(4) a copy of this prospectus supplement and the accompanying
prospectus; and
(b) copies of the monthly statement described under "Description of
the Certificates--Reports" when published, will be available
without charge during regular business hours, at the specified
offices of the Listing Agent in Luxembourg.
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<PAGE> 58
CLEARING SYSTEMS
The Class A and Class B certificates have been accepted for clearing
through the facilities of Clearstream, Luxembourg and Morgan Guaranty Trust
Company of New York, Brussels office, as operator of the Euroclear system, under
the following Common Codes:
<TABLE>
<S> <C>
Class A certificates [ ]
Class B certificates [ ]
</TABLE>
The International Securities Identification Numbers for the Class A and
Class B certificates are as follows:
<TABLE>
<S> <C>
Class A certificates [ ]
Class B certificates [ ]
</TABLE>
The CUSIP Numbers for the Class A and Class B certificates are as follows:
<TABLE>
<S> <C>
Class A certificates [ ]
Class B certificates [ ]
</TABLE>
MISCELLANEOUS
The trust was formed pursuant to the pooling and servicing agreement dated
as of December 1, 1993, for the limited purposes of acquiring receivables and
other assets described in the prospectus and this prospectus supplement, issuing
certificates and engaging in ancillary activities. Certificates issued by the
trust and remaining outstanding, other than certificates of your series, are as
described in the prospectus and this prospectus supplement. On each distribution
date the trustee of the trust will make available the statement described under
"Description of the Certificates--Reports" in this prospectus supplement. No
financial statements of the trust or other statements or reports will be made
available to certificateholders.
RATINGS OF CERTIFICATES
The Class A certificates will be rated at the time of issuance in the
highest long-term rating category by at least one rating agency. The Class B
certificates will be rated at the time of issuance in one of the three highest
long-term rating categories by at least one rating agency. Limitations on
ratings of securities are discussed under "Risk Factors" in this prospectus
supplement.
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<PAGE> 59
GLOSSARY
Terms defined in the Glossary of the accompanying prospectus and used in
this prospectus supplement without definition will have the meanings assigned to
those terms in the accompanying prospectus. For the purpose of making this
prospectus supplement easier to read, in many instances we have used lower case
letters to describe terms that are defined in more detail in this Glossary or in
the Glossary of the accompanying prospectus. All references in this prospectus
supplement to any agreement will be understood to be references to that
agreement as it may be amended, amended and restated or otherwise modified from
time to time.
"Accumulation Period" is defined under "Description of the
Certificates--Accumulation Period."
"Accumulation Period Commencement Date" is defined under "Description of
the Certificates--Accumulation Period."
"Accumulation Period Length" is defined under "Description of the
Certificates--Accumulation Period."
"Additional Interest" for any distribution date will mean an amount equal
to the sum of the Class A Additional Interest, the Class B Additional Interest
and the Class C Additional Interest.
"Adjustment Date" means, for any interest period, the second London
Business Day preceding that interest period; provided that for the first
interest period, the Adjustment Date will be a date determined prior to the
closing date.
"Available Certificateholder Principal Collections" for any distribution
date means the sum of
- principal collections for the related calendar month allocated to your
series as set forth under "Description of the Certificates--Allocations
of Collections, Defaulted Amounts and Miscellaneous Payments to Your
Series";
- the amount, if any, of non-principal collections allocated with respect
to the Investor Default Amount or unreimbursed Class A Investor
Charge-Offs, Class B Investor Charge-Offs or Class C Investor
Charge-Offs;
- the product of (a) a fraction, the numerator of which is the Series
Allocation Percentage for your series and the denominator of which is
the sum of the series allocation percentages for all series not in their
revolving periods and (b) Miscellaneous Payments for that distribution
date;
- any funds remaining in the yield supplement account at the beginning of
the Accumulation Period or upon the occurrence of an Early Amortization
Event; and
- on the Termination Date, any funds remaining in the reserve fund, after
the application of funds in the reserve fund as described under
"Description of the Certificates--Distributions from the Collection
Account; Reserve Fund."
"Carry-over Amounts" means the sum of the Class A Carry-over Amount, the
Class B Carry-over Amount and the Class C Carry-over Amount.
"Certificateholders' Monthly Servicing Fee" is defined under "Description
of the Certificates--Servicing Compensation and Payment of Expenses."
"Class A Additional Interest" means, as of any distribution date, an amount
equal to the product of:
- the Class A interest rate for the interest period then ended;
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- a fraction the numerator of which is the actual number of days in that
interest period and the denominator of which is 360; and
- the Class A Interest Shortfall, if any, for the previous distribution
date.
"Class A Carry-over Amount" for a distribution date is an amount equal to
the excess, if any, of:
- Class A monthly interest for that distribution date, determined as if
the interest rate were based on LIBOR rather than the Net Receivables
Rate; over
- the actual Class A monthly interest for that distribution date.
"Class A Carry-over Amount Additional Interest" for a distribution date
means an amount equal to the product of:
- the Class A interest rate for the interest period then ended;
- a fraction, the numerator of which is the actual number of days in that
interest period and the denominator of which is 360; and
- any unpaid Class A Carry-over Amount, if any, for the previous
distribution date.
"Class A Initial Invested Amount" for any date means:
- the initial principal amount of the Class A certificates, which is set
forth on the front cover page of this prospectus supplement, plus
- the product of (a) the Class A Percentage multiplied by (b) the amount
of any withdrawals from the excess funding account in connection with an
increase in the Pool Balance since the closing date for your series,
minus
- the product of (a) the Class A Percentage multiplied by (b) the amount
of any additions to the excess funding account in connection with a
reduction in the Pool Balance since the closing date for your series.
"Class A interest rate", for an interest period, means a rate per annum
equal to the lesser of:
- LIBOR plus 0. % per annum; and
- the related Net Receivables Rate.
"Class A Interest Shortfall" is an amount, calculated by the servicer on
the determination date preceding each distribution date, equal to the excess, if
any, of:
- the Class A monthly interest for the interest period applicable to that
distribution date; over
- the amount which will be available to be paid to the Class A
certificateholders as Class A monthly interest from the interest funding
account on that distribution date.
"Class A Invested Amount" for any date means an amount equal to the result
of:
- the Class A Initial Invested Amount; minus
- the aggregate amount of principal payments made to Class A
certificateholders prior to that date; minus
- the aggregate amount of all unreimbursed Class A Investor Charge-Offs;
- however, the Class A Invested Amount will not be less than zero.
"Class A Investor Charge-Off" for a distribution date means the lesser of:
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- the amount, if any, by which the Class B Investor Charge-Off for that
distribution date would have reduced the Class B Invested Amount below
zero--that is, without giving effect to the requirement that the Class B
Invested Amount not be reduced to below zero; and
- the Class A Invested Amount on that distribution date.
"Class A monthly interest" on any distribution date will be an amount equal
to the product of:
- the Class A interest rate;
- a fraction the numerator of which is the actual number of days in the
related interest period and the denominator of which is 360; and
- the outstanding principal balance of the Class A certificates as of the
close of business on the preceding distribution date, after giving
effect to all repayments of principal made to Class A certificateholders
on that preceding distribution date, if any, or for the first
distribution date, the initial principal amount of the Class A
certificates.
"Class A Percentage" means the percentage equivalent of a fraction:
- the numerator of which is the outstanding principal balance of the Class
A certificates; and
- the denominator of which is the outstanding principal balance of all
certificates of your series.
"Class B Additional Interest" means, as of any distribution date, an amount
equal to the product of:
- the Class B interest rate for the interest period then ended;
- a fraction the numerator of which is the actual number of days in that
interest period and the denominator of which is 360; and
- the Class B Interest Shortfall, if any, for the previous distribution
date.
"Class B Carry-over Amount" for a distribution date is an amount equal to
the excess, if any, of:
- Class B monthly interest for that distribution date, determined as if
the interest rate were based on LIBOR rather than the Net Receivables
Rate; over
- the actual Class B monthly interest for that distribution date.
"Class B Carry-over Amount Additional Interest" for a distribution date
means an amount equal to the product of:
- the Class B interest rate for the interest period then ended;
- a fraction, the numerator of which is the actual number of days in that
interest period and the denominator of which is 360; and
- any unpaid Class B Carry-over Amount, if any, for the previous
distribution date.
"Class B Initial Invested Amount" for any date means:
- the initial principal amount of the Class B certificates, which is set
forth on the front cover page of this prospectus supplement, plus
- the product of (a) the Class B Percentage multiplied by (b) the amount
of any withdrawals from the excess funding account in connection with an
increase in the Pool Balance since the closing date for your series,
minus
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- the product of (a) the Class B Percentage multiplied by (b) the amount
of any additions to the excess funding account in connection with a
reduction in the Pool Balance since the closing date for your series.
"Class B interest rate", for an interest period, is a rate per annum equal
to the lesser of:
- LIBOR plus 0. % per annum; and
- the related Net Receivables Rate.
"Class B Interest Shortfall" is an amount, calculated by the servicer on
the determination date preceding each distribution date, equal to the excess, if
any, of:
- the Class B monthly interest for the interest period applicable to that
distribution date; over
- the amount which will be available to be paid to the Class B
certificateholders as Class B monthly interest from the interest funding
account on that distribution date.
"Class B Invested Amount" for any date means an amount equal to the result
of:
- the Class B Initial Invested Amount; minus
- the aggregate amount of principal payments made to Class B
certificateholders prior to that date; minus
- the aggregate amount of all unreimbursed Class B Investor Charge-Offs;
- however, the Class B Invested Amount will not be less than zero.
"Class B Investor Charge-Off" for a distribution date means the lesser of:
- the amount, if any, by which the Class C Investor Charge-Off for that
distribution date would have reduced the Class C Invested Amount below
zero--that is, without giving effect to the requirement that the Class C
Invested Amount not be reduced to below zero; and
- the Class B Invested Amount for that distribution date.
"Class B monthly interest" on any distribution date will be an amount equal
to the product of:
- the Class B interest rate;
- a fraction the numerator of which is the actual number of days in the
related interest period and the denominator of which is 360; and
- the outstanding principal balance of the Class B certificates as of the
close of business on the preceding distribution date, after giving
effect to all repayments of principal made to Class B certificateholders
on that preceding distribution date, if any, or for the first
distribution date, the initial principal amount of the Class B
certificates.
"Class B Percentage" means the percentage equivalent of a fraction:
- the numerator of which is the outstanding principal balance of the Class
B certificates; and
- the denominator of which is the outstanding principal balance of all
certificates of your series.
"Class C Additional Interest" means, as of any distribution date, an amount
equal to the product of:
- the Class C interest rate for the interest period then ended;
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- a fraction the numerator of which is the actual number of days in that
interest period and the denominator of which is 360; and
- the Class C Interest Shortfall, if any, for the previous distribution
date.
"Class C Carry-over Amount" for a distribution date is an amount equal to
the excess, if any, of:
- Class C monthly interest for that distribution date, determined as if
the interest rate were based on LIBOR rather than the Net Receivables
Rate; over
- the actual Class C monthly interest for that distribution date.
"Class C Carry-over Amount Additional Interest" for a distribution date
means an amount equal to the product of:
- the Class C interest rate for the interest period then ended;
- a fraction, the numerator of which is the actual number of days in that
interest period and the denominator of which is 360; and
- any unpaid Class C Carry-over Amount, if any, for the previous
distribution date.
"Class C Initial Invested Amount" for any date means:
- the initial principal amount of the Class C certificates, plus
- the product of (a) the Class C Percentage multiplied by (b) the amount
of any withdrawals from the excess funding account in connection with an
increase in the Pool Balance since the closing date for your series,
minus
- the product of (a) the Class C Percentage multiplied by (b) the amount
of any additions to the excess funding account in connection with a
reduction in the Pool Balance since the closing date for your series.
"Class C interest rate", for an interest period, is a rate per annum equal
to the lesser of:
- LIBOR plus the percentage specified in the supplement for your series;
and
- the related Net Receivables Rate.
"Class C Interest Shortfall" is an amount, calculated by the servicer on
the determination date preceding each distribution date, equal to the excess, if
any, of:
- the Class C monthly interest for the interest period applicable to that
distribution date; over
- the amount which will be available to be paid to the Class C
certificateholders as Class C monthly interest from the interest funding
account on that distribution date.
"Class C Invested Amount" for any date means an amount equal to the result
of:
- the Class C Initial Invested Amount; minus
- the aggregate amount of principal payments made to Class C
certificateholders prior to that date; minus
- the aggregate amount of all unreimbursed Class C Investor Charge-Offs;
- however, the Class C Invested Amount will not be less than zero.
"Class C Investor Charge-Off" for a distribution date will be calculated as
follows:
- If on that distribution date, after giving effect to the allocations,
distributions, withdrawals and deposits to be made on that distribution
date, the balance of the
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reserve fund exceeds zero, then the Class C Investor Charge-Off will be
zero for that distribution date.
- If on that distribution date, after giving effect to the allocations,
distributions, withdrawals and deposits to be made on that distribution
date, the balance of the reserve fund is zero, then the Class C Investor
Charge-Off for that distribution date will equal the lesser of the
Deficiency Amount for that distribution date and the Investor Default
Amount for that distribution date.
"Class C monthly interest" on any distribution date will be an amount equal
to the product of:
- the Class C interest rate;
- a fraction the numerator of which is the actual number of days in the
related interest period and the denominator of which is 360; and
- the outstanding principal balance of the Class C certificates as of the
close of business on the preceding distribution date, after giving
effect to all repayments of principal made to Class C certificateholders
on that preceding distribution date, if any, or for the first
distribution date, the initial principal amount of the Class C
certificates.
"Class C Percentage" means the percentage equivalent of a fraction:
- the numerator of which is the outstanding principal balance of the Class
C certificates; and
- the denominator of which is the outstanding principal balance of all
certificates of your series.
"Code" is defined under "Federal Income Tax Considerations--Overview."
"Concentration Limit Percentage" is defined under "Description of the
Certificates--Allocations of Collections, Defaulted Amounts and Miscellaneous
Payments to the Dealer Overconcentration Series."
"Controlled Accumulation Amount" will mean the quotient obtained by
dividing the Invested Amount as of the determination date on which the
Accumulation Period Length is determined (after that giving effect to any
changes therein on that date) by the number of months comprising the
Accumulation Period Length.
"Controlled Deposit Amount" will mean, for any distribution date with
respect to the Accumulation Period, the excess, if any, of (i) the product of
the Controlled Accumulation Amount and the number of distribution dates from and
including the first distribution date during the Accumulation Period through and
including that distribution date over (ii) the sum of amounts on deposit in the
excess funding account and the principal funding account, in each case before
giving effect to any withdrawals from or deposits to those accounts on the
applicable distribution date.
"Dealer" is defined under "The Accounts--General."
"Dealer Concentration Limit" is defined under "Description of the
Certificates--Allocations of Collections, Defaulted Amounts and Miscellaneous
Payments to the Dealer Overconcentration Series."
"Dealer Overconcentration" is defined under "Description of the
Certificates--Allocations of Collections, Defaulted Amounts and Miscellaneous
Payments to the Dealer Overconcentration Series."
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"Dealer Overconcentration Series" is defined under "Description of the
Certificates--Allocations of Collections, Defaulted Amounts and Miscellaneous
Payments to the Dealer Overconcentration Series."
"Defaulted Amount" on any determination date means an amount, which will
not be less than zero, equal to:
- the amount of Principal Receivables that became Defaulted Receivables
during the preceding calendar month; less
- the full amount of those Defaulted Receivables for that calendar month
which may be reassigned to the seller or purchased by the servicer
unless certain events of bankruptcy, insolvency, or receivership have
occurred regarding either of the seller or the servicer, in which event
the Defaulted Amount will not be reduced for those Defaulted
Receivables.
"Deficiency Amount" with respect to a distribution date (the "current
distribution date") is an amount, determined by the servicer on the related
determination date, as the amount, if any, by which
(1) the sum of
(a) the Monthly Interest for the current distribution date,
(b) any Monthly Interest for any prior distribution dates not
distributed to the certificateholders of your series on a prior
distribution date,
(c) Additional Interest, if any, for the current distribution date and
any Additional Interest for any prior distribution date not
distributed to the certificateholders of your series on that prior
distribution date, but only to the extent permitted by applicable
law,
(d) the Certificateholders' Monthly Servicing Fee for the current
distribution date,
(e) the Investor Default Amount for the current distribution date, and
(f) the Series Allocation Percentage (for your series) of the amount
of any Adjustment Payment for the related calendar month that has
not been deposited in the collection account as required under the
pooling and servicing agreement; exceeds
(2) the sum of non-principal collections allocated to your series for the
current distribution date, plus any Investment Proceeds for the
current distribution date.
"Deutsche North America" means Deutsche Bank Americas Holding Corp., a
Delaware corporation, and its successors in interest.
"Early Amortization Events" is defined under "Description of the
Certificates--Early Amortization Events."
"Early Amortization Period" is defined under "Description of the
Certificates--Early Amortization Period."
"ERISA" is defined under "ERISA Considerations."
"Excess Funding Account" is defined under "Description of the
Certificates--Excess Funding Account."
"Excess Principal Collections" means the amounts described as Excess
Principal Collections under "Description of the Certificates--Distributions from
the Collection Account; Reserve Fund--Principal Collections."
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"Excess Servicing" for any distribution date means the amount described in
clause (11) under "Description of the Certificates--Distributions from the
Collection Account; Reserve Fund--Non-Principal Collections."
"Expected Final Payment Date" has the meaning set forth on the front cover
page of this prospectus supplement (or, if such date is not a business day, the
next business day will be the Expected Final Payment Date).
"Floating Allocation Percentage" for any calendar month means the
percentage equivalent, which will never exceed 100%, of a fraction:
- the numerator of which is the Invested Amount as of the last day of the
immediately preceding calendar month; and
- the denominator of which is the Unconcentrated Pool Balance as of that
last day.
Notwithstanding the foregoing, for the calendar month in which the closing
date for your series occurs, the Floating Allocation Percentage will mean the
percentage equivalent of a fraction:
- the numerator of which is the sum of the initial principal balances of
the certificates of your series; and
- the denominator of which is the Unconcentrated Pool Balance on the last
day of the calendar month immediately preceding the closing date.
"Interest Period" is defined under "Summary--The Securities--Interest
Payments."
"Interest Funding Account" is defined under "Description of the
Certificates--Interest Funding Account."
"Invested Amount" means for any date the sum of:
- the Class A Invested Amount;
- the Class B Invested Amount; and
- the Class C Invested Amount.
"Investment Proceeds" for any distribution date means an amount equal to
the sum of:
- the investment earnings, net of losses and investment expenses, on the
related determination date on funds on deposit in the interest funding
account, the principal funding account, the excess funding account, the
reserve fund and the yield supplement account; and
- the Series Allocation Percentage for your series of investment earnings,
net of losses and investment expenses, credited to the collection
account on the related determination date relating to funds held in the
collection account.
"Investor Default Amount" means, for any distribution date, an amount equal
to the product of:
- the Defaulted Amount for the preceding calendar month, after giving
effect to any allocation of any portion of that Defaulted Amount to the
Dealer Overconcentration Series, and
- the Floating Allocation Percentage for the preceding calendar month.
"IRS" is defined under "Federal Income Tax Considerations--Overview."
"June 2000 Addition of Accounts" is defined under "The Accounts--General."
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"LIBOR" means, for any interest period, the offered rates for deposits in
United States dollars having a maturity of one month (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 the date of calculation as
determined by the trustee of the trust. If at least two offered rates appear on
Telerate Page 3750, LIBOR will be the arithmetic mean--rounded upwards, if
necessary, to the nearest one-sixteenth of a percent--of those offered rates.
If fewer than two offered rates appear, LIBOR for the interest period will
be determined at approximately 11:00 A.M., London time, on the Adjustment Date
on the basis of the rate at which deposits in United States dollars having the
Index Maturity are offered to prime banks in the London interbank market by four
major banks in the London interbank market selected by the trustee of the trust
and in a principal amount equal to an amount of not less than US $1,000,000 and
that is representative for a single transaction in that market at that time.
- The trustee of the trust will request the principal London office of
each of those banks to provide a quotation of its rate.
- If at least two of the banks quote rates to the trustee, LIBOR will be
the arithmetic mean--rounded upwards, if necessary, to the nearest
one-sixteenth of one percent--of those quotations.
- If fewer than two of the banks quote rates to the trustee, LIBOR for
that interest period will be the arithmetic mean--rounded upwards, if
necessary, to the nearest one-sixteenth of one percent--of the rates
quoted at approximately 11:00 A.M., New York City time, on the
Adjustment Date by three major banks in New York, New York selected by
the trustee of the trust for loans in United States dollars to leading
European banks having the Index Maturity and in a principal amount equal
to an amount of not less than US $1,000,000 and that is representative
for a single transaction in that market at that time.
- However, if the banks selected are not providing quotations as mentioned
in the previous sentence, LIBOR in effect for the applicable period will
be LIBOR in effect for the previous period.
"Listing Agent" means, if the Class A and Class B certificates are listed
on the Luxembourg Stock Exchange, the listing agent appointed by the trustee of
the trust, which is expected to be Kredietbank S.A. Luxembourgeoise, as
additional paying agent and transfer agent in Luxembourg for the Class A and
Class B certificates, or any successor thereto.
"London Business Day" means any business day on which dealings in deposits
in United States dollars are transacted in the London interbank market.
"Monthly Interest" for any distribution date will mean an amount equal to
the sum of the Class A monthly interest, the Class B monthly interest and the
Class C monthly interest.
"Monthly Payment Rate" for a calendar month is the percentage equivalent of
a fraction:
- the numerator of which is the Principal Collections, without excluding
the Discount Portions, collected during that calendar month; and
- the denominator of which is the aggregate balance of the Principal
Receivables--without deducting the Discount Portions--as of the
beginning of that calendar month.
"Monthly Principal" for any distribution date relating to the Accumulation
Period or any Early Amortization Period for your series will equal the Available
Certificateholder Principal Collections for that distribution date. However,
- for each distribution date with respect to the Accumulation Period,
Monthly Principal, at the option of the seller, may be increased to
include amounts otherwise payable or
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distributable to the seller or may be limited to the Controlled Deposit
Amount for that distribution date; and
- Monthly Principal will not exceed the aggregate outstanding principal
balances of the certificates of your series.
"Monthly Servicing Fee" for your series has the meaning set forth in
"Description of the Certificates--Servicing Compensation and Payment of
Expenses."
"Net Receivables Rate" for each distribution date is:
- the weighted average of the interest rates borne by the receivables
during the second calendar month preceding that distribution
date--interest payments on the receivables at those rates being due and
payable in the calendar month preceding that distribution date; plus
- the product of (a) the Monthly Payment Rate for the calendar month
preceding that distribution date, (b) the Discount Factor for that
distribution date and (c) twelve; less
- 2% per annum, unless the Monthly Servicing Fee has been waived, as
described under "Description of the Certificates--Servicing Compensation
and Payment of Expenses" in whole or in part for your series for that
distribution date, in which case, solely for that distribution date, "2%
per annum" will be deemed to be replaced by "0% per annum."
"Overconcentrated Dealer" is defined under "Description of the
Certificates--Allocations of Collections, Defaulted Amounts and Miscellaneous
Payments to the Dealer Overconcentration Series."
"Overconcentration Percentage" is defined under "Description of the
Certificates--Allocations of Collections, Defaulted Amounts and Miscellaneous
Payments to the Dealer Overconcentration Series."
"Principal Allocation Percentage" for any calendar month means the
percentage equivalent, which will never exceed 100%, of a fraction:
- the numerator of which is the Invested Amount as of the last day of the
Revolving Period; and
- the denominator of which is the Unconcentrated Pool Balance as of the
last day of the immediately preceding calendar month.
"Principal Funding Account" is defined under "Description of the
Certificates--Principal Funding Account."
"Receivables Balances" has the meaning set forth under "The
Accounts--General."
"Record Date", with respect to any distribution date, means either (i) for
so long as the Class A and Class B certificates are maintained in book-entry
form, the close of business on the day preceding such distribution date, or (ii)
if definitive certificates have been issued pursuant to the pooling and
servicing agreement, the last day of the month preceding the month in which such
distribution date occurs.
"Required Participation Percentage" means for your series, 105%; provided,
however, that the seller may, upon 10 days' prior notice to the trustee of the
trust, each Rating Agency and any Enhancement Provider, reduce the Required
Participation Percentage to a percentage which will not be less than 100%;
provided, however, that the Rating Agency Condition is satisfied.
"Reserve Fund" is defined under "Description of the
Certificates--Distributions from the Collection Account; Reserve Fund."
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"Reserve Fund Deposit Amount" means, with respect to any distribution date,
the amount, if any, by which the Reserve Fund Required Amount for that
distribution date exceeds the amount on deposit in the reserve fund after giving
effect to any withdrawals from the reserve fund on that distribution date.
"Reserve Fund Required Amount" means, for any distribution date, an amount
equal to the product of:
- 3.5%; and
- the aggregate outstanding balance of the certificates of your series as
of that distribution date--after giving effect to any change in that
aggregate outstanding balance on that distribution date.
"Revolving Period" is defined under "Description of the
Certificates--Revolving Period."
"Seller's Participation Amount" means, at any time of determination, an
amount equal to (a) the Pool Balance at the time minus (b) the sum of the
Invested Amount for your series plus the invested amounts of all other
outstanding series (other than the Dealer Overconcentration Series, which will
not be considered to have an invested amount) at the time.
"Series Allocation Percentage" for your series means, for any calendar
month, the percentage equivalent of a fraction:
- the numerator of which is the Invested Amount as of the last business
day of the calendar month immediately preceding that calendar month; and
- the denominator of which is the Trust Invested Amount on that last
business day.
"Servicer Advance" is defined under "Description of the
Certificates--Servicer Advances."
"Servicing Fee" means the sum of the Monthly Servicing Fees for all series.
"Specified Party" means any of the seller, the servicer, DFS, if it is not
the servicer, Deutsche North America, so long as DFS is an Affiliate of Deutsche
North America, or, if Deutsche North America has merged or consolidated with
another person, the surviving person (but only so long as DFS is an Affiliate of
the surviving person), or any other person which is the direct, controlling
shareholder of DFS.
"Termination Date" for your series is defined under "Summary--The
Securities--Termination Date."
"Three Month Net Loss Ratio" means the ratio, expressed as a percentage,
of:
- the average for each month of the net losses on the receivables,
exclusive of the Ineligible Receivables, owned by the trust--that is,
gross losses less recoveries on the receivables, including, without
limitation, recoveries from collateral security in addition to
recoveries from the products, recoveries from Manufacturers and
insurance proceeds--during any three consecutive calendar months, to
- the average of the month-end aggregate balances of those
receivables--without deducting the Discount Portion--for that
three-month period.
"Treasury" means the United States Department of the Treasury.
"Trust Portfolio" is defined under "The Accounts--General."
"Unconcentrated Percentage" is defined under "Description of the
Certificates--Allocations of Collections, Defaulted Amounts and Miscellaneous
Payments to the Dealer Overconcentration Series."
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<PAGE> 70
"Unconcentrated Pool Balance" is defined under "Description of the
Certificates--Allocations of Collections, Defaulted Amounts and Miscellaneous
Payments to the Dealer Overconcentration Series."
"Yield Supplement Account" is defined under "Description of the
Certificates--Distributions from the Collection Account; Reserve Fund."
"Yield Supplement Account Deposit Amount" means, with respect to any
distribution date, the amount, if any, by which the Yield Supplement Account
Required Amount exceeds the amount on deposit in the yield supplement account
after giving effect to any withdrawals from the yield supplement account on that
distribution date.
"Yield Supplement Account Required Amount" means an amount equal to 0.5% of
the aggregate initial principal balance of the certificates of your series.
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<PAGE> 71
ANNEX I
OTHER SERIES
This Annex I sets forth certain information regarding other series
(excluding the Dealer Overconcentration Series) that are outstanding or are
expected to be outstanding at the date of the issuance of your series.
SERIES 1999-1 CERTIFICATES
Initial principal balance..... $1,500,000,000
Outstanding principal balance
as of June 30, 2000........... $2,000,000,000
Some or all of the net proceeds of the sale of
your series may be used to repay some or all of
the outstanding amount of Series 1999-1.
Principal payment dates....... Weekly
Series termination date....... April 2002 distribution date
SERIES 2000-1 CERTIFICATES
Initial principal balance..... $1,250,000,000
Distribution dates............ The fifteenth day of each month (or, if that
day is not a business day, the next succeeding
business day)
Expected final payment date... April 2003 distribution date
Series termination date....... April 2005 distribution date
SERIES 2000-2 CERTIFICATES
Initial principal balance..... $500,000,000
Distribution dates............ The fifteenth day of each month (or, if that
day is not a business day, the next succeeding
business day)
Expected final payment date... April 2005 distribution date
Series termination date....... April 2007 distribution date
I-1
<PAGE> 72
PROSPECTUS
DISTRIBUTION FINANCIAL SERVICES
FLOORPLAN MASTER TRUST
ISSUER
DEUTSCHE FLOORPLAN RECEIVABLES, L.P.
SELLER
DEUTSCHE FINANCIAL SERVICES CORPORATION
SERVICER
ASSET BACKED CERTIFICATES
--------------------------------------------------------------------------------
CONSIDER CAREFULLY THE DISCUSSION UNDER "RISK FACTORS" BEGINNING ON PAGE 3
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. This prospectus and the accompanying prospectus
supplement together constitute the full prospectus for the certificates of your
series.
This prospectus may be used to offer and sell any series of certificates
only if accompanied by the prospectus supplement for that series.
--------------------------------------------------------------------------------
THE TRUST--
- may periodically issue asset backed certificates in one or more series with
one or more classes; and
- will own--
- receivables generated from time to time in a portfolio of revolving credit
arrangements with dealers, manufacturers or distributors to finance
inventory or other assets;
- payments due on those receivables; and
- other property described in this prospectus and in the accompanying
prospectus supplement.
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.
APRIL 20, 2000
<PAGE> 73
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We provide information to you about the certificates in two separate
documents that progressively provide more detail: (a) this prospectus, which
provides general information, some of which may not apply to a particular series
of certificates, including your series, and (b) the accompanying prospectus
supplement, which describes specific terms of your series of certificates.
IF THE TERMS OF YOUR SERIES OF CERTIFICATES VARY BETWEEN THIS PROSPECTUS
AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT, YOU SHOULD RELY ON THE INFORMATION
IN THE PROSPECTUS SUPPLEMENT.
You should rely only on the information provided in this prospectus and the
accompanying prospectus supplement including the information incorporated by
reference. We have not authorized anyone to provide you with other or different
information. We are not offering the certificates in any jurisdiction where the
offer is not permitted. We do not assert the accuracy of the information in this
prospectus or the accompanying prospectus supplement as of any date other than
the dates stated on their respective covers.
We include cross-references in this prospectus and in the accompanying
prospectus supplement to captions in these materials where you can find further
related discussions. The following Table of Contents and the Table of Contents
included in the accompanying prospectus supplement provide the pages on which
these captions are located.
Some terms used in this prospectus are defined under the caption "Glossary"
beginning on page 50 in this prospectus.
<PAGE> 74
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
SUMMARY..................................................... 1
Seller................................................. 1
Originator of the Receivables.......................... 1
Servicer............................................... 1
Trustee................................................ 1
The Trust.............................................. 1
The Certificates....................................... 1
The Trust Assets....................................... 2
Tax Status............................................. 2
ERISA Considerations................................... 2
Risk Factors........................................... 2
RISK FACTORS................................................ 3
Bankruptcy of DFS or the Seller Could Result in Delays
and Reductions in Payments on the Certificates........ 3
Prior Interests in Receivables Could Result in Delays
and Reductions in Payments on the Certificates........ 5
Commingling by the Servicer May Result in Delays and
Reductions in Payments on the Certificates............ 6
Insolvency Laws May Adversely Affect the Collection of
Receivables........................................... 6
Lack of Security Interest Could Result in Delays and
Reductions in Payments on the Certificates............ 6
Reduced Collections or Originations of Receivables
Could Result in Early Repayment, Delayed Payment or
Reduced Payment of the Certificates................... 7
Potential Delays and Reductions in Payments on
Certificates Due to Addition of Accounts.............. 8
Potential Delays and Reductions in Payments on
Certificates Due to Removal of Accounts............... 9
Potential Delays and Reductions in Payments on
Certificates Due to Dependence of the Trust on DFS.... 9
Potential Delays and Reductions in Payments on
Certificates Due to Decrease in Sales of Products..... 10
Potential Delays and Reductions in Payments on the
Certificates Due to Dealer Default, Dealer Fraud or
Manufacturer Default.................................. 10
You May Not Be Able to Influence Actions of the
Trust................................................. 11
The Existence or Issuance of Additional Series May
Result in Delays and Reductions in Payments on
Certificates.......................................... 11
Possible Delays and Reductions in Payments on
Certificates Due to Priority Differences Among the
Classes............................................... 12
Potential Delays and Reductions in Payments on
Certificates Due to the Ability of the Servicer to
Change Payment Terms.................................. 12
Possible Delays and Reductions in Payments on
Certificates Due to Adjustments in the Amounts of the
Receivables........................................... 12
You Will Not Receive Physical Certificates Representing
the Certificates of Your Series....................... 12
DEUTSCHE FLOORPLAN RECEIVABLES, L.P. AND DEUTSCHE FLOORPLAN
RECEIVABLES, INC.......................................... 14
Deutsche Floorplan Receivables, L.P.................... 14
Deutsche Floorplan Receivables, Inc.................... 14
</TABLE>
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<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE TRUST................................................... 14
USE OF PROCEEDS............................................. 15
THE DEALER FINANCING BUSINESS OF DFS........................ 15
General................................................ 15
Credit Underwriting Process............................ 16
Creation of Floorplan Receivables...................... 17
Payment Terms.......................................... 18
Floorplan Agreements with Manufacturers................ 18
Billing Procedures..................................... 19
Dealer Monitoring...................................... 19
Realization on Receivables............................. 20
Charge-Off Policy...................................... 20
Asset Based Receivables................................ 21
Private Label Programs................................. 21
Participation Arrangements............................. 21
DESCRIPTION OF THE CERTIFICATES............................. 22
General................................................ 22
Principal and Interest on the Certificates............. 23
Book-Entry Registration................................ 23
Definitive Certificates................................ 27
Supplemental Certificates.............................. 29
New Issuances.......................................... 29
Uncertificated Series.................................. 30
Representations and Warranties......................... 30
The Overconcentration Amount........................... 34
Addition of Accounts................................... 34
Removal of Accounts; Transfers of Participations....... 35
Collection Account..................................... 36
Allocations Among Series............................... 36
Discount Factor........................................ 37
Allocation of Collections; Deposits in Collection
Account............................................... 37
Termination............................................ 38
Indemnification........................................ 38
Collection and Other Servicing Procedures.............. 39
Servicer Covenants..................................... 39
Servicing Compensation................................. 40
Certain Matters Regarding the Servicer................. 40
Servicer Default....................................... 40
Evidence as to Compliance.............................. 41
Amendments............................................. 41
Limitation on Suits and Bankruptcy Filing.............. 42
The Trustee............................................ 43
DESCRIPTION OF THE RECEIVABLES CONTRIBUTION AND SALE
AGREEMENT................................................. 44
Sale or Transfer of Receivables........................ 44
Representations and Warranties......................... 44
Cessation of Sales of Receivables; Termination......... 47
</TABLE>
ii
<PAGE> 76
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES.................... 47
Transfer of Receivables................................ 47
Certain Matters Relating to Bankruptcy................. 48
LEGAL MATTERS............................................... 48
REPORTS TO CERTIFICATEHOLDERS............................... 48
WHERE YOU CAN FIND MORE INFORMATION......................... 48
GLOSSARY.................................................... 50
EXHIBIT A Global Clearance, Settlement and Tax Documentation
Procedures................................................ A-1
</TABLE>
iii
<PAGE> 77
SUMMARY
This summary highlights selected information from this document. This
summary does not contain all of the information that you need to consider in
making your investment decision and is qualified by the more complete
descriptions contained in this prospectus and the accompanying prospectus
supplement. To understand all of the terms of an offering of the certificates,
you should read carefully this entire prospectus and the accompanying prospectus
supplement, including the information under "Risk Factors" in this prospectus
and the accompanying prospectus supplement.
SELLER........................ Deutsche Floorplan Receivables, L.P., a
Delaware limited partnership.
- The general partner of the seller is Deutsche
Floorplan Receivables, Inc., a wholly-owned
subsidiary of DFS.
- The limited partner of the seller is Deutsche
Financial Services Corporation.
ORIGINATOR OF THE
RECEIVABLES................... Deutsche Financial Services Corporation
("DFS"), which
- is a party to revolving credit arrangements
that give rise to receivables; and
- transfers receivables to the seller pursuant
to a receivables contribution and sale
agreement.
Affiliates of DFS may originate receivables
that are transferred to the seller and by the
seller to the trust. All references in this
prospectus or the prospectus supplement to DFS
in its capacity as the originator of
receivables should be understood to include any
affiliate of DFS that originates receivables
that are transferred to the seller.
SERVICER...................... DFS.
TRUSTEE....................... The Chase Manhattan Bank.
THE TRUST..................... Distribution Financial Services Floorplan
Master Trust. The trust was formed pursuant to
a pooling and servicing agreement among the
seller, the servicer and the trustee of the
trust. The trust is a master trust and will
engage in the following activities:
- acquiring and holding receivables;
- issuing the certificates; and
- activities which are incidental to or
relating to the foregoing.
THE CERTIFICATES.............. Each prospectus supplement will describe the
certificates that are being offered to
investors pursuant to that prospectus
supplement. The offered certificates will
include one or more classes of certificates
issued pursuant to a supplement to the pooling
and servicing agreement. This prospectus and
the accompanying prospectus supplement
sometimes refer to the certificates issued
pursuant to a supplement as a series. This
prospectus and the
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<PAGE> 78
accompanying prospectus supplement may offer
fewer than all classes of a series. The seller
may retain one or more classes of a series and
may sell one or more classes of a series in
private placements.
THE TRUST ASSETS.............. The assets of the trust include receivables
generated from time to time under revolving
credit arrangements that we call accounts. The
accounts are not transferred by DFS to the
seller or by the seller to the trust. The
accounts are identified in a computer file or
microfiche or written list delivered from time
to time to the trustee of the trust in
accordance with the pooling and servicing
agreement.
The assets of the trust also include all of the
seller's right, title and interest in:
- security interests purporting to secure
payment of the receivables, and all
agreements or arrangements supporting or
securing payment of the receivables;
- documents, books and records relating to the
receivables; and
- monies due or to become due on the
foregoing.
The seller may add or remove accounts from time
to time.
TAX STATUS.................... The related prospectus supplement contains
information concerning the application of the
federal income tax laws, including whether the
certificates offered by that prospectus
supplement will be characterized as
indebtedness for federal income tax purposes.
ERISA CONSIDERATIONS.......... The related prospectus supplement contains
information concerning whether the certificates
offered by that prospectus supplement are
eligible for purchase by employee benefit
plans.
RISK FACTORS.................. You should consider the matters set forth under
"Risk Factors" beginning on page 3 of this
prospectus.
2
<PAGE> 79
RISK FACTORS
In addition to the other information contained in this prospectus and the
prospectus supplement, you should consider the following risk factors, and the
"Risk Factors" set forth in the prospectus supplement, in deciding whether to
purchase certificates. The disclosure below and in the "Risk Factors" set forth
in the prospectus supplement summarize material risks of investing in the
certificates. The summary does not purport to be complete; to fully understand
and evaluate it, you should also read the rest of this prospectus and the
related prospectus supplement.
Bankruptcy of DFS or the
Seller
Could Result in Delays and
Reductions in Payments on the
Certificates DFS has warranted to the seller in the
receivables contribution and sale agreement
that the receivables contribution and sale
agreement or the related assignment constitutes
a valid sale, transfer and assignment to the
seller of all right, title and interest of DFS
in the receivables. However, if DFS were to
become a debtor in a bankruptcy case, a
bankruptcy trustee or creditor of DFS, or DFS
as debtor in possession, may take the position
that the transfer of the receivables to the
seller should be characterized as a pledge of
the receivables. If so, the trustee for the
trust would be required to go through
bankruptcy court proceedings to establish its
rights to collections on the receivables in the
trust, and, if the transfer were held to be a
pledge, to establish the amount of claims
secured by the pledge. These proceedings could
result in delays and reductions in payments on
your certificates.
Likewise, if the seller were to become a debtor
in a bankruptcy case and a bankruptcy trustee
or creditor of the seller, or the seller as
debtor in possession, were to take the position
that the transfer of the receivables from the
seller to the trust should be characterized as
a pledge of those receivables, then delays and
reductions in payments on your certificates
could result.
Payments made by DFS pursuant to the
receivables contribution and sale agreement,
the pooling and servicing agreement or the
supplement for your series, or by the seller
pursuant to the pooling and servicing agreement
or the supplement for your series, may be
recoverable by DFS or the seller, as
applicable, as debtor in possession, or by a
creditor or a bankruptcy trustee of DFS or the
seller, as a preferential transfer from DFS or
the seller, as applicable, if those payments
are made within one year prior to the filing of
a bankruptcy case relating to DFS or the
seller.
If the seller, the servicer or DFS were to
become the subject of bankruptcy proceedings,
an early amortization event would occur for all
outstanding series.
- The bankruptcy of the seller will result in
the trustee of the trust selling the
receivables unless holders of more than 50%
of the aggregate unpaid principal amount of
each class of outstanding certificates, and
each holder
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<PAGE> 80
of a certificate issued in exchange for part
of the seller's interest in the trust,
instruct the trustee of the trust not to sell
the receivables.
- You will suffer a loss if the sale of the
receivables produced insufficient net
proceeds to pay you in full.
A bankruptcy court may have the power
regardless of the terms of the relevant
agreements or the instructions of
certificateholders, (a) to prevent the
beginning of an early amortization period, (b)
to prevent the early sale of the receivables
and termination of the trust, (c) to require
new receivables to continue being transferred
to the trust, (d) to prevent the transfer of
receivables to the trust, (e) to prevent the
addition or removal of accounts, or (f) to
prevent the seller, DFS or the servicer from
making any payments contemplated by this
prospectus or the accompanying prospectus
supplement.
There is a time delay between the servicer's
receipt of collections and its deposit of those
collections in a deposit account of the trust.
If the servicer becomes a debtor in a
bankruptcy case, the trustee's claim to
collections in the servicer's possession at the
time of the bankruptcy filing would not be
perfected. In this event, delays and reductions
on your certificates may occur.
If the servicer becomes a debtor in a
bankruptcy case, the bankruptcy court would
have the power to prevent the appointment of a
new servicer. If the servicer becomes a debtor
in a bankruptcy case, the ability of the
servicer to service the receivables could be
impaired by its bankruptcy and its actions
would be supervised by a court, which could
cause delays and reductions in payments on your
certificates.
In addition, in a case decided by the United
States Court of Appeals for the Tenth Circuit
in 1993, the court said, in effect, that
receivables transferred by a seller to a buyer
would remain property of the debtor's
bankruptcy estate. If, following a bankruptcy
of DFS or the seller, a court were to follow
the reasoning of the court in that case, delays
and reductions in payments on your certificates
could result.
The seller has agreed to take steps in order to
reduce the likelihood that the assets and
liabilities of the seller would be consolidated
in a bankruptcy proceeding with those of DFS.
For example, the seller will agree in the
pooling and servicing agreement to take
reasonable steps to make it apparent to third
parties that the seller is an entity with
assets and liabilities distinct from those of
DFS. However, we cannot assure you that a court
would refrain from consolidating the assets and
liabilities of the seller with those of DFS or
another person in a bankruptcy or similar
proceeding. If the assets and liabilities
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<PAGE> 81
of the seller were consolidated into the
bankruptcy or insolvency estate of DFS or any
other person, delays and reductions in payments
on your certificates could result.
The receivables contribution and sale agreement
provides that upon the occurrence of one or
more specified early amortization events, DFS
will stop selling receivables to the seller,
except as otherwise provided in the receivables
contribution and sale agreement. The pooling
and servicing agreement provides that upon the
occurrence of one or more specified early
amortization events, the seller will stop
transferring receivables to the trust. If DFS
stops selling receivables to the seller, or the
seller stops transferring receivables to the
trust, and the servicer allocates collections
to receivables that are not part of the trust,
delays and reductions in payments on your
certificates would occur.
In addition, if an insolvency event were to
occur involving DFS, any delayed funding
receivables that had not yet been funded may
not become funded and may be executory
contracts that can be disaffirmed by the
trustee-in-bankruptcy of DFS, in which case the
related dealers would no longer be obligated to
pay those delayed funding receivables, which
the trust has already treated as part of the
trust assets and in respect of which funds have
been paid to the seller, and the trust would
suffer a loss on those receivables. A delayed
funding receivable is a receivable for which
the related floorplan agreement permits DFS to
delay payment of the purchase price of the
related product to the manufacturer for a
specified period after the invoice date for the
product.
In addition, under federal or state fraudulent
transfer laws, a court could, among other
things, subordinate the rights of the seller
and the trustee in the receivables to the
rights of creditors of DFS if a court were to
find, among other things, that DFS received
less than reasonably equivalent value or fair
consideration for those receivables.
Prior Interests in Receivables
Could Result in Delays and
Reductions in Payments on the
Certificates The receivables contribution and sale agreement
provides for the transfer of receivables by DFS
to the seller. The pooling and servicing
agreement provides for the transfer of
receivables by the seller to the trust.
However, a court could conclude that the
government or other persons or entities have a
lien or other interest in the receivables with
priority over the interest of the seller and
the trust in the receivables. Claims of the
government or other persons or entities in the
receivables could result in delays and
reductions in payments on your certificates.
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For example, if a court concludes that the
transfer by DFS to the seller, or the transfer
by the seller to the trust, is only a grant of
a security interest in the receivables, some
liens on the property of DFS or the seller
arising before new receivables come into
existence may take priority over, and may be
entitled to be paid before, the interest of the
seller or the trust in those receivables. Those
liens include a tax or government lien or other
liens permitted under the law without the
consent of DFS or the seller.
Various circumstances could result in the
seller or the trust failing to have a perfected
interest in the receivables. See "Certain Legal
Aspects of the Receivables--Transfer of
Receivables."
Commingling by the Servicer
May
Result in Delays and
Reductions in
Payments on the Certificates The pooling and servicing agreement allows the
servicer to retain collections on the
receivables. So long as rating agencies that
have rated outstanding series have approved of
the retention of collections by the servicer,
the servicer does not have to deposit
collections into the collection account until
the related distribution date. The servicer is
currently retaining collections on the
receivables and will not deposit collections
into the collection account for any calendar
month until the related distribution date.
Until the servicer deposits payments on the
receivables into the collection account, the
servicer may use those funds for its own
benefit and will not segregate those funds from
its own assets, and the proceeds of any
investment of those funds will accrue to the
servicer. The servicer will pay no fee to the
trust or any certificateholder for any use by
the servicer of collections on the receivables.
If the servicer became insolvent, the
servicer's failure to deposit collections in
the collection account may result in delays and
reductions in payments on your certificates.
Insolvency Laws May Adversely
Affect the Collection of
Receivables If a dealer becomes bankrupt or insolvent,
federal and state bankruptcy and debtor relief
laws may result in delays and reductions in
payments due on those receivables and, in turn,
could result in delays and reductions in
payments on your certificates.
Lack of Security Interest
Could
Result in Delays and
Reductions in
Payments on the Certificates The seller has represented and warranted in the
pooling and servicing agreement that each
receivable is at the time of creation generally
secured by a first priority perfected security
interest in the related product or account
receivable securing that receivable.
- However, receivables arising in an account
for which the payment terms are on a
scheduled payment plan basis and whose
maximum credit limit is at or below $250,000
need not be secured by a first priority
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security interest if the account was in the
trust at or before March 1994.
- Notwithstanding the foregoing, a receivable
need not be secured by a first priority
security interest if the rating agencies
rating the outstanding series have confirmed
that the absence of a first priority security
interest will not result in a reduction or
withdrawal of the ratings of the outstanding
series or classes of series rated by those
rating agencies. The failure of receivables
to be secured by a first priority security
interest as described above will not
constitute a breach of the seller's
representation and warranty as to perfection
matters.
- Even if a receivable is secured by a product
held by a dealer, DFS's security interest in
the product will terminate at the time that
the product is sold. If the dealer is not
required to remit, or fails to remit, to DFS
amounts owed on products that have been sold,
the related receivables will no longer be
secured by the products. As a result, delays
or reductions in the amounts of collections
on the related receivables could occur and,
in turn, delays and reductions in payments on
your certificates could occur.
Reduced Collections or
Originations of Receivables
Could
Result in Early Repayment,
Delayed Payment or Reduced
Payment of the Certificates You may suffer delays and reductions in
payments on your certificates because of the
performance of the dealers or the receivables.
- The receivables arising from the purchase of
inventory are generally payable by dealers
either after retail sale of the related
product or, in some cases, in accordance with
a predetermined schedule whether or not the
product has been sold. The timing of sales of
products is uncertain and varies depending on
the product type.
- We refer to receivables payable in accordance
with a predetermined schedule, regardless of
whether the product has been sold, as
scheduled payment plan receivables. If
products securing scheduled payment plan
receivables sell more quickly than
anticipated, then the receivables may, from
time to time, not be secured by products.
Conversely, when products sell more slowly
than anticipated, scheduled payment plan
receivables may have the benefit of excess
inventory collateral. We cannot assure you
that the collateral for any receivable would
be of sufficient value, if repossessed or
sold, to repay that receivable.
- The relative portions of the trust's pool of
receivables made up of receivables secured by
products and receivables secured by other
assets may vary over time and cannot be
predicted. The mix of products securing
receivables may also be expected to vary over
time and cannot be predicted. As a result, it
is possible
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<PAGE> 84
that the credit quality of the receivables in
the trust, as a whole, may decline as a
result of the addition of additional
receivables.
- We cannot assure you that there will be
additional receivables created under the
accounts or that any particular pattern or
amount of dealer repayments will occur.
Payments of principal on the certificates
depends on dealer repayments. By way of
example, collections during the accumulation
period described in the related prospectus
supplement may not be sufficient to fully
amortize your certificates on the date
referred to in the prospectus supplement.
- Reductions in the amount or frequency of
payments by dealers could result in delays
and reductions in payments to you.
In addition, a significant decline in the
amount of receivables generated could cause an
early amortization event and could result in
payment of your certificates sooner than
expected.
A discount factor will be applied to the
receivables in order to increase the amount of
what we call non-principal collections.
Reductions in the payment rate by dealers will
result in a reduction in the amount of
non-principal collections, which in turn will
reduce the amounts available to pay interest on
the certificates, to pay the servicing fee and
to cover defaults and delinquencies on the
receivables.
Potential Delays and
Reductions in
Payments on Certificates Due
to
Addition of Accounts You may suffer delays and reductions in
payments on your certificates because of the
addition of accounts from the trust.
- The seller may, and in some cases will be
obligated by the terms of the pooling and
servicing agreement to, designate additional
accounts, the receivables in which will be
conveyed to the trust.
- Additional accounts may include accounts
originated under criteria different from
those which were applied to previously
designated accounts. Additional accounts may
also provide financing for products of types
different from those included in the trust at
or prior to the time that your series is
issued.
- Additional accounts designated in the future
may not be of the same credit quality, and
may not relate to the same types of products,
as previously designated accounts. If
additional accounts are not of the same
credit quality as previously designated
accounts or if new product types that secure
the receivables in new accounts do not
provide security that is as favorable as that
provided by existing product types, then
delays
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<PAGE> 85
and reductions in payments on your
certificates could result.
Potential Delays and
Reductions in
Payments on Certificates Due
to
Removal of Accounts You may suffer delays and reductions in
payments on your certificates because of the
removal of accounts from the trust.
- The seller may, and in some cases will be
obligated by the terms of the pooling and
servicing agreement to, remove accounts from
the trust. The pooling and servicing
agreement contemplates that receivables in
those accounts will remain in the trust
unless the applicable account was an
ineligible account at the time it was
originally designated as an account.
- Following the removal of an account, some
receivables relating to the account will be
outside of the trust and other receivables
relating to the account may remain in the
trust.
- If the servicer applies collections relating
to an account to receivables that are outside
of the trust rather than to receivables that
remain in the trust, then delays and
reductions in payments on your certificates
could occur.
- The pooling and servicing agreement provides
for some conditions precedent to be satisfied
prior to the seller's removal of eligible
accounts from the trust. However, the removal
of eligible accounts may result in delays and
reductions in payments on your certificates.
Potential Delays and
Reductions in
Payments on Certificates Due
to
Dependence of the Trust on DFS You may suffer delays and reductions in
payments on your certificates if DFS does not
generate a sufficient level of receivables or
if DFS does not perform its obligations as
servicer or otherwise under the pooling and
servicing agreement, the supplements or the
receivables contribution and sale agreement.
- The trust depends entirely on DFS to generate
new receivables. DFS competes with various
other financing sources, including
independent finance companies,
manufacturer-affiliated finance companies and
banks, which are in the business of providing
financing arrangements to dealers.
Competition from other financing sources may
result in a reduction in the amount of
receivables generated by DFS. We cannot
assure you that DFS will continue to generate
receivables at the same rate as in prior
years. A reduction in the amount of
receivables generated by DFS may result in
delays and reductions in payments on your
certificates.
- In addition, if DFS were to cease acting as
servicer or to fail to perform its
obligations as servicer, delays in processing
payments on the receivables and in
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<PAGE> 86
processing information relating to the trust
and its assets could occur and could result
in delays and reductions in payments to you.
- Pursuant to the pooling and servicing
agreement, the seller agrees to repurchase
receivables or the certificateholders'
interest in the trust upon certain breaches
of specified representations and warranties.
However, the seller may be unable to fulfill
those obligations unless it receives a
corresponding payment from DFS pursuant to
the receivables contribution and sale
agreement.
Potential Delays and
Reductions in
Payments on Certificates Due
to
Decrease in Sales of Products You may suffer delays or reductions in payments
on your certificates due to decreased sales of
the products relating to the receivables.
- DFS's ability to generate new receivables,
and a dealer's ability to make payments on
the receivables, will depend on the sales of
the products relating to those receivables. A
variety of social and economic factors will
affect the level of sales of products
relating to the receivables, including
national and regional unemployment levels and
levels of economic activity in general,
interest rates and consumer perceptions of
economic conditions.
- A reduction in sales of products of the type
that secure receivables would reduce payments
to the trust, which, in turn, could result in
delays and reductions in payments to you.
Potential Delays and
Reductions in
Payments on the Certificates
Due
to Dealer Default, Dealer
Fraud or
Manufacturer Default If a dealer fails to perform its obligations
relating to the receivables, or if a dealer
commits fraud, delays and reductions in
payments on your certificates could occur. A
dealer may misrepresent various matters to DFS,
including, without limitation, the dealer's
financial condition or the existence or value
of accounts receivable or other collateral for
receivables owed by the dealer. This type of
misrepresentation may be intentional, or
fraudulent. Fraud by a dealer may result in
delays and reductions in payments on the
applicable receivables, which could result in
delays and reductions in payments on your
certificates.
Payment of receivables may depend on the
performance of repurchase obligations by
manufacturers as described under "The Dealer
Financing Business of DFS--Floorplan Agreements
with Manufacturers." To the extent that the
amount of manufacturer's repurchase obligation
is less than the amount owed by the dealer to
DFS, or if a manufacturer does not fulfill its
repurchase obligations, then delays and
reductions in payments on your certificates
could occur.
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<PAGE> 87
In administering the receivables, the servicer
may exercise a right of set-off in a floorplan
agreement against a manufacturer that becomes
insolvent. It is possible that the exercise of
a right of set-off may take the form of not
funding a delayed funding receivable owned by
the trust and applying the funds toward an
obligation of the manufacturer in respect of a
receivable owned by DFS or one of its
affiliates. The dealer obligated under that
delayed funding receivable may in turn take the
position that DFS has failed to perform its
obligation under the delayed funding receivable
and, consequently, that it is discharged from
its obligation to pay that delayed funding
receivable.
You May Not Be Able to
Influence
Actions of the Trust You may be unable to influence or otherwise
control the actions of the trust, and, as a
result, you may be unable to stop actions that
are adverse to you.
- Certificateholders of any series or any class
within a series may need the approval or
consent of other certificateholders, whether
in the same or a different series, to take or
direct various actions, including amending
the pooling and servicing agreement and
directing the seller to purchase the
certificateholders' interest in the trust.
- In addition, following the occurrence of an
insolvency event involving the seller, action
by the holders of certificates evidencing
more than 50% of the aggregate unpaid
principal amount of each class of each
series, and by any holder of a certificate
representing a portion of the seller's
interest in the trust, will be required in
order to direct the trustee not to sell or
otherwise liquidate the receivables.
- The interests of the certificateholders of
any class or series may not coincide with
your interests, making it more difficult for
you to achieve your desired results in a
situation requiring the consent or approval
of other certificateholders.
- In addition, the seller, the servicer and the
trustee may amend the pooling and servicing
agreement or the supplement for your series
without your consent in the circumstances
described in this prospectus.
Any of the foregoing could result in a delay or
reduction in payments on your certificates.
The Existence or Issuance of
Additional Series May Result
in
Delays and Reductions in
Payments on Certificates The existence or issuance of other series could
result in delays or reductions in payments on
your series. The trust has issued series before
issuing your series. The trust is expected to
issue additional series--which may be
represented by different classes within a
series--from time to time without your consent.
The terms of any series may be different from
your series. Some series
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<PAGE> 88
may be in accumulation or amortization periods
while your series is in a revolving period;
principal collections will be paid to those
series while your series is not receiving
principal payments. It is a condition to the
issuance of each new series that each rating
agency, if any, that has rated an outstanding
series confirm in writing that the issuance of
the new series will not result in a reduction
or withdrawal of its rating. However, a ratings
confirmation does not guarantee that the timing
or amount of payments on your series will
remain the same.
Possible Delays and Reductions
in
Payments on Certificates Due
to
Priority Differences Among the
Classes Each class of certificates of a series may have
a different priority in the ranking of payments
of principal and interest. Because of this
priority structure, if you hold a class that is
paid later than another class, you bear more
risk of delay and loss than holders of prior
classes and you could experience delays and
reductions in payments on your certificates.
Potential Delays and
Reductions in
Payments on Certificates Due
to
the Ability of the Servicer to
Change Payment Terms The servicer will have the right to change the
terms of the receivables without your
consent--including payment terms, finance
charges and other fees it charges. Changes in
relevant law, changes in the marketplace or
business practice could lead the servicer to
change the terms of the receivables, which
could result in delays and reductions in
payments on your certificates.
Possible Delays and Reductions
in
Payments on Certificates Due
to
Adjustments in the Amounts of
the Receivables If the servicer adjusts the amount of a
receivable because of a rebate, refund, credit
adjustment or billing error, or because the
receivable relates to a product which was
refused or returned by a dealer, the pooling
and servicing agreement does not require a
payment to be made to the trust for that
adjustment unless, as described in the
definition of "Adjustment Payment" in the
Glossary, the pool balance would be reduced to
less than a specified amount, in which case the
seller must make a payment equal to that
deficiency. We cannot assure you that the
seller would be able to make that payment.
Downward adjustments by the servicer in the
amounts of the receivables may result in delays
and reductions in payments on your
certificates.
You Will Not Receive Physical
Certificates Representing the
Certificates of Your Series Your ownership of the certificates will be
registered electronically through DTC,
Clearstream, Luxembourg or Euroclear, and you
will not receive a physical certificate except
in certain limited circumstances. The lack of
physical certificates could:
- cause you to experience delays in receiving
payments on the certificates because the
trustee of the trust will be sending payments
on the certificates owned by you through DTC
instead of directly to you;
- limit or prevent you from using your
certificates as collateral; and
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<PAGE> 89
- hinder your ability to resell your
certificates or reduce the price that you
receive for them.
For definitions of some of the terms used in this prospectus, see the "Glossary"
of this prospectus.
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DEUTSCHE FLOORPLAN RECEIVABLES, L.P.
AND DEUTSCHE FLOORPLAN RECEIVABLES, INC.
DEUTSCHE FLOORPLAN RECEIVABLES, L.P.
The seller is a limited partnership formed under the laws of the State of
Delaware, of which Deutsche Floorplan Receivables, Inc. is the general partner
and DFS is the limited partner. DFS's limited partnership interest in the seller
constitutes ninety-nine percent (99%) of the total partnership interests in the
seller, with the remaining one percent (1%) owned by the general partner. The
seller was organized for limited purposes, which include:
- purchasing receivables;
- transferring receivables to trusts; and
- engaging in any activities necessary or incidental to the foregoing.
If Additional Accounts are added to the trust, DFS may make contributions
of capital to the seller to fund a portion of the purchase price of the
receivables arising in Additional Accounts.
DEUTSCHE FLOORPLAN RECEIVABLES, INC.
Deutsche Floorplan Receivables, Inc., a wholly-owned subsidiary of DFS, was
incorporated in the State of Nevada in 1993. Deutsche Floorplan Receivables,
Inc. was organized for limited purposes, which include:
- acting as the general partner in a limited partnership engaged in
purchasing receivables from DFS;
- transferring receivables to trusts; and
- exercising any powers necessary or convenient to the attainment of
those purposes.
The principal executive offices of Deutsche Floorplan Receivables, Inc. are
located at Bank of America Plaza, 300 South Fourth Street, Suite 1100, Las
Vegas, Nevada 89101. The telephone number of those offices is (702) 385-1668.
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 is not a statutory
business trust. The trust was formerly known as Deutsche Floorplan Receivables
Master Trust. The property of the trust will consist of:
- receivables generated in any accounts designated from time to time in
accordance with the terms of the pooling and servicing agreement,
excluding: (a) receivables paid or charged off; (b) receivables arising
after the removal date in any accounts that are removed from the trust
from time to time; and (c) any undivided interest in the receivables in
some accounts that have been transferred to a third party as described
in this prospectus under "The Dealer Financing Business of
DFS--Participation Arrangements";
- the seller's rights and remedies under the receivables contribution and
sale agreement;
- all monies due or to become due in respect of the receivables in the
trust;
- funds on deposit in certain accounts of the trust; and
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<PAGE> 91
- all of the seller's right, title and interest in the Collateral
Security relating to receivables in the trust
The property of the trust may include Enhancements for the benefit of a
particular series. Your series will not have any interest in any Enhancements
provided for the benefit of any other series.
USE OF PROCEEDS
The net proceeds from the sale of each series will be paid to the seller as
consideration for the transfer of receivables to the trust. The seller may
deposit some of those proceeds into one or more accounts or reserve funds for
the benefit of a particular series. The seller may use some or all of the net
proceeds from the sale of a series to pay in whole or in part the outstanding
principal balance of any series and any other amounts payable to any series. The
seller may also use the net proceeds from the sale of a series for general
operating purposes, including the distribution of those proceeds to its limited
partner, DFS. DFS may use the proceeds it receives to repay inter-company debt
and for other general corporate purposes.
THE DEALER FINANCING BUSINESS OF DFS
GENERAL
The receivables sold or to be sold to the seller have been or will
generally be selected from extensions of credit made by DFS to Dealers in the
Floorplan Business, the Accounts Receivable Business and the Asset Based Lending
Business.
The products financed within the Floorplan Business may include, among
others:
- computers and related equipment;
- manufactured housing;
- recreational vehicles;
- boats and boat motors;
- consumer electronics and appliances;
- keyboards and other musical instruments;
- industrial and agricultural equipment;
- snowmobiles; and
- motorcycles.
The types of products financed may change over time.
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, less a discount, if applicable.
The A/R Receivables are secured by accounts receivable owed to the Dealer
against which an extension of credit was made and, in limited cases, by other
personal property, mortgages on real estate, assignments of certificates of
deposit or letters of credit. The accounts receivable which are pledged to DFS
as collateral may or may not be secured by collateral. The amount advanced by
DFS generally does not exceed 80%-85% of the amount of the accounts receivable
that the applicable dealer represents and warrants meet criteria specified in
the agreement between DFS and that dealer.
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Occasionally, specific transactions under the Accounts Receivable Business
are documented as sales of receivables to DFS.
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 in other parts of the United
States. The number and location of these servicing offices may change from time
to time. In the future, receivables in the trust may include receivables
originated by affiliates of DFS, if the Rating Agency Condition is satisfied as
to the designation of the affiliate as an approved affiliate. References in this
prospectus to originations by DFS will be deemed to include originations by any
affiliate of DFS if the Rating Agency Condition has been satisfied regarding the
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 that financial information and credit information, DFS
will consider the following factors:
- the reason for the request for the extension of credit;
- the need for the credit line;
- the products to be financed and the financial status of the
manufacturer of those products, if any, that would enter into a related
Floorplan Agreement; and
- the experience of the Dealer's management.
The determination of whether to extend credit and of the amount to be
extended is based on a weighing of the above factors. The Dealer credit
underwriting process of DFS also involves the use of a system that DFS refers to
as the "expert credit system". The expert credit system employs artificial
intelligence technology to simulate the analytical approach of senior
underwriting personnel. By utilizing a standardized review process to analyze
credit information, DFS believes that the expert credit system adds greater
consistency to underwriting decisions across geographic areas and product lines.
While all Dealer applications are processed through the expert credit system,
DFS does not use the expert credit system as a credit scoring system that
results in a numerical score that approves or disapproves the extension of
credit or that indicates what amount of credit may be extended.
The size and risk weighting of a credit line to a Dealer determines who in
DFS or above DFS must approve the credit line.
- Extensions of credit lines of more than $50,000,000 if secured and
$25,000,000 if unsecured require approval by Deutsche Bank AG.
- Extensions of credit lines between $20,000,000 and $50,000,000 if
secured and between $5,000,000 and $25,000,000 if unsecured require
approval by both the Chief Executive Officer and Chief Credit Officer
of DFS.
- Extensions of credit up to $20,000,000 if secured and $5,000,000 if
unsecured may be approved by the Vice President of Credit of DFS.
- A DFS division president may approve extensions of credit in amounts
which vary by program but do not exceed $2,500,000.
- Less senior officers have lower levels of approval authority.
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<PAGE> 93
DFS reviews individual Dealer credit limits:
- prior to any increase in the credit limit for that Dealer;
- generally every 12 to 18 months; and
- after becoming aware that the Dealer is experiencing financial
difficulties or is in default of its obligations under its agreement
with DFS.
CREATION OF FLOORPLAN RECEIVABLES
The Floorplan Business is typically documented by an agreement between DFS
and the Dealer which provides for both the extension of credit and a grant of
security interest.
- The agreement generally is for an unspecified period of time and
creates a discretionary line of credit, which DFS may terminate at any
time in its sole discretion. However, termination of a line of credit
may be limited by prevailing standards of commercial reasonableness and
good faith, which may require commercially reasonable notice and other
accommodations by DFS.
- After the effective date of termination, DFS is under no obligation to
continue to provide additional financing, but, absent default by the
Dealer, the then current outstanding balance will be repayable in
accordance with the Pay-as-Sold or Scheduled Payment Plan terms of that
Dealer's program with DFS, as described below.
- Receivables may be accelerated upon default by the Dealer following any
notice or cure period negotiated with the Dealer.
In the Floorplan Business, advances made for the purchase of inventory are
most commonly arranged in the following manner. The Dealer will contact the
Manufacturer and place a purchase order for a shipment of inventory. If the
Manufacturer has been advised that DFS is the Dealer's inventory financing
source, the Manufacturer will contact DFS to obtain an approval number for the
purchase order. At the time of that request, DFS will determine whether:
- the Manufacturer is in compliance with its Floorplan Agreement, if
applicable;
- the Dealer is in compliance with its program with DFS, if applicable;
and
- the purchase order is within the Dealer's credit limit.
If so, DFS will issue an approval number to the Manufacturer.
The Manufacturer will then ship the inventory to the Dealer and directly
submit its invoice for the purchase order to DFS for payment. Interest or
finance charges normally begin to accrue on the Dealer's account 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.
DFS will negotiate with each Manufacturer whether to pay the loan proceeds
reflecting the invoice immediately or following a mutually agreed delay.
Typically, funding delays will range from a few days to up to 30 days, and in
some cases ranges up to 90 days, after the date of the invoice. These Delayed
Funding Receivables will be transferred to the trust on the date of the invoice,
and will be treated as part of the Pool Balance and the trust will release funds
to the seller relating to Delayed Funding Receivables even though the Delayed
Funding Receivables are not funded by DFS until a later time--that is, when DFS
pays the advance to the Manufacturer in payment of the invoice price.
DFS and the Manufacturer may also agree that DFS may discount the invoice
price of the inventory ordered by the Dealer. Under this arrangement, the
Manufacturer will deem itself
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paid in full when it receives the discounted amount. Typically, in exchange for
the float and income 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 the receivables owed
by that Dealer.
PAYMENT TERMS
DFS's Floorplan Business provides two basic payment terms to Dealers:
- Pay-as-Sold; or
- Scheduled Payment Plan.
Under a "Pay-as-Sold" program, the Dealer is obligated to pay interest or
finance charges monthly, but principal repayment on any particular item of
inventory financed by DFS is due and payable only at the time of sale of that
item by the Dealer or at a predetermined maturity date. On occasion, DFS may
require particular Dealers to begin repaying principal in installments if the
unit has not been sold within a specified period of time. These payments are
referred to as "curtailments." Even if a curtailment schedule has not yet
elapsed, the outstanding balance owing on that unit will be payable in full if
the unit is sold. Pay-as-Sold programs are principally offered in the
motorcycle, manufactured housing, recreational vehicle, boat and motor,
agricultural equipment, and other product lines in which the individual
inventory price is relatively 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 on
schedule, regardless of when the item of inventory is actually sold. DFS offers
Scheduled Payment Plans principally in the computer, consumer electronics and
other product lines where the individual inventory price is relatively low, and
the product inventory turnover is relatively fast.
In the case of A/R Receivables, the Dealer is obligated to pay interest or
finance charges monthly. Principal repayment is due at the end of the term of
the credit facility, or, if earlier, when and to the extent principal
outstandings exceed eligible Accounts Receivable at negotiated advance rates.
In the case of Asset Based Receivables, interest is payable monthly, while
principal is payable at the end of the term of the credit facility, or, if
earlier, when and to the extent principal outstandings exceed eligible
collateral at negotiated advance rates.
FLOORPLAN AGREEMENTS WITH MANUFACTURERS
In the Floorplan Business, DFS will provide financing for products for a
particular Dealer, in most instances, only if DFS has also entered into a
Floorplan Agreement with the Manufacturer of the product. Pursuant to a
Floorplan Agreement, the Manufacturer will agree, among other matters, to
purchase from DFS those products sold by the Manufacturer to a Dealer and
financed by DFS if DFS acquires possession of the products pursuant to
repossession, voluntary surrender, or other circumstances. This arrangement
reduces the time, expense and risk normally associated with a secured lender's
disposition of collateral.
The terms of repurchase obligations of Manufacturers may vary, both by
industry and by Manufacturer.
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- In some instances, the Manufacturer will be obligated to repurchase the
product for a price equal to the unpaid principal balance owed by the
Dealer for the product in question whenever DFS acquires possession of
that product.
- Different terms may be negotiated by Manufacturers with DFS. The terms
may provide for a smaller purchase price, or a purchase price which
declines over time, or time periods beyond which no obligation to
purchase by the Manufacturer will apply.
- Some Floorplan Agreements may also eliminate the repurchase obligation
or reduce the purchase price payable by the Manufacturer, depending on
the condition of the inventory acquired by DFS.
In determining whether to include a Manufacturer's products in its
Floorplan Business, DFS considers:
- the Manufacturer's financial status;
- its number of years in the business;
- the number of years the product has been sold; and
- whether its products are sold nationally or in a limited area.
In general, a more favorable determination by DFS of those factors will
increase the amount of Dealer outstanding payables to DFS that DFS will allow.
DFS generally reviews Manufacturers annually in the case of Manufacturers whose
Dealers have outstanding payables to DFS of more than $10,000,000, and less
frequently in the case of other Manufacturers.
BILLING PROCEDURES
At the beginning of each month DFS sends to each account obligor a billing
statement for the interest, if any, and any other non-principal charges accrued
or arising in the prior month. Payment is generally due in respect of that
statement by the 15th of that month.
DEALER MONITORING
DFS performs inventory inspections in connection with Pay-as-Sold financing
programs in order 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 21-45 days, or every 60-75 days
for industrial or agricultural equipment.
- Floorchecks are performed by field service representatives who are
specially trained to audit Dealer inventory. DFS has developed a
computerized field audit communications network providing field service
representatives with timely and accurate inventory reports on the day
of inspection. Any discrepancies in a Dealer's inventory or payment
schedule, or other problems discovered by a field service
representative, are reported to DFS management.
Floorchecks generally are not performed on Dealers on Scheduled Payment
Plans. However, DFS monitors these Dealers for payment delinquencies. DFS 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
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with a payment of $10,000-$100,000, field service representatives will visit the
Dealer to audit the related collateral and report their findings to DFS.
In the Accounts Receivables Business, DFS conducts field audits, 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 appropriate DFS management.
REALIZATION ON RECEIVABLES
If a Dealer has defaulted on its obligations to DFS under the related
financing agreement:
- After learning of the default, DFS generally makes contact with the
Dealer to determine whether it can develop a workout arrangement with
the Dealer to cure all defaults. If disputes with the Dealer exist,
those disputes may be submitted to arbitration.
- After expiration of any and all applicable notice and cure periods that
may have been agreed to between DFS and that Dealer, DFS may declare
the Dealer's obligations immediately due and payable and enforce all of
its legal rights and remedies, including commencement of proceedings to
foreclose on any collateral, limited by the prevailing standards of
commercial reasonableness and good faith.
- In the case of A/R Receivables, DFS attempts to collect directly from
the obligors on the accounts receivable; for some accounts relating to
A/R Receivables, DFS will already control the collection of accounts
receivable through the use of lockboxes.
- If a Manufacturer is obligated to repurchase the collateral under a
Floorplan Agreement as described above under "--Floorplan Agreements
with Manufacturers," and if DFS has recovered the collateral, then DFS
will arrange for the collateral to be delivered to the related
Manufacturer.
DFS may be unable to recover some or all of the amount owing on a
receivable. For some historical information as to loss experience in the total
U.S. portfolio of DFS, see "The Accounts--Loss Experience" in the prospectus
supplement.
CHARGE-OFF POLICY
DFS's charge-off policy is based on SAU/NSF aging.
- Pay-as-Sold receivables which are coded as SAU or NSF are charged off
at the end of the month in which those receivables have been so coded
for at least 181 days.
- For delinquent Scheduled Payment Plan receivables, DFS performs
inventory inspections to evaluate its collateral position with the
related Dealer as described above under "--Dealer Monitoring." If the
inspection reveals an uncollateralized position, the shortage is coded
SAU and will be charged off on or before 181 days after being coded as
SAU.
- For A/R Receivables and Asset Based Receivables, if the amount of the
receivable exceeds the value of the eligible collateral for that
receivable by at least $25,000 for two consecutive months, then DFS
will code some or all of the receivable as SAU. In addition, if DFS
believes that a receivable has a high probability of not being
collected, then DFS will code that receivable as SAU. Those receivables
that are coded as SAU will be charged off at the end of the month in
which those receivables have been so coded for at least 181 days.
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- "SAU" means, for a receivable, that if the receivable was originally
secured by a security interest in a product, the product has been sold
and the receivable is not paid in full.
- "NSF" means, with respect to a receivable, that a check in payment of
the receivable has been returned because of insufficient funds and has
not thereafter been paid.
DFS's charge-off policy as described above may change over time.
ASSET BASED RECEIVABLES
Asset Based Receivables arise from asset based revolving credit facilities
provided to some 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 the line of
credit or a specifically negotiated loan availability amount. The loan
availability amount is determined by multiplying agreed advance rates
against the value of certain types of assets.
- In these facilities, DFS will most typically lend against finished
inventory and parts which the Dealer represents are subject to a
perfected security interest in favor of DFS and otherwise in compliance
with specified standards. DFS will also lend in accordance with an
advance rate against the Dealer's 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 normally are not supported by a Floorplan Agreement with a
Manufacturer.
PRIVATE LABEL PROGRAMS
Under DFS's so-called "private label" programs, DFS will agree to provide
inventory financing and accounts receivable financing for Dealers 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 products;
- Cisco Financial Services, to provide financing to Dealers of products
manufactured or sold by Cisco Systems--computer network integration
equipment; and
- Tech Data Financial Services, to provide financing to Dealers of
products manufactured or sold by Tech Data--miscellaneous personal
computers and related equipment.
The Manufacturer may or may not have an equity participation in certain of
the receivables funded by those private label programs. Other private label
programs generating trust receivables may be developed from time to time and the
programs listed above may cease to generate receivables transferred to the
trust.
PARTICIPATION ARRANGEMENTS
From time to time DFS will enable other financing sources to participate in
certain of its credit facilities.
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- Pursuant to a typical Participation Agreement, the documentation for
the underlying line of credit will remain in the name of DFS, as
lender. In a separate contractual arrangement with DFS, the participant
will agree to provide a portion of the funding for that facility in
exchange for an agreed interest rate and repayment of the principal
amount of the portion funded. Occasionally, fees and other charges may
also be shared with the participant. Losses and recoveries from
defaulted accounts are shared with the participants in proportion to
their share of the fundings.
- In some situations, if participants cease to participate, the size of
the credit facility may be reduced.
- The receivables to be sold by DFS to the seller, and transferred in
turn by the seller to the trust, may include the non-participated
portion of receivables in which Participation Interests have been
created.
- In addition, Participation Interests in receivables may be created
after those receivables have been transferred to the trust. Amounts
payable by the related dealers that are allocable to Participation
Interests will not be part of the receivables and will not belong to
the trust. Participation Interests may be transferred to one or more
third parties.
- 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 be issued
pursuant to the pooling and servicing agreement, as supplemented by the
supplement for that series. The pooling and servicing agreement, in the form in
effect at the time that the registration statement became effective, 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 pooling and servicing agreement will be amended in
connection with the issuance of the first series issued in 2000, and a copy of
that amended pooling and servicing agreement will be filed with the Securities
and Exchange Commission following issuance of that 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 prospectus supplement.
The certificates will represent undivided interests in the trust
representing the right to receive from the trust funds up to, but not more than
the amounts required to make payments on the certificates.
Each class of certificates offered by this prospectus and the related
prospectus supplement will initially be represented by one or more certificates
registered in the name of the nominee of DTC, except as set forth below. The
offered certificates will be available for purchase in minimum denominations of
$1,000 and integral multiples in book-entry form. The seller has been informed
by DTC that DTC's nominee will be Cede & Co. Accordingly,
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Cede & Co. is expected to be the holder of record of the offered certificates.
No certificate owner will be entitled to receive a certificate representing that
person's beneficial interest in the offered certificates. Unless and until
definitive certificates are issued under the limited circumstances described in
this prospectus, all references in this prospectus or the prospectus supplement
to actions by certificateholders will refer to actions taken by DTC on
instructions from its participants, and all references in this prospectus or the
prospectus supplement to distributions, notices, reports and statements to
holders or certificateholders will refer to distributions, notices, reports and
statements to Cede & Co., as the registered holder of the offered certificates.
See "--Book-Entry Registration" and "--Definitive Certificates" below.
PRINCIPAL AND INTEREST ON THE CERTIFICATES
The timing and priority of payment, seniority, interest rate and amount of
or method of determining payments of principal and interest, and any other
payments, if so specified in the related prospectus supplement, on each class of
certificates will be described in the related prospectus supplement. Each
prospectus supplement will specify the dates on which payments will be payable,
which may be monthly, quarterly or otherwise.
The right of holders of any class of certificates to receive payments of
principal and interest, and any other payments, if so specified in the related
prospectus supplement, may be senior or subordinate to the rights of holders of
any other class or classes of certificates of the series, as described in the
related prospectus supplement. If provided in the related prospectus supplement,
a series may include one or more classes of certificates entitled to (a)
principal payments with disproportionate, nominal or no interest payments, or
(b) interest payments with disproportionate, nominal or no principal payments.
Each class of certificates may have a different interest rate, which may be a
fixed, variable or adjustable interest rate, and which may be zero for certain
classes of certificates, or any combination of the foregoing. The related
prospectus supplement will specify the interest rate or the method for
determining the interest rate for each class of certificates of a given series.
One or more classes of certificates of a series may be redeemable in whole or in
part under the circumstances specified in the related prospectus supplement.
In the case of a series of certificates which includes two or more classes
of certificates, the sequential order and priority of payment in respect of
principal and interest of each class, if any, will be set forth in the related
prospectus supplement.
One or more classes of a series of certificates may be entitled to receive
principal payments prior to the receipt of principal payments by other classes
of that series.
One or more classes of a series of certificates may have principal payment
schedules which are fixed or based on targeted schedules derived by assuming
differing prepayment rates. One or more classes of the related series of
certificates may be designated to receive principal payments on a distribution
date only if principal payments have been made to another class of certificates,
and to receive any excess payments over the amount required to be paid to
another class of certificates.
BOOK-ENTRY REGISTRATION
Certificate owners may hold their interests in the offered certificates
through DTC, in the United States, or Clearstream, Luxembourg or the Euroclear
System, in Europe, if they are participants in those systems, or indirectly
through organizations that are participants in those systems. Cede & Co., as
nominee for DTC, will hold the offered certificates. Clearstream, Luxembourg and
Euroclear will hold omnibus positions on behalf of their respective
participants, through customers' securities accounts in Clearstream,
Luxembourg's and Euroclear's names on the books of their respective
depositaries. The depositaries in turn will
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hold the positions in customers' securities accounts in the depositaries' names
on the books of DTC.
DTC has advised us and the underwriters that it is:
- a limited-purpose trust company organized under the New York Banking
Law;
- a "banking organization" within the meaning of the New York Banking
Law;
- a member of the Federal Reserve System;
- a "clearing corporation" within the meaning of the New York Uniform
Commercial Code; and
- a "clearing agency" registered under the provisions of Section 17A of
the Exchange Act.
DTC holds securities for its participants and facilitates the clearance and
settlement among its participants of securities transactions, including
transfers and pledges, in deposited securities through electronic book-entry
changes in its participants' accounts. This eliminates the need for physical
movement of securities certificates. DTC participants include securities brokers
and dealers, banks, trust companies, clearing corporations and other
organizations. Indirect access to the DTC system is also available to others
including securities brokers and dealers, banks, and trust companies that clear
through or maintain a custodial relationship with a participant, either directly
or indirectly. The rules applicable to DTC and its participants are on file with
the Securities and Exchange Commission.
Transfers between participants on the DTC system will occur in accordance
with DTC rules. Transfers between participants on the Clearstream, Luxembourg
system and participants on the Euroclear System will occur in accordance with
their rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Clearstream,
Luxembourg participants or Euroclear participants, on the other, will be
effected by DTC in accordance with DTC rules on behalf of the relevant European
international clearing system by that system's depositary. However, these
cross-market transactions will require delivery of instructions to the relevant
European international clearing system by the counterparty in that system in
accordance with its rules and procedures and within its established deadlines,
European time. The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to its
depositary to take action to effect final settlement on its behalf by delivering
or receiving securities in DTC, and making or receiving payment in accordance
with normal procedures for same-day funds settlement applicable to DTC.
Clearstream, Luxembourg participants and Euroclear participants may not deliver
instructions directly to their system's depositary.
Because of time-zone differences, credits of securities in Clearstream,
Luxembourg or Euroclear as a result of a transaction with a DTC participant will
be made during the subsequent securities settlement processing, dated the
business day following the DTC settlement date. The credits for any transactions
in these securities settled during this processing will be reported to the
relevant Clearstream, Luxembourg participant or Euroclear participant on that
business day. Cash received in Clearstream, Luxembourg or Euroclear as a result
of sales of securities by or through a Clearstream, Luxembourg participant or a
Euroclear participant to a DTC participant will be received and available on the
DTC settlement date. However, it will not be available in the relevant
Clearstream, Luxembourg or Euroclear cash account until the business day
following settlement in DTC.
Purchases of offered certificates under the DTC system must be made by or
through DTC participants, which will receive a credit for the offered
certificates on DTC's records. The
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ownership interest of each actual certificate owner is in turn to be recorded on
the DTC participants' and indirect participants' records. Certificate owners
will not receive written confirmation from DTC of their purchase. However,
certificate owners are expected to receive written confirmations providing
details of the transaction, as well as periodic statements of their holdings,
from the DTC participant or indirect participant through which the certificate
owner entered into the transaction. Transfers of ownership interests in the
offered certificates are to be accomplished by entries made on the books of DTC
participants acting on behalf of certificate owners. Certificate owners will not
receive certificates representing their ownership interest in offered
certificates unless use of the book-entry system for the offered certificates is
discontinued.
To facilitate subsequent transfers, all securities deposited by DTC
participants with DTC are registered in the name of DTC's nominee, Cede & Co.
The deposit of securities with DTC and their registration in the name of Cede &
Co. effects no change in beneficial ownership. DTC has no knowledge of the
actual certificate owners of the offered certificates; DTC's records reflect
only the identity of the DTC participants to whose accounts the offered
certificates are credited, which may or may not be the actual beneficial owners
of the certificates. The DTC participants will remain responsible for keeping
account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to DTC participants,
by DTC participants to indirect participants, and by DTC participants and
indirect participants to certificate owners will be governed by arrangements
among them and by any statutory or regulatory requirements as may be in effect
from time to time.
Neither DTC nor Cede & Co. will consent or vote on behalf of the offered
certificates. Under its usual procedures, DTC mails an omnibus proxy to the
issuer as soon as possible after the record date, which assigns Cede & Co.'s
consenting or voting rights to those DTC participants to whose accounts the
offered certificates are credited on the record date, identified in a listing
attached the proxy.
Principal and interest payments on the offered certificates will be made to
DTC. DTC's practice is to credit its participants' accounts on the applicable
distribution date in accordance with their respective holdings shown on DTC's
records unless DTC has reason to believe that it will not receive payment on
that distribution date. Payments by DTC participants to certificate owners will
be governed by standing instructions, customary practices, and any statutory or
regulatory requirements as may be in effect from time to time. These payments
will be the responsibility of the DTC participant and not of DTC, the trustee of
the trust or the seller. Payment of principal and interest to DTC is the
responsibility of the trustee of the trust, disbursement of the payments to DTC
participants is the responsibility of DTC, and disbursement of the payments to
certificate owners is the responsibility of DTC participants and indirect
participants.
DTC may discontinue providing its services as securities depository for the
offered certificates at any time by giving notice to the seller or the trustee
of the trust. Under these circumstances, if a successor securities depository is
not obtained, definitive certificates are required to be printed and delivered.
The seller and, after the occurrence of a Servicer Default, a specified
percentage of each class of certificate owners the certificates of which are
registered in the name of DTC's nominee may decide to discontinue use of the
system of book-entry transfers through DTC or a successor securities depository.
In that event, definitive certificates will be delivered to certificate owners.
See "--Definitive Certificates."
DTC management is aware that some computer applications, systems, and the
like for processing data that are dependent on calendar dates, including dates
before, on, and after January 1, 2000, may encounter Year 2000 problems. DTC has
informed its participants and other members of the financial community that it
has developed and is implementing a
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program so that its systems continue to function appropriately, as the same
relate to the timely payment of distributions to securityholders, book-entry
deliveries, and settlement of trades within DTC.
DTC's ability to perform properly its services is also dependent on other
parties, including issuers and their agents, DTC's direct and indirect
participants, third party vendors from whom DTC licenses software and hardware,
and third party vendors on whom DTC relies for information or the provision of
services, including telecommunication and electrical utility service providers.
DTC has informed members of the financial community that it is contacting, and
will continue to contact, third party vendors from whom DTC acquires services
to: (1) impress on them the importance of these services being Year 2000
compliant; and (2) determine the extent of their efforts for Year 2000
remediation and testing of their services.
According to DTC, the foregoing information about DTC has been provided for
informational purposes only and is not intended to serve as a representation,
warranty, or contract modification of any kind.
Clearstream Banking, societe anonyme, 67 Bd Grande-Duchesse Charlotte,
L-2967 Luxembourg ("Clearstream, Luxembourg"), was incorporated in 1970 as
"Cedel S.A.", a company with limited liability under Luxembourg law (a societe
anonyme). Cedel S.A. subsequently changed its name to Cedelbank. In January
2000, Cedelbank's parent company, Cedel International, societe anonyme ("CI")
merged its clearing, settlement and custody business with that of Deutsche Borse
Clearing AG ("DBC"). The merger involved the transfer by CI of substantially all
of its assets and liabilities (including its shares in CB) to a new Luxembourg
company, New Cedel International, societe anonyme ("New CI"), which is 50% owned
by CI and 50% owned by DBC's parent company Deutsche Borse AG. The shareholders
of these two entities are banks, securities dealers and financial institutions.
Further to the merger, the Board of Directors of New Cedel International
decided to re-name the companies in the group in order to give them a cohesive
brand name. The new brand name that was chosen is "Clearstream". In January
2000, New CI was renamed "Clearstream International, societe anonyme", Cedelbank
was renamed "Clearstream Banking, societe anonyme", and Cedel Global Services
was renamed "Clearstream Services, societe anonyme".
In January 2000, DBC was renamed "Clearstream Banking AG". This means that
there are now two entities in the corporate group headed by Clearstream
International which share the name "Clearstream Banking": the entity previously
named "Cedelbank" and the entity previously named "Deutsche Borse Clearing AG".
Clearstream, Luxembourg holds securities for its customers and facilitates
the clearance and settlement of securities transactions between Clearstream,
Luxembourg customers through electronic book-entry changes in accounts of
Clearstream, Luxembourg customers, thereby eliminating the need for physical
movement of certificates. Transactions may be settled by Clearstream, Luxembourg
in various currencies, including United States dollars.
Clearstream, Luxembourg provides to its customers, among other things,
services for safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing.
Clearstream, Luxembourg also deals with domestic securities markets in various
countries through established depository and custodial relationships.
Clearstream, Luxembourg is registered as a bank in Luxembourg, and as that is
subject to regulation by the Commission de Surveillance du Secteur Financier,
"CSSF", which supervises Luxembourg banks. Clearstream, Luxembourg's customers
are world-wide financial institutions including underwriters, securities brokers
and dealers, banks, trust companies and clearing corporations. Clearstream,
Luxembourg's U.S. customers are limited to securities brokers and dealers, and
banks. Indirect access to Clearstream, Luxembourg is available to
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other institutions that clear through or maintain a custodial relationship with
an account holder of Clearstream, Luxembourg. Clearstream, Luxembourg has
established an electronic bridge with Morgan Guaranty Trust Company of New York
as the operator of the Euroclear System in Brussels to facilitate settlement of
trades between Clearstream, Luxembourg and Euroclear System.
The Euroclear System was created in 1968 to hold securities for its
participants and to clear and settle transactions between Euroclear participants
through simultaneous electronic book-entry delivery against payment. This
eliminates the need for physical movement of certificates. Transactions may be
settled in various currencies, including United States dollars.
The Euroclear System ("Euroclear System" or "Euroclear") is operated by
Morgan Guaranty Trust Company of New York, Brussels, Belgium office, the
Euroclear operator, under contract with Euroclear Clearance System, Societe
Cooperative, a Belgium cooperative corporation, the Euroclear cooperative. All
operations are conducted by the Euroclear operator, and all Euroclear securities
clearance accounts and Euroclear cash accounts are accounts with the Euroclear
operator, not the Euroclear cooperative. The board of the Euroclear cooperative
establishes policy for the Euroclear System.
Euroclear participants include banks--including central banks--securities
brokers and dealers and other professional financial intermediaries. Indirect
access to the Euroclear System is also available to other firms that maintain a
custodial relationship with a Euroclear participant, either directly or
indirectly.
Securities clearance accounts and cash accounts with the Euroclear operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System. These terms and conditions
govern transfers of securities and cash within the Euroclear System, withdrawal
of securities and cash from the Euroclear System, and receipts of payments for
securities in the Euroclear System. All securities in the Euroclear System are
held on a fungible basis without attribution of specific certificates to
specific securities clearance accounts. The Euroclear operator acts under these
terms and conditions only on behalf of Euroclear participants and has no record
of or relationship with persons holding through Euroclear participants.
Distributions on the offered certificates held through Clearstream,
Luxembourg or Euroclear will be credited to the cash accounts of Clearstream,
Luxembourg participants or Euroclear participants in accordance with the
relevant system's rules and procedures, to the extent received by its
depositary. These distributions must be reported for tax purposes in accordance
with United States tax laws and regulations. Clearstream, Luxembourg or the
Euroclear operator, as the case may be, will take any other action permitted to
be taken by a certificateholder on behalf of a Clearstream, Luxembourg
participant or Euroclear participant only in accordance with its rules and
procedures, and depending on its depositary's ability to affect these actions on
its behalf through DTC.
Although DTC, Clearstream, Luxembourg and Euroclear have agreed to the
foregoing procedures in order to facilitate transfers of offered certificates
among participants of DTC, Clearstream, Luxembourg and Euroclear, they are under
no obligation to perform or continue to perform these procedures and these
procedures may be discontinued at any time.
DEFINITIVE CERTIFICATES
Certificates issued in fully registered, certificated form are referred to
in this prospectus as "definitive certificates". If certificates of a class or
series have been registered in the name of DTC or its nominee, then those
certificates will be issued as definitive certificates, rather than to DTC or
its nominee, only if:
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- the seller advises the trustee of the trust in writing that DTC is no
longer willing or able to properly discharge its responsibilities as
depository regarding the offered certificates, as applicable, and the
trustee of the trust or the seller is unable to locate a qualified
successor;
- the seller, at its option, elects to terminate the book-entry system
through DTC regarding the applicable class or series; or
- after the occurrence of a Servicer Default, certificate owners
representing not less than 50% of the aggregate unpaid principal amount
of the affected class or series the certificates of which are
registered in the name of DTC or its nominee advise in writing both the
trustee of the trust and DTC through DTC's clearing agency participants
that the continuation of a book-entry system through DTC is no longer
in the best interests of those certificate owners.
If any of these events occurs, the pooling and servicing agreement
contemplates that the trustee of the trust will notify all certificate owners,
through DTC, of the occurrence of the applicable event and of the availability
of definitive certificates. At the time of surrender by DTC of the certificate
or certificates representing the outstanding certificates and instructions for
re-registration, the trustee will issue those certificates, as applicable, in
the form of definitive certificates, and thereafter the trustee will recognize
the holders of those definitive certificates as certificateholders under the
pooling and servicing agreement.
Distributions of principal of and interest on the offered certificates will
be made by the trustee directly to holders of certificates in accordance with
the procedures set forth in this prospectus and under "Description of the
Certificates--Distributions" in the prospectus supplement.
- Distributions on each distribution date will be made to holders in
whose names the certificates were registered at the close of business
on the related Record Date.
- Distributions will be made by check mailed to the address of each
holder as it appears on the register maintained by the trustee of the
trust.
- The final distribution on any certificate, whether definitive
certificates or the certificate or certificates registered in the name
of DTC or its nominee representing the certificates, however, will be
made only after presentation and surrender of the certificate on the
final payment date at the office that is specified in the notice of
final distribution to certificateholders. The trustee of the trust will
provide that notice to registered certificateholders not later than the
fifth day of the month of the final distribution.
- The trustee of the trust will pay to the seller any monies held by it
for the payment of principal or interest that remain unclaimed for two
years after that notice. After that payment to the seller,
certificateholders entitled to the money must look to the seller for
payment as general creditors unless an applicable abandoned property
law designates another person.
Registered certificates will be transferable or exchangeable at the office
of the trustee of the trust or at the office of any paying and transfer agent,
including any paying agent in Luxembourg. The trustee of the trust is not
required to register the transfer of or exchange any certificate for a period of
15 days preceding the due date for any payment with respect to that certificate.
The trustee of the trust will not impose a service charge for any registration
of transfer or exchange, but the trustee of the trust may require payment of a
sum sufficient to cover any tax or other governmental charge imposed in
connection therewith.
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SUPPLEMENTAL CERTIFICATES
The seller owns a certificate evidencing the interest in the trust that is
not allocated to the interests of the outstanding series. The pooling and
servicing agreement provides that the seller may exchange a portion of this
seller's certificate for a new seller's certificate and a supplemental
certificate for transfer to a person designated by the seller; provided that:
- the seller will, after giving effect to the transfer, have an interest
in the Pool Balance of not less than 2% of the Pool Balance,
- the seller will have delivered to the trustee, each rating agency and
any Enhancement Provider a Tax Opinion regarding that transfer and
exchange, and
- the Rating Agency Condition has been satisfied.
The seller's interest in the trust is not being offered by this prospectus
or any prospectus supplement.
NEW ISSUANCES
The pooling and servicing agreement provides that, pursuant to one or more
supplements, the seller may cause the trustee of the trust to issue one or more
new series. The supplement will specify, among other things, one or more of the
following types of terms for the applicable series (the "Principal Terms"), not
all of which will necessarily be applicable to each series:
- the name or designation for the series;
- its initial principal amount, if applicable;
- the interest rate or rates applicable to the certificates of a series,
or the method for determining the interest rate or rates;
- a date on which it will begin its accumulation period, amortization
period or controlled amortization period, if any;
- the method for allocating collections to certificateholders of that
series;
- the monthly servicing fee;
- the Enhancement Provider and terms of any Enhancement, if applicable,
for the series;
- if applicable, the terms on which the certificates of that series may be
exchanged for certificates of another series, be repurchased, redeemed
in an optional redemption or mandatory redemption or be remarketed to
other investors;
- the series termination date; and
- any other terms permitted or not prohibited by the pooling and servicing
agreement.
The seller may offer any series under a prospectus or other disclosure
document in transactions either registered under the Securities Act of 1933 or
exempt from registration thereunder, directly or through one or more
underwriters or placement agents. There is no limit to the number of series that
may be issued under the pooling and servicing agreement.
The terms of your series may be different than the terms of another series.
We cannot assure you that the terms of your series will be as favorable as the
terms of any other series. Each series may have, but need not have, an
amortization period or accumulation period which may have a different length and
begin on a different date than the amortization period or accumulation period
for any other series. Further, one or more series may be in 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
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accumulating principal. Also, different series may have the benefits of
different forms of Enhancement issued by the same or different entities. A
series need not have an accumulation period.
The trustee of the trust will hold each form of Enhancement only on behalf
of the series, or a particular class within a series, to which it relates. Your
series will not have any interest in any Enhancements provided for the benefit
of any other series. The seller may specify different interest rates and monthly
servicing fees for each series, or a particular class within a series. In
addition, the seller may vary between series, or classes within a series, the
terms on which a series, or classes within a series, may be repurchased or
redeemed.
A new series may be issued at any time if the conditions specified in the
pooling and servicing agreement are satisfied.
The trust may issue one or more series that represent an interest in a
limited portion of the trust assets. For example, the trust may issue a series
that represents an interest only in the portions of some or all of the
receivables that exceed specified concentration limits.
UNCERTIFICATED SERIES
Notwithstanding the references in this prospectus and the prospectus
supplement to certificates of a series, any series may be issued in
uncertificated form--that is, without being evidenced by a certificate of any
kind. This is in addition to, and not the same as, the fact that certificates of
a series may be issued in book-entry form and held through DTC, Clearstream,
Luxembourg or the Euroclear System.
All references in this prospectus or the related prospectus supplement (a)
to a series of certificates will be deemed to refer also to an uncertificated
series, and (b) to certificateholders of a series will be deemed to refer also
to the holder or holders of an uncertificated series.
REPRESENTATIONS AND WARRANTIES
Pursuant to the pooling and servicing agreement, the seller represents and
warrants that:
- Each receivable and all other trust assets existing on the closing date
for the series issued in 1993 or, in the case of Additional Accounts,
on the applicable Addition Date, and on each Transfer Date, has been
conveyed to the trust free and clear of any lien.
- With respect to each Receivable and all other trust assets existing on
the closing date for the series issued in 1993 or, in the case of
Additional Accounts, on the applicable Addition Date, and on each
Transfer Date, all consents, licenses, approvals or authorizations of
or registrations or declarations with any governmental authority
required to be obtained, effected or given by the seller in connection
with the conveyance of that receivable or other trust assets to the
trust have been duly obtained, effected or given and are in full force
and effect.
- On the cut-off date for the series issued in 1993, each Initial Account
was an Eligible Account, and on the applicable Additional Cut-Off Date
each applicable Additional Account is an Eligible Account. On the date
any receivable is transferred to the Trust, the related account or
Additional Account was or is an Eligible Account or if it was or is an
Ineligible Account on that date, that account is being removed from the
trust in accordance with the pooling and servicing agreement.
- On the closing date for the series issued in 1993, in the case of the
Initial Accounts, and, in the case of the Additional Accounts, on the
applicable Additional Cut-Off Date, and on each Transfer Date, each
receivable conveyed to the trust on that date is an Eligible Receivable
or, if that receivable is not an Eligible Receivable, the related
account is an Eligible Account.
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If any representation and warranty described in the preceding paragraphs is
not true and correct and that breach has a material adverse effect on the
certificateholders' interest in the applicable receivable or account, then
within 30 days, or any longer period as may be agreed to by the trustee of the
trust, after the earlier to occur of the discovery of that breach by the seller
or the servicer or receipt of written notice of that breach by the seller or the
servicer, that receivable or, in the case of a breach relating to an account,
all receivables in the related account, will be reassigned to the seller on the
terms and conditions set forth below; provided that the seller will not be
required to accept the reassignment if, by the end of the 30 day period, or a
longer period of time as may be agreed to by the trustee of the trust, the
breached representation and warranty is then true and correct in all material
respects and any material adverse effect caused thereby has been cured.
The applicable receivable will be reassigned to the seller on or before the
end of the calendar month in which that reassignment obligation arises by the
seller directing the servicer to deduct the principal amount of that receivable,
exclusive of the Discount Portion of that receivable, from the Pool Balance.
- In the event that the deduction would cause the Pool Balance to be less
than the Required Participation Amount on the preceding determination
date--after giving effect to the allocations, distributions,
withdrawals and deposits to be made on the distribution date following
that determination date--on the date on which that reassignment is to
occur the seller will be obligated to make a deposit into the
collection account in immediately available funds in an amount equal to
the Transfer Deposit Amount, provided that if the Transfer Deposit
Amount is not so deposited, the amount to be deducted relating to the
applicable receivable will be deducted from the Pool Balance only to
the extent the Pool Balance is not reduced below the Required
Participation Amount and any amount not so deducted will not be
reassigned and will remain part of the trust.
- The reassignment of the receivable to the seller and the payment of any
related Transfer Deposit Amount will be the sole remedy respecting any
breach of the representations and warranties described in the preceding
paragraph available to certificateholders or the trustee of the trust
on behalf of certificateholders.
The seller will represent and warrant to the trust, as of the closing date
for each series, that:
- The seller is a limited partnership duly organized and validly existing
and in good standing under the law of the State of Delaware and has, in
all material respects, full power, authority and legal right to own its
properties and conduct its business as that properties are presently
owned and that business is presently conducted, and to execute, deliver
and perform its obligations under the pooling and servicing agreement
and to execute and deliver the certificates.
- The seller is duly qualified to do business and, where necessary, is in
good standing as a foreign partnership, or is exempt from that
requirement, and has obtained all necessary licenses and approvals in
each jurisdiction in which the conduct of its business requires that
qualification except where the failure to so qualify or obtain licenses
or approvals would not have a material adverse effect on its ability to
perform its obligations under the pooling and servicing agreement.
- The execution and delivery of the pooling and servicing agreement and
the applicable supplement and the receivables contribution and sale
agreement and any applicable Enhancement Agreement and the execution
and delivery to the trustee of the trust of the certificates by the
seller and the consummation of the transactions provided for or
contemplated by the pooling and servicing agreement and the applicable
supplement
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and the receivables contribution and sale agreement and any applicable
Enhancement Agreement, have been duly authorized by the seller by all
necessary partnership action on the part of the seller.
- The execution and delivery of the pooling and servicing agreement, the
applicable supplement, the receivables contribution and sale agreement
and any applicable Enhancement Agreement and the certificates, the
performance of the transactions contemplated by the pooling and
servicing agreement and the applicable supplement and the receivables
contribution and sale agreement and any applicable Enhancement
Agreement and the fulfillment of the terms thereof, will not conflict
with, result in any breach of any of the material terms and provisions
of, or, with or without notice or lapse of time or both, a material
default under, any indenture, contract, agreement, mortgage, deed of
trust, or other instrument to which the seller is a party or by which
it or its properties are bound.
- The execution and delivery of the pooling and servicing agreement, the
applicable supplement, the receivables contribution and sale agreement
and any applicable Enhancement Agreement and the certificates, the
performance of the transactions contemplated by the pooling and
servicing agreement and the applicable supplement and the Receivables
contribution and sale agreement and any applicable Enhancement
Agreement and the fulfillment of the terms thereof applicable to the
seller, will not conflict with or violate any material requirements of
law applicable to the seller.
- There are no proceedings or, to the best knowledge of the seller,
investigations pending or threatened against the seller before any
governmental authority (i) asserting the invalidity of the pooling and
servicing agreement, the applicable supplement, any of the receivables
contribution and sale agreement and any applicable Enhancement
Agreement or the certificates, (ii) seeking to prevent the issuance of
the certificates or the consummation of any of the transactions
contemplated by the pooling and servicing agreement and the applicable
supplement or the receivables contribution and sale agreement and any
applicable Enhancement Agreement, (iii) seeking any determination or
ruling that, in the reasonable judgment of the seller, would materially
and adversely affect the performance by the seller of its obligations
under the pooling and servicing agreement and the applicable supplement
or the receivables contribution and sale agreement and any applicable
Enhancement Agreement, (iv) seeking any determination or ruling that
would materially and adversely affect the validity or enforceability of
the pooling and servicing agreement and the applicable supplement, the
receivables contribution and sale agreement and any applicable
Enhancement Agreement or the certificates or (v) seeking to affect
adversely the income tax attributes of the trust under the United
States Federal or any State income, single business or franchise tax
systems.
- All appraisals, authorizations, consents, orders, approvals or other
actions of any person or of any governmental body or official required
in connection with the execution and delivery of the pooling and
servicing agreement, the applicable supplement, the receivables
contribution and sale agreement and any applicable Enhancement
Agreement and the certificates, the performance of the transactions
contemplated by the pooling and servicing agreement, the applicable
supplement and any of the receivables contribution and sale agreement
and any applicable Enhancement Agreement, and the fulfillment of the
terms thereof, have been obtained, except where the failure to so
obtain that item will not have a material adverse effect on its ability
to render that performance.
- The pooling and servicing agreement and the applicable supplement and
the receivables contribution and sale agreement and any applicable
Enhancement
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Agreement each constitutes a legal, valid and binding obligation of the
seller enforceable against the seller in accordance with its terms,
except as that enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect affecting the enforcement of creditors' rights in
general and except as that enforceability may be limited by general
principles of equity, whether considered in a suit at law or in equity.
- As of the closing date for the series issued in 1993, in the case of
the Initial Accounts, as of the applicable Addition Date, in the case
of the Additional Accounts, and, as of the applicable Removal Date, in
the case of Removed Accounts, Schedule 1 to the pooling and servicing
agreement is an accurate and complete listing in all material respects
of all the accounts as of the cut-off date for the series issued in
1993, the applicable Additional Cut-Off Date or the applicable Removal
Date, as the case may be, and the information contained therein with
respect to the identity of that accounts and the receivables existing
thereunder is true and correct in all material respects as of the
cut-off date for the series issued in 1993, that applicable Additional
Cut-Off Date or that Removal Date, as the case may be.
- The pooling and servicing agreement or, in the case of Additional
Accounts, the related assignment constitutes 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 and the proceeds thereof
and all of the seller's rights, remedies, powers and privileges with
respect to the receivables under the receivables contribution and sale
agreement and the related Financing Agreements and Floorplan
Agreements, if any, and, upon the filing of the financing statements
described in the pooling and servicing agreement with the applicable
filing office and, in the case of the receivables and the proceeds
thereof, upon the creation thereof, the trust will have a perfected
ownership interest in that property, free of the liens of any other
person, except for liens permitted under the pooling and servicing
agreement. Except as otherwise provided in the pooling and servicing
agreement, neither the seller nor any person claiming through or under
the seller has any claim to or interest in the trust assets.
In the event that the breach of any of the representations and warranties
described in the preceding paragraphs 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 not less than a
majority of the aggregate unpaid principal amount of all outstanding series, by
written notice to the seller and the servicer--and to the trustee and any
Enhancement Provider, if notice is given by certificateholders--may direct the
seller to purchase the certificateholders' interest in the trust within 60 days
of that notice, or within any longer period specified in that notice.
- Following that notice, the seller will be obligated to purchase the
certificateholders' interest in the trust on a distribution date
occurring within the 60-day period. However, the seller will not be
required to make that purchase if, at the end of that period of time,
the representations and warranties will then be true and correct in all
material respects and any material adverse effect on the
certificateholders' interest caused by that breach will have been
cured.
- The price for the reassignment will be equal to the sum of the amounts
for each outstanding series specified in the supplements for those
series. The payment of the reassignment price will be considered a
payment in full of the certificateholders' interest in the trust.
- If the trustee or the certificateholders give notice as provided above,
the obligation of the seller to purchase the certificateholders'
interest will constitute the sole remedy
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respecting a breach of the applicable representations and warranties
available to certificateholders or the trustee on behalf of the
certificateholders.
THE OVERCONCENTRATION AMOUNT
Pursuant to the pooling and servicing agreement, some concentrations of
Principal Receivables are characterized collectively as the Overconcentration
Amount. As defined in more detail in the Glossary to this prospectus, the
Overconcentration Amount on any determination date means the sum of the Asset
Based Receivable Overconcentration, the A/R Receivable Overconcentration, the
Manufacturer Overconcentration and the Product Line Overconcentration on that
determination date. Dealer Overconcentrations are not included for this purpose.
Rather, Dealer Overconcentrations are in effect allocated to the Dealer
Overconcentration Series. See "Description of the Certificates--Allocations of
Collections, Defaulted Amounts and Miscellaneous Payments to the Dealer
Overconcentration Series" in the prospectus supplement.
If on any determination date the Overconcentration Amount as of the end of
the preceding calendar month exceeds zero, and the Overconcentration Amount is
not reduced to zero within five business days after the related distribution
date, then an Early Amortization Event for your series will result pursuant to
the related supplement to the pooling and servicing agreement, unless the Rating
Agency Condition has been satisfied with respect to the existence of the
Overconcentration Amount. The seller may attempt to reduce the Overconcentration
Amount to zero by removing receivables from the trust. However, in attempting to
reduce the Overconcentration Amount to zero, the seller will not be permitted to
remove a receivable (a) that has been classified by the servicer as SAU or NSF
for more than sixty days, (b) that has been charged off, (c) as to which the
related Dealer is in bankruptcy or insolvency proceedings, or (d) if the
servicer believes that the receivable will be charged off in the foreseeable
future or that the related Dealer will be in bankruptcy or insolvency
proceedings in the foreseeable future.
ADDITION OF ACCOUNTS
The seller has the right to add Additional Accounts to the computer file,
microfiche list or other list of accounts previously delivered to the trustee of
the trust, and to transfer receivables to the trust relating to the Additional
Accounts, if it satisfies the conditions set forth in the pooling and servicing
agreement. In addition, the pooling and servicing agreement provides that the
seller is required to designate Additional Accounts, and to transfer the related
receivables to the trust, if on any distribution date, after giving effect to
the allocations, distributions, withdrawals and deposits to be made on that
distribution date, either:
- the Pool Balance, exclusive of Delayed Funding Receivables, on the last
day of the preceding calendar month is less than the Required
Participation Amount as of that distribution date; or
- the Seller's Participation Amount, exclusive of Delayed Funding
Receivables, as of that distribution date multiplied by the percentage
equivalent of the portion of the seller's interest represented by the
seller's certificate is less than 5% of the Pool Balance, exclusive of
Delayed Funding Receivables, on that last day.
In either case, the pooling and servicing agreement provides that the
seller will, within 10 business days after the applicable distribution date,
designate Additional Accounts and transfer related receivables to the trust so
that, after giving effect to that designation and transfer:
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- the Pool Balance, exclusive of Delayed Funding Receivables, as of the
close of business on the Addition Date, is at least equal to that
Required Participation Amount; and
- the result of multiplying the Seller's Participation Amount, as
determined above, by the percentage equivalent of the portion of the
seller's interest represented by the seller's certificate, is at least
equal to 5% of the Pool Balance, exclusive of Delayed Funding
Receivables, as of the close of business on that Addition Date.
Additional Accounts and the related receivables may not be of the same
credit quality as the accounts and receivables which are in the trust at the
time the Additional Accounts are designated by the seller. Additional Accounts
may have been originated by DFS using credit criteria different from those which
were applied to existing accounts.
We cannot assure you that the seller would be able to, or would be
permitted to, designate Additional Accounts, and transfer the related
receivables to the trust, at any particular time.
REMOVAL OF ACCOUNTS; TRANSFERS OF PARTICIPATIONS
The seller will have the right at any time to remove accounts from the
computer file, microfiche list or other list of accounts previously delivered to
the trustee of the trust. To remove any Eligible Account, the seller, or the
servicer on its behalf, will:
- on or before the fifth business day prior to the removal date, furnish
to the trustee of the trust, any Enhancement Provider, and each Rating
Agency a written notice of removal specifying the removal date;
- on or before the fifth business day after the removal date, furnish to
the trustee of the trust a computer file, microfiche list or other list
of the accounts that were removed on the removal date, specifying for
each removed account as of the date of the removal notice its number,
the aggregate amount outstanding in that removed account and the
aggregate amount of receivables in that removed account;
- represent and warrant that the removal of any Eligible Account on the
removal date will not, in the reasonable belief of the seller, cause an
Early Amortization Event to occur or cause the Pool Balance to be less
than the Required Participation Amount;
- represent and warrant that no selection procedures believed by the
seller to be adverse to the interest of the certificateholders were
utilized in selecting the removed accounts; and
- cause the Rating Agency Condition to be satisfied with respect to the
removal.
The pooling and servicing agreement provides that the seller, or the
servicer on its behalf, will remove Ineligible Accounts. If the account was an
Ineligible Account at the time it was originally designated as an account, then
prior to the time that account is removed the pooling and servicing agreement
contemplates that a portion of the collections on non-principal receivables
relating to that account will be allocated to the seller.
All receivables existing in any removed 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 part of the trust.
The termination of an account by a dealer upon such dealer's payment in
full of the receivables in the related account will not be a removal of such
account for purposes of the foregoing.
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Participation Interests in receivables may be created before or after those
receivables have been transferred to the trust. Amounts payable by the related
dealers that are allocable to Participation Interests will not be part of the
receivables and will not belong to the trust. Participation Interests may be
transferred to one or more third parties.
COLLECTION ACCOUNT
The trustee of the trust has established an Eligible Deposit Account in the
name of the trust, bearing a designation indicating that funds deposited in that
deposit account are held for the benefit of the seller, all series and any
Enhancement Providers (the "collection account").
At the direction of the servicer, funds in the collection account will be
invested in Eligible Investments. All interest and other investment
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 of the trust to make withdrawals and
payments from the collection account for the purpose of carrying out the duties
of the servicer or the trustee of the trust specified in the pooling and
servicing agreement.
ALLOCATIONS AMONG SERIES
The supplement for each series will specify how collections of
Non-Principal Receivables and Principal Receivables, Defaulted Amounts and
Miscellaneous Payments will be allocated to that series. Amounts so allocated to
any series will not, except as specified in the related supplement, be available
to any other series.
On each distribution date, (a) the servicer will allocate Excess Principal
Collections, as described below, to each series as set forth in the related
supplement and (b) the servicer will instruct the trustee of the trust to
withdraw from the collection account and pay to the seller:
(1) an amount equal to the excess, if any, of (a) the aggregate
amount, if any, for all outstanding series of collections of Principal
Receivables which the related supplements specify are to be treated as
"Excess Principal Collections" for that distribution date, over (b) the
aggregate amount, if any, for all outstanding series which the related
supplements specify are "Principal Shortfalls" for that distribution date;
and
(2) without duplication, the aggregate amount for all outstanding
series of that portion of Principal Collections which the related
supplements specify are to be allocated and paid to the seller for that
distribution date;
provided, however, that, in the case of clauses (1) and (2), the amounts will be
paid to the seller only if the Unconcentrated Pool Balance for that distribution
date, determined after giving effect to any Principal Receivables transferred to
the trust on that date, exceeds the Required Participation Amount for the
immediately preceding determination date, after giving effect to the
allocations, distributions, withdrawals and deposits to be made on that
distribution date. The amount held in the collection account as a result of the
proviso in the preceding sentence ("Unallocated Principal Collections") will be
paid to the seller at the time the Unconcentrated Pool Balance exceeds the
Required Participation Amount for the immediately preceding determination date,
after giving effect to the allocations, distributions, withdrawals and deposits
to be made on that distribution date immediately following that determination
date; provided, however, that any Unallocated Principal Collections on deposit
in the collection account at any time during which any series is in its
amortization period, accumulation period or early amortization period will be
deemed to be "Miscellaneous Payments."
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DISCOUNT FACTOR
Finance charges are payable on the receivables generally. However, finance
charges will not begin to accrue on a portion of the receivables until a certain
period of time has elapsed after their origination.
In order to create additional Non-Principal Collections in respect of those
receivables as well as to create additional Non-Principal Collections relating
to the other receivables in the trust, a portion of the principal collections on
each receivable will be treated as Non-Principal Collections. Principal payments
on receivables will be treated as Non-Principal Collections in an amount equal
to the product of those principal payments times the Discount Factor.
ALLOCATION OF COLLECTIONS; DEPOSITS IN COLLECTION ACCOUNT
The pooling and servicing agreement provides that the servicer will deposit
all collections received from the receivables, excluding collections allocable
to the seller, into the collection account, not later than two business days
after the date on which the collections are recorded on the servicer's computer
file of accounts. However, for so long as:
- DFS remains the servicer under the pooling and servicing agreement;
- no Servicer Default has occurred and is continuing; and
- DFS arranges for and maintains a letter of credit or other form of
Enhancement for the servicer's obligation to make deposits of
collections on the receivables in the collection account that is
acceptable in form and substance to each rating agency, or DFS
otherwise obtains each rating agency confirmation described below, then
DFS need not deposit collections into the collection account until the
business day immediately preceding the distribution date on which those
funds are required to be distributed to certificateholders, at which
time DFS will make those deposits in an amount equal to the net amount
of those deposits and withdrawals which would have been made had the
conditions of this sentence not applied. The pooling and servicing
agreement provides that prior to ceasing daily deposits as described
above, the seller will have delivered to the trustee of the trust
confirmation from each of the rating agencies that the failure by DFS
to make daily deposits will not result in a reduction or withdrawal of
the rating of any outstanding series or class of certificates.
Until collections are deposited into the collection account, the servicer
may use the collections for its own benefit, and the proceeds of any investment
of those collections will accrue to the servicer. So long as the servicer holds
collections and is permitted to use the collections for its own benefit, the
certificateholders are exposed to risk of loss, including risk resulting from
the bankruptcy or insolvency of the servicer. The servicer will pay no fee to
the trust or any certificateholder for any use by the servicer of funds
representing collections on the receivables.
The servicer will be required to deposit collections into the collection
account only to the extent of, without duplication:
- the distributions required to be made to certificateholders and any
Enhancement Provider for the applicable distribution date; and
- the amounts required to be deposited into any deposit account
maintained for the benefit of certificateholders.
If, at any time prior to that distribution date, the amount of collections
deposited in the collection account exceeds the amount required to be deposited,
the servicer will be permitted to withdraw the excess from the collection
account.
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In addition, the servicer will be permitted to make the deposit of
collections and other amounts net of any amounts to be distributed or paid to
the servicer. The servicer will net the portion of its monthly servicing fee
allocated to your series for a distribution date only if amounts deposited in
the collection account for that distribution date otherwise would be sufficient
to pay the amounts that are payable to your series on that distribution date.
TERMINATION
The trust will terminate on the earliest to occur of:
- the day following the distribution date on which the aggregate invested
amounts for all series is zero, if the seller elects to terminate the
trust at that time;
- if (a) an insolvency event relating to the seller occurs, or the seller
violates its covenant not to sell receivables to third parties or
create a lien on receivables, and (b) the trustee of the trust sells
the receivables as described under "Description of the
Certificates--Early Amortization Events" in the prospectus supplement,
the date on which proceeds of that receivables sale are distributed to
certificateholders; and
- December 31, 2014.
At the time of termination of the trust, all right, title and interest in
the receivables and other funds of the trust, other than amounts held in the
trust deposit accounts for the final distribution of principal and interest to
certificateholders, will be conveyed and transferred to the seller.
INDEMNIFICATION
The pooling and servicing agreement provides that the servicer will
indemnify the trust and the trustee of the trust 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 of the
trust or the servicer pursuant to the pooling and servicing agreement; provided
that:
- the trust or the trustee of the trust will not be so indemnified if
those acts or omissions constitute fraud, gross negligence, breach of
fiduciary duty or willful misconduct by the trustee of the trust; and
- the servicer will not indemnify the trust, the trustee of the trust or
the certificateholders (a) for any act taken by the trustee of the
trust at the request of the certificateholders or any Enhancement
Provider to the extent that the trustee of the trust has been
indemnified by the certificateholders or that Enhancement Provider, or
(b) for any tax required to be paid by the trust or the
certificateholders, or (c) for any loss due to the financial inability
of Dealers to make payments on the receivables.
The pooling and servicing agreement generally provides that, except as
described above, neither the seller, the servicer, Deutsche Floorplan
Receivables, Inc. nor any of their directors, officers, employees or agents will
be under any liability to the trust, the trustee of the trust, the
certificateholders or any other person for taking any action, or for refraining
from taking any action, pursuant to the pooling and servicing agreement.
In addition, the pooling and servicing agreement provides that the servicer
is not under any obligation to appear in, prosecute or defend any legal action
which is not incidental to its servicing responsibilities under the pooling and
servicing agreement.
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COLLECTION AND OTHER SERVICING PROCEDURES
Pursuant to the pooling and servicing agreement, the servicer is
responsible for servicing and administering the receivables and collecting
payments due under the receivables in accordance with its customary and usual
servicing procedures in effect from time to time for servicing wholesale
receivables, comparable to the receivables, which the servicer services for its
own account.
Pursuant to the pooling and servicing agreement, DFS is permitted to change
the terms relating to the accounts if, in the servicer's reasonable judgment, no
Early Amortization Event will occur as a result of the change.
Pursuant to the pooling and servicing agreement, the servicer agrees to
maintain custody of all documents, instruments or records that evidence or
relate to the receivables as custodian for the benefit of the certificateholders
and the trustee of the trust.
The servicer, and any successor servicer, may delegate its duties to
another person, subject to satisfaction of the Rating Agency Condition.
SERVICER COVENANTS
In the pooling and servicing agreement, the servicer covenants that:
- it will duly satisfy all obligations on its part to be fulfilled under
or in connection with the receivables and accounts, will maintain in
effect all qualifications required under requirements of law 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 any outstanding series;
- it will not permit any rescission or cancellation of a receivable
except as ordered by a court of competent jurisdiction or other
government authority and except for a negotiated work-out of defaulted
receivables that enhances the trust's recovery on those receivables;
- it will do nothing to impair the rights of the certificateholders in
the receivables; and
- it will not reschedule, revise or defer payments due on any receivable
except in accordance with its policies and procedures, as amended from
time to time, (a) relating to the operation of the Floorplan Business,
the Accounts Receivable Business and the Asset Based Lending Business,
and (b) relating to the maintenance of accounts and collection of
receivables.
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,
the noncompliance has a material adverse effect on the certificateholders'
interest in that receivable or account and the noncompliance, and any material
adverse effect caused by the noncompliance, has not been cured within 30 days
thereafter, or any longer period as the trustee of the trust may agree to, then:
- the servicer will purchase that receivable or all receivables in that
account, as applicable; and
- that purchase will be made on the determination date following the
expiration of the 30 day cure period, or following the expiration of a
longer period as may be agreed to by the trustee of the trust, and the
servicer will be obligated to deposit into the collection account an
amount equal to the Purchase Price of that receivable.
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The purchase by the servicer constitutes the sole remedy available to the
certificateholders if the applicable covenants of the servicer are not complied
with and the applicable receivables will be automatically assigned to the
servicer.
SERVICING COMPENSATION
The servicer's compensation for each series for its servicing activities
and reimbursement for its expenses will be a monthly servicing fee in an amount,
specified in the related prospectus supplement, payable in arrears on each
distribution date.
CERTAIN MATTERS REGARDING THE SERVICER
The pooling and servicing agreement provides that the servicer may not
resign from its obligations and duties under the pooling and servicing
agreement, except on determination that those duties are no longer permissible
under applicable law. No resignation of the servicer will become effective until
the trustee of the trust or a successor to the servicer has assumed the
servicer's responsibilities and obligations under the pooling and servicing
agreement.
The pooling and servicing agreement provides that the servicer will not
consolidate with or merge with any other person or convey or transfer its
properties and assets substantially as an entirety to any person, unless:
(a) the person formed by that consolidation or with which the servicer
is merged or the person which acquires by conveyance or transfer the
properties and assets of the servicer substantially as an entirety is a
person organized and existing under the laws of the United States of
America or any State or the District of Columbia and, if the servicer is
not the surviving entity, the person assumes, without the execution or
filing of any paper or any further act on the part of any of the parties to
the pooling and servicing agreement, the performance of every covenant and
obligation of the servicer under the pooling and servicing agreement and,
upon compliance with paragraph (b) below, that person will be the servicer
without your consent; and
(b) the servicer has delivered to the trustee of the trust an
officers' certificate stating that the consolidation, merger, conveyance or
transfer comply with paragraph (a).
The pooling and servicing agreement does not prevent the sale or other
transfer of the stock of DFS.
SERVICER DEFAULT
In the event of any Servicer Default, the trustee of the trust, by written
notice to the servicer, may terminate all of the rights and obligations of the
servicer, as servicer, under the pooling and servicing agreement and in and to
the receivables and the proceeds of those receivables and appoint a new
servicer.
The trustee of the trust will as promptly as possible appoint a successor
servicer and if no successor servicer has been appointed by the trustee of the
trust and has accepted that appointment by the time the servicer ceases to act
as servicer, will automatically be appointed as the successor servicer.
Prior to any appointment of a new servicer, the trustee of the trust will
review any bids obtained from potential servicers meeting certain eligibility
requirements set forth in the pooling and servicing agreement to serve as
successor servicer for servicing compensation not more than the Servicing Fee
plus certain excess amounts payable by the seller.
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EVIDENCE AS TO COMPLIANCE
The pooling and servicing agreement provides for delivery to the trustee of
the trust on or before March 31 of each calendar year of a statement signed by
an officer of the servicer to the effect that the servicer believes that it
complied in all material respects with its obligations under specified
provisions of the pooling and servicing agreement throughout the preceding year
or, if there has been a material default in the performance of any of those
obligations, specifying the nature and status of the default.
The pooling and servicing agreement provides that on or before March 31 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 deliver a report to the trustee of the trust to the
effect that (a) they have examined the assertion of the servicer as to the
servicer's compliance with its obligations under specified provisions of the
pooling and servicing agreement and (b) based upon examination of such
assertion, the servicer was in compliance with such provisions of the pooling
and servicing agreement in all material respects or, if there has been a
material default in the performance of such obligations, specifying such default
of the servicer and the nature of that default.
Copies of the foregoing furnished to the trustee of the trust may be
obtained by a request in writing delivered to the trustee of the trust. See
"--The Trustee" below.
AMENDMENTS
The pooling and servicing agreement or any supplement may be amended by the
seller, the servicer and the trustee of the trust, without your consent, so long
as the amendment will not, as evidenced by an officer's certificate of Deutsche
Floorplan Receivables, Inc., adversely affect in any material respect the
interests of any certificateholders.
In addition, the pooling and servicing agreement or any supplement may be
amended by the servicer and the trustee of the trust at the direction of the
seller without your consent:
(1) to add, modify or eliminate 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, and to the extent that those regulations eliminate or modify the need
therefor, to modify or eliminate existing provisions of the pooling and
servicing agreement or any supplement relating to the intended availability
of partnership treatment of the trust for federal income tax purposes;
(3) to enable all or a portion of the trust to qualify as, and to
permit an election to be made to cause the trust to be treated as, a
"financial asset securitization investment trust," as described in the
provisions of the "Small Business Job Protection Act of 1996," H.R.
3448--and, in connection with that type of election, to modify or eliminate
existing provisions of the pooling and servicing agreement or any
supplement relating to the intended Federal income tax treatment of the
certificates and the trust in the absence of that type of election, which
may include elimination of the sale of receivables, 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;
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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 of the trust have received an
opinion of counsel to the effect that the amendment will not adversely affect
the characterization of the certificates of any outstanding series or class as
debt or partnership interests.
The pooling and servicing agreement or any supplement may be amended by the
seller, the servicer and the trustee of the trust 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. An amendment
contemplated by the preceding sentence may not:
(a) reduce in any manner the amount of, or delay the timing of,
distributions required to be made on any certificate without the consent of
the holder of each affected certificate;
(b) change the definition of or the manner of calculating the interest
of any certificateholder without the consent of the holder of each affected
certificate;
(c) reduce the amount available under any Enhancement without the
consent of the holder of each affected certificate;
(d) adversely affect the rating of any series or class by any rating
agency without the consent of all holders of certificates of that series or
class; or
(e) reduce the percentage described above of the unpaid principal
amount of certificates the holders of which are required to consent to any
amendment without the consent of all certificateholders.
The pooling and servicing agreement may not be amended in any manner which
would adversely affect in any material respect the interests of any Enhancement
Provider without its consent.
Notwithstanding the matters described above, the pooling and servicing
agreement or any supplement may be amended by the servicer, the seller and the
trustee of the trust without your consent to change in any manner the treatment
of Delayed Funding Receivables under the pooling and servicing agreement or any
supplement, but only if the Rating Agency Condition is satisfied.
In addition, the pooling and servicing agreement or any supplement may be
amended without your consent in order to make changes required to obtain a
listing of any class of any series on the Luxembourg Stock Exchange.
The Dealer Overconcentration Series will have voting and consent rights of
the type applicable to other series. References to certificateholders of a
series in this prospectus or in the prospectus supplement should be read to
include, where applicable, the holder or holders of the Dealer Overconcentration
Series.
LIMITATION ON SUITS AND BANKRUPTCY FILING
No certificateholder will have any right by virtue of any provisions of the
pooling and servicing agreement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to the pooling and servicing
agreement, unless the certificateholder previously has made, and unless the
holders of certificates evidencing more than 50% of the aggregate unpaid
principal amount of all certificates (or, with respect to any such action, suit
or proceeding that does not relate to all series, 50% of the aggregate unpaid
principal amount of the certificates of all series to which the action, suit or
proceeding relates) have made, a
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request to the trustee of the trust to institute the action, suit or proceeding
in its own name as trustee and have offered to the trustee of the trust
reasonable indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby, and the trustee, for 60 days
after such request and offer of indemnity, has neglected or refused to institute
any such action, suit or proceeding; it being understood and intended, and being
expressly covenanted by each certificateholder with every other
certificateholder and the trustee, that no one or more certificateholders will
have any right in any manner whatever by virtue or by availing itself or
themselves of any provisions of the pooling and servicing agreement to affect,
disturb or prejudice the rights of the holders of any other of the certificates,
or to obtain or seek to obtain priority over or preference to any other such
certificateholder, or to enforce any right under the pooling and servicing
agreement, except in the manner therein provided and for the equal, ratable and
common benefit of all certificateholders except as otherwise expressly provided
in the pooling and servicing agreement.
Each of the trustee (not in its individual capacity but solely as trustee),
by entering into the pooling and servicing agreement, and you, by accepting a
certificate or an interest in a certificate, are deemed to covenant and agree
that it and you will not at any time institute against, or encourage or solicit
any person to institute against, the seller, the general partner of the seller,
or the trust, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings under any United States Federal or
state bankruptcy or similar law.
THE TRUSTEE
The Chase Manhattan Bank, a New York banking corporation, currently acts as
trustee of the trust under the pooling and servicing agreement. The trustee of
the trust is located at, and any request for copies of statements, certificates
and reports furnished to the trustee of the trust should be addressed to the
trustee at 450 W. 33rd Street, New York, New York 10001, Attention: Structured
Finance Relationship Management. 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 of the trust in
its individual or other capacity may become the owner or pledgee of certificates
and may deal with the seller and the servicer in banking and other transactions
with the same rights it would have if it were not the trustee of the trust.
The pooling and servicing agreement does not require the trustee of the
trust:
- to make any initial or periodic general examination of the receivables
or any records relating to the receivables for the purpose of
establishing the presence or absence of defects, compliance with
representations and warranties of the seller or for any other purpose;
or
- make any initial or periodic general examination of the servicer for
the purpose of establishing the compliance by the servicer with its
representations or warranties, the observation of its obligations under
the pooling and servicing agreement or for any other purpose.
For purposes of meeting the legal requirements of applicable jurisdictions,
the trustee of the trust will have the power to appoint a co-trustee or separate
trustees of all or a part of the trust. In the event of that type of
appointments, all rights, powers, duties and obligations will be conferred or
imposed on the trustee and the separate trustee or co-trustee jointly, or in any
jurisdiction in which the trustee of the trust will be incompetent or
unqualified to perform certain acts, singly on the separate trustee or
co-trustee.
For so long as certificates of any series are listed on the Luxembourg
Stock Exchange, the trustee of the trust will maintain a paying agent and a
transfer agent in Luxembourg.
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The trustee of the trust may resign at any time, in which event the seller
will be obligated to appoint a successor trustee.
The servicer may remove the trustee of the trust at any time and from time
to time in the servicer's sole discretion. Upon removal of the trustee, the
servicer will appoint a successor trustee.
Any resignation or removal of the trustee of the trust and appointment of a
successor trustee does not become effective until the acceptance of the
appointment by the successor trustee.
DESCRIPTION OF THE RECEIVABLES CONTRIBUTION AND SALE AGREEMENT
The following summary describes certain terms of the receivables
contribution and sale agreement, but it does not purport to be complete and is
qualified in its entirety by reference to the receivables contribution and sale
agreement. The receivables contribution and sale agreement, in the form in
effect at the time that the registration statement became effective, was filed
as an exhibit to the registration statement. If affiliates of DFS originate
receivables and sell them to the seller for transfer to the trust, those other
affiliates will become parties to the receivables contribution and sale
agreement and make representations, warranties and covenants similar to those
made by DFS in the receivables contribution and sale agreement.
SALE OR TRANSFER OF RECEIVABLES
Pursuant to the receivables contribution and sale agreement, DFS has
contributed or sold to the seller all of its right, title and interest in and to
all of the receivables in each Account and all Collateral Security 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.
At the time that the receivables contribution and sale agreement was
entered into, Deutsche Business Services Corporation, an affiliate of DFS, was a
party to the receivables contribution and sale agreement and sold receivables to
the seller. Since that time, Deutsche Business Services Corporation has ceased
to be an active corporation and no longer sells receivables to the seller.
However, the receivables contribution and sale agreement has not been amended to
remove Deutsche Business Services Corporation as a party.
REPRESENTATIONS AND WARRANTIES
Pursuant to the receivables contribution and sale agreement, DFS represents
and warrants to the seller that:
- Each receivable and all Collateral Security existing on the closing
date for the series issued in 1993, or, in the case of Additional
Accounts, on the applicable Addition Date, and on each Transfer Date,
has been conveyed to the seller free and clear of any lien.
- With respect to each receivable and all Collateral Security existing on
the closing date for the series issued in 1993, or, in the case of
Additional Accounts, on the applicable Addition Date, and on each
Transfer Date, all consents, licenses, approvals or authorizations of
or registrations or declarations with any governmental authority
required to be obtained, effected or given by DFS in connection with
the conveyance of that receivable or Collateral Security to the seller
have been duly obtained, effected or given and are in full force and
effect.
- On the cut-off date for the series issued in 1993 and the closing date
for each series, each Initial Account is an Eligible Account and, in
the case of Additional Accounts, on
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the applicable Additional Cut-Off Date and each subsequent closing date
for a series, the Additional Account is an Eligible Account.
- On the closing date for the series issued in 1993, in the case of the
Initial Accounts, on the applicable Additional Cut-Off Date, in the
case of Additional Accounts, and on each Transfer Date, each receivable
conveyed to the seller on that date is an Eligible Receivable or, if
that receivable is not an Eligible Receivable, the receivable is
conveyed to the seller in accordance with the receivables contribution
and sale agreement.
- Each Participation Agreement, if any, relating to receivables conveyed
by DFS permits the transfer of those receivables to the seller and the
trust and provides that the undivided interest of such participant is
pari passu in all respects (other than non-subordinated interest strips
and fees) with the remaining undivided interest in the related
receivables.
In the event any representation and warranty described above is not true
and correct as of the date specified therein with respect to any receivable or
account and the seller is, in connection therewith, required to purchase that
receivable or all receivables in such account pursuant to the pooling and
servicing agreement, then, within 30 days (or such longer period as may be
agreed to by the seller) of the earlier to occur of the discovery of any such
event by DFS or the seller, or receipt by DFS or the seller of written notice of
any such event given by the trustee or any Enhancement Providers, DFS will
repurchase the receivable or receivables, if any, of which the seller is
required to accept reassignment pursuant to the pooling and servicing agreement.
DFS will pay the seller the Purchase Price for the purchased receivable.
The obligation of DFS to repurchase any receivable will constitute the sole
remedy respecting the event giving rise to that obligation available to the
seller and to the certificateholders (or the trustee on behalf of
certificateholders).
Pursuant to the receivables contribution and sale agreement, DFS also
represents and warrants to the seller as of the closing date for each series,
that:
- DFS is a corporation duly organized and validly existing and in good
standing under the laws of the state of its incorporation and has, in
all material respects, full corporate power, authority and legal right
to own its properties and conduct its business as such properties are
presently owned and such business is presently conducted, and to
execute, deliver and perform its obligations under the receivables
contribution and sale agreement.
- DFS is duly qualified to do business and, where necessary, is in good
standing as a foreign corporation (or is exempt from such requirement)
and has obtained all necessary licenses and approvals in each
jurisdiction in which the conduct of its business requires such
qualification except where the failure to so qualify or obtain licenses
or approvals would not have a material adverse effect on its ability to
perform its obligations under the receivables contribution and sale
agreement.
- The execution and delivery of the receivables contribution and sale
agreement and the consummation of the transactions provided for or
contemplated by the receivables contribution and sale agreement have
been duly authorized by DFS by all necessary corporate action on the
part of DFS and are within its corporate powers.
- The execution and delivery of the receivables contribution and sale
agreement, the performance of the transactions contemplated by the
receivables contribution and sale agreement and the fulfillment of the
terms of the receivables contribution and sale agreement, will not
conflict with, result in any breach of any of the material
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terms and provisions of, or constitute (with or without notice or lapse
of time or both) a material default under, any indenture, contract,
agreement, mortgage, deed of trust, or other instrument to which DFS is
a party or by which it or its properties are bound.
- The execution and delivery of the receivables contribution and sale
agreement, the performance of the transactions contemplated by the
receivables contribution and sale agreement and the fulfillment of the
terms of the receivables contribution and sale agreement applicable to
DFS, will not conflict with or violate any material requirements of law
applicable to DFS or conflict with, violate, result in any breach of
any of the material terms and provisions of, or constitute (with or
without notice or lapse of time or both) a material default under any
indenture, contract, agreement, mortgage, deed of trust, or other
instrument to which DFS is a party or by which DFS is bound.
- There are no proceedings or, to the best knowledge of DFS,
investigations, pending or threatened against DFS, before any
governmental authority (i) asserting the invalidity of the receivables
contribution and sale agreement, (ii) seeking to prevent the
consummation of any of the transactions contemplated by the receivables
contribution and sale agreement, (iii) seeking any determination or
ruling that, in the reasonable judgment of DFS, would materially and
adversely affect the performance by DFS of its obligations under the
receivables contribution and sale agreement, (iv) seeking any
determination or ruling that would materially and adversely affect the
validity or enforceability of the receivables contribution and sale
agreement or (v) seeking to affect adversely the income tax attributes
of the trust under the United States federal or any state income,
single business or franchise tax systems.
- All appraisals, authorizations, consents, orders, approvals or other
actions of any person or of any governmental body or official required
in connection with the execution and delivery of the receivables
contribution and sale agreement, the performance of the transactions
contemplated by the receivables contribution and sale agreement, and
the fulfillment of the terms of the receivables contribution and sale
agreement, have been obtained.
- The receivables contribution and sale agreement constitutes a legal,
valid and binding obligation of DFS enforceable against DFS in
accordance with its terms, except as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect affecting the enforcement
of creditors' rights in general and except as such enforceability may
be limited by general principles of equity (whether considered in a
suit at law or in equity).
- As of the closing date for the series issued in 1993, in the case of
Initial Accounts, as of the applicable Addition Date, in the case of
the Additional Accounts, and, as of the applicable Removal Date, in the
case of Removed Accounts, Schedule 1 to the receivables contribution
and sale agreement is an accurate and complete listing in all material
respects of all the accounts as of the cut-off date for the series
issued in 1993, the applicable Additional Cut-Off Date or the
applicable Removal Date, as the case may be, and the information
contained therein with respect to the identity of such accounts and the
receivables existing thereunder is true and correct in all material
respects as of the cut-off date for the series issued in 1993, such
applicable Additional Cut-Off Date or such Removal Date, as the case
may be.
- The receivables contribution and sale agreement or, in the case of
Additional Accounts, the related assignment constitutes a valid sale,
transfer and assignment to the seller of all right, title and interest
of DFS in the receivables and the Collateral Security and the proceeds
thereof. Upon the filing of the financing statements
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described in the receivables contribution and sale agreement with the
applicable filing offices and, in the case of the receivables thereafter
created and the proceeds thereof, upon the creation thereof, the seller
will have a first priority perfected ownership interest in such
property. Except as otherwise provided in the pooling and servicing
agreement, neither DFS nor any person claiming through or under DFS has
any claim to or interest in the trust assets.
In the event of the breach of the representations and warranties described
in the immediately preceding paragraphs and if, in connection with that breach
the seller is obligated under the pooling and servicing agreement to purchase
the certificateholders' interest in the trust, DFS will be obligated to
repurchase the receivables from the seller for an amount equal to the amount the
seller is required to deposit under the pooling and servicing agreement in
connection with its purchase of the certificateholders' interest. The obligation
of DFS to purchase receivables as described in the preceding sentence will
constitute the sole remedy against DFS for its breach of the applicable
representations and warranties available to the seller, the certificateholders
or the trustee of the trust on behalf of the certificateholders.
CESSATION OF SALES OF RECEIVABLES; TERMINATION
The receivables contribution and sale agreement provides that DFS will sell
receivables to the seller until the earlier of (a) the occurrence of one or more
specified early amortization events, and (b) the termination of the trust.
However, the receivables contribution and sale agreement provides that, under
some circumstances, DFS may sell receivables to the seller even if DFS is a
party to insolvency proceedings. The receivables contribution and sale agreement
will terminate immediately after the trust terminates.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
TRANSFER OF RECEIVABLES
DFS has retained and will retain, and will not deliver to the trustee of
the trust, records or agreements relating to the receivables. The records and
agreements relating to the receivables have not been and will not be segregated
from those relating to other accounts of DFS, and the physical documentation
relating to the receivables has not and will not be stamped or marked to reflect
the transfer of the receivables to the trust. Any interest in receivables
acquired by the seller, and the trust, will be limited by the rights and
defenses--including rights of setoff--of the applicable Dealer against DFS.
Filing of appropriate financing statements under the UCC generally is
required to protect the interests of the seller and the trust in the
receivables. If DFS, or the seller, were to change its name, identity or
organizational structure so that filed UCC financing statements became
misleading, those UCC financing statements would not be effective to perfect the
interests of the seller or the trust, as applicable, in receivables originated
or acquired by DFS or the seller, as applicable, more than four months after the
change. A similar rule applies if DFS or the seller changes the location of its
chief executive office.
There are some circumstances under the UCC and applicable federal law in
which third parties could have an interest in the receivables with priority over
the trust's interest. If the receivables are deemed to be "chattel paper", a
purchaser of the receivables who gives new value and takes possession of the
documents which evidence the receivables--that is, the chattel paper--in the
ordinary course of that purchaser's business may, under certain circumstances,
have priority over the interest of the seller or the trust in the receivables. A
tax or other government lien on property of DFS or the seller arising prior to
the time a receivable is conveyed to the seller or the trust may also have
priority over the interest of the
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seller and the trust in that receivable. Statutory and judgment liens arising
under local law may also gain priority over claims of the seller and the trust.
CERTAIN MATTERS RELATING TO BANKRUPTCY
A limited partnership, like the seller, could become insolvent if its
general partner becomes insolvent--which, in the case of the seller, is Deutsche
Floorplan Receivables, Inc. Pursuant to the pooling and servicing agreement, the
trustee and all certificateholders covenant that they will not at any time
institute against the seller or against the general partner of the seller any
bankruptcy, reorganization or other proceedings under any federal or state
bankruptcy or similar law. We cannot assure you that the foregoing covenant is
enforceable.
LEGAL MATTERS
Naran U. Burchinow, Esq., General Counsel of DFS, will render an opinion
for the seller regarding certain legal matters relating to each series. Mayer,
Brown & Platt, Chicago, Illinois will render an opinion for the seller regarding
certain legal matters and certain federal income tax matters relating to each
series. Bryan Cave LLP, St. Louis, Missouri will render an opinion for the
seller regarding certain legal matters and certain Missouri tax matters relating
to each series.
REPORTS TO CERTIFICATEHOLDERS
The servicer will prepare monthly unaudited reports that will contain
information about the trust. The reports will not constitute financial
statements prepared in accordance with generally accepted accounting principles.
Unless and until definitive certificates are issued, the reports will be sent
only to Cede & Co. which is the nominee of DTC and the registered holder of the
offered certificates. See "Description of the Certificates--Book-Entry
Registration," and "--Evidence as to Compliance" in this prospectus.
WHERE YOU CAN FIND MORE INFORMATION
We filed a registration statement relating to the certificates with the
Securities and Exchange Commission. The registration statement includes
additional information.
You may read and copy any reports, statements or other information we file
with the Securities and Exchange Commission at the public reference room of the
Securities and Exchange Commission in Washington, D.C., New York, New York or
Chicago, Illinois. You can request copies of these documents, on payment of a
duplicating fee, by writing to the Securities and Exchange Commission. Please
call the Securities and Exchange Commission at (800) SEC-0330 for further
information on the operation of the public reference rooms. Our Securities and
Exchange Commission filings are also available to the public on the Securities
and Exchange Commission Internet site (http://www.sec.gov).
The Securities and Exchange Commission allows us to "incorporate by
reference" information we file with it, which means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is considered to be part of this
prospectus. Information that we file later with the Securities and Exchange
Commission will automatically update the information in this prospectus. In all
cases, you should rely on the later information over different information
included in this prospectus or the accompanying prospectus supplement. We
incorporate by reference any future reports and proxy materials filed by or on
behalf of the trust until we terminate our offering of the certificates.
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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. If any of the certificates of your series are listed on the Luxembourg
Stock Exchange, copies of the pooling and servicing agreement and the supplement
for your series will be available for inspection at the office of a paying agent
in Luxembourg.
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GLOSSARY
For the purpose of making this prospectus easier to read, in many instances
we have used lower case letters to describe terms that are defined in more
detail in this Glossary or in the Glossary of the accompanying prospectus
supplement. All references in this prospectus to any agreement will be
understood to be references to that agreement as it may be amended, amended and
restated or otherwise modified from time to time.
"Account" means each Initial Account and, from and after the related
Addition Date, each Additional Account. The term "Account" will not apply to any
Removed Accounts reassigned or assigned to the seller or the servicer in
accordance with the terms of the pooling and servicing agreement.
"Accounts Receivable" means, for any Dealer, all amounts shown on the
Dealer's records as amounts payable by a customer in respect of goods or
services sold by the Dealer to the customer.
"Accounts Receivable Business" means the extensions of credit made by DFS
or an Approved Affiliate to Dealers in order to finance the Accounts Receivable
of the Dealers.
"Accounts Receivable Financing Agreement" means an accounts receivable
financing agreement entered into by DFS or an Approved Affiliate with a Dealer
in connection with the Accounts Receivable Business with the Dealer.
"Addition Date" means a date specified in an Addition Notice relating to
Additional Accounts.
"Addition Notice" means a notice provided by the seller, or the servicer on
its behalf, to the trustee of the trust relating to Additional Accounts.
"Additional Accounts" means each individual revolving credit arrangement
established by DFS or an Approved Affiliate with a Dealer in connection with the
Floorplan Business, the Accounts Receivable Business, or the Asset Based Lending
Business, which account is designated to be included as an Account and is
identified in a computer file or microfiche or written list delivered to the
trustee of the trust by the seller.
"Additional Cut-Off Date" means, for Additional Accounts, the applicable
day specified in the related Addition Notice.
"Adjustment Payment" means a deposit in the collection account as described
below. If the servicer adjusts the amount of any principal receivable because of
a rebate, refund, credit adjustment or billing error to a Dealer, or because the
receivable relates to a product which was refused or returned by a Dealer, then:
- the Seller's Participation Amount will be reduced by the amount of the
adjustment; and
- if following that reduction the Pool Balance would be less than the
Required Participation Amount for the immediately preceding
determination date--after giving effect to the allocations,
distributions, withdrawals and deposits to be made on the distribution
date immediately following that determination date--the seller will be
required to pay an amount equal to that deficiency--up to the amount of
the adjustment--into the collection account on the day on which that
reduction occurs.
"Affiliate" means, with respect to any specified person, any other person
controlling or controlled by or under common control with that specified person.
For the purposes of this definition, "control" when used with respect to any
specified person means the power to direct the management and policies of that
person, directly or indirectly, whether through the
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ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Approved Affiliate" means any Affiliate of DFS if the Rating Agency
Condition has been satisfied with respect to designating that Affiliate as an
Approved Affiliate.
"A/R Receivable Overconcentration" on any determination date means the
excess of:
(a) the aggregate of all amounts of principal receivables in accounts
created pursuant to Accounts Receivable Financing Agreements on the last
day of the calendar month immediately preceding the determination date,
over
(b) 20% of the Pool Balance on the last day of that immediately preceding
calendar month or, if the Rating Agency Condition is satisfied, a larger
percentage of the Pool Balance as is stated in the applicable notice
from each applicable Rating Agency.
"A/R Receivables" means receivables arising from the Accounts Receivable
Business.
"Asset Based Lending Business" means the extensions of credit made by DFS
or an Approved Affiliate to Dealers in order to provide loans based on the value
of certain assets of the Dealer and secured by a security interest in the
assets.
"Asset Based Lending Financing Agreement" means an asset based lending
financing agreement entered into by DFS or an Approved Affiliate and a Dealer in
connection with the Asset Based Lending Business with the Dealer.
"Asset Based Receivable Overconcentration" on any determination date means
the excess of:
(a) the aggregate of all amounts of principal receivables in accounts
created pursuant to Asset Based Lending Financing Agreements on the last
day of the calendar month immediately preceding that determination date,
over
(b) 20% of the Pool Balance on the last day of that immediately preceding
calendar month or, if the Rating Agency Condition is satisfied, a larger
percentage of the Pool Balance as is stated in the applicable notice
from each applicable Rating Agency.
"Asset Based Receivables" means receivables arising from Asset Based
Lending Business.
"Clearstream, Luxembourg" means Clearstream Banking, societe anonyme.
"Collateral Security" for a receivable generally includes the security
interest granted by or on behalf of the related Dealer with respect thereto.
"Collection Account" is defined under "Description of the
Certificates--Collection Account."
"Dealer" means a Person engaged generally in the business of purchasing
consumer or commercial products from a manufacturer or distributor of those
types of products and holding the products for sale or lease in the ordinary
course of business, or a Person engaged generally in the business of
manufacturing or distributing products for sale to dealers in the ordinary
course of business.
"Dealer Overconcentration" is defined under "Description of the
Certificates--Allocations of Collections, Defaulted Amounts and Miscellaneous
Payments to the Dealer Overconcentration Series" in the accompanying prospectus
supplement.
"Dealer Overconcentration Series" is defined under "Description of the
Certificates--Allocations of Collections; Defaulted Amounts and Miscellaneous
Payments to the Dealer Overconcentration Series" in the accompanying prospectus
supplement.
"Defaulted Amount" is defined in the accompanying prospectus supplement.
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"Defaulted Receivables" on any determination date are:
(1) all receivables which were Eligible Receivables when transferred to the
trust, which arose in an account which became an Ineligible Account
after the date of transfer of those receivables to the trust and which
remained outstanding for any six consecutive determination dates
(inclusive of the determination date on which the determination is
being made) after the account became an Ineligible Account; and
(2) all receivables, other than all Ineligible Receivables, which were
charged off as uncollectible in respect of the immediately preceding
calendar month. For a description of DFS's charge off policy, see "The
Dealer Financing Business of DFS--Charge-Off Policy."
"Definitive Certificates" are defined under "Description of the
Certificates--Definitive Certificates."
"Delayed Funding Receivable" means a receivable in respect of which the
related Floorplan Agreement permits DFS or an Approved Affiliate to delay
payment of the purchase price of the related product to the Manufacturer for a
specified period after the invoice date for the product; provided that the
receivable will be a Delayed Funding Receivable only until DFS or the Approved
Affiliate funds the payment of that purchase price. If the Rating Agency
Condition is satisfied, then the receivables referred to in the preceding
sentence will not be Delayed Funding Receivables and the provisions relating to
Delayed Funding Receivables will no longer be of any force or effect.
"Determination Date" means, for any distribution date, the day that is two
business days prior to that distribution date.
"Deutsche FRI" means Deutsche Floorplan Receivables, Inc., a Nevada
corporation, and its successors and assigns.
"DFS" means Deutsche Financial Services Corporation, a Nevada corporation,
and its successors and assigns. Any reference to DFS in its capacity as
originator of receivables should be understood to be a reference also to any
Approved Affiliate. As of the date of this prospectus, no affiliate of DFS is an
Approved Affiliate.
"Discount Factor" will be calculated as follows:
- If on any distribution date the Net Receivables Rate for that
distribution date less (1) the weighted average of the interest rates,
as determined below, for all outstanding series (other than the Dealer
Overconcentration Series) for that distribution date less (2) the
annualized Net Loss Rate for the preceding twelve calendar months is
less than 1%, then the Discount Factor for that distribution date will
be adjusted upwards, rounded up to the nearest 0.1%--but in no event
will the Discount Factor exceed 1%--so that the Net Receivables Rate
less the rate in clause (1) less the rate in clause (2) will be equal
to 1%; and the Discount Factor will remain at the adjusted percentage
until it is further adjusted by the terms of this sentence or either of
the following two sentences.
- Notwithstanding the foregoing, the seller, at its discretion, may
increase or decrease the Discount Factor, but in no event will the
Discount Factor exceed 1% or be less than the percentage required by
the immediately preceding sentence or be greater than the percentage
required by the next sentence.
- Notwithstanding the foregoing, if the application of the Discount
Factor would cause the Pool Balance to be less than the Required
Participation Amount, then the Discount Factor will be the
percentage--which will in no event be less than 0%--rounded down
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to the nearest 0.1%, which, when applied, will cause the Pool Balance to
at least equal the Required Participation Amount. For purposes of this
definition:
(1) if the interest rate on a class of certificates is calculated as the
lesser of (x) a fixed rate or a formula rate and (y) the Net
Receivables Rate, then the interest rate will be the rate in clause
(x); and
(2) if an interest rate swap agreement provides the interest
distributable on a series or class of certificates, then the interest
rate for the series or class of certificates will be the interest
rate payable by the trust to the related swap counterparty.
"Discount Portion" means, for a receivable, the portion of that receivable
equal to the product of the Discount Factor and the outstanding principal
balance of the receivable.
"Distribution Date" means the fifteenth day of each month or, if that day
is not a business day, the next succeeding business day.
"DTC" means The Depository Trust Company.
"Early Amortization Event" has the meaning set forth in the prospectus
supplement.
"Early Amortization Period" has the meaning set forth in the prospectus
supplement.
"Eligible Account" means each individual revolving credit arrangement
payable in U.S. dollars and established by DFS or an Approved Affiliate with a
Dealer in the ordinary course of business pursuant to a Financing Agreement,
which arrangement, as of the date of determination with respect thereto:
- is in favor of a Dealer which is doing business in the United States of
America, including its territories and possessions, and which has not
been identified by the servicer as being the subject of any voluntary
or involuntary bankruptcy proceeding or being in a voluntary or
involuntary liquidation, and in which Deutsche North America or any
Affiliate thereof does not have an equity investment,
- is in existence and maintained and serviced by DFS or an Approved
Affiliate and
- is an account in respect of which no amounts have been charged off as
uncollectible.
"Eligible Deposit Account" means either:
- a segregated account with an Eligible Institution; or
- a segregated trust account with the corporate trust department of a
depository institution or trust company organized under the laws of the
United States or any one of the states or the District of Columbia--or
any domestic branch of a foreign bank--having corporate trust powers
and acting as trustee for funds deposited in that account, so long as
any of the securities of that depository institution or trust company
has a credit rating from each rating agency in one of its rating
categories which signifies investment grade.
"Eligible Institution" means:
- the corporate trust department of the trustee of the trust; or
- a depository institution or trust company organized under the laws of
the United States or any one of the states or the District of Columbia,
or a domestic branch of a foreign bank, which at all times (1) has
either (a) a long-term unsecured debt rating acceptable to each rating
agency or (b) a certificate of deposit rating acceptable to each rating
agency and (2) whose deposits are insured by the Federal Deposit
Insurance Corporation or any successor thereto.
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"Eligible Investments" means book-entry securities, negotiable instruments
or securities of the type contemplated by the pooling and servicing agreement,
or any other investment as to which the Rating Agency Condition has been
satisfied.
"Eligible Receivable" means each receivable:
- which was originated or acquired by DFS or the related Approved
Affiliate in the ordinary course of business;
- which arose under an Eligible Account;
- which is owned by DFS or the related Approved Affiliate at the time of
sale or contribution by DFS or the related Approved Affiliate to the
seller;
- which represents the obligation of a Dealer to repay an advance made or
to be made to or on behalf of the Dealer;
- which at the time of creation and at the time of transfer to the trust
is secured, to the extent required by the related Financing Agreement,
by a perfected first priority security interest--whether by prior
filing, purchase money security interest statutory priority, or
subordination agreement from prior filers, or otherwise--in the
products, accounts receivable or other assets financed by the related
advance; however, the security interest need not be a first priority
security interest (x) in the case of a receivable arising in an account
for which the payment terms are on a Scheduled Payment Plan basis and
the maximum credit line is $250,000 or less, but only if that account
was designated as an account on or before the closing date for a series
issued in 1994, or (y) in the case of any receivable if the Rating
Agency Condition is satisfied with respect thereto;
- which was created in compliance in all respects with all requirements
of law applicable thereto and pursuant to a Financing Agreement which
complies in all respects with all requirements of law applicable to any
party thereto;
- for which all consents, licenses, approvals or authorizations of any
governmental authority required to be obtained by DFS, the related
Approved Affiliate or the seller in connection with the creation of
that receivable or the transfer of that receivable to the trust or the
performance by DFS or the related Approved Affiliate of the Financing
Agreement pursuant to which that receivable was created, have been duly
obtained and are in full force and effect;
- as to which at all times following the transfer of that receivable to
the trust, the trust will have (a) 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 or (b) a first priority perfected security interest
therein;
- which will at all times be the legal and assignable payment obligation
of the related Dealer, enforceable against the Dealer in accordance
with its terms except as may be limited by applicable bankruptcy or
other similar laws and except as may be limited by general principles
of equity;
- which at the time of transfer to the trust is not subject to any valid
claim of a right of rescission, setoff, counterclaim or any other
defense of the Dealer;
- as to which, at the time of transfer of the receivable to the trust,
DFS, the related Approved Affiliate and the seller have satisfied all
their respective obligations regarding that receivable required to be
satisfied at that time;
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- as to which, at the time of transfer of the receivable to the trust,
neither DFS, the related Approved Affiliate nor the seller has taken or
failed to take any action which would impair the rights of the trust or
the certificateholders in that receivable;
- which constitutes "chattel paper," an "account" or a "general
intangible" as defined in Article 9 of the UCC as then in effect in the
State of Missouri; provided that the Financing Agreement giving rise to
the receivable may be subject by its terms, or by judicial
interpretation, to the laws of other states;
- which was transferred to the trust free and clear of any lien, except
as permitted by the pooling and servicing agreement, and all applicable
governmental authorizations required to be obtained by the seller in
connection with that transfer were in effect; and
- if the receivable has the benefit of a Floorplan Agreement, the
Floorplan Agreement provides, except as otherwise provided in that
agreement--which may vary among Floorplan Agreements--that the
Manufacturer is obligated to repurchase the applicable products that
the servicer repossesses following the related Dealer's default. For a
description of Floorplan Agreements, see "The Dealer Financing Business
of DFS--Floorplan Agreements with Manufacturers."
"Enhancement" means the rights and benefits provided to the
certificateholders of any series or class pursuant to any letter of credit,
surety bond, cash collateral account, spread account, guaranteed rate agreement,
maturity liquidity facility, tax protection agreement, interest rate swap
agreement or other similar arrangement. The subordination of any series or class
to any other series or class or of the seller's interest to any series or class
will be deemed to be an Enhancement.
"Enhancement Agreement" means any agreement, instrument or document
governing the terms of any Enhancement or pursuant to which any Enhancement is
issued or outstanding.
"Enhancement Provider" means the provider of any Enhancement, other than
any certificateholders the certificates of which are subordinated to any series
or class.
"Euroclear" and "Euroclear System" are defined under "Description of the
Certificates--Book-Entry Registration."
"Excess Principal Collections" has the meaning set forth under "Description
of the Certificates--Allocations Among Series."
"Financing Agreement" means any Wholesale Financing Agreement, Accounts
Receivable Financing Agreement or Asset Based Lending Financing Agreement.
"Floorplan Agreement" means an agreement, entered into by DFS or the
related Approved Affiliate and a Manufacturer pursuant to which the Manufacturer
agrees, among other matters, to repurchase from DFS or the Approved Affiliate,
as applicable, products sold by the Manufacturer to any of its Dealers and
financed by DFS or the Approved Affiliate under a Wholesale Financing Agreement
if DFS or the Approved Affiliate acquires possession of the products because of
a default by the Dealer under the Wholesale Financing Agreement, voluntary
surrender or other circumstances.
"Floorplan Business" means the extensions of credit made by DFS or the
related Approved Affiliate to Dealers in order to finance products purchased by
Dealers from Manufacturers.
"Floorplan Receivables" means receivables arising from the Floorplan
Business.
"Global Certificate" means a certificate described in Exhibit A to this
prospectus.
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"Ineligible Account" means an Account that at the time of determination is
not an Eligible Account.
"Ineligible Receivable" means, without duplication,
- any receivable that arises in an Eligible Account, was not an Eligible
Receivable at the time of its transfer to the trust and was transferred
to the trust in accordance with the pooling and servicing agreement,
- any receivable that, at the time of its transfer to the trust, has been
SAU or NSF for more than 30 days, and
- the aggregate of receivables that, at the time of transfer of each of
those receivables to the trust, have been SAU or NSF for a period of
one to 30 days but only to the extent that the aggregate amount exceeds
0.75% of the Pool Balance at the end of the calendar month.
"Initial Account" means each individual revolving credit arrangement
established by DFS or an Approved Affiliate with a Dealer identified in the list
delivered to the trustee by the seller on the closing date for the series issued
in 1993.
"Initial Invested Amount" means, with respect to any series and for any
date, an amount equal to the initial invested amount specified in the related
supplement. The Initial Invested Amount for any series may be increased or
decreased from time to time as specified in the related supplement. However, the
Dealer Overconcentration Series will not have an Initial Invested Amount.
"Lien" means any security interest, mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), preference, participation interest, priority or other security agreement
or preferential arrangement of any kind or nature whatsoever, including any
conditional sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing and the filing of
any financing statement under the UCC or comparable law of any jurisdiction to
evidence any of the foregoing; provided, however, that (i) any assignment
involving the servicer permitted by the pooling and servicing agreement, (ii)
any lien created by the pooling and servicing agreement, any supplement or any
Participation Agreement, (iii) any security interests in products or accounts
receivable that are subordinate to the security interests securing the related
receivables and (iv) any inchoate lien that arises by operation of law, is not
delinquent or due and affects collateral securing a receivable (but does not
encumber any receivable) will not be deemed to constitute a Lien.
"Manufacturer" means a person engaged generally in the business of
manufacturing or distributing products for sale or lease to Dealers in the
ordinary course of business.
"Manufacturer Overconcentration" on any determination date means, for all
accounts covered by a Floorplan Agreement with the same Manufacturer as obligor,
the excess of:
(a) the aggregate of all amounts of principal receivables in accounts on
the last day of the immediately preceding calendar month that are
covered by that Floorplan Agreement, over
(b) 15% of the Pool Balance on the last day of that immediately preceding
calendar month or, if the Rating Agency Condition is satisfied, a
larger percentage of the Pool Balance as is stated in the notice from
each applicable Rating Agency in connection with the satisfaction of
the Rating Agency Condition.
"Miscellaneous Payments" means, for any calendar month, the sum of (a)
Adjustment Payments and Transfer Deposit Amounts on deposit in the Collection
Account on the related distribution date and (b) Unallocated Principal
Collections available to be treated as
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Miscellaneous Payments on the applicable distribution date as described under
"Description of the Certificates--Allocations Among Series."
"Monthly Payment Rate" means, unless otherwise specified for a series in
the related supplement, for any calendar month, the percentage derived from
dividing the Principal Collections (without excluding the Discount Portions)
collected during that calendar month by the aggregate balance of the Principal
Receivables (without deducting the Discount Portions) as of the beginning of
that calendar month.
"Net Loss Rate" means, with respect to a calendar month, the percentage
derived from a fraction, the numerator of which is the aggregate of the net
losses on receivables (exclusive of the Ineligible Receivables) that were
charged off during that calendar month (i.e., gross losses less any recoveries
received in that calendar month in respect of charged off Receivables, whether
that charge off occurred in that calendar month or a prior calendar month) and
the denominator of which is the aggregate of the Principal Receivables (without
deducting therefrom the Discount Portions) in the trust at the beginning of that
calendar month.
"Net Receivables Rate" means, for a distribution date, unless otherwise
specified for a series in the supplement for that series:
- the weighted average of the interest rates borne by the receivables
during the second calendar month preceding that distribution
date--interest payments on the receivables at those rates being due and
payable in the calendar month preceding that distribution date; plus
- the product of (a) the Monthly Payment Rate for the calendar month
preceding that distribution date, (b) the Discount Factor for that
distribution date and (c) twelve; less
- 2% per annum.
"Non-Principal Collections" means (a) collections of interest and all other
non-principal charges, including insurance service fees and handling fees, on
the receivables, (b) the product of principal payments on the receivables and
the Discount Factor, and (c) all Recoveries.
"Non-Principal Receivables" for any account means all amounts billed to the
related Dealer in respect of interest and all other non-principal charges.
"NSF" is defined under "The Dealer Financing Business of DFS--Charge-Off
Policy."
"Overconcentration Amount" on any determination date means the sum of the
Asset Based Receivable Overconcentration, the A/R Receivable Overconcentration,
the Manufacturer Overconcentrations, and the Product Line Overconcentration on
that determination date.
"Participation Agreement" means an agreement between DFS or an Approved
Affiliate and a lender pursuant to which DFS or the Approved Affiliate, as
applicable, conveys to the lender an undivided interest in certain receivables
that is pari passu in all respects, other than nonsubordinated interest strips
and fees, with the undivided interest retained by DFS or the Approved Affiliate,
as applicable.
"Participation Interest" means the undivided interest, created pursuant to
a Participation Agreement, in a receivable in which a receivable represents the
remaining undivided interest.
"Pay-as-Sold" is described under "The Dealer Financing Business of
DFS--Payment Terms."
"Person" means any legal person, including any individual, corporation,
partnership, association, limited liability company, joint-stock company, trust,
unincorporated organization, governmental entity or other entity.
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"Pool Balance" means, as of the time of determination, the product of (a)
the aggregate of Principal Receivables, without deducting the Discount Portion,
in the trust at the time, other than all Ineligible Receivables, multiplied by
(b) 1 minus the Discount Factor.
"Pooling and Servicing Agreement" means the pooling and servicing agreement
among the seller, the servicer and the trustee of the trust.
"Principal Collections" means collections under the receivables other than
Non-Principal Collections.
"Principal Receivables" for an Account means amounts shown on the
servicer's records as receivables, other than the amounts which represent
Non-Principal Receivables and Discount Portions, payable by the related Dealer.
"Principal Shortfalls" has the meaning set forth under "Description of the
Certificates--Allocations Among Series."
"Principal Terms" is defined in "Description of the Certificates--New
Issuances."
"Product Line Overconcentration" on any determination date means, for
accounts created pursuant to Wholesale Financing Agreements, the excess of:
(a) the aggregate of all amounts of principal receivables in those accounts
that represent financing for a single product line (according to DFS's
classification system) on the last day of the calendar month
immediately preceding the determination date, over
(b) (i) 25% of the Pool Balance on the last day of that immediately
preceding calendar month if that product line is not computers and
related equipment, and (ii) 40% of that Pool Balance if that product
line is computers and related equipment, or, in the case of clause (i)
or (ii), if the Rating Agency Condition is satisfied, a larger
percentage of that Pool Balance as is stated in the applicable notice
from each applicable Rating Agency.
"Products" means the commercial and consumer goods financed by DFS or the
related Approved Affiliate for Dealers pursuant to a Wholesale Financing
Agreement.
"Purchase Price" means, with respect to any receivable for any date on
which such receivable is to be purchased by the servicer pursuant to the pooling
and servicing agreement or by DFS as a result of the breach of representations
and warranties in the receivables contribution and sale agreement, (a) an amount
equal to the amount payable by the dealer in respect thereof as reflected in the
records of the servicer as of the date of purchase plus (b) interest accrued (to
the extent interest accrues on such receivable) from the end of the last
calendar month in respect of which interest on such receivable was billed by the
servicer, at a per annum rate equal to the rate being charged to the dealer
under the Wholesale Financing Agreement, Accounts Receivable Financing Agreement
or Asset Based Lending Financing Agreement, as the case may be, based on the
actual number of days elapsed over a year of 360 days.
"Rating Agency" means, for any outstanding series or class, each
statistical rating agency, if any, selected by the seller to rate the
certificates of the series or class.
"Rating Agency Condition" means, for any action, that each Rating Agency
will have notified the seller, the servicer and the trustee of the trust in
writing that the action will not result in a reduction or withdrawal of that
Rating Agency's rating of any outstanding series or class for which it is a
Rating Agency.
"Receivables" means, with respect to an Account, all amounts payable
(including interest, finance charges and other charges), and the obligation to
pay those amounts, by the related Dealer from time to time in respect of
advances made by DFS or the related Approved
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Affiliate to or on behalf of that Dealer in connection with the Floorplan
Business, the Accounts Receivable Business, or the Asset Based Lending Business,
as the case may be, together with the group of writings evidencing those amounts
and the security interest created in connection therewith and all of the rights,
remedies, powers and privileges thereunder (including under the related
Financing Agreement); provided that if a Participation Interest has been created
in respect of that Account, whether before or after that Account has been
designated as an Account, the amounts so payable by the related Dealer that are
allocable to that Participation Interest will not be part of the "Receivables"
in respect of that Account. A Receivable that, prior to its transfer to the
seller, was subject to a participation from an Approved Affiliate in favor of
DFS will be considered a Receivable. Receivables which become Defaulted
Receivables will remain in the trust but will cease to be included in the Pool
Balance on the day on which they become Defaulted Receivables. Delayed Funding
Receivables will cease to be included as Receivables on the day on which an
insolvency event in respect of DFS occurs, whether or not those Delayed Funding
Receivables are funded after the occurrence of that insolvency event.
Receivables which DFS or the related Approved Affiliate is unable to transfer to
the seller pursuant to the receivables contribution and sale agreement or which
the seller is unable to transfer to the trust as provided in the pooling and
servicing agreement and Receivables which arise in an account from and after the
related removal commencement date (as defined in the pooling and servicing
agreement) will not be included in calculating the Pool Balance.
"Receivables Contribution and Sale Agreement" means the receivables
contribution and sale agreement among DFS, any affiliate of DFS which may become
a party thereto from time to time and the seller.
"Recoveries" on any determination date means all amounts received,
including insurance proceeds, by the servicer during the calendar month
immediately preceding the determination date with respect to receivables which
have previously become Defaulted Receivables.
"Removal Date" means the applicable date specified in a Removal Notice
relating to a Removed Account.
"Removal Notice" means a notice furnished by the seller, or the servicer on
its behalf, relating to the removal of accounts.
"Removed Account" means an account that is removed from the applicable list
of accounts.
"Required Participation Amount" means, at any time of determination, an
amount equal to the sum of the amounts for each series obtained by multiplying
(1) the Required Participation Percentage for that series times (2) the Initial
Invested Amount of that series at that time.
"Required Participation Percentage" means, for any series, the percentage
specified for that series in the related supplement. However, the Dealer
Overconcentration Series will not have a Required Participation Percentage.
"Revolving Period" means with respect to any series, the period, if any,
specified as such in the related supplement.
"SAU" is defined under "The Dealer Financing Business of DFS--Charge-Off
Policy."
"Scheduled Payment Plans" are defined under "The Dealer Financing Business
of DFS--Payment Terms."
"Seller" means Deutsche Floorplan Receivables, L.P. and its successors.
"Seller's Participation Amount" is defined in the Glossary of the
prospectus supplement.
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"Series" means (a) any series of investor certificates and (b) the Dealer
Overconcentration Series.
"Servicer" initially means DFS, in its capacity as servicer under the
pooling and servicing agreement, and any successor servicer.
"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 of the trust to make any payment,
transfer or deposit or to take action under any Enhancement Agreement,
on or before the date the servicer is required to do so under the
pooling and servicing agreement, which failure is not cured within five
business days after written notice from the trustee to the servicer of
that failure;
(2) failure on the part of the servicer duly to observe or perform:
(a) its covenant not to create any lien on any receivable which failure
has a material adverse effect on the certificateholders and which
continues unremedied for a period of 60 days after written notice to
it; provided, however, that a Servicer Default will not be deemed to
have occurred if the seller or the servicer will have repurchased
the related receivables or, if applicable, all the receivables
during that period in accordance with the terms and provisions of
the pooling and servicing agreement; or
(b) failure on the part of the servicer duly to observe or perform 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 complies with its obligations relating to
repurchases as described under "Description of the
Certificates--Servicer Covenants", which failure has a material
adverse effect on the certificateholders and which continues
unremedied for a period of 30 days after written notice of that
failure to the servicer by the trustee of the trust;
(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 material adverse effect on the rights
of the certificateholders of any series, and which material adverse
effect continues for a period of 60 days after written notice to the
servicer by the trustee of the trust; provided, however, that a Servicer
Default will not be deemed to have occurred if the seller or the
servicer will have repurchased the related receivables or, if
applicable, all the receivables during that period in accordance with
the provisions of the pooling and servicing agreement; or
(4) the occurrence of certain events of bankruptcy or similar events
involving the servicer.
Notwithstanding the foregoing, a delay in or failure of performance
referred to under clause (1) above for a period of ten business days or referred
to under clauses (2) or (3) for a period of 60 business days, will not
constitute a Servicer Default if that delay or failure was caused by an act of
God or other similar occurrence.
"Supplement" means, for any series, a supplement to the pooling and
servicing agreement.
"Tax Opinion" generally means, for any action, an opinion of counsel to the
effect that, for Federal income and Missouri state income and franchise tax
purposes, (a) the action will not adversely affect the characterization of the
certificates of any outstanding series or class as debt or as partnership
interests, (b) the action will not cause or constitute a taxable event
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for any certificateholders or the trust and (c) if the action is the issuance of
a new series, each class of certificates of the new series will be characterized
as debt or as partnership interests.
"Termination Date" means, for any series, the termination date, if any,
specified in the related prospectus supplement.
"Transfer Date" means any business day, prior to the earlier of (a) the
occurrence of one or more specified early amortization events, and (b) the
termination of the trust, on which receivables are created in the accounts.
"Transfer Deposit Amount" means, for any receivable reassigned or assigned
to the seller or the servicer, as applicable, the amounts specified in the
pooling and servicing agreement.
"Trust" means the Distribution Financial Services Floorplan Master Trust,
the trust created by the pooling and servicing agreement.
"Trust Invested Amount" means, at any time of determination, the sum of the
invested amounts for all outstanding series at the time.
"Trustee" means the trustee of the trust and any successor trustee of the
trust.
"UCC" means the Uniform Commercial Code, as amended from time to time, as
in effect in any applicable jurisdiction.
"Unallocated Principal Collections" is defined under "Description of the
Certificates--Allocations Among Series."
"Wholesale Financing Agreement" means a wholesale financing agreement
entered into by DFS or the related Approved Affiliate and a Dealer in order to
finance products purchased by the Dealer from a Manufacturer.
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EXHIBIT A
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
In most circumstances, the certificates offered by this prospectus and the
prospectus supplement will be issued only as "global certificates" which are
registered and held by a depository. Certificate owners of the global
certificates may hold their global certificates through any of DTC, Clearstream,
Luxembourg or Euroclear. The global certificates will be tradeable as home
market instruments in both the European and U.S. domestic markets. Initial
settlement and all secondary trades will settle in same-day funds.
Secondary market trading between investors holding global certificates
through Clearstream, Luxembourg and Euroclear will be conducted in the ordinary
way in accordance with their normal rules and operating procedures and in
accordance with conventional eurobond practice, which is seven calendar day
settlement.
Secondary market trading between investors holding global certificates
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations.
Secondary cross-market trading between Clearstream, Luxembourg or Euroclear
and DTC participants holding global certificates will be effected on a
delivery-against-payment basis through the respective depositaries of
Clearstream, Luxembourg and Euroclear and the DTC participants.
Non-U.S. holders of global certificates may have to pay U.S. withholding
taxes unless the holders meet the requirements for exemption from the tax and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
Initial Settlement
All global certificates will be held in book-entry form by DTC in the name
of Cede & Co., as nominee of DTC. Certificate owners' interests in the global
certificates will be represented through financial institutions acting on their
behalf as direct and indirect participants in DTC. As a result, Clearstream,
Luxembourg and Euroclear will hold positions on behalf of their participants
through their respective depositaries, which in turn will hold their positions
in accounts as DTC participants.
Certificate owners electing to hold their global certificates through DTC
will follow the settlement practices applicable to U.S. corporate debt
obligations. Certificate owner securities custody accounts will be credited with
their holdings against payment in same-day funds on the settlement date.
Certificate owners electing to hold their global certificates through
Clearstream, Luxembourg or Euroclear accounts will follow the settlement
procedures applicable to conventional eurobonds, except that there will be no
temporary global security and no "lock-up" or restricted period. Global
certificates will be credited to the securities custody accounts on the
settlement date against payment in same-day funds.
Secondary Market Trading
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
participants will be settled using the procedures applicable to U.S. corporate
debt obligations in same-day funds.
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Trading between Clearstream, Luxembourg and/or Euroclear
Participants. Secondary market trading between Clearstream, Luxembourg
participants or Euroclear participants will be settled using the procedures
applicable to conventional eurobonds in same-day funds.
Trading between DTC seller and Clearstream, Luxembourg or Euroclear
purchaser. When global certificates are to be transferred from the account of a
DTC participant to the account of a Clearstream, Luxembourg participant or a
Euroclear participant, the purchaser will send instructions to Clearstream,
Luxembourg or Euroclear through a Clearstream, Luxembourg participant or
Euroclear participant at least one business day before settlement. Clearstream,
Luxembourg or Euroclear will instruct the respective Depositary, as the case may
be, to receive the global certificates against payment. Payment will include
interest accrued on the global certificates from and including the last coupon
payment date to and excluding the settlement date. Payment will then be made by
the respective Depositary to the DTC participant's account against delivery of
the global certificates. After settlement has been completed, the global
certificates will be credited to the respective clearing system and by the
clearing system, in accordance with its usual procedures, to the Clearstream,
Luxembourg participant's or Euroclear participant's account. The global
certificates credit will appear the next day according to European time, and the
cash debit will be back-valued to, and the interest on the global certificates
will accrue from, the value date. The value date would be the preceding day when
settlement occurred in New York. If the trade fails and settlement is not
completed on the intended value date, the Clearstream, Luxembourg or Euroclear
cash debit will be valued instead on the actual settlement date.
Clearstream, Luxembourg participants and Euroclear participants will need
to make available to the respective clearing systems the funds necessary to
process same-day funds settlement. The most direct means of doing so is to
pre-position funds for settlement, either from cash on hand or existing lines of
credit, as they would for any settlement occurring within Clearstream,
Luxembourg or Euroclear. Under this approach, they may take on credit exposure
to Clearstream, Luxembourg or Euroclear until the global certificates are
credited to their accounts one day later.
As an alternative, if Clearstream, Luxembourg or Euroclear has extended a
line of credit to them, Clearstream, Luxembourg participants or Euroclear
participants can elect not to pre-position funds and instead use that credit
line to make the funds necessary to process same-day funds settlement available
to the respective clearing systems. Under this procedure, Clearstream,
Luxembourg participants or Euroclear participants purchasing global certificates
would incur overdraft charges for one day, assuming they cleared the overdraft
when the global certificates were credited to their accounts. However, interest
on the global certificates would accrue from the value date. Therefore, in many
cases the investment income on the global certificates earned during that
one-day period may substantially reduce or offset the amount of the overdraft
charges, although this result will depend on each Clearstream, Luxembourg
participant's or Euroclear participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
participants can employ their usual procedures for sending global certificates
to the respective Depositary for the benefit of Clearstream, Luxembourg
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 Clearstream, Luxembourg or Euroclear seller and DTC
purchaser. Due to time zone differences in their favor, Clearstream, Luxembourg
participants and Euroclear participants may employ their customary procedures
for transactions in which global certificates are to be transferred by the
respective clearing system, through the respective Depositary, to a DTC
participant. The seller will send instructions to Clearstream, Luxembourg
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or Euroclear through a Clearstream, Luxembourg participant or Euroclear
participant at least one business day before settlement. In these cases,
Clearstream, Luxembourg or Euroclear will instruct the respective Depositary, as
appropriate, to deliver the bonds to the DTC participant's account against
payment. Payment will include interest accrued on the global certificates from
and including the last coupon payment date to and excluding the settlement date.
The payment will then be reflected in the account of the Clearstream, Luxembourg
participant or Euroclear participant the following day, and receipt of the cash
proceeds in the Clearstream, Luxembourg participant's or Euroclear participant's
account would be back-valued to the value date. The value date would be the
preceding day, when settlement occurred in New York. Should the Clearstream,
Luxembourg participant or Euroclear participant have a line of credit with its
respective clearing system and elect to be in debit in anticipation of receipt
of the sale proceeds in its account, the back-valuation will extinguish any
overdraft charges incurred over that one-day period. If the trade fails and
settlement is not completed on the intended value date, receipt of the cash
proceeds in the Clearstream, Luxembourg participant's or Euroclear participant's
account would instead be valued on the actual settlement date. Finally, day
traders that use Clearstream, Luxembourg or Euroclear and that purchase global
certificates from DTC participants for delivery to Clearstream, Luxembourg
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 Clearstream, Luxembourg or Euroclear for one day,
until the purchase side of the day trade is reflected in their
Clearstream, Luxembourg or Euroclear accounts, in accordance with the
clearing system's customary procedures;
(b) borrowing the global certificates in the U.S. from a DTC participant no
later than one day prior to settlement, which would give the global
certificates sufficient time to be reflected in their Clearstream,
Luxembourg 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 Clearstream,
Luxembourg participant or Euroclear participant.
U.S. Federal Income Tax Documentation Requirements
A beneficial owner of global certificates holding securities through
Clearstream, Luxembourg or Euroclear, or through DTC if the holder has an
address outside the U.S., will be required to pay 30% U.S. withholding tax that
generally applies to payments of interest, including original issue discount, on
registered debt issued by U.S. Persons, unless (a) each clearing system, bank or
other financial institution that holds customers' securities in the ordinary
course of its trade or business in the chain of intermediaries between that
beneficial owner and the U.S. entity required to withhold tax complies with
applicable certification requirements and (b) that beneficial owner takes one of
the following steps to obtain an exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8 or new Form W-8BEN). Beneficial
owners of global certificates that are non-U.S. Persons can obtain a complete
exemption from the withholding tax by filing a signed Form W-8--Certificate of
Foreign Status. If the information shown on Form W-8--or new Form
W-8BEN--changes a new Form W-8, or new Form W-8BEN, must be filed within 30 days
of the change.
Exemption for non-U.S. Persons with effectively connected income (Form 4224
or new Form W-8ECI). A non-U.S. Person, including a non-U.S. corporation or bank
with a U.S. branch, for which the interest income is effectively connected with
its conduct of a trade or business in the United States, can obtain an exemption
from the withholding tax by filing
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Form 4224--Exemption from Withholding of Tax on Income Effectively Connected
with the Conduct of a Trade or Business in the United States--or New Form
W-8ECI--Certificate of Foreign Persons Claim for Exemption from Withholding on
Income Effectively Connected with the Conduct of a Trade or Business in the
United States.
Exemption or reduced rate for non-U.S. Persons resident in treaty countries
(Form 1001 or new Form W-8BEN). Non-U.S. Persons that are beneficial owners of
Global certificates residing in a country that has a tax treaty with the United
States can obtain an exemption or reduced tax rate--depending on the treaty
terms--by filing Form 1001--Ownership, Exemption or Reduced Rate Certificate, or
by filing new Form W-8BEN. If the treaty provides only for a reduced rate,
withholding tax will be imposed at that rate unless the filer alternatively
files Form W-8. Form 1001 may be filed by the certificate owner or his agent
whereas new Form W-8BEN must be filed by the beneficial owner.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9--Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The beneficial owner of a
Global certificate or in the case of a Form 1001 or a Form 4224 filer, his
agent, files by submitting the appropriate form to the person through whom it
holds--the clearing agency, in the case of persons holding directly on the books
of the clearing agency. Form W-8 and Form 1001 are effective for three calendar
years and Form 4224 is effective for one calendar year, but Forms W-8, 1001 and
4224 will not be effective after December 31, 2000.
A new Form W-8BEN, if furnished with a taxpayer identification number
("TIN"), will remain in effect until the status of the beneficial owner changes,
or a change in circumstances makes any information on the form incorrect. A new
Form W-8BEN, if furnished without a TIN, and a new Form W-8ECI will remain in
effect for a period starting on the date the form is signed and ending on the
last day of the third succeeding calendar year, unless a change in circumstances
makes any information on the form incorrect.
The term "U.S. Person" means:
- a citizen or resident of the United States;
- a corporation or partnership organized in or under the laws of the
United States or any political subdivision of the United States;
- an estate, the income of which is includible in gross income for United
States tax purposes, regardless of its source; or
- a trust if a U.S. court is able to exercise primary supervision over
the administration of the trust and one or more U.S. persons have the
authority to control all substantial decisions of the trust.
This summary does not deal with all aspects of U.S. Federal income tax
withholding that may be relevant to foreign holders of the Global certificates.
Certificate owners are advised to consult their own tax advisers for specific
tax advice concerning their holding and disposing of the global certificates.
In 1997, final Treasury regulations (the "New Withholding Regulations")
were issued that modify certain of the filing requirements with which non-U.S.
persons must comply in order to be entitled to an exemption from U.S.
withholding tax or a reduction to the applicable U.S. withholding tax rate.
Those persons currently required to file Form W-8 or Form 1001 will be required
to file new Form W-8BEN, while those persons currently required to file Form
4224 will be required to file new Form W-8ECI. The New Withholding Regulations
generally are effective for payments of interest due after December 31, 2000,
but Forms W-8, 1001 and 4224
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filed prior to that date will continue to be effective until the earlier of
December 31, 2000 or the current expiration date of those forms. Prospective
investors should consult their tax advisors regarding the effect of the New
Withholding Regulations.
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REGISTERED OFFICE OF THE ISSUER
DISTRIBUTION FINANCIAL SERVICES FLOORPLAN MASTER TRUST
c/o The Chase Manhattan Bank
450 West 33rd Street
15th Floor
New York, New York 10001
<TABLE>
<S> <C>
TRUSTEE PAYING AGENT AND TRANSFER AGENT
THE CHASE MANHATTAN BANK (IF THE CLASS A AND CLASS B CERTIFICATES
450 West 33rd Street ARE LISTED ON THE LUXEMBOURG STOCK EXCHANGE)
15th Floor KREDIETBANK S.A. LUXEMBOURGEOISE
New York, New York 10001 43 Boulevard Royal
L-2955
Luxembourg
</TABLE>
LEGAL ADVISORS
<TABLE>
<S> <C>
To the Seller To the Underwriters
MAYER, BROWN & PLATT BROWN & WOOD LLP
190 South LaSalle Street 1666 K Street, N.W.
Chicago, Illinois 60603 Washington, D.C. 20006
</TABLE>
ACCOUNTANTS
KPMG LLP
1010 Market Street
St. Louis, Missouri 63101
LISTING AGENT
(IF THE CLASS A AND CLASS B CERTIFICATES
ARE LISTED ON THE LUXEMBOURG STOCK EXCHANGE)
Kredietbank S.A. Luxembourgeoise
43 Boulevard Royal
L-2955
Luxembourg
<PAGE> 144
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DISTRIBUTION FINANCIAL SERVICES FLOORPLAN MASTER TRUST
ISSUER
DEUTSCHE FLOORPLAN RECEIVABLES, L.P.
SELLER
DEUTSCHE FINANCIAL SERVICES CORPORATION
SERVICER
$1,193,750,000 FLOATING RATE ASSET BACKED CERTIFICATES, SERIES 2000-3, CLASS A
$37,500,000 FLOATING RATE ASSET BACKED CERTIFICATES, SERIES 2000-3, CLASS B
-----------------------------------------
PROSPECTUS SUPPLEMENT
-----------------------------------------
DEUTSCHE BANC ALEX. BROWN
BANC OF AMERICA SECURITIES LLC
BANC ONE CAPITAL MARKETS, INC.
J.P. MORGAN & CO.
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 October , 2000, all dealers that effect transactions in
these securities, whether or not participating in this offering, may be required
to deliver a prospectus. This is in addition to the dealers' obligation to
deliver a prospectus when acting as underwriters and regarding their unsold
allotments or subscriptions.
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