<PAGE>
RULE NO. 424(b)(5)
REGISTRATION NO. 333-07249
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED WITHOUT THE DELIVERY OF A FINAL PROSPECTUS +
+SUPPLEMENT AND ACCOMPANYING PROSPECTUS. THIS PROSPECTUS SUPPLEMENT AND THE +
+ACCOMPANYING PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE +
+SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED AUGUST 12, 1996
PROSPECTUS SUPPLEMENT
(To Prospectus dated July 24, 1996)
$240,000,000
CIT RV TRUST 1996-B
$88,000,000 CLASS A-1 % ASSET-BACKED NOTES
$75,000,000 CLASS A-2 % ASSET-BACKED NOTES
$62,600,000 CLASS A-3 % ASSET-BACKED NOTES
$14,400,000 % ASSET-BACKED CERTIFICATES
THE CIT GROUP SECURITIZATION CORPORATION II,
SELLER
THE CIT GROUP/SALES FINANCING, INC.,
SERVICER
The CIT RV Trust 1996-B (the "Trust" or the "Issuer") will be formed pursuant
to a Trust Agreement, to be dated as of August 1, 1996, between The CIT Group
Securitization Corporation II (the "Company" or the "Seller") and Mellon Bank
(DE), National Association, as trustee (the "Owner Trustee"), and will issue
Class A-1 % Asset-Backed Notes (the "Class A-1 Notes"), Class A-2 % Asset-
Backed Notes (the "Class A-2 Notes") and Class A-3 % Asset-Backed Notes (the
"Class A-3 Notes," and together with the Class A-1 Notes and the Class A-2
Notes, the "Notes") in the principal amount of $88,000,000, $75,000,000 and
$62,600,000, respectively, pursuant to an Indenture, to be dated as of August
1, 1996, between the Issuer and The Bank of New York, as trustee (the
"Indenture Trustee"). The Trust will also issue % Asset-Backed Certificates
(the "Certificates" and, together with the Notes, the "Securities") in the
principal amount of $14,400,000.
(Continued on following page)
A DISCUSSION OF CERTAIN RISK FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
PURCHASERS OF THE SECURITIES OFFERED HEREBY CAN BE FOUND ON PAGE S-22 HEREIN
AND ON PAGE 20 IN THE ACCOMPANYING PROSPECTUS.
THE SECURITIES WILL REPRESENT INTERESTS IN OR OBLIGATIONS OF THE TRUST AND WILL
NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF THE CIT GROUP SECURITIZATION
CORPORATION II, THE CIT GROUP/SALES FINANCING, INC. OR ANY OF THEIR RESPECTIVE
AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO THE
PUBLIC(1) DISCOUNT COMPANY(1)(2)
<S> <C> <C> <C>
Per Class A-1 Note....................... % % %
Per Class A-2 Note....................... % % %
Per Class A-3 Note....................... % % %
Per Certificate.......................... % % %
Total.................................... $ $ $
- --------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, at the respective Interest Rate or the Pass-
Through Rate, as appropriate, from August , 1996.
(2) Before deduction of expenses payable by the Company estimated at $ .
The Securities are offered subject to receipt and acceptance by the
Underwriters, to prior sale and to the Underwriters' right to reject any order
in whole or in part and to withdraw, cancel or modify the offer without notice.
It is expected that delivery of the Securities will be made in book-entry form
through the facilities of The Depository Trust Company ("DTC"), and in the case
of the Notes, Cedel Bank, societe anonyme ("Cedel") and the Euroclear System
("Euroclear") on or about August , 1996, against payment therefor in
immediately available funds.
SALOMON BROTHERS INC
BA SECURITIES, INC.
UBS SECURITIES
The date of this Prospectus Supplement is August , 1996.
<PAGE>
(continued from preceding page)
The assets of the Trust will primarily include a pool of simple interest
retail installment sale contracts (the "Initial Contracts") secured by the new
and used recreational vehicles financed thereby (the "Initial Financed
Vehicles"), certain monies received under the Initial Contracts on and after
August 1, 1996 (the "Initial Cut-off Date"), an assignment of the security
interests in the Initial Financed Vehicles, the Collection Account, the
Certificate Distribution Account, the Note Distribution Account, the Reserve
Account, the Capitalized Interest Account and the Pre-Funding Account, in each
case, together with the proceeds thereof, the proceeds from claims under
certain insurance policies in respect of individual Initial Financed Vehicles
or the related Obligors and certain rights under the Sale and Servicing
Agreement, to be dated as of August 1, 1996 (the "Sale and Servicing
Agreement"), among the Seller, the Servicer, and the Trust. From time to time
during the Funding Period, additional simple interest retail installment sale
contracts (the "Subsequent Contracts" and, together with the Initial
Contracts, the "Contracts") secured by the new and used recreational vehicles
financed thereby (the "Subsequent Financed Vehicles" and, together with the
Initial Financed Vehicles, the "Financed Vehicles"), certain monies received
under the Subsequent Contracts on and after the related subsequent cut-off
dates (each, a "Subsequent Cut-off Date"), an assignment of the security
interests in the Subsequent Financed Vehicles and proceeds from claims under
certain insurance policies in respect of individual Subsequent Financed
Vehicles or the related Obligors will be purchased by the Trust from the
Seller from monies on deposit in the Pre-Funding Account.
The Notes will be secured by assets of the Trust (other than the Certificate
Distribution Account and the Reserve Account) pursuant to the Indenture. The
Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes will bear
interest at the per annum rate of %, % and %, respectively (each, an
"Interest Rate"). Interest on the Notes will generally be payable on the
fifteenth day of each month (each, a "Distribution Date"), commencing
September 16, 1996. Principal on the Notes will be payable on each
Distribution Date to the extent described herein; however, no principal
payments will be made (i) on the Class A-2 Notes until the Class A-1 Notes
have been paid in full or (ii) on the Class A-3 Notes until the Class A-2
Notes have been paid in full. The Certificates represent fractional undivided
interests in the Trust. The Certificates will bear interest at the rate of %
per annum (the "Pass-Through Rate") and will be distributed to
Certificateholders on each Distribution Date to the extent described herein.
Distributions of interest and principal on the Certificates will be
subordinated in priority of payment to payment of interest and principal on
the Notes, to the extent described herein. No principal will be paid on the
Certificates until all of the Notes have been paid in full, except for
payments of the Principal Liquidation Loss Amount (as defined herein), if any.
The final scheduled Distribution Date for the Certificates will be the
December 2017 Distribution Date. The final scheduled Distribution Date for the
Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes, will be the
August 2003, February 2007 and December 2017 Distribution Date, respectively.
The aggregate outstanding principal amount of the Securities is likely to be
paid earlier than such dates due to a variety of factors including an Optional
Purchase or Auction Sale as described herein.
There currently is no secondary market for the Securities and there is no
assurance that one will develop. The Underwriters expect, but are not
obligated, to make a market in the Securities. There is no assurance that any
such market will develop, or if one does develop, that it will continue or
provide sufficient liquidity.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE SECURITIES
AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain of the matters discussed under the caption "The CIT Group/Sales
Financing, Inc., Servicer" may constitute forward-looking statements within
the meaning of Section 7A of the Securities Act of 1933, as amended, and as
such may involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of CITSF's
recreational vehicle portfolio to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements.
---------------
This Prospectus Supplement does not contain complete information about the
offering of the Securities. Additional information is contained in the
Prospectus of the Seller dated July 24, 1996 (the "Prospectus") and purchasers
are urged to read both this Prospectus Supplement and the Prospectus in full.
Sales of the Securities may not be consummated unless the purchaser has
received both this Prospectus Supplement and the Prospectus. To the extent, if
any, that any statement in the final Prospectus Supplement is inconsistent
with statements contained in this Prospectus Supplement, the statements in the
final Prospectus Supplement shall control. Terms used and not otherwise
defined herein shall have the respective meanings ascribed to such terms in
the Prospectus.
S-2
<PAGE>
SUMMARY
This Summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and in the
accompanying Prospectus. Certain capitalized terms used in the Summary are
defined elsewhere in this Prospectus Supplement or in the Prospectus.
Issuer...................... CIT RV Trust 1996-B (the "Trust" or the
"Issuer"), a Delaware business trust to be formed
by the Seller and the Owner Trustee pursuant to
the Trust Agreement, to be dated as of August 1,
1996 (the "Trust Agreement").
Seller...................... The CIT Group Securitization Corporation II (the
"Company"), a wholly-owned, limited purpose
subsidiary of The CIT Group Holdings, Inc.
("CIT"). Neither CIT nor any of its affiliates,
including the Company and The CIT Group/Sales
Financing, Inc. ("CITSF"), has guaranteed,
insured or is otherwise obligated with respect to
the Securities. See "Risk Factors--Limited
Obligations."
Servicer.................... The CIT Group/Sales Financing, Inc. (in such
capacity referred to herein as the "Servicer"), a
wholly-owned subsidiary of CIT. The Servicer will
be responsible for managing, administering,
servicing and making collections on the contracts
held by the Trust.
Owner Trustee............... Mellon Bank (DE), National Association, as
trustee under the Trust Agreement (the "Owner
Trustee" and, together with the Indenture
Trustee, the "Trustees").
Indenture Trustee........... The Bank of New York, as trustee under the
Indenture, to be dated as of August 1, 1996 (the
"Indenture Trustee").
Risk Factors................ Certain potential risks and other considerations
are particularly relevant to a decision to invest
in any securities sold hereunder. See "Risk
Factors."
The Certificates............ The CIT RV Trust 1996-B % Asset-Backed
Certificates (the "Certificates") will represent
fractional undivided interests in the Trust. See
"The Certificates--General."
The Trust will issue $14,400,000 aggregate
principal amount of Certificates (the "Original
Certificate Balance") pursuant to the Trust
Agreement. Payments in respect of the
Certificates will be subordinated to payments on
the Notes to the limited extent described herein
and in the Prospectus. See "The Certificates--
General."
The Certificates will be issued in minimum
denominations of $20,000 and integral multiples
of $1,000 in excess thereof and will be available
in book-entry form only; provided, however, that
one Certificate may be issued in a denomination
other
S-3
<PAGE>
than an integral multiple of $1,000 such that the
Affiliated Purchaser (as defined herein) may be
issued at least 1% of the Original Certificate
Balance (as defined herein). Persons
("Certificate Owners") acquiring beneficial
interests in the Certificates will hold their
interests through The Depository Trust Company
("DTC"). Definitive Certificates (as defined in
the Prospectus) will be issued only under the
limited circumstances described herein and in the
Prospectus. Unless and until Certificates of a
class are issued in definitive form, all
references herein to distributions, notices,
reports and statements to and to actions by and
effects upon the related Certificateholders will
refer to the same actions and effects with
respect to DTC or Cede & Co. ("Cede"), as the
case may be, for the benefit of the related
Certificate Owners in accordance with the DTC
procedures. See "Certain Information Regarding
the Securities--Book-Entry Registration" and "--
Definitive Securities" in the Prospectus.
The Notes................... The CIT RV Trust 1996-B Class A-1 % Asset-Backed
Notes (the "Class A-1 Notes"), the Class A-2 %
Asset-Backed Notes (the "Class A-2 Notes") and
the Class A-3 % Asset-Backed Notes (the "Class
A-3 Notes" and, together with the Class A-1 Notes
and the Class A-2 Notes, the "Notes" and,
together with the Certificates, the "Securities")
will represent obligations of the Trust secured
by assets of the Trust (other than the
Certificate Distribution Account and the Reserve
Account (each, as defined herein)). See "The
Notes--General."
The Trust will issue $88,000,000, $75,000,000 and
$62,600,000 aggregate principal amount of Class
A-1 Notes, Class A-2 Notes and Class A-3 Notes,
respectively, pursuant to an Indenture, to be
dated as of August 1, 1996, between the Issuer
and the Indenture Trustee (the "Indenture"). See
"The Notes--General."
The Notes will be issued in minimum denominations
of $1,000 and integral multiples of $1,000 in
excess thereof and will be available in book-
entry form only. Definitive Notes will be issued
only under the limited circumstances described
herein. Persons ("Note Owners") acquiring
beneficial interests in the Notes will hold their
interests through DTC in the United States or
Cedel Bank, societe anonyme ("Cedel") or the
Euroclear System ("Euroclear") in Europe.
Definitive Notes (as defined in the Prospectus)
will be issued only under the limited
circumstances described herein and in the
Prospectus. Unless and until Notes of a class are
issued in definitive form, all references herein
to distributions, notices, reports and statements
to and to actions by and effects upon the related
Noteholders will refer to the same actions and
effects with
S-4
<PAGE>
respect to DTC or Cede, as the case may be, for
the benefit of the related Note Owners in
accordance with the DTC procedures. See "Certain
Information Regarding the Securities--Book-Entry
Registration" and "--Definitive Securities" in
the Prospectus and Annex I hereto.
Property of the Trust....... The property of the Trust will primarily include
(i) a pool of simple interest retail installment
sale contracts (the "Initial Contracts") secured
by the new and used recreational vehicles
financed thereby (the "Initial Financed
Vehicles"), (ii) certain monies received under
the Initial Contracts on and after August 1, 1996
(the "Initial Cut-off Date"), (iii) an assignment
of the security interests in the Initial Financed
Vehicles, (iv) the Collection Account, the
Certificate Distribution Account, the Note
Distribution Account, the Reserve Account, the
Capitalized Interest Account and the Pre-Funding
Account (each as defined herein or in the
Prospectus), in each case together with the
proceeds thereof, (v) the proceeds from claims
under certain insurance policies in respect of
individual Initial Financed Vehicles or the
related Obligors (as defined herein) and (vi)
certain rights under the Sale and Servicing
Agreement, to be dated as of August 1, 1996 (the
"Sale and Servicing Agreement"), among the
Seller, the Servicer and the Trust.
From time to time on or before November 15, 1996,
the Trust will be obligated to purchase from the
Seller during the Funding Period, from monies on
deposit in the Pre-Funding Account, additional
simple interest retail installment sale contracts
(the "Subsequent Contracts" and, together with
the Initial Contracts, the "Contracts") secured
by the new and used recreational vehicles
financed thereby (the "Subsequent Financed
Vehicles" and, together with the Initial Financed
Vehicles, the "Financed Vehicles"), certain
monies received under the Subsequent Contracts on
and after the related Subsequent Cut-off Dates,
an assignment of the security interests in the
Subsequent Financed Vehicles and proceeds from
claims under certain insurance policies in
respect of individual Subsequent Financed
Vehicles or the related Obligors. See "The Trust
Property." The Subsequent Contracts will have an
aggregate principal balance approximately equal
to the Pre-Funded Amount (as defined herein).
CITSF will be obligated to repurchase Contracts
(a "Repurchased Contract") upon the occurrence of
certain breaches of representations and
warranties (a "Repurchase Event"). See "The
Purchase Agreements and the Trust Documents--Sale
and Assignment of the Contracts" and "--Servicing
Procedures" in the Prospectus.
S-5
<PAGE>
The Contracts............... The property of the Trust will consist primarily
of installment sale contracts for recreational
vehicles originated by recreational vehicle
dealers ("Dealers") and acquired by CITSF or The
CIT Group/Consumer Finance, Inc. (NY) ("CITCF-
NY"), originated directly by CITSF or one of its
affiliates, or purchased by CITSF or one of its
affiliates from unaffiliated third parties. The
Financed Vehicles will consist of motor homes,
travel trailers and other types of recreational
vehicles. See "The Contract Pool." On or prior to
the date of issuance of the Securities (the
"Closing Date"), CITCF-NY will sell certain
contracts that will constitute a portion of the
Initial Contracts to CITSF pursuant to a purchase
agreement, to be dated as of August 1, 1996, and
CITSF will sell the Initial Contracts to the
Company pursuant to a purchase agreement, to be
dated as of August 1, 1996 (the "Purchase
Agreement"), and the Company will sell the
Initial Contracts to the Trust pursuant to the
Sale and Servicing Agreement.
All of the Initial Contracts were, and the
Subsequent Contracts were or will be, originated
by CITSF or one of its affiliates (directly or
through Dealers) in accordance with CITSF's
underwriting standards or purchased by CITSF or
an affiliate from unaffiliated third parties (in
which event the Contracts were or will be
reviewed by CITSF to confirm that they conform to
CITSF's underwriting standards).
As of the Initial Cut-off Date, the Initial
Contracts had an aggregate principal balance of
$164,276,094, a weighted average original
maturity of 154 months and a remaining weighted
average maturity of 152 months. The final
scheduled payment date on the Initial Contract
with the last maturity occurs in August 2016. See
"The Contract Pool." The Initial Contracts and
the Subsequent Contracts will generally be
prepayable by the Obligor at any time without
premium or penalty.
From time to time during the Funding Period,
CITSF will be obligated to sell, and the Company
will be obligated to purchase, pursuant to a
purchase agreement (the "Subsequent Purchase
Agreement") subject to the satisfaction of
certain conditions, Subsequent Contracts at a
purchase price equal to the aggregate principal
amount thereof as of the first day in the related
month of transfer designated by CITSF and the
Company (each, a "Subsequent Cut-off Date"). A
portion of such Subsequent Contracts may be
acquired by CITSF from CITCF-NY or other
affiliates of CITSF. Pursuant to one or more
subsequent transfer agreements (each, a
"Subsequent Transfer Agreement") between the
Company and the Trust, and subject to the
satisfaction of certain conditions, the Company
will in turn sell the Subsequent Contracts to the
Trust at a purchase price
S-6
<PAGE>
equal to the amount paid by the Company to CITSF
for such Subsequent Contracts, which purchase
price shall be paid from monies on deposit in the
Pre-Funding Account. The aggregate principal
balance of the Subsequent Contracts to be
conveyed to the Trust during the Funding Period
will not exceed $75,723,906. Subsequent Contracts
will be transferred from CITSF to the Company and
from the Company to the Trust on the Business Day
(as defined herein) specified by CITSF and the
Company during the month in which the related
Subsequent Cut-off Date occurs (each, a
"Subsequent Transfer Date").
The Pre-Funding Account..... The Pre-Funding Account will be maintained as an
Eligible Account (as defined in the Prospectus),
initially maintained with the Indenture Trustee,
and the funds on deposit therein will be invested
solely in Permitted Investments (as defined
herein) that mature not later than one Business
Day prior to the next succeeding Distribution
Date, until such funds are applied by the Owner
Trustee during the Funding Period to pay to the
Company the purchase price for Subsequent
Contracts. See "The Contract Pool--Pre-Funding
Account; Capitalized Interest Account." Monies on
deposit in the Pre-Funding Account will not be
available to cover losses on or in respect of the
Contracts.
On the Closing Date, the Pre-Funding Account will
be created with an initial deposit, from the
proceeds of the Securities, of $75,723,906 (the
"Pre-Funded Amount"). The "Funding Period" will
be the period from the Closing Date until the
earliest to occur of (i) the date on which the
amount on deposit in the Pre-Funding Account
(exclusive of investment earnings) is less than
$100,000, (ii) the date on which an Event of
Default occurs under the Indenture, (iii) the
date on which an Event of Termination occurs
under the Sale and Servicing Agreement, (iv) the
insolvency of the Company, CITSF, CITCF-NY or CIT
or (v) the close of business on November 15,
1996. During the Funding Period, on one or more
Subsequent Transfer Dates, the Pre-Funded Amount
will be applied to purchase Subsequent Contracts
from the Company. The Company expects that the
Pre-Funded Amount will be reduced to less than
$100,000 by November 15, 1996, although no
assurance can be given that this will in fact
occur. If the portion of the Pre-Funded Amount
remaining on deposit in the Pre-Funding Account
at the end of the Funding Period, if any, is less
than or equal to $100,000, such portion will be
payable as principal to the Class A-1 Noteholders
or, if the portion of the Pre-Funded Amount
remaining on deposit in the Pre-Funding Account
at the end of the Funding Period, if any, is
greater than $100,000, such portion will be
payable as principal to Noteholders and
S-7
<PAGE>
Certificateholders in accordance with the Pre-
Funded Percentage (as defined herein), in either
case on the first Distribution Date thereafter
or, if the end of the Funding Period is on a
Distribution Date, then on such date.
Capitalized Interest On the Closing Date approximately $ of the
Account.................... proceeds from the sale of the Securities will be
deposited into an account (the "Capitalized
Interest Account") maintained as an Eligible
Account, initially maintained with the Indenture
Trustee and the funds on deposit therein will be
invested solely in Permitted Investments that
mature no later than one Business Day prior to
the next Distribution Date. Amounts deposited in
the Capitalized Interest Account will be used on
the September 1996, October 1996 and November
1996 Distribution Dates, if applicable, to fund
the excess, if any, of (i) the product of (x)
one-twelfth of the current weighted average of
the Interest Rates and the Pass-Through Rate
(each, as defined herein) and (y) the undisbursed
funds (excluding investment earnings) in the Pre-
Funding Account (as of the last day of the
related Due Period) over (ii) the amount of any
investment earnings on funds in the Pre-Funding
Account that are available to pay interest on the
Securities on each such Distribution Date.
On each Distribution Date during the Funding
Period any amount remaining in the Capitalized
Interest Account in excess of the Required
Capitalized Interest Amount (as defined under
"The Contract Pool--Pre-Funding Account;
Capitalized Interest Account") shall be released
to the Affiliated Purchaser. Any amounts
remaining in the Capitalized Interest Account on
the last day of the Funding Period and not used
for such purposes will be deposited in the
Collection Account and will be available for
distributions, as described herein, on the first
Distribution Date thereafter or, if the end of
the Funding Period is on a Distribution Date,
then on such date. Monies on deposit in the
Capitalized Interest Account will not be
available to cover losses on or in respect of the
Contracts.
Distribution Dates.......... Payments of interest and principal on the
Securities will be made on the fifteenth day of
each month or, if any such day is not a Business
Day, on the next succeeding Business Day (each, a
"Distribution Date"), commencing September 1996.
Payments on the Securities on each Distribution
Date will be made to the holders of record of the
related Securities at the close of business on
the Business Day immediately preceding such
Distribution Date or, in the event Definitive
Securities (as defined in the Prospectus) have
been issued, at the close of business on the last
Business Day of the month immediately preceding
the month in which such Distribution Date occurs
(each, a "Record Date").
S-8
<PAGE>
To the extent not previously paid in full prior
to such time, the outstanding principal amount of
the Certificates will be payable on the
Distribution Date occurring in December 2017 (the
"Certificate Final Scheduled Distribution Date")
and the outstanding principal amount of the Class
A-1 Notes, the Class A-2 Notes and the Class A-3
Notes will be payable on the Distribution Date
occurring in August 2003, February 2007 and
December 2017, respectively (the "Class A-1 Note
Final Scheduled Distribution Date," the "Class A-
2 Note Final Scheduled Distribution Date" and the
"Class A-3 Note Final Scheduled Distribution
Date," respectively).
A "Business Day" is any day other than a
Saturday, Sunday or any day on which banking
institutions or trust companies in the states of
New York, Delaware or Oklahoma are authorized by
law, regulation or executive order to be closed.
Due Period.................. With respect to any Distribution Date, the "Due
Period" is the period during which principal,
interest and other amounts will be collected on
the Contracts for application towards the payment
of principal and interest to the Securityholders
and the payment of fees on such Distribution
Date. The "Due Period" will be the calendar month
immediately preceding the Distribution Date. The
first Due Period will commence on and include
August 1, 1996 and will end on and include August
31, 1996.
Determination Date.......... The "Determination Date" is the third Business
Day prior to each Distribution Date. On each
Determination Date, the Servicer will determine
the Available Amount (as defined herein) for
distribution on the related Distribution Date,
allocate such amounts between the Notes, the
Certificates and the Servicer Payment (as defined
herein), and advise the Trustees (or the paying
agent appointed pursuant to the Sale and
Servicing Agreement) of the amounts of the
payments to be made to Securityholders, all as
described under "The Purchase Agreements and The
Trust Documents--Distributions."
The "Available Amount" on any Distribution Date
is equal to the excess of (A) the sum of (i) all
amounts on deposit in the Collection Account
attributable to collections or deposits made in
respect of the Contracts in the related Due
Period and (ii) the Purchase Price (as defined in
the Prospectus) for any Contract repurchased by
CITSF as a result of breaches of certain
representations and warranties or purchased by
the Servicer as a result of breaches of certain
covenants and any Monthly Advances (as defined
herein) made by the Servicer, if such Purchase
Price or Monthly Advance is paid on the
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<PAGE>
Deposit Date (as defined herein) immediately
preceding such Distribution Date, over (B) the
sum of the following amounts (to the extent that
the Servicer has not already withheld such
amounts from collections on the Contracts): (i)
any repossession profits on Liquidated Contracts
(as defined herein), Liquidation Expenses (as
defined herein) incurred and taxes and insurance
advanced by the Servicer in respect of Financed
Vehicles that are reimbursable to the Servicer
under the Sale and Servicing Agreement, (ii) any
amounts incorrectly deposited in the Collection
Account, (iii) net investment earnings on the
funds in the Collection Account and (iv) any
other amounts permitted to be withdrawn from the
Collection Account by the Servicer (or to be
retained by the Servicer from collections on the
Contracts) pursuant to the Sale and Servicing
Agreement.
Terms of the Certificates... The principal terms of the Certificates will be
as described below:
A. Pass-Through Rate........ The Certificates will bear interest at the rate
of % per annum (the "Pass-Through Rate").
B. Interest................. Interest will be paid to the Certificateholders
of record on the related Record Date, on each
Distribution Date, subject to the remaining
Available Amount and the Available Reserve Amount
on such Distribution Date, (i) in an amount equal
to one-twelfth of the product of the Pass-Through
Rate and the Certificate Balance immediately
preceding such Distribution Date or (ii) in the
case of the first Distribution Date, in an amount
equal to interest accruing at the Pass-Through
Rate (computed on the basis of a 360-day year
consisting of twelve 30-day months) from August
, 1996 to but excluding September 15, 1996, on
the Original Certificate Balance (the
"Certificate Interest Distribution Amount"). See
"The Certificates--Distribution of Interest." The
"Certificate Balance" means the Original
Certificate Balance reduced by (i) all
distributions allocable to principal actually
made to Certificateholders, including payments of
any Principal Liquidation Loss Amount (as defined
herein) and payments of any Principal
Distribution Amount (as defined herein) made to
the Certificateholders, (ii) the aggregate amount
of all Principal Liquidation Loss Amounts
distributable to Certificateholders to the extent
such amounts have not been so previously
distributed and (iii) on or after the
Distribution Date on which the Notes have been
paid in full (the "Cross-Over Date"), the
aggregate amount of all Principal Distribution
Amounts distributable to Certificateholders to
the extent such amounts have not been so
previously distributed. Distributions of interest
on the Certificates will be funded to the extent
of the Available Amount after the Servicer has
been paid the Servicer Payment and interest and
principal has been paid in
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respect of the Notes on such Distribution Date
or, to the extent such Available Amount is
insufficient, will be funded through a payment
from the Reserve Account, subject to the
Available Reserve Amount (as defined herein),
under the circumstances described herein.
The "Servicer Payment" is equal on each
Distribution Date to the sum of the reimbursement
then due to the Servicer for outstanding Monthly
Advances and the Servicing Fee (including any
unpaid Servicing Fees for past Distribution
Dates); provided, however, that if CITSF or one
of its affiliates is the Servicer, the Servicing
Fee (including any unpaid Servicing Fees for past
Distribution Dates) shall not be included in the
Servicer Payment but instead shall be payable to
the Servicer on each Distribution Date only from
the Available Amount, if any, remaining after the
principal and interest payable on the Securities
on such Distribution Date have been paid.
The rights of Certificateholders to receive
distributions of interest will be subordinated to
the rights of Noteholders to receive
distributions of interest and principal, as
described herein. See "The Certificates--
Distributions of Interest."
C. Principal................ On each Distribution Date on or after the Cross-
Over Date, principal of the Certificates will be
payable, subject to the remaining Available
Amount and the Available Reserve Amount, in an
amount equal to the Principal Distribution Amount
with respect to such Distribution Date. Such
principal payments will be funded to the extent
of the Available Amount remaining after the
Servicer has been paid the Servicer Payment, and
the interest due on the Certificates has been
paid or, to the extent such Available Amount is
insufficient, will be funded through a payment
from the Reserve Account, subject to the
Available Reserve Amount, under the circumstances
described herein. The rights of
Certificateholders to receive distributions of
principal (following the payment of distributions
of interest in respect of the Certificates) will
be subordinated to the rights of Noteholders to
receive distributions of interest and principal.
On each Distribution Date prior to the Cross-Over
Date, the Certificateholders will be entitled to
receive the Principal Liquidation Loss Amount for
such Distribution Date. Such principal payments
will be funded to the extent of the Available
Amount remaining after the Servicer has been paid
the Servicer Payment, the principal and interest
due on the Notes has been paid and the interest
on the Certificates has been paid or, to the
extent that such remaining Available Amount is
insufficient, will be funded through a payment
from the Reserve Account, subject to the
Available Reserve Amount, under the circumstances
described herein. The "Principal Liquidation Loss
Amount" for any Distribution Date
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will equal the amount, if any, by which the sum
of the aggregate outstanding principal balance of
the Notes and the Certificate Balance (after
giving effect to all distributions of principal
on such Distribution Date) exceeds the sum of the
aggregate principal balance of the Contracts (the
"Pool Balance") plus the amounts remaining on
deposit in the Pre-Funding Account (other than
investment earnings), if any, at the close of
business on the last day of the related Due
Period. (The principal balance of a Liquidated
Contract or a Repurchased Contract will not be
included in the Pool Balance for this purpose).
The Principal Liquidation Loss Amount represents
future principal payments on the Contracts that,
because of the subordination of the Certificates
and liquidation losses on the Contracts, will not
be paid to the Certificateholders. The
Certificate Balance will be reduced to the extent
that prior to the Cross-Over Date distributions
are not made in respect of the Principal Loss
Liquidation Amount and on or after the Cross-Over
Date distributions are not made in respect of the
Principal Distribution Amount. As a result of
such reductions, less interest will accrue on the
Certificates than would otherwise be the case,
and the Certificateholders will not receive a
full return of their original investment.
In the event that the Certificates are
outstanding on the Certificate Final Scheduled
Distribution Date (after taking into account
distributions on such date), the Owner Trustee
will withdraw from the Reserve Account (to the
extent funds are available therefor in the
Reserve Account), and will deposit in the
Certificate Distribution Account for distribution
to the Certificateholders in retirement of the
Certificates, an amount equal to the Certificate
Balance.
D. Redemption............... The Certificates will be subject to mandatory
redemption in part, on a pro rata basis, on the
Distribution Date immediately succeeding the day
on which the Funding Period ends (or on the
Distribution Date on which the Funding Period
ends if the Funding Period ends on a Distribution
Date) in the event that more than $100,000 of the
Pre-Funded Amount remains on deposit in the Pre-
Funding Account at the end of the Funding Period
after giving effect to the acquisition by the
Seller and the sale to the Trust of all
Subsequent Contracts, including any such
acquisition and conveyance on the date on which
the Funding Period ends. The aggregate principal
amount of Certificates to be redeemed on such
date will be an amount equal to the Pre-Funded
Percentage allocable to the Certificates of the
amount then on deposit in the Pre-Funding
Account. The "Pre-Funded Percentage" with respect
to each class of the Notes or the Certificates is
the percentage derived from the fraction, the
numerator of which is the initial principal
balance of each class of the Notes or the
Original Certificate Balance, as the case may
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be, and the denominator of which is the sum of
the initial principal balance of the Notes and
the Original Certificate Balance. See "The
Certificates--Redemption."
In the event of an Optional Purchase or Auction
Sale (each as defined herein), the Certificates
will be redeemed at a redemption price equal to
the Certificate Balance plus accrued and unpaid
interest thereon at the Pass-Through Rate. See
"Summary--Optional Purchase of the Contracts,"
"--Auction Sale" and "The Certificates--
Redemption" and "The Purchase Agreements and The
Trust Documents--Insolvency Event" in the
Prospectus.
Terms of the Notes.......... The principal terms of the Notes will be as
described below:
A. Interest Rate............ The Class A-1 Notes will bear interest at the
rate of % per annum (the "Class A-1 Interest
Rate"), the Class A-2 Notes will bear interest at
the rate of % per annum (the "Class A-2 Interest
Rate") and the Class A-3 Notes will bear interest
at the rate of % per annum (the "Class A-3
Interest Rate"). The interest rates for the
various classes of Notes are referred to herein
collectively as "Interest Rates."
B. Interest................. Interest will be paid to the Noteholders of
record on the related Record Date, on each
Distribution Date, to the extent of the Available
Amount on such Distribution Date (i) in an amount
equal to one-twelfth of the product of the
applicable Interest Rate and the outstanding
principal balance of the class of Notes,
immediately preceding such Distribution Date or
(ii) in the case of the first Distribution Date,
in an amount equal to interest accruing at the
applicable Interest Rate (computed on the basis
of a 360-day year consisting of twelve 30-day
months) from August , 1996 to but excluding
September 15, 1996, on the outstanding principal
balance of the class of Notes as of the Closing
Date. See "The Notes--Payment of Interest."
Interest payments to all classes of Noteholders
will have the same priority. Under certain
circumstances, the amount available for interest
payments could be less than the amount of
interest payable on the Notes on any Distribution
Date, in which case each class of Noteholders
will receive their ratable share (based upon the
aggregate amount of interest due to such class of
Noteholders) of the aggregate amount available to
be distributed in respect of interest on the
Notes.
C. Principal................ Principal of the Notes will be payable on each
Distribution Date in an amount equal to the
Principal Distribution Amount, calculated as
described under "The Notes--Payments of
Principal," to the extent of the Available Amount
remaining
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after the Servicer has been paid the Servicer
Payment and following the payment of interest due
on the Notes on such Distribution Date. The
Principal Distribution Amount will generally
consist of all payments of principal made on each
Contract during the related Due Period and the
unpaid principal balance of each Contract that
became a Repurchased Contract or Liquidated
Contract during the related Due Period. See "The
Notes--Payments of Principal."
Except as provided in "Redemption" below, under
no circumstances will any principal payments be
made (i) on the Class A-2 Notes until the Class
A-1 Notes have been paid in full or (ii) on the
Class A-3 Notes until the Class A-2 Notes have
been paid in full.
The outstanding principal amount of the Class A-1
Notes, to the extent not previously paid, will be
payable on the Class A-1 Note Final Scheduled
Distribution Date; the outstanding principal
amount of the Class A-2 Notes, to the extent not
previously paid, will be payable on the Class A-2
Note Final Scheduled Distribution Date; and the
outstanding principal amount of the Class A-3
Notes, to the extent, not previously paid, will
be payable on the Class A-3 Note Final Scheduled
Distribution Date. See "The Notes--Payments of
Principal."
D. Redemption............... The Class A-1 Notes will be subject to mandatory
redemption in part, on a pro rata basis, on the
Distribution Date immediately succeeding the day
on which the Funding Period ends (or on the
Distribution Date on which the Funding Period
ends if the Funding Period ends on a Distribution
Date) in the event that $100,000 or less of the
Pre-Funded Amount remains on deposit in the Pre-
Funding Account at the end of the Funding Period
after giving effect to the acquisition by the
Seller and the sale to the Trust of all
Subsequent Contracts, including any such
acquisition and conveyance on the date on which
the Funding Period ends. In the event that more
than $100,000 of the Pre-Funded Amount remains on
deposit, all of the Notes (and Certificates) will
be subject to mandatory redemption in part, on a
pro rata basis, on such Distribution Date. In
such event, the aggregate principal amount of
each class of the Notes to be redeemed on such
date will be an amount equal to the Pre-Funded
Percentage allocable to each class of the Notes
of the amount then on deposit in the Pre-Funding
Account. See "The Notes--Redemption" and "Certain
Information Regarding the Securities" in the
Prospectus.
In the event of an Optional Purchase or Auction
Sale, as described herein, the outstanding Notes
will be redeemed, at a redemption price equal to
the unpaid principal amount of the
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<PAGE>
Notes plus accrued and unpaid interest thereon at
the applicable Interest Rates. See "Summary--
Optional Purchase of the Contracts," "--Auction
Sale," "The Notes--Redemption" and "The Purchase
Agreements and The Trust Documents--Termination"
in the Prospectus.
Subordination of the The rights of the Certificateholders to receive
Certificates............... distributions with respect to the Contracts will
be subordinated to the rights of the Noteholders,
to the extent described herein. This
subordination is intended to enhance the
likelihood of timely receipt by Noteholders of
the full amount of interest and principal
required to be paid to them, and to afford the
Noteholders limited protection against losses in
respect of the Contracts.
No distribution will be made to the
Certificateholders on any Distribution Date in
respect of (i) interest until the full amount of
interest and principal on the Notes payable on
such Distribution Date has been distributed to
the Noteholders, other than payments from the
Reserve Account, and (ii) principal until the
Notes have been paid in full, other than
distributions in respect of the Principal
Liquidation Loss Amount.
The protection afforded to the Noteholders by the
subordination feature described above will be
effected by the preferential right of the
Noteholders to receive, to the extent described
herein, current distributions from collections on
or in respect of the Contracts prior to the
application of such collections to payments in
respect of the Certificates. There is no other
protection against losses on the Contracts
afforded the Notes. The Reserve Account will not
be available to provide a source of funds to make
payments of principal or interest on the Notes.
Reserve Account............. On the Closing Date, an account (the "Reserve
Account") will be established pursuant to the
Sale and Servicing Agreement. The Owner Trustee
will have the right to withdraw (or cause to be
withdrawn) payments from the Reserve Account
under certain circumstances specified below. The
Reserve Account will not be funded on the Closing
Date. After the Closing Date, the Reserve Account
will be funded with the Excess Collections (as
defined herein), if any, and certain investment
earnings on funds deposited in the Reserve
Account. With respect to any Distribution Date,
the amount available to be withdrawn from the
Reserve Account (the "Available Reserve Amount")
will equal the lesser of (i) the Specified
Reserve Amount (as defined herein) and (ii) the
amount on deposit in the Reserve Account before
giving effect to any deposit to be made to the
Reserve Account on such Distribution Date. If the
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<PAGE>
Available Amount on any Distribution Date is
insufficient (after paying the Servicer Payment
and paying the interest and principal due on the
Notes) to pay the interest and principal
(including, prior to the Cross-Over Date, any
Principal Liquidation Loss Amount) required to be
distributed on the Certificates on such
Distribution Date, the Owner Trustee will
withdraw (or cause to be withdrawn) from the
Reserve Account an amount equal to the lesser of
the amount of such deficiency or the Available
Reserve Amount. See "Enhancement--Reserve
Account." If the Available Reserve Amount is zero
(which will be the case on the Closing Date),
holders of the Certificates will bear the risk of
loss resulting from default by Obligors and will
have to look primarily to the value of the
related Financed Vehicles for recovery of the
outstanding principal and unpaid interest on the
defaulted Contracts.
On each Distribution Date, the Servicer will
deposit Excess Collections, if any, into the
Reserve Account in an amount sufficient to
increase the amount on deposit in the Reserve
Account to the Specified Reserve Amount for the
next Distribution Date. Excess Collections, if
any, not so required to be deposited in the
Reserve Account will be paid to the Affiliated
Purchaser. "Excess Collections" for any
Distribution Date will equal the amounts
collected or deposited in respect of the
Contracts in the related Due Period and which
remain in the Collection Account on such
Distribution Date after taking into account
distributions to be made on the Securities and
payments and reimbursements to be made to the
Servicer on such Distribution Date. See "The
Purchase Agreements and The Trust Documents--
Distributions." The "Specified Reserve Amount"
with respect to any Distribution Date means 1.0%
of the Pool Balance as of the first day of the
related Due Period, but in no event less than
$1,200,000 (subject to adjustment based on
delinquencies and losses on the Contracts),
provided that the Specified Reserve Amount shall
never be greater than the outstanding balance of
the Certificates and may be reduced from time to
time if the Rating Agencies shall have given
prior written notice to the Seller, the Servicer
and the Issuer that such reduction will not
result in a downgrade or withdrawal of the then
current ratings of the Notes or the Certificates.
See "Enhancement--Reserve Account."
If, on any Distribution Date, the Available
Reserve Amount (after taking into account any
deposits to and withdrawals from the Reserve
Account pursuant to the Sale and Servicing
Agreement on such Distribution Date) exceeds the
Specified Reserve Amount for the next
Distribution Date, such excess will be withdrawn
from the Reserve Account and paid to the
Affiliated Purchaser. See "Enhancement--Reserve
Account."
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<PAGE>
The sole source of funding for the Reserve
Account will be the Excess Collections, and there
can be no assurance that the Excess Collections
will be sufficient to fund the Reserve Account in
an amount equal to the Specified Reserve Amount
or to replenish the Reserve Account after funds
are withdrawn to make payments on the
Certificates. Neither the Seller nor the Servicer
will be obligated to deposit any of their own
funds into the Reserve Account in the event that
the Excess Collections are not sufficient to fund
the Reserve Account in an amount equal to the
Specified Reserve Amount. Accordingly, there can
be no assurance of the Distribution Date, if
ever, by which the Reserve Account will be funded
in an amount equal to the Specified Reserve
Amount for such Distribution Date.
Monthly Advances............ With respect to each Contract as to which there
has been an Interest Shortfall during the related
Due Period (other than an Interest Shortfall
arising from a Contract which has been prepaid in
full or which has been subject to a Relief Act
Reduction (as defined in the Prospectus) during
the related Due Period), the Servicer shall
advance funds in the amount of such Interest
Shortfall (each, a "Monthly Advance"), but only
to the extent that the Servicer, in its good
faith judgment, expects to recover such Monthly
Advance from subsequent collections with respect
to interest on such Contract made by or on behalf
of the obligor thereunder (the "Obligor"), or
from Net Liquidation Proceeds (as defined herein)
or insurance proceeds with respect to such
Contract. The Servicer shall be reimbursed for
any Monthly Advance from subsequent collections
with respect to such Contract. If the Servicer
determines in its good faith judgment that an
unreimbursed Monthly Advance shall not ultimately
be recoverable from subsequent collections, the
Servicer shall be reimbursed for such Monthly
Advance from collections on all Contracts. In
determining whether an advance is or will be
nonrecoverable, the Servicer need not take into
account that it might receive any amounts in a
deficiency judgment against an Obligor. The
Servicer will not make a Monthly Advance in
respect of (i) the principal component of any
scheduled payment or (ii) an Interest Shortfall
arising from a Contract which has been prepaid in
full or which has been subject to a Relief Act
Reduction during the related Due Period. See "The
Purchase Agreements and The Trust Documents--
Monthly Advances" in the Prospectus.
"Interest Shortfall" means with respect to any
Contract and any Distribution Date, the excess of
(A) the product of (i) the sum of (a) one-twelfth
of the weighted average of the Pass-Through Rate
and the Interest Rates and (b) one-twelfth of the
Servicing Fee Rate (as defined herein) and (ii)
the
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outstanding principal amount of such Contract as
of the last day of the second preceding Due
Period (or, in the case of the first Due Period
ending after the Contract was acquired by the
Trust, as of the Initial Cut-off Date or the
Subsequent Cut-off Date, as the case may be),
over (B) the amount of interest, if any,
collected on such Contract in the related Due
Period.
Non-Reimbursable Payments... The Servicer will not be obligated to make any
Non-Reimbursable Payments (as defined in the
Prospectus).
Servicing Fees.............. The Servicer shall receive a monthly fee (the
"Servicing Fee"), payable on each Distribution
Date, equal to the sum of (i) one-twelfth of the
product of 0.50% (the "Servicing Fee Rate") and
the Pool Balance as of the last day of the second
preceding Due Period (or, in the case of the
first Distribution Date, as of the Initial Cut-
off Date) and (ii) any investment earnings on
amounts on deposit in the Collection Account, the
Note Distribution Account and the Certificate
Distribution Account; provided, however, if CITSF
or an affiliate thereof is not the Servicer, the
Servicing Fee Rate shall be a rate determined at
the time of the appointment of a successor
Servicer but not to exceed 1.00%. See "The
Purchase Agreements and The Trust Documents--
Servicing Compensation" herein and in the
Prospectus.
Optional Purchase of the At its option, CITSF may purchase all the
Contracts.................. Contracts on any Distribution Date on which the
Pool Balance as of the last day of the related
Due Period is 10% or less of the Initial Pool
Balance, at a purchase price determined as
described under "The Purchase Agreements and The
Trust Documents--Termination" herein and in the
Prospectus. The "Initial Pool Balance" equals the
sum of (i) the Pool Balance as of the Initial
Cut-off Date and (ii) the aggregate principal
balance of all Subsequent Contracts added to the
Trust as of their respective Subsequent Cut-off
Dates.
Auction Sale................ Within ten days after the first Distribution Date
on which the Pool Balance as of the last day of
the related Due Period is 5% or less of the
Initial Pool Balance, the Indenture Trustee (or,
if the Notes have been paid in full and the
Indenture has been discharged in accordance with
its terms, the Owner Trustee) shall solicit bids
for the purchase of the Contracts remaining in
the Trust. In the event that satisfactory bids
are received as described in "The Purchase
Agreements and The Trust Documents--Termination"
in the Prospectus, the net sale proceeds (after
the Servicer Payment) will be distributed to
Securityholders, in the same order of priority as
collections received in respect of the Contracts,
on the second Distribution Date succeeding such
Due Period. If satisfactory bids are not
received, such Trustee shall decline to sell the
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<PAGE>
Contracts and shall not be under any obligation
to solicit any further bids or otherwise
negotiate any further sale of the Contracts. See
"The Purchase Agreements and The Trust
Documents--Termination" herein and in the
Prospectus.
Mandatory Sale.............. If an Insolvency Event with respect to the
Affiliated Purchaser occurs, the Indenture
Trustee (or, if no Notes are outstanding, the
Owner Trustee) will promptly sell, dispose of or
otherwise liquidate the Contracts in a
commercially reasonable manner on commercially
reasonable terms, except under certain limited
circumstances. The net proceeds from any such
sale, disposition or liquidation of the Contracts
will be treated as collections on the Contracts
and deposited in the Collection Account.
Distributions will be made first, to the payment
of the Servicer Payment, second, to the payment
of interest and principal on the Notes and third,
to the payment of interest and principal on the
Certificates. If the net proceeds from the
liquidation of the Contracts (after payment of
the Servicer Payment and payment of the principal
amount of and accrued interest on the Notes) and
any amounts on deposit in the Certificate
Distribution Account are not sufficient to pay
the Certificate Balance of the Certificates in
full, the amount of principal returned to the
Certificateholders will be reduced and such
Certificateholders will incur a loss, except to
the extent of payments to the Certificateholders
from the Reserve Account, subject to the
Available Reserve Amount. If the net proceeds
from the liquidation of the Contracts (after
payment of the Servicer Payment) and any amounts
on deposit in the Note Distribution Account are
not sufficient to pay the principal amount of and
accrued interest on the Notes in full, holders of
the Notes also will incur a loss as described
herein. See "The Purchase Agreements and The
Trust Documents--Insolvency Event" in the
Prospectus.
Ratings..................... It is a condition to the issuance of each class
of the Notes that each class of the Notes be
rated "AAA" by Standard & Poor's Ratings Service,
a division of The McGraw-Hill Companies, Inc.
("S&P") and "Aaa" by Moody's Investors Service,
Inc. ("Moody's") (each, a "Rating Agency"). It is
a condition to the issuance of the Certificates
that the Certificates be rated at least "BBB" by
S&P and "Baa2" by Moody's. The ratings of the
Notes will be based primarily on the Initial
Contracts, the Capitalized Interest Account, the
Pre-Funding Account and the terms of the
Securities, including the subordination provided
by the Certificates. The ratings of the
Certificates will be based primarily on the
Initial Contracts, the Capitalized Interest
Account, the Pre-Funding Account and the Reserve
Account. The ratings of the Securities should be
evaluated independently from similar ratings on
other types of securities. The ratings do not
address the possibility that Securityholders
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<PAGE>
may suffer a lower than anticipated yield. The
ratings do not address the likelihood that the
Securities will be retired following the sale of
the Contracts by the Trustee as described above
under "Auction Sale" or "Optional Purchase of the
Contracts." See "Ratings."
There can be no assurance that any rating will
remain in effect for any given period of time or
that a rating will not be lowered or withdrawn by
the assigning Rating Agency if, in its judgment,
circumstances so warrant. In the event that the
rating initially assigned to any of the
Securities is subsequently lowered or withdrawn
for any reason, no person or entity will be
obligated to provide any additional credit
enhancement with respect to such Securities.
There can be no assurance whether any other
rating agency will rate any of the Securities, or
if one does, what rating would be assigned by any
such other rating agency. A security rating is
not a recommendation to buy, sell or hold
securities.
Certain Federal Income Tax
Considerations.............
For Federal income tax purposes: (1) the Notes
will constitute indebtedness and (2) the
Certificates will constitute interests in a trust
fund that will not be treated as an association
taxable as a corporation. Each Noteholder, by
acceptance of a Note, will agree to treat the
Notes as indebtedness, and each
Certificateholder, by the acceptance of a
Certificate, will agree to treat the Trust as a
partnership in which the Certificateholders are
partners for Federal income tax purposes.
Alternative characterizations of the Trust, the
Notes and the Certificates are possible, but
would not result in materially adverse tax
consequences to Noteholders or
Certificateholders. See "Certain Federal Income
Tax Consequences."
ERISA Considerations........ Subject to certain considerations discussed under
"ERISA Considerations" herein, the Notes will be
eligible for purchase by employee benefit plans
that are subject to the Employee Retirement
Income Security Act of 1974, as amended
("ERISA").
Employee benefit plans subject to ERISA will not
be eligible to purchase the Certificates.
Fiduciaries of employee benefit plans subject to
ERISA, or plans subject to Section 4975 of the
Internal Revenue Code of 1986 (the "Code") should
carefully review with their legal advisors
whether the purchase or holding of the
Certificates offered hereby could give rise to a
transaction prohibited or not otherwise
permissible under ERISA or the Code. Any benefit
plan fiduciary considering the purchase of the
Notes should, among other things, consult with
its counsel in determining whether all required
conditions have been satisfied. See "ERISA
Considerations."
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<PAGE>
Legal Investment............ The appropriate characterization of the
Certificates and each class of the Notes under
various legal investment restrictions applicable
to the investment activities of certain
institutions, and thus the ability of investors
subject to these restrictions to purchase the
Certificates and the Notes, may be subject to
significant interpretive uncertainties. All
investors whose investment authority is subject
to legal restrictions should consult their own
legal advisors to determine whether, and to what
extent, the Certificates and each class of the
Notes will constitute legal investments for them.
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<PAGE>
RISK FACTORS
Prospective Securityholders should consider the following risk factors in
connection with the purchase of the Securities:
1. Limited Obligations. The Securities will not represent an interest in or
an obligation of The CIT Group Holdings, Inc. ("CIT"), The CIT Group
Securitization Corporation II (the "Company"), the Affiliated Purchaser (as
defined herein) or any Servicer (including The CIT Group/Sales Financing, Inc.
("CITSF")) or any of their respective affiliates. The Securities will not be
insured or guaranteed by any government agency or instrumentality, CIT or any
of its affiliates (including the Company, the Affiliated Purchaser, and
CITSF), the Underwriters (as defined herein) or any of their affiliates, or
any other Servicer or any of its affiliates. CIT will not issue a Limited
Guarantee (as defined in the Prospectus) supporting the Notes or the
Certificates.
2. Risk of Loss. An investment in the Securities may be affected by, among
other things, a downturn in regional or local economic conditions. These
regional or local economic conditions are often volatile and historically have
affected the delinquency, loan loss and liquidation experience of pools of
installment sale contracts secured by recreational vehicles. The credit
criteria and underwriting guidelines under which CITSF originates recreational
vehicle installment sale contracts were changed in 1994. The delinquency and
loan loss experience for CITSF's portfolio will be affected adversely by this
change in credit criteria. See "The CIT Group/Sales Financing, Inc.,
Servicer--Delinquency and Loan Loss Experience." Since the market value of
recreational vehicles generally declines with age and since in certain states
the Trustees may not have a first perfected security interest in the Financed
Vehicles, the Servicer may not recover the entire amount owing under a
defaulted Contract. See "Certain Legal Aspects of the Contracts" in the
Prospectus. In such a case, the Securityholders may suffer a corresponding
loss. The market value of the Financed Vehicles could be or could become lower
than the outstanding principal balances of the Contracts that they secure.
Sufficiently high liquidation losses on the Contracts will have the effect of
reducing, and could eliminate (a) the protection against loss afforded to the
Noteholders by the subordination of the Certificates, (b) the protection
against loss afforded to the Certificateholders by the Available Reserve
Amount (as defined herein), if any, and (c) the amount of the Excess
Collections (as defined herein) available to fund the Reserve Account. If the
Certificate Balance is reduced to zero, the holders of the Notes will bear the
risk of loss resulting from default by Obligors and will have to look
primarily to the value of the related Financed Vehicles for recovery of the
outstanding principal and unpaid interest on the defaulted Contracts. If the
Available Reserve Amount is zero (which will be the case on the Closing Date),
holders of the Certificates will bear the risk of loss resulting from default
by Obligors (as defined herein) and will have to look primarily to the value
of the related Financed Vehicles for recovery of the outstanding principal and
unpaid interest on the defaulted Contracts.
3. Certain Matters Relating to Insolvency. CITSF and the Company intend that
each transfer of Contracts from The CIT Group/Consumer Finance, Inc. (NY)
("CITCF-NY") to CITSF, from CITSF to the Company and from the Company to the
Trust constitutes a sale, rather than a pledge of the Contracts to secure
indebtedness. However, if CITCF-NY, CITSF or the Company were to become a
debtor under Title 11 of the United States Code, 11 U.S.C. (S)101 et seq. (the
"Bankruptcy Code"), it is possible that a creditor, receiver, other party in
interest or trustee in bankruptcy of CITCF-NY, CITSF or the Company, or CITCF-
NY, CITSF or the Company as debtor-in-possession, may argue that the sale of
the Contracts by CITCF-NY to CITSF, by CITSF to the Company, or by the Company
to the Trust, respectively, was a pledge of the Contracts rather than a sale
and that, accordingly, such Contracts should be part of such assigning
entity's bankruptcy estate. Such a position, if presented to a court, even if
ultimately unsuccessful, could result in a delay in or reduction of
distributions to the Securityholders. See "Certain Legal Aspects of the
Contracts--Certain Matters Relating to Insolvency" in the Prospectus.
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<PAGE>
The CIT GP Corporation V, a Delaware corporation and a wholly-owned
subsidiary of CIT (the "Affiliated Purchaser"), will own a certificate
evidencing at least 1% of the Original Certificate Balance. The Affiliated
Purchaser will have the same rights with regard to the Trust as all other
Certificateholders based on its percentage ownership of the Certificate
Balance. The Trust Agreement will provide that if an Insolvency Event (as
defined in the Prospectus) with respect to the Affiliated Purchaser occurs,
subject to certain conditions, the Trust will dissolve. Certain steps will be
taken in structuring the transactions contemplated hereby that are intended to
make it less likely that an Insolvency Event with respect to the Affiliated
Purchaser will occur. These steps include the formation of the Affiliated
Purchaser as a separate, limited-purpose corporation pursuant to a certificate
of incorporation containing certain limitations (including restrictions on the
nature of the Affiliated Purchaser's business and a restriction on the
Affiliated Purchaser's ability to commence a voluntary case or proceeding
under the Bankruptcy Code or similar applicable state laws without the prior
affirmative unanimous vote of its directors). However, an Insolvency Event
with respect to the Affiliated Purchaser may occur nonetheless.
If an Insolvency Event with respect to the Affiliated Purchaser occurs, the
Indenture Trustee (or, if no Notes are outstanding, the Owner Trustee) will
promptly sell, dispose of or otherwise liquidate the Contracts in a
commercially reasonable manner on commercially reasonable terms, except under
certain limited circumstances. The net proceeds from any such sale,
disposition or liquidation of the Contracts will be treated as collections on
the Contracts and deposited in the Collection Account. Distributions will be
made first, to the payment of the Servicer Payment, second, to the payment of
interest and principal on the Notes and third, to the payment of interest and
principal on the Certificates. If the net proceeds from the liquidation of the
Contracts (after payment of the Servicer Payment and payment of the principal
amount of and accrued interest on the Notes) and any amounts on deposit in the
Certificate Distribution Account are not sufficient to pay the Certificate
Balance of the Certificates in full, the amount of principal returned to the
Certificateholders will be reduced and such Certificateholders will incur a
loss, except to the extent of payments to the Certificateholders from the
Reserve Account, subject to the Available Reserve Amount. If the net proceeds
from the liquidation of the Contracts (after payment of the Servicer Payment)
and any amounts on deposit in the Note Distribution Account are not sufficient
to pay the principal amount of and accrued interest on the Notes in full,
holders of the Notes also will incur a loss. See "The Purchase Agreements and
The Trust Documents--Insolvency Event" in the Prospectus. Such net proceeds
together with amounts on deposit in the Note Distribution Account will be
applied first, to the payment of interest on the Notes pro rata and second, to
principal of the Class A-1, Class A-2 and Class A-3 Notes in that order.
4. The Subsequent Contracts and the Pre-Funding Account. The conveyance of
Subsequent Contracts by CITSF during the Funding Period will be subject to the
conditions described herein under "The Contract Pool." If CITSF does not
originate contracts satisfying such criteria during the Funding Period, CITSF
will have insufficient contracts to sell to the Trust on Subsequent Transfer
Dates, thereby resulting in either prepayments of principal to the Class A-1
Noteholders only or prepayment of principal to all classes of Noteholders and
Certificateholders as described below.
To the extent that amounts on deposit in the Pre-Funding Account have not
been fully applied to the purchase of Subsequent Contracts by the Trust by the
end of the Funding Period, if the Pre-Funded Amount remaining in the Pre-
Funding Account is less than or equal to $100,000, the Class A-1 Noteholders
will receive a prepayment of principal in an amount equal to such remaining
Pre-Funded Amount or, if the Pre-Funded Amount remaining in the Pre-Funding
Account is greater than $100,000, all classes of Noteholders and
Certificateholders will receive a prepayment of principal in an amount equal
to the Pre-Funded Percentage allocable to each class of the Noteholders and
the Certificateholders, respectively, of such Pre-Funded Amount, which
prepayment in either case will be made on the first Distribution Date
following the end of the Funding Period or, if the Funding Period ends on a
Distribution Date, on such date. The "Pre-Funded Percentage" with respect to
the Notes or the Certificates is the percentage derived from the fraction, the
numerator of which is the initial principal balance of the Notes or the
Original Certificate Balance, as the case may be, and the
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denominator of which is the sum of the initial principal balance of the Notes
and the Original Certificate Balance. It is anticipated that the principal
amount of Subsequent Contracts purchased by the Trust will not be exactly
equal to the amount on deposit in the Pre-Funding Account and that therefore
there will be at least a nominal amount of principal prepaid either to the
Class A-1 Noteholders only or to the Noteholders and the Certificateholders at
the end of the Funding Period.
Each Subsequent Contract must satisfy the eligibility criteria specified
herein and in the Sale and Servicing Agreement at the time of its sale to the
Trust. The Company (the seller of any Subsequent Contracts to the Trust) will
certify that all such eligibility criteria have been satisfied and CITSF (the
seller of any Subsequent Contracts to the Company) will certify that all
conditions precedent to the sale of the Subsequent Contracts to the Trust have
been satisfied. It is a condition to the sale of any Subsequent Contracts to
the Trust that each Rating Agency, after receiving prior notice of the
proposed transfer of Subsequent Contracts to the Trust, shall not have advised
the Seller or the Trustees that the conveyance of such Subsequent Contracts
will result in a qualification, modification or withdrawal of its then current
rating of either the Notes or the Certificates. Following the transfer of
Subsequent Contracts to the Contract Pool the aggregate characteristics of the
Contracts then held in the Contract Pool may vary from those of the Initial
Contracts included therein.
The ability of the Trust to invest in Subsequent Contracts is entirely
dependent upon whether CITSF is able to originate recreational vehicle
contracts that meet the requirements for transfer on a Subsequent Transfer
Date under a Subsequent Purchase Agreement transferring Subsequent Contracts
from CITSF to the Company and under the Sale and Servicing Agreement. The
ability of CITSF to originate such contracts may be affected by a variety of
economic and social factors. Moreover, such factors may affect the ability of
the Obligors thereunder to perform their obligations thereunder which may
cause contracts originated by CITSF or its affiliates to fail to meet the
requirements for transfer under the Subsequent Purchase Agreement or the Sale
and Servicing Agreement. Economic factors include interest rates, unemployment
levels, the rate of inflation and consumer perception of economic conditions
generally. However, CITSF is unable to determine and has no basis to predict
whether or to what extent economic or social factors will affect CITSF's
ability to originate Subsequent Contracts.
5. Prepayment from the Pre-Funding Account. If the Pre-Funded Amount has not
been fully applied by the Trust to purchase Subsequent Contracts by the end of
the Funding Period, then the Pre-Funded Amount will be payable as principal to
the Class A-1 Noteholders if such remaining Pre-Funded Amount is less than or
equal to $100,000 or, if such remaining Pre-Funded Amount is greater than
$100,000, to each class of the Noteholders and Certificateholders in
accordance with the Pre-Funded Percentage, in either case on the first
Distribution Date following the end of the Funding Period, or, if the end of
the Funding Period is on a Distribution Date, then on such date.
In the event that amounts remain on deposit in the Pre-Funding Account at
the end of the Funding Period and are applied to the payment of principal to
any of the Noteholders and/or the Certificateholders, such partial retirement
of such Notes and Certificates may shorten the average life of the Securities
and may cause such Noteholders and Certificateholders to experience a lower
yield on the Securities. In addition, any reinvestment risk resulting from
such partial retirement will be borne by the holders of such Securities.
6. Limited Assets. The Trust will covenant to sell the Contracts (a) if
directed to do so by the Indenture Trustee in accordance with the Indenture
following an acceleration of the Notes upon an Event of Default and (b) upon
the occurrence of an Insolvency Event with respect to the Affiliated
Purchaser. However, there is no assurance that the market value of the
Contracts will at any time be equal to or greater than the aggregate
outstanding principal balance of the Notes and the interest accrued thereon.
Therefore, upon an Event of Default with respect to the Notes or an Insolvency
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Event, there can be no assurance that sufficient funds will be available to
repay Noteholders in full. In addition, the amount of principal required to be
distributed to Noteholders under the Indenture is generally limited to amounts
available to be deposited in the Note Distribution Account. Therefore, the
failure to pay principal on the Notes may not result in the occurrence of an
Event of Default until the Note Final Scheduled Distribution Date applicable
to each class of the Notes.
7. Limited Source of Funding for Reserve Account.
On the Closing Date, there will be no funds on deposit in the Reserve
Account. The Reserve Account will be funded solely from the Excess
Collections, and there can be no assurance that the Excess Collections will be
sufficient to fund the Reserve Account on any Distribution Date in an amount
equal to the Specified Reserve Amount for such Distribution Date or to
replenish the Reserve Account after funds are withdrawn to make payments on
the Certificates. The Excess Collections to be deposited in the Reserve
Account are limited and will be reduced as the Pool Balance is reduced. If
funds are deposited in the Reserve Account, they will be available to pay
principal and interest on the Certificates on any Distribution Date, but the
funds available for such purpose will not exceed the Available Reserve Amount
for such Distribution Date. If funds in the Reserve Account are exhausted, the
Certificateholders will depend solely on payments on or with respect to the
Contracts for distributions.
Liquidations of Contracts may reduce, and perhaps eliminate, the amount of
Excess Collections that would otherwise have been available on any
Distribution Date to fund the Reserve Account, because before any excess
interest collections are available to fund the Reserve Account such excess
interest collections must be applied first to pay the portion of the Principal
Distribution Amount (as defined herein) equal to the difference between the
Stated Principal Balance (as defined herein) of Liquidated Contracts (as
defined herein) and the Net Liquidation Proceeds (as defined herein) thereof.
Any event or circumstance which causes the Trust not to receive a full
month's interest at the Contract Rate on a Contract also will reduce the
amount of Excess Collections that would otherwise have been available on any
Distribution Date to fund the Reserve Account. Accordingly, the amount of
Excess Collections will be less than they otherwise would have been if a
Contract is prepaid in full or becomes subject to a Relief Act Reduction (as
defined herein). Paid-Ahead Contracts and delinquencies on the Contracts also
will reduce, and perhaps eliminate, the Excess Collections that otherwise
would have been available on any Distribution Date to fund the Reserve
Account; a Monthly Advance made in respect of such Paid-Ahead Contracts
(during the Paid-Ahead Period) or in respect of such delinquent Contracts will
not result in any Excess Collections, because the amount of each Monthly
Advance is calculated based on the weighted average interest rate on the
Securities and the Servicing Fee Rate, rather than on the Contract Rate. For a
similar reason, a purchase of a Contract by CITSF will not result in any
Excess Collections because the Purchase Price (as defined herein) is based on
the weighted average interest rate on the Securities, rather than on the
Contract Rate.
8. Geographic Concentration of Recreational Vehicles. A significant
concentration of the Initial Contracts have Obligors with mailing addresses in
the states of California, Texas, Florida and Arizona. Based on the Initial
Cut-off Date Pool Principal Balance, 22.0%, 10.3%, 7.3% and 5.4% of the
Initial Contracts have Obligors with mailing addresses in California, Texas,
Florida and Arizona, respectively. Because of the relative lack of geographic
diversity, losses on the related Contracts may be higher than would be the
case if there were more diversification. The economies of such states may be
adversely affected to a greater degree than that of other areas of the country
by certain regional economic conditions. An economic downturn in California,
Texas, Florida or Arizona may have an adverse effect on the ability of
Obligors in such states to meet their payment obligations under the Contracts.
9. Litigation. In June 1995, a suit, Harvey Travis et al. v. The CIT Group
Sales Financing, Inc., et al., Civil Action No. CV-95-P-1544-S, was filed in
the United States District Court for the Northern
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District of Alabama, against CITSF, its force-placed insurance carrier and
another lender. Plaintiffs in this action allege primarily that force-placed
insurance coverage on manufactured homes was placed by defendants in a manner
which caused plaintiffs and other borrowers to be charged or assessed for
excessive premiums and that there was inadequate disclosure regarding certain
fees charged and commissions earned in connection therewith. In their
complaint, plaintiffs ask that a class action be certified, with the class to
be comprised of individuals against whom monetary charges alleged to be
excessive have been assessed and/or collected by CITSF and/or the other
defendants for the purchase of force-placed insurance in connection with
consumer installment transactions with CITSF and/or the other defendants. The
complaint makes a claim for actual damages and punitive damages. Plaintiffs
have amended the complaint to add as defendants an insurance agency affiliated
with CITSF and two companies affiliated with the insurance carrier. It cannot
at this time be determined whether or not a court will certify a class action.
The allegations of the complaint are very broad and discovery is still
underway. However, based on what it knows at this time, the management of
CITSF has no reason to believe that this case will have a material effect upon
CITSF's financial condition or results of operations.
As of the Initial Cut-off Date, force-placed insurance has not been obtained
on any of the Initial Contracts and as of the Subsequent Cut-off Date, force-
placed insurance will not have been obtained on any of the Subsequent
Contracts. Historically, CITSF has force-placed insurance on a relatively
small percentage of its retail installment sales contracts relating to
recreational vehicles. The Servicer, however, may force-place insurance on the
Contracts once they are owned by the Trust as described under "The Purchase
Agreements and the Trust Documents--Physical Damage Insurance" in the
Prospectus, and there can be no assurance as to the number or principal
balance of the Contracts that may become subject to force-placed insurance. In
the event that the Servicer fails to comply with the provisions of the Sale
and Servicing Agreement relating to force-placed insurance with respect to any
Contract and such failure materially and adversely affects the Trust's
interest in such Contract, the Servicer will be required to purchase such
Contract in accordance with the terms of the Sale and Servicing Agreement.
10. Ratings of the Securities. It is a condition to the issuance of each
class of the Notes that each class of the Notes be rated "AAA" by S&P and
"Aaa" by Moody's. It is a condition to the issuance of the Certificates
offered pursuant to this Prospectus Supplement that the Certificates be rated
at least "BBB" by S&P and "Baa2" by Moody's. The foregoing ratings do not
address the likelihood that the Securities will be retired following the sale
of the Contracts by the applicable Trustee. There can be no assurance that any
rating will remain in effect for any given period of time or that a rating
will not be lowered or withdrawn by the Rating Agency if, in its judgment,
circumstances so warrant. In the event that the rating initially assigned to
the Securities is subsequently lowered or withdrawn for any reason, no person
or entity will be obligated to provide any additional credit enhancement with
respect to such Securities. There can be no assurance that any other rating
agency will rate the Notes or the Certificates, or if one does, what rating
would be assigned by any such other rating agency. A security rating is not a
recommendation to buy, sell or hold securities.
11. Book-Entry Registration. The Securities will be offered for purchase in
book-entry form only and will be initially registered in the name of the
nominee of The Depository Trust Company ("DTC" and, together with any
successor depository selected by the Company, the "Depository"). No person
acquiring an interest in the Notes through the facilities of DTC (a "Note
Owner") will be entitled to receive a Note representing such person's interest
in the Notes, except as set forth under "Certain Information Regarding the
Securities--Definitive Securities" in the Prospectus, and such persons will
hold their interests in the Notes through DTC in the United States or Cedel
Bank, societe anonyme ("Cedel") or Euroclear in Europe. No person acquiring an
interest in the Certificates through the facilities of DTC (a "Certificate
Owner") will be entitled to receive a Definitive Certificate representing such
person's interest in the Certificates, except as set forth under "Certain
Information Regarding The Securities--Definitive Securities" in the
Prospectus, and such persons will hold their interests in the
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Certificates through the DTC. Unless and until Definitive Securities are
issued under the limited circumstances described herein and in the related
Prospectus, all references to actions by Securityholders shall refer to
actions taken by DTC upon instructions from its Participants (as defined in
the Prospectus), and all references herein to distributions, notices, reports
and statements to Securityholders shall refer to distributions, notices,
reports and statements to DTC in accordance with DTC procedures. See "Certain
Information Regarding The Securities--Definitive Securities" in the Prospectus
and Annex I hereto.
12. Risk of Commingling. At any time that the requirements as specified
under "The Purchase Agreements and the Trust Documents--Collections" in the
Prospectus are met, the Servicer may deposit payments on or with respect to
the Contracts and proceeds of Contracts in the Collection Account monthly on
the Business Day immediately preceding the next Distribution Date (the
"Deposit Date"). Pending such a monthly deposit into the Collection Account,
collections on the Contracts may be invested by the Servicer at its own risk
and for its own benefit and will not be segregated from its own funds. If the
Servicer were unable to remit such funds or if the Servicer became insolvent,
the holders of the Securities could incur a loss with respect to collections
not deposited in the Collection Account. As of the Closing Date, the Servicer
meets such requirements.
STRUCTURE OF THE TRANSACTION
The Issuer, CIT RV Trust 1996-B (the "Issuer" or the "Trust"), is a business
trust formed under the laws of the State of Delaware pursuant to a Trust
Agreement (as amended and supplemented from time to time, the "Trust
Agreement"), to be dated as of August 1, 1996 between the Seller and Mellon
Bank (DE), National Association, acting thereunder not in its individual
capacity but solely as trustee of the Trust (the "Owner Trustee"). Prior to
the sale and assignment of the Contracts pursuant to the Sale and Servicing
Agreement, the Trust will have no assets or obligations. After its formation,
the Trust will not engage in any activity other than (i) acquiring, holding
and managing the Contracts and the other assets of the Trust and proceeds
therefrom, (ii) issuing the Notes and the Certificates, (iii) making payments
on the Notes and the Certificates and (iv) engaging in other activities that
are necessary, suitable or convenient to accomplish the foregoing or are
incidental thereto or connected therewith.
Each Certificate will represent a fractional undivided interest in, and each
Note, will represent an obligation of, the Trust.
The Trust will initially be capitalized with equity equal to approximately
$14,400,000 (the "Original Certificate Balance"). Certificates with an
aggregate original principal balance of approximately $150,000 will be owned
by the Affiliated Purchaser and Certificates representing the remainder of the
Original Certificate Balance will be sold to third party investors that are
expected to be unaffiliated with the Affiliated Purchaser, the Seller, the
Servicer or their affiliates. The equity in the Trust, together with the
proceeds of the initial sale of the Notes, will be used by the Trust to
purchase the Initial Contracts from the Seller pursuant to the Sale and
Servicing Agreement, to fund the deposit of the Pre-Funded Amount and the
deposit to the Capitalized Interest Account.
The Servicer will service the Contracts held by the Trust and will receive
fees for such services. CITSF will be appointed as custodian on behalf of the
Trust, and will hold the original installment sales contract/or promissory
note as well as the originals or copies of documents and instruments relating
to each Contract and evidencing the security interest in the Financed Vehicle
securing each Contract (the "Contract Files").
The Trust's principal offices are in Wilmington, Delaware in care of Mellon
Bank (DE), National Association, as Owner Trustee, at the address listed in
"--The Owner Trustee" below.
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CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the Trust as of the
Initial Cut-off Date, as if the issuance and sale of the Notes and the
Certificates offered hereby had taken place on such date:
<TABLE>
<S> <C>
Class A-1 % Asset-Backed Notes............................. $ 88,000,000
Class A-2 % Asset-Backed Notes............................. $ 75,000,000
Class A-3 % Asset-Backed Notes............................. $ 62,600,000
% Asset-Backed Certificates................................ $ 14,400,000
------------
Total....................................................... $240,000,000
============
</TABLE>
THE OWNER TRUSTEE
Mellon Bank (DE), National Association, is the Owner Trustee under the Trust
Agreement. Mellon Bank (DE), National Association is a national banking
association formed under the laws of the United States. The principal offices
of Mellon Bank (DE), National Association, are located at 919 North Market
Street, Wilmington, Delaware 19801. The Owner Trustee will perform limited
administrative functions under the Trust Agreement, including making
distributions from the Certificate Distribution Account. The Owner Trustee's
liability in connection with the issuance and sale of the Certificates and the
Notes is limited solely to the express obligations of the Owner Trustee as set
forth in the Trust Agreement and the Sale and Servicing Agreement. The Owner
Trustee may appoint a co-trustee to act as co-trustee pursuant to a co-trustee
agreement with the Owner Trustee.
The Owner Trustee may resign at any time, in which event the Servicer will
be obligated to appoint a successor trustee. The Servicer may also remove the
Owner Trustee if the Owner Trustee ceases to be eligible to continue as Owner
Trustee under the Sale and Servicing Agreement or if the Owner Trustee becomes
insolvent. In such circumstances, the Servicer will be obligated to appoint a
successor trustee. Any resignation or removal of the Owner Trustee and
appointment of a successor trustee will not become effective until acceptance
of the appointment by the successor trustee.
The Sale and Servicing Agreement will provide that the Servicer will pay the
Owner Trustee's fees. The Sale and Servicing Agreement will further provide
that the Owner Trustee will be entitled to indemnification by the Servicer
for, and will be held harmless against, any loss, liability or expense
incurred by the Owner Trustee not resulting from its own willful misfeasance,
bad faith or negligence (other than by reason of a breach of any of its
representations or warranties set forth in the Sale and Servicing Agreement).
THE TRUST PROPERTY
The Notes are an obligation of the Trust and will be secured by assets of
the Trust (other than the Certificate Distribution Account and the Reserve
Account). Each Certificate represents a fractional undivided interest in the
Trust. The Trust property will include, among other things, (i) a pool (the
"Contract Pool") of simple interest retail installment sale contracts secured
by new and used recreational vehicles between Dealers and Obligors, consisting
of the Initial Contracts and the Subsequent Contracts; (ii) all monies
received under the Initial Contracts on or after the Initial Cut-off Date and
the Subsequent Contracts on or after the related Subsequent Cut-off Date;
(iii) such amounts as from time to time may be held in one or more accounts
established and maintained by the Servicer pursuant to the Sale and Servicing
Agreement (including all investments in such accounts and all income from the
funds therein and all proceeds thereof); (iv) all monies on deposit in the
Pre-Funding Account, the Reserve Account and the Capitalized Interest Account
(as defined herein) (including all investments in such accounts and all income
from the funds therein and all proceeds thereof); (v) assignments of the
security interests in the Financed Vehicles and any accessions thereto; (vi)
the right to proceeds from physical damage, credit life and disability
insurance policies, if any, covering individual Financed Vehicles or Obligors,
as the case may be; (vii) the rights of the Trust under the Sale and Servicing
Agreement and (viii) any and all proceeds of the foregoing.
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THE CONTRACT POOL
GENERAL
The Contract Pool will initially consist of 6,775 conventional fixed-rate
simple interest installment sale contracts secured by recreational vehicles
(collectively, the "Initial Contracts") having an aggregate unpaid principal
balance as of August 1, 1996 (the "Initial Cut-off Date") of $164,276,094 (the
"Initial Cut-off Date Pool Principal Balance"). For the purposes of the
discussion of the characteristics of the Initial Contracts on the Initial Cut-
off Date contained herein, the principal balance of each Initial Contract is
the unpaid principal balance as of the Initial Cut-off Date.
In addition to the Initial Contracts sold by the Company to the Trust on the
Closing Date the Trust is expected to purchase from the Company additional
conventional fixed-rate simple interest installment sale contracts secured by
recreational vehicles from time to time during the Funding Period
(collectively, the "Subsequent Contracts" and, together with the Initial
Contracts, the "Contracts"). The Subsequent Contracts to be purchased by the
Trust, if available, will be purchased by CITSF from CITCF-NY or Dealers and
sold by CITSF to the Company and by the Company to the Trust. Accordingly, the
statistical characteristics of the Contract Pool will vary as of any
Subsequent Cut-off Date upon the acquisition of such Subsequent Contracts.
CITSF will sell the Initial Contracts to the Company pursuant to a Purchase
Agreement to be dated as of August 1, 1996 (the "Purchase Agreement") and the
Company will sell the Initial Contracts to the Trust pursuant to the Sale and
Servicing Agreement to be dated as of August 1, 1996 (the "Sale and Servicing
Agreement"), among the Seller, the Servicer and the Trust. CITSF will sell any
Subsequent Contracts to the Company pursuant to a purchase agreement (the
"Subsequent Purchase Agreement") and the Company will sell any Subsequent
Contracts to the Trust pursuant to a transfer agreement (the "Subsequent
Transfer Agreement").
The obligation of the Trust to purchase the Subsequent Contracts is subject
to the following requirements: (i) such Subsequent Contracts must satisfy the
representations and warranties specified in the Sale and Servicing Agreement
as applicable to the Subsequent Contracts; (ii) such Subsequent Contracts will
not be selected by either CITSF or the Seller in a manner that it believes is
adverse to the interests of the Securityholders; (iii) the weighted average
Contract Rate (as defined herein) of the Contracts (including the related
Subsequent Contracts) is not less than 10.15%; (iv) the weighted average
remaining term of the Contracts (including the Subsequent Contracts) as of the
related Subsequent Transfer Date is not greater than 157 months; (v) the
Seller and the Trustees shall not have been advised by any Rating Agency that
the conveyance of such Subsequent Contracts will result in a qualification,
modification or withdrawal of its then current rating of either the Notes or
the Certificates; (vi) the Owner Trustee shall have received certain opinions
of counsel as to, among other things, the enforceability and validity of the
Subsequent Transfer Agreement relating to such conveyance of Subsequent
Contracts; (vii) each Subsequent Contract will be originated in the United
States of America; (viii) each Subsequent Contract will have a Contract Rate
equal to or greater than 8.25%; (ix) each Subsequent Contract will provide for
level monthly payments which include interest at the related Contract Rate
and, if paid in accordance with its schedule, fully amortizes the amount
financed over an original term of no greater than 240 months; (x) as of the
related Subsequent Cut-off Date, the most recent scheduled payment, if any, of
principal and interest on each Subsequent Contract will have been made by or
on behalf of the related Obligor or will not have been delinquent more than 30
days; (xi) no Subsequent Financed Vehicle will have been repossessed without
reinstatement as of the related Subsequent Cut-off Date; (xii) as of the
related Subsequent Cut-off Date, no Obligor on any Subsequent Contract will be
the subject of a bankruptcy proceeding; (xiii) as of the related Subsequent
Cut-off Date, each Subsequent Contract will have a remaining principal balance
of not less than $1,000 and not more than $300,000; (xiv) the final scheduled
payment date on the Subsequent Contract with the latest scheduled payment date
will not be later than November
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2016; (xv) no more than 34% of the Contracts, based on the Subsequent Cut-off
Date Pool Principal Balance (including the related Subsequent Contracts) are
Contracts secured by used Financed Vehicles and (xvi) such other requirements
as the Rating Agencies shall request. The Subsequent Financed Vehicles will
consist of motor homes, travel trailers and other types of recreational
vehicles. Each of the Subsequent Contracts will have been purchased by CITSF
or CITCF-NY from Dealers or originated directly by CITSF or one of its
affiliates using the underwriting standards described under "The CIT
Group/Sales Financing, Inc., Servicer--CITSF's Underwriting Guidelines" in the
Prospectus or purchased by CITSF or one of its affiliates from unaffiliated
third parties (in which event such Subsequent Contracts will have been
reviewed by CITSF to confirm that they conform to such underwriting standards
of CITSF).
Because the Subsequent Contracts may be originated after the Initial
Contracts, following the conveyance of the Subsequent Contracts to the Trust,
the characteristics of the Contracts (including the Subsequent Contracts) may
vary from those of the Initial Contracts.
The Initial Contracts were purchased by CITSF or CITCF-NY from Dealers,
originated directly by CITSF or one of its affiliates using the underwriting
standards described under "The CIT Group/Sales Financing, Inc., Servicer--
CITSF's Underwriting Guidelines" in the Prospectus, or purchased by CITSF or
one of its affiliates from unaffiliated third parties (in which event such
Initial Contracts will have been reviewed by CITSF to confirm that they
conform to such underwriting standards of CITSF). The Initial Contracts were
selected from CITSF's portfolio of recreational vehicle installment sale
contracts based on several criteria, including the following: (i) each Initial
Contract was originated in the United States of America; (ii) each Initial
Contract has a Contract Rate equal to or greater than 8.49%; (iii) each
Initial Contract provides for level monthly payments which include interest at
the related Contract Rate and, if paid in accordance with its schedule, fully
amortizes the amount financed over an original term of no greater than 240
months; (iv) as of the Initial Cut-off Date the most recent scheduled payment
of principal and interest, if any, on each Initial Contract was made by or on
behalf of the related Obligor or was not delinquent more than 30 days; (v) no
Initial Financed Vehicle has been repossessed without reinstatement as of the
related Initial Cut-off Date; (vi) as of the Initial Cut-off Date no Obligor
on any Initial Contract was the subject of a bankruptcy proceeding and (vii)
as of the Initial Cut-off Date each Initial Contract has a remaining principal
balance of not less than $1,070 and not more than $298,209. The Initial
Financed Vehicles consist of motor homes, travel trailers and other types of
recreational vehicles.
All of the Initial Contracts are, and all of the Subsequent Contracts will
be, Simple Interest Contracts. A "Simple Interest Contract" is a Contract as
to which interest accrues under the simple interest method (i.e., the interest
portion of each monthly payment equals the interest on the outstanding
principal balance of the related Contract for the number of days since the
most recent payment made on such Contract and the balance, if any, of such
monthly payment is applied to principal).
The Initial Contracts were first entered onto CITSF'S or CITCF-NY's
servicing system (which, typically, represents the date on which CITSF or
CITCF-NY funds the purchase of such Contracts from Dealers) between September
1995 and July 1996. All Initial Contracts are installment sale contracts
secured by recreational vehicles originated by a Dealer and purchased by
CITCF-NY or CITSF, originated directly by CITSF or one of its affiliates, or
purchased by CITSF or one of its affiliates from unaffiliated third parties.
Approximately 65.78%, 29.47% and 4.75% of the Initial Cut-off Date Pool
Principal Balance represented Contracts secured by motor homes, travel
trailers and other types of recreational vehicles, respectively. Approximately
70.41% of the Initial Contracts, by Initial Cut-off Date Pool Principal
Balance, represented financing of recreational vehicles which were new and
approximately 29.59% represented financing of recreational vehicles which were
used at the time the related Initial Contracts
S-30
<PAGE>
were originated. As of the Initial Cut-off Date, the average outstanding
principal balance of the Initial Contracts secured by motor homes, travel
trailers and other types of recreational vehicles was $40,055, $15,006 and
$9,164, respectively.
The Obligors under the Initial Contracts have mailing addresses in 49 states
and Washington D.C. As of the Initial Cut-off Date, approximately 22.04% of
the Initial Contracts, based upon Initial Cut-off Date Pool Principal Balance,
had Obligors with mailing addresses in the State of California, approximately
10.31% had Obligors with mailing addresses in the State of Texas,
approximately 7.33% had Obligors with mailing addresses in the State of
Florida and approximately 5.35% had Obligors with mailing addresses in the
State of Arizona. Each other state accounts for less than 5.00% of the Initial
Contracts based upon Initial Cut-off Date Pool Principal Balance.
All Initial Contracts have an interest rate specified in such Contract (the
"Contract Rate") of at least 8.49%. As of the Initial Cut-off Date, the
Initial Contracts have remaining maturities of at least 9 months but not more
than 240 months, original maturities of at least 12 months but not more than
240 months, and a weighted average remaining term to stated maturity of 152
months. The weighted average original term to maturity of the Initial
Contracts was 154 months. As of the Initial Cut-off Date, the weighted average
Contract Rate of the Initial Contracts was 10.31%. The final scheduled payment
dates on the Initial Contracts range from May 1997 to August 2016. The average
remaining principal balance per contract, as of the Initial Cut-off Date, was
$24,247 and the outstanding principal balances of the Initial Contracts, as of
the Initial Cut-off Date, ranged from $1,070 to $298,209.
S-31
<PAGE>
Set forth below is a description of certain characteristics of the Initial
Contracts.
GEOGRAPHICAL DISTRIBUTION OF INITIAL CONTRACTS (1)
<TABLE>
<CAPTION>
% OF CONTRACT
% OF CONTRACT AGGREGATE PRINCIPAL POOL BY
NUMBER OF POOL BY NUMBER BALANCE OUTSTANDING PRINCIPAL BALANCE
INITIAL OF INITIAL AS OF OUTSTANDING
CONTRACTS AS OF CONTRACTS AS OF INITIAL CUT- AS OF
STATE INITIAL CUT-OFF DATE INITIAL CUT-OFF DATE OFF DATE INITIAL CUT-OFF DATE
- ----- -------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Alabama................. 34 0.50% $ 1,302,443 0.79%
Alaska.................. 9 0.13 200,068 0.12
Arizona................. 365 5.39 8,788,663 5.35
Arkansas................ 57 0.84 1,798,902 1.10
California.............. 1,398 20.63 36,200,023 22.04
Colorado................ 364 5.37 6,500,267 3.96
Connecticut............. 126 1.86 2,438,924 1.48
Delaware................ 3 0.04 143,804 0.09
District of Columbia.... 1 0.01 57,825 0.04
Florida................. 397 5.86 12,036,452 7.33
Georgia................. 183 2.70 5,234,976 3.19
Idaho................... 44 0.65 896,938 0.55
Illinois................ 113 1.67 2,788,923 1.70
Indiana................. 30 0.44 641,189 0.39
Iowa.................... 16 0.24 558,565 0.34
Kansas.................. 160 2.36 3,668,098 2.23
Kentucky................ 3 0.04 37,035 0.02
Louisiana............... 64 0.95 1,506,993 0.92
Maine................... 19 0.28 337,013 0.20
Maryland................ 142 2.10 3,007,646 1.83
Massachusetts........... 217 3.20 4,644,398 2.83
Michigan................ 32 0.47 1,409,052 0.86
Minnesota............... 59 0.87 2,055,897 1.25
Mississippi............. 25 0.37 658,427 0.40
Missouri................ 403 5.95 7,996,398 4.87
Montana................. 19 0.28 647,212 0.39
Nebraska................ 28 0.41 503,247 0.31
Nevada.................. 168 2.48 3,853,829 2.35
New Hampshire........... 48 0.71 1,196,925 0.73
New Jersey.............. 54 0.80 1,484,985 0.90
New Mexico.............. 117 1.73 2,419,866 1.47
New York................ 148 2.18 4,082,477 2.48
North Carolina.......... 160 2.36 2,819,196 1.72
North Dakota............ 3 0.04 112,999 0.07
Ohio.................... 13 0.19 627,984 0.38
Oklahoma................ 313 4.62 6,427,190 3.91
Oregon.................. 190 2.81 4,928,469 3.00
Pennsylvania............ 63 0.93 1,669,841 1.02
Rhode Island............ 35 0.52 693,405 0.42
South Carolina.......... 64 0.95 1,090,972 0.66
South Dakota............ 6 0.09 211,338 0.13
Tennessee............... 74 1.09 1,729,542 1.05
Texas................... 702 10.36 16,944,402 10.31
Utah.................... 17 0.25 500,601 0.30
Vermont................. 12 0.18 338,285 0.21
Virginia................ 37 0.55 1,547,211 0.94
Washington.............. 201 2.97 4,564,626 2.78
West Virginia........... 1 0.02 4,898 0.00
Wisconsin............... 29 0.43 690,954 0.42
Wyoming................. 9 0.13 276,721 0.17
----- ----- ------------ -----
Total................... 6,775 100% $164,276,094 100%
===== ===== ============ =====
</TABLE>
- --------
(1)In most cases, based on the mailing addresses of the Obligors as of the
Initial Cut-off Date.
S-32
<PAGE>
RANGE OF CONTRACT RATES
<TABLE>
<CAPTION>
% OF CONTRACT POOL
AGGREGATE PRINCIPAL BY PRINCIPAL
NUMBER OF % OF CONTRACT POOL BALANCE OUTSTANDING BALANCE OUTSTANDING
INITIAL CONTRACTS BY NUMBER OF AS OF AS OF
RANGE OF INITIAL AS OF INITIAL CONTRACTS AS OF INITIAL CUT- INITIAL CUT-
CONTRACT RATES INITIAL CUT-OFF DATE INITIAL CUT-OFF DATE OFF DATE OFF DATE
---------------- -------------------- ----------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
8.49% - 8.99%......... 539 7.96% $ 25,837,426 15.73%
9.00% - 9.99%......... 1,794 26.48 60,182,131 36.63
10.00% - 10.99%......... 1,839 27.14 40,893,431 24.89
11.00% - 11.99%......... 1,258 18.57 19,969,390 12.16
12.00% - 12.99%......... 789 11.65 11,108,362 6.76
13.00% - 13.99%......... 366 5.40 4,490,292 2.73
14.00% - 14.99%......... 125 1.84 1,207,477 0.74
15.00% - 20.99%......... 65 0.96 587,585 0.36
----- ------ ------------ ------
Total................. 6,775 100.00% $164,276,094 100.00%
===== ====== ============ ======
</TABLE>
RANGE OF REMAINING MATURITIES
<TABLE>
<CAPTION>
% OF CONTRACT POOL
AGGREGATE PRINCIPAL BY PRINCIPAL
NUMBER OF % OF CONTRACT POOL BALANCE OUTSTANDING BALANCE OUTSTANDING
INITIAL CONTRACTS BY NUMBER OF AS OF AS OF
RANGE OF REMAINING AS OF INITIAL CONTRACTS AS OF INITIAL CUT- INITIAL CUT-
MATURITY IN MONTHS INITIAL CUT-OFF DATE INITIAL CUT-OFF DATE OFF DATE OFF DATE
------------------ -------------------- ----------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
9 - 49............... 573 8.46% $ 2,875,035 1.75%
50 - 59............... 448 6.61 3,735,197 2.27
60 - 69............... 182 2.68 1,511,195 0.92
70 - 79............... 174 2.57 1,988,384 1.21
80 - 89............... 500 7.38 5,204,240 3.17
90 - 99............... 361 5.33 3,877,436 2.36
100 - 109............... 12 0.18 170,060 0.10
110 - 119............... 1,029 15.19 16,785,534 10.22
120 - 129............... 292 4.31 4,890,592 2.98
130 - 139............... 56 0.83 982,675 0.60
140 - 149............... 1,195 17.64 23,118,051 14.07
150 - 159............... 2 0.03 93,046 0.06
160 - 169............... 8 0.12 581,545 0.35
170 - 179............... 1,496 22.08 76,285,121 46.44
180 - 189............... 443 6.54 21,818,855 13.28
200 - 209............... 1 0.01 41,749 0.03
240..................... 3 0.04 317,379 0.19
----- ------ ------------ ------
Total................. 6,775 100.00% $164,276,094 100.00%
===== ====== ============ ======
</TABLE>
PRE-FUNDING ACCOUNT; CAPITALIZED INTEREST ACCOUNT
The Pre-Funding Account will be maintained as an Eligible Account (as
defined in the Prospectus), initially maintained with the Indenture Trustee,
and the funds on deposit therein will be invested solely in Permitted
Investments (as defined herein), that mature not later than one Business Day
prior to the next succeeding Distribution Date, until they are applied by the
Owner Trustee during the Funding Period, to pay to the Company the purchase
price for Subsequent Contracts. See "The Purchase Agreements and the Trust
Documents--Accounts" in the Prospectus. Monies on deposit in the Pre-Funding
Account will not be available to cover losses on or in respect of the
Contracts.
On the Closing Date, the Pre-Funding Account will be created with an initial
deposit, from the proceeds of the Securities, of $75,723,906 (the "Pre-Funded
Amount"). The "Funding Period" will be the period from the Closing Date until
the earliest to occur of (i) the date on which the amount on deposit in the
Pre-Funding Account is less than $100,000, (ii) the date on which an Event of
Default occurs under the Indenture, (iii) the date on which an Event of
Termination occurs under the Sale and
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<PAGE>
Servicing Agreement, (iv) the insolvency of the Company, CITSF, CITCF-NY or
CIT or (v) the close of business on November 15, 1996. During the Funding
Period, on one or more Subsequent Transfer Dates, the Pre-Funded Amount will
be applied to purchase Subsequent Contracts from the Company. The Company
expects that the Pre-Funded Amount will be reduced to less than $100,000 by
November 15, 1996, although no assurance can be given that this will in fact
occur. If the portion of the Pre-Funded Amount remaining on deposit in the
Pre-Funding Account at the end of the Funding Period, if any, is less than or
equal to $100,000, such portion will be payable as principal to the Class A-1
Noteholders or, if the portion of the Pre-Funded Amount remaining on deposit
in the Pre-Funding Account at the end of the Funding Period, if any, is
greater than $100,000, such portion will be payable as principal to each class
of the Noteholders and Certificateholders in accordance with the Pre-Funded
Percentage, in either case on the first Distribution Date thereafter or, if
the end of the Funding Period is on a Distribution Date, then on such date.
"Permitted Investments" will include the following obligations and
securities: (i) obligations of the United States or any agency thereof, backed
by the full faith and credit of the United States; (ii) general obligations of
or obligations guaranteed by any State, and certificates of deposit, demand or
time deposits, federal funds or banker's acceptances issued by any depository
institution or trust company incorporated under the laws of the United States
or of any state and subject to supervision and examination by federal or state
banking authorities; in each case rated in the highest rating of each Rating
Agency for such obligations, or such lower rating as will not result in the
qualification, downgrading or withdrawal of the rating then assigned to either
the Notes or the Certificates by such Rating Agency and (iii) demand or time
deposits or certificates of deposit issued by any bank, trust company, savings
bank or other savings institution, which deposits are fully insured by the
FDIC.
The Sale and Servicing Agreement will provide that the Owner Trustee cannot
release any funds from the Pre-Funding Account to purchase Subsequent
Contracts unless the following conditions, among others specified in the Sale
and Servicing Agreement, have been satisfied: (i) the Company has certified
that each such Subsequent Contract satisfies the eligibility criteria
described under "--General"; (ii) the Servicer has delivered to the Trustees
executed UCC financing statements evidencing the sale of the Subsequent
Contracts; (iii) the Servicer certifies to the Trustees that it has reviewed
each Subsequent Contract and Contract File relating thereto, and confirmed
that they each conform to the related list of Subsequent Contracts; (iv) the
Servicer has delivered opinions of counsel regarding the Trustees' security
interest in the Subsequent Contracts; (v) the Servicer has certified that all
of the conditions precedent to the transfer of the Subsequent Contracts have
been satisfied; (vi) the Owner Trustee (and/or the Indenture Trustee) has
inspected each of the certificates, schedules, UCC financing statements,
officers' certificates and opinions, as described above, and determined that
each item required to be delivered pursuant to the Sale and Servicing
Agreement has been so delivered; and (vii) the Rating Agencies, after
receiving prior notice of the transfer of any Subsequent Contracts to the
Trust, have not advised either the Seller or the Trustees that the conveyance
of the Subsequent Contracts would result in a qualification, modification or
withdrawal of its then current rating of either the Notes or the Certificates.
On the Closing Date, approximately $ of the proceeds from the sale of the
Securities will be deposited into an account (the "Capitalized Interest
Account") in the name of the Owner Trustee on behalf of the Securityholders.
Amounts deposited in the Capitalized Interest Account will be used on the
September 1996, October 1996 and November 1996 Distribution Dates, if
applicable, to fund the excess, if any, of (i) the product of (x) one-twelfth
of the current weighted average of the Interest Rates and the Pass-Through
Rate, and (y) the undisbursed funds (excluding investment earnings) in the
Pre-Funding Account (as of the last day of the related Due Period) over (ii)
the amount of any investment earnings on funds in the Pre-Funding Account that
are available to pay interest on the Securities on each such Distribution
Date. Any amounts remaining in the Capitalized Interest Account on any
Distribution Date during the Funding Period (after giving effect to any
withdrawals therefrom on
S-34
<PAGE>
such Distribution Date) in excess of the Required Capitalized Interest Amount
on such Distribution Date shall be released to the Affiliated Purchaser on
such Distribution Date. The "Required Capitalized Interest Amount" for any
Distribution Date during the Funding Period is an amount equal to the product
of (x) the current weighted average of the Interest Rates and the Pass-Through
Rate minus 2.5%, (y) the undisbursed funds (excluding investment earnings) in
the Pre-Funding Account (as of such Distribution Date, after giving effect to
any purchases of Subsequent Contracts on such Distribution Date) and (z) a
fraction, the numerator of which is equal to the maximum number of
Distribution Dates remaining in the Funding Period and the denominator of
which is 12. Any amounts remaining in the Capitalized Interest Account on the
last day of the Funding Period and not used for such purposes will be
deposited in the Collection Account and will be available for distributions,
as described herein, on the first Distribution Date thereafter or, if the end
of the Funding Period is on a Distribution Date, then on such date.
MATURITY AND PREPAYMENT CONSIDERATIONS
All of the Contracts are prepayable at any time without any penalty. If
prepayments are received on the Contracts, the actual weighted average life of
the Contracts will be shorter than the scheduled weighted average life, which
is based on the assumption that payments will be made as scheduled and that no
prepayments will be made. For this purpose the term "prepayments" includes,
among other items, voluntary prepayments by Obligors, regular installment
payments made in advance of their scheduled due dates, liquidations due to
default, proceeds from physical damage, credit life and credit disability
insurance policies, if any, and purchases by CITSF or the Servicer of certain
Contracts as described herein. Weighted average life means the average amount
of time during which each dollar of principal on a Contract is outstanding.
The rate of prepayments on the Contracts may be influenced by a variety of
economic, social and other factors, including the fact that an Obligor may not
sell or transfer a Financed Vehicle without the consent of CITSF. Any
reinvestment risk resulting from the rate of prepayment of the Contracts and
the distribution of such prepayments to Securityholders will be borne entirely
by the Securityholders. In addition, early retirement of the Securities may be
effected by (i) the exercise of the option of CITSF to purchase all of the
Contracts remaining in the Trust when the aggregate principal balance of the
Contracts (the "Pool Balance") is 10% or less of the Initial Pool Balance (as
defined herein), (ii) the sale by the applicable Trustee of all of the
Contracts remaining in the Trust when the Pool Balance is 5% or less of the
Initial Pool Balance or (iii) the occurrence of an Insolvency Event with
respect to the Affiliated Purchaser or an Event of Default. See "The Purchase
Agreements and The Trust Documents--Termination" herein and in the Prospectus.
Moreover, partial retirement of the Notes and Certificates will occur to the
extent there is remaining any Pre-Funded Amount on deposit in the Pre-Funding
Account at the end of the Funding Period.
The rate of principal payments (including prepayments) on pools of
recreational vehicle installment sale contracts may be influenced by a variety
of economic, geographic, social and other factors. In general, if prevailing
interest rates were to fall significantly below the Contract Rates on the
Contracts, the Contracts could be subject to higher prepayment rates than if
prevailing interest rates were to remain at or above the Contract Rates on the
Contracts. Conversely, if prevailing interest rates were to rise
significantly, the rate of prepayments on the Contracts would generally be
expected to decrease. No assurances can be given as to the rate of prepayments
on the Contracts in stable or changing interest rate environments.
CITSF is not aware of any publicly available industry statistics that set
forth principal prepayment experience for recreational vehicle installment
sale contracts similar to the Contracts over an extended period of time, and
its experience with respect to recreational vehicle receivables included in
its portfolio is insufficient to draw any specific conclusions with respect to
the expected prepayment rates on the Contracts.
CERTAIN PAYMENT DATA
Certain statistical information relating to the payment behavior of
recreational vehicle installment sale contracts originated by CITSF directly
or through Dealers is set forth below. In evaluating the
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<PAGE>
information contained in this table and its relationship to the expected
prepayment behavior of the Contracts, prospective Securityholders should
consider that the information set forth below reflects, with respect to
contracts originated in a given year, all principal payments made in respect
of such contracts in a given year, including regularly scheduled payments,
liquidation or insurance proceeds applied to principal of such contracts, as
well as principal prepayments made by or on behalf of the obligors on the
contracts in advance of the date on which such principal payment was scheduled
to be made. The information set forth below also reflects charge-offs of the
contracts during a given year. In addition, the Company has not performed any
statistical analysis to determine whether the contracts to which the table
relates constitute a statistically significant sample of recreational vehicle
installment sale contracts for purposes of determining expected payment
behavior. Payment rates on the contracts are influenced by a number of
economic, social and other factors. Certain of the contracts included in the
table below were originated with underwriting criteria that differ from the
underwriting criteria under which the Contracts were originated. Furthermore,
no assurance can be given that the prepayment experience of the Contracts will
exhibit payment behavior similar to the behavior summarized in the following
table. In addition to the foregoing, prospective Securityholders should
consider that the table set forth below is limited to the period covered
therein and thus cannot reflect the effects, if any, of aging on the payment
behavior of recreational vehicle contracts beyond such periods. As a result,
investors should not draw any conclusions regarding the prepayment rate of the
Contracts from the information presented in the table below. Each investor
must make its own assumptions regarding the prepayment rate of the Contracts.
The following table sets forth, with respect to all of the recreational
vehicles contracts originated by CITSF directly or through Dealers (excluding
contracts purchased in bulk) in each year since 1989, the aggregate initial
principal balance of the contracts originated in such year (or in the first
six months of 1996), the approximate aggregate principal balance outstanding
on the contracts originated in such year as of the last day of such year and
the approximate aggregate principal balance outstanding on the contracts
originated in such year as of the end of each subsequent year (and as of June
30, 1996).
INFORMATION REGARDING PRINCIPAL REDUCTION ON RECREATIONAL
VEHICLE CONTRACTS ORIGINATED BY CITSF
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR OF ORIGINATION
-----------------------------------------------------------------------
1989 1990 1991 1992 1993(3) 1994(3) 1995(3) 1996(3)
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Approximate Volume(1)... $158,100 $287,800 $332,700 $374,800 $405,900 $294,500 $417,300 $230,100
Approximate Aggregate
Principal Balance(2):
December 31, 1989..... $142,100
December 31, 1990..... 115,400 $250,300
December 31, 1991..... 90,400 202,000 $282,600
December 31, 1992..... 64,400 144,300 198,800 $322,700
December 31, 1993..... 44,500 100,700 134,300 233,700 $354,400
December 31, 1994..... 28,200 63,200 84,100 165,200 274,000 $260,700
December 31, 1995..... 20,200 46,300 61,200 122,300 213,200 208,200 $371,900
June 30, 1996......... 17,200 40,400 53,100 105,800 185,800 179,100 313,300 $217,400
</TABLE>
- --------
(1) Volume represents aggregate initial principal balance of each contract
originated in a particular year.
(2) Approximate aggregate principal balance as of any date represents the
approximate aggregate principal balance outstanding at the end of the
indicated year or six-month period on each contract originated in a
particular year.
(3) Includes contracts sold by CITSF in previous securitizations which CITSF
is servicing.
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<PAGE>
PAID-AHEAD CONTRACTS
If an Obligor, in addition to making his regularly scheduled payment, makes
one or more additional scheduled payments in any Due Period (for example,
because the Obligor intends to be on vacation the following month), the
additional scheduled payments made in such Due Period will be treated as a
principal prepayment and applied to reduce the principal balance of the
related Contract in such Due Period and, unless otherwise requested by the
Obligor, the Obligor will not be required to make any scheduled payment in
respect of such Contract (a "Paid-Ahead Contract") for the number of due dates
corresponding to the number of such additional scheduled payments (the "Paid-
Ahead Period"). During the Paid-Ahead Period, interest will continue to accrue
on the principal balance of the Contract, as reduced by the application of the
additional scheduled payments made in the Due Period in which such Contract
became a Paid-Ahead Contract. The Obligor's Contract would not be considered
delinquent during the Paid-Ahead Period. An Interest Shortfall with respect to
such Contract will exist during each Due Period occurring during the Paid-
Ahead Period and the Servicer may be required to make a Monthly Advance in
respect of such Interest Shortfall, as described under "The Purchase
Agreements and The Trust Documents--Monthly Advances" in the Prospectus;
however, no Monthly Advances will be made in respect of principal in respect
of a Paid-Ahead Contract and such Monthly Advance will not result in any
excess interest collections with respect to such Paid-Ahead Contract which
could otherwise have been applied to liquidation losses or to fund the Reserve
Account. See "Yield and Prepayment Considerations."
When the Obligor resumes his required payments following the Paid-Ahead
Period, the payments so paid may be insufficient to cover the interest that
has accrued since the last payment by the Obligor. Notwithstanding such
insufficiency, the Obligor's Contract would be considered current. This
situation will continue until the regularly scheduled payments are once again
sufficient to cover all accrued interest and to reduce the principal balance
of the Contract. Depending on the principal balance and Contract Rate of the
related Contract, and on the number of payments that were paid-ahead, there
may be extended periods of time during which Contracts that are current are
not amortizing. During such periods, no distributions in respect of principal
will be made to the Securityholders with respect to such Contracts.
Paid-Ahead Contracts will affect the weighted average life of the
Securities. The distribution of the paid-ahead amount on the Distribution Date
following the Due Period in which such amount was received will generally
shorten the weighted average life of the Securities. However, depending on the
length of time during which a Paid-Ahead Contract is not amortizing as
described above, the weighted average life of the Securities may be extended.
In addition, to the extent the Servicer makes Monthly Advances with respect to
a Paid-Ahead Contract which subsequently goes into default, because
liquidation proceeds with respect to such Contract will be applied first to
reimburse the Servicer for such Monthly Advances, the loss with respect to
such Contract may be larger than would have been the case had such Monthly
Advances not been made.
As of the Initial Cut-off Date, approximately 9.64% of the number of
Contracts in the Contract Pool were Paid-Ahead Contracts, with at least one
scheduled monthly payment having been paid-ahead. CITSF's portfolio of
recreational vehicle installment sale contracts has historically included
contracts which have been paid-ahead by one or more scheduled monthly
payments. There can be no assurance as to the number of Contracts which may
become Paid-Ahead Contracts or the number or the principal amount of the
scheduled payments which may be paid-ahead.
WEIGHTED AVERAGE LIFE OF THE SECURITIES
Prepayments on recreational vehicle contracts can be measured relative to a
prepayment standard or model. The model used in this Prospectus Supplement,
the Absolute Prepayment Model ("ABS"), represents an assumed rate of
prepayment each month relative to the original number of
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<PAGE>
contracts in a pool of contracts. ABS further assumes that all the Contracts
are the same size and amortize at the same rate and that each Contract in each
month of its life will either be paid as scheduled or be prepaid in full. For
example, in a pool of contracts originally containing 10,000 Contracts, a 1.0%
ABS rate means that 100 Contracts prepay each month. ABS does not purport to
be a historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of any pool of contracts including the
Contracts.
As the rate of payments of principal of the Notes and in respect of the
Certificate Balance will depend on the rate of payment (including prepayments)
of the principal balance of the Contracts and the rate at which Contracts
become Liquidated Contracts, final payment of each class of the Notes could
occur significantly earlier than their respective Note Final Scheduled
Distribution Dates. The final distribution in respect of the Certificates also
could occur prior to the Certificate Final Scheduled Distribution Date.
Reinvestment risk associated with early payment of the Notes and the
Certificates will be borne exclusively by the Noteholders and the
Certificateholders, respectively.
The tables captioned "Percent of Initial Note Principal Balance at Various
ABS Percentages" and "Percent of Initial Certificate Balance at Various ABS
Percentages" (the "ABS Table") have been prepared on the basis of the
characteristics of the Initial Contracts. The ABS Table assumes that (i) the
Contracts prepay in full at the specified constant percentage of ABS monthly,
with no defaults, losses or repurchases, (ii) each scheduled monthly payment
on the Contracts is made on the last day of each month and each month has 30
days, (iii) payments on the Notes and distributions on the Certificates are
made on each Distribution Date (and each such date is assumed to be the
fifteenth day of each applicable month), (iv) the Closing Date occurs on
August 22, 1996, (v) CITSF exercises its option to purchase the Contracts as
specified under "The Purchase Agreements and The Trust Documents--Termination"
herein and in the Prospectus and (vi) all of the Subsequent Contracts are
purchased by the Trust on or prior to the second Distribution Date. The ABS
Table indicates the projected weighted average life of each class of the Notes
and the Certificates and sets forth the percent of the initial principal
amount of each class of the Notes and the percent of the original Certificate
Balance that is projected to be outstanding after each of the Distribution
Dates shown at various constant ABS percentages.
The ABS Table also assumes that the Contracts have been aggregated into
three hypothetical pools with all of the Contracts within each such pool
having the following characteristics and that the level scheduled monthly
payment for each of the pools (which is based on its aggregate principal
balance, weighted average APR, weighted average original term to maturity and
weighted average remaining term to maturity as of the appropriate Cut-off
Date) will be such that each pool will be fully amortized by the end of its
remaining term to maturity.
<TABLE>
<CAPTION>
WEIGHTED AVERAGE WEIGHTED AVERAGE
WEIGHTED ORIGINAL TERM REMAINING TERM WEIGHTED AVERAGE
AGGREGATE AVERAGE TO MATURITY TO MATURITY SEASONING
PRINCIPAL BALANCE CONTRACT RATE (MONTHS) (MONTHS) (MONTHS)
----------------- ------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Pool 1.................. $164,276,094 10.31% 154 152 2
Pool 2.................. $ 37,861,953 10.30% 154 154 0
Pool 3.................. $ 37,861,953 10.30% 154 154 0
</TABLE>
The actual characteristics and performance of the Contracts will differ from
the assumptions used in constructing the ABS Table. The assumptions used are
hypothetical and have been provided only to give a general sense of how the
principal cash flows might behave under varying prepayment scenarios. For
example, it is very unlikely that the Contracts will prepay at a constant
level of ABS until maturity or that all of the Contracts will prepay at the
same level of ABS. Moreover, the diverse terms of Contracts within each of the
hypothetical pools could produce slower or faster principal distributions
S-38
<PAGE>
than indicated in the ABS Table at the various constant percentages of ABS
specified, even if the original and remaining terms to maturity of the
Contracts are as assumed. Any difference between such assumptions and actual
characteristics and performance of the Contracts or actual prepayment
experience, will affect the percentages of initial balances outstanding over
time and weighted average lives of the Notes and the Certificates.
PERCENT OF INITIAL NOTE PRINCIPAL BALANCE AT VARIOUS ABS PERCENTAGES (1)
<TABLE>
<CAPTION>
CLASS A-1
- -------------------------------------------------------------------------------
DISTRIBUTION DATE 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percent........................ 100% 100% 100% 100% 100% 100% 100% 100%
8/15/97................................ 89% 74% 59% 53% 46% 40% 34% 27%
8/15/98................................ 77% 48% 18% 6% 0% 0% 0% 0%
8/15/99................................ 64% 22% 0% 0% 0% 0% 0% 0%
8/15/00................................ 49% 0% 0% 0% 0% 0% 0% 0%
8/15/01................................ 33% 0% 0% 0% 0% 0% 0% 0%
8/15/02................................ 14% 0% 0% 0% 0% 0% 0% 0%
8/15/03................................ 0% 0% 0% 0% 0% 0% 0% 0%
8/15/04................................ 0% 0% 0% 0% 0% 0% 0% 0%
8/15/05................................ 0% 0% 0% 0% 0% 0% 0% 0%
8/15/06................................ 0% 0% 0% 0% 0% 0% 0% 0%
8/15/07................................ 0% 0% 0% 0% 0% 0% 0% 0%
8/15/08................................ 0% 0% 0% 0% 0% 0% 0% 0%
8/15/09................................ 0% 0% 0% 0% 0% 0% 0% 0%
Weighted Average Life (years)(2): 3.78 1.95 1.24 1.08 0.96 0.86 0.78 0.72
</TABLE>
<TABLE>
<CAPTION>
CLASS A-2
- -------------------------------------------------------------------------------
DISTRIBUTION DATE 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percent........................ 100% 100% 100% 100% 100% 100% 100% 100%
8/15/97................................ 100% 100% 100% 100% 100% 100% 100% 100%
8/15/98................................ 100% 100% 100% 100% 92% 78% 63% 49%
8/15/99................................ 100% 100% 75% 55% 34% 14% 0% 0%
8/15/00................................ 100% 95% 32% 7% 0% 0% 0% 0%
8/15/01................................ 100% 66% 0% 0% 0% 0% 0% 0%
8/15/02................................ 100% 38% 0% 0% 0% 0% 0% 0%
8/15/03................................ 93% 11% 0% 0% 0% 0% 0% 0%
8/15/04................................ 67% 0% 0% 0% 0% 0% 0% 0%
8/15/05................................ 38% 0% 0% 0% 0% 0% 0% 0%
8/15/06................................ 6% 0% 0% 0% 0% 0% 0% 0%
8/15/07................................ 0% 0% 0% 0% 0% 0% 0% 0%
8/15/08................................ 0% 0% 0% 0% 0% 0% 0% 0%
8/15/09................................ 0% 0% 0% 0% 0% 0% 0% 0%
Weighted Average Life (years)(2): 8.57 5.61 3.61 3.13 2.75 2.45 2.21 2.01
</TABLE>
S-39
<PAGE>
<TABLE>
<CAPTION>
CLASS A-3
- -------------------------------------------------------------------------------
DISTRIBUTION DATE 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- ----------------- ----- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percent....................... 100% 100% 100% 100% 100% 100% 100% 100%
8/15/97............................... 100% 100% 100% 100% 100% 100% 100% 100%
8/15/98............................... 100% 100% 100% 100% 100% 100% 100% 100%
8/15/99............................... 100% 100% 100% 100% 100% 100% 91% 67%
8/15/00............................... 100% 100% 100% 100% 77% 46% 0% 0%
8/15/01............................... 100% 100% 91% 56% 20% 0% 0% 0%
8/15/02............................... 100% 100% 49% 0% 0% 0% 0% 0%
8/15/03............................... 100% 100% 0% 0% 0% 0% 0% 0%
8/15/04............................... 100% 82% 0% 0% 0% 0% 0% 0%
8/15/05............................... 100% 54% 0% 0% 0% 0% 0% 0%
8/15/06............................... 100% 29% 0% 0% 0% 0% 0% 0%
8/15/07............................... 64% 0% 0% 0% 0% 0% 0% 0%
8/15/08............................... 16% 0% 0% 0% 0% 0% 0% 0%
8/15/09............................... 0% 0% 0% 0% 0% 0% 0% 0%
Weighted Average Life (years)(2): 11.28 9.19 6.01 5.14 4.48 3.96 3.54 3.21
</TABLE>
- --------
(1) Assumes the exercise by CITSF of its option to purchase all of the
Contracts on the Distribution Date on which the Pool Balance as of the
last day of the related Due Period is 10% or less of the Initial Pool
Balance.
(2) The weighted average life of a Note is determined by (i) multiplying the
amount of each principal payment of the Note by the number of years from
the date of the issuance of the Note to the related Distribution Date,
(ii) adding the results and (iii) dividing the sum by the related initial
principal amount of the Note.
THE ABS TABLE HAS BEEN PREPARED BASED ON THE ASSUMPTIONS DESCRIBED ABOVE
(INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND PERFORMANCE OF
THE CONTRACTS WHICH WILL DIFFER FROM THE ACTUAL CHARACTERISTICS AND
PERFORMANCE THEREOF) AND SHOULD BE READ IN CONJUNCTION THEREWITH.
S-40
<PAGE>
PERCENT OF ORIGINAL CERTIFICATE BALANCE AT VARIOUS ABS PERCENTAGES(1)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
DISTRIBUTION DATE 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- ----------------- ----- ----- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percent...................... 100% 100% 100% 100% 100% 100% 100% 100%
8/15/97.............................. 100% 100% 100% 100% 100% 100% 100% 100%
8/15/98.............................. 100% 100% 100% 100% 100% 100% 100% 100%
8/15/99.............................. 100% 100% 100% 100% 100% 100% 100% 100%
8/15/00.............................. 100% 100% 100% 100% 100% 100% 0% 0%
8/15/01.............................. 100% 100% 100% 100% 100% 0% 0% 0%
8/15/02.............................. 100% 100% 100% 0% 0% 0% 0% 0%
8/15/03.............................. 100% 100% 0% 0% 0% 0% 0% 0%
8/15/04.............................. 100% 100% 0% 0% 0% 0% 0% 0%
8/15/05.............................. 100% 100% 0% 0% 0% 0% 0% 0%
8/15/06.............................. 100% 100% 0% 0% 0% 0% 0% 0%
8/15/07.............................. 100% 0% 0% 0% 0% 0% 0% 0%
8/15/08.............................. 100% 0% 0% 0% 0% 0% 0% 0%
8/15/09.............................. 0% 0% 0% 0% 0% 0% 0% 0%
Weighted Average Life (years)(2)..... 12.06 10.56 6.98 5.90 5.15 4.48 3.98 3.65
</TABLE>
- --------
(1) Assumes the exercise by CITSF of its option to purchase all of the
Contracts on the Distribution Date on which the Pool Balance as of the
last day of the related Due Period is 10% or less of the Initial Pool
Balance.
(2) The weighted average life of a Certificate is determined by (i)
multiplying in the amount of each principal payment on the Certificate by
the number of years from the date of the issuance of the Certificate to
the related Distribution Date, (ii) adding the results and (iii) dividing
the sum by the related initial principal balance of the Certificate.
THE ABS TABLE HAS BEEN PREPARED BASED ON THE ASSUMPTIONS DESCRIBED ABOVE
(INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND PERFORMANCE OF
THE CONTRACTS WHICH WILL DIFFER FROM THE ACTUAL CHARACTERISTICS AND
PERFORMANCE THEREOF) AND SHOULD BE READ IN CONJUNCTION THEREWITH.
S-41
<PAGE>
YIELD AND PREPAYMENT CONSIDERATIONS
Thirty days of interest will be paid to the Noteholders on each Distribution
Date (except the first Distribution Date) to the extent of the remaining
Available Amount, in an amount equal to one-twelfth of the product of the
applicable Interest Rate and the outstanding principal balance of each class
of the Notes as of the preceding Distribution Date (after giving effect to any
distributions of principal to be made on such Distribution Date). See "The
Notes--Payments of Principal." Thirty days of interest will be passed through
to Certificateholders on each Distribution Date (except the first Distribution
Date) to the extent of the remaining Available Amount and the Available
Reserve Amount, in an amount equal to one-twelfth of the product of the Pass-
Through Rate and the Certificate Balance immediately preceding such
Distribution Date. The "Certificate Balance" means the Original Certificate
Balance reduced by (i) all distributions allocable to principal actually made
to Certificateholders, including payments of any Principal Liquidation Loss
Amount and payments of any Principal Distribution Amount made to the
Certificateholders, (ii) the aggregate amount of all Principal Liquidation
Loss Amounts distributable to Certificateholders to the extent such amounts
have not been so previously distributed and (iii) on or after the Distribution
Date on which the Notes have been paid in full (the "Cross-Over Date"), the
aggregate amount of all Principal Distribution Amounts distributable to
Certificateholders to the extent such amounts have not been so previously
distributed. See "The Certificates--Distributions of Principal." Interest
Shortfalls, to the extent not covered by Monthly Advances and amounts on
deposit in the Collection Account, will adversely affect the yield on the
Securities.
The Certificate Balance will be reduced to the extent that prior to the
Cross-Over Date distributions are not made in respect of the Principal Loss
Liquidation Amount and on or after the Cross-Over Date distributions are not
made in respect of the Principal Distribution Amount. As a result of such
reductions, less interest will accrue on the Certificates than would otherwise
be the case, and the Certificateholders will not receive a full return of
their original investment.
Generally, the excess of the amount of interest at the Contract Rate over
the amount of interest payable under such Contract and allocable to pay such
Contract's share of interest on the Securities and the Servicing Fee would be
available to cover losses on Liquidated Contracts or to fund the Reserve
Account. Because Monthly Advances are calculated at rates that are less than
the Contract Rate, in any month in which an Interest Shortfall on a Contract
occurs and a Monthly Advance is made in respect of the interest on such
Contract, there will be less interest available to the Trust to cover losses
on Liquidated Contracts or to fund the Reserve Account. A similar result
occurs when CITSF purchases a Contract at the Purchase Price (as defined in
the Prospectus).
The Trust will not receive a full month's interest at the Contract Rate on
any Contract which is prepaid in full or which is subject to a Relief Act
Reduction (as defined in the Prospectus), nor will the Servicer make Monthly
Advances for any Interest Shortfall which results from a Relief Act Reduction
or a prepayment in full of a Contract. The Servicer will not make Non-
Reimbursable Payments. As a result, there will be less interest available to
the Trust to pay interest on the Securities, to cover losses on the Liquidated
Contracts and to fund the Reserve Account.
S-42
<PAGE>
POOL FACTORS
The "Certificate Pool Factor" is a seven-digit decimal which the Servicer
will compute each month indicating the remaining Certificate Balance as of the
Distribution Date, as a fraction of the Original Certificate Balance. The
Certificate Pool Factor will be 1.0000000 as of the Initial Cut-off Date, and
thereafter will decline to reflect reductions in the outstanding principal
balance of the Certificates. A Certificateholder's portion of the aggregate
outstanding Certificate Balance is the product of (i) the original
denomination of the Certificateholder's Certificate and (ii) the Certificate
Pool Factor.
The "Note Pool Factor" is a seven-digit decimal which the Servicer will
compute each month indicating the remaining outstanding principal balance of
each class of Notes as of the Distribution Date, as a fraction of the initial
outstanding principal balance of such class of Notes. The Note Pool Factor
will be 1.0000000 as of the Initial Cut-off Date, and thereafter will decline
to reflect reductions in the outstanding principal balance of the applicable
class of Notes. A Noteholder's portion of the aggregate outstanding principal
balance of the related class of Notes is the product of (i) the original
denomination of the Noteholder's Note and (ii) the applicable Note Pool
Factor.
On each Distribution Date the Certificateholders and the Noteholders will
receive monthly reports concerning the payments received on the Contracts, the
Pool Balance, the Note Pool Factor and various other items of information.
Pursuant to the Trust Agreement, the Certificateholders will receive monthly
reports concerning the payments received on the Contracts, the Pool Balance,
Certificate Pool Factor and various other items of information.
Securityholders of record (which in most cases will be Cede & Co.) during any
calendar year will be furnished information for tax reporting purposes not
later than the latest date permitted by law. Certificate Owners and Note
Owners may receive such reports, upon written request, together with a
certification that they are Certificate Owners or Note Owners, as the case may
be, and payment of any expenses associated with the distribution of such
reports, from the Trustee (at the address listed in "Structure of the
Transaction--The Owner Trustee") and the Indenture Trustee at 101 Barclay
Street, New York, NY 10286. See "Certain Information Regarding the
Securities--Statements to Securityholders" in the Prospectus.
USE OF PROCEEDS
The Company will sell the Initial Contracts to the Trust concurrently with
the sale of the Securities and the net proceeds from the sale of the
Securities will be applied by the Trust to the purchase of the Initial
Contracts, to the payment of certain expenses connected with pooling the
Contracts and issuing the Securities, to the deposit of the Pre-Funded Amount
in the Pre-Funding Account, and to the deposit of the initial amount into the
Capitalized Interest Account. Such net proceeds less the payment of such
expenses, the Pre-Funded Amount and the initial deposit into the Capitalized
Interest Account represent the cash purchase price paid by the Trust to the
Company for the sale of the Initial Contracts to the Trust. Such amount will
be determined as a result of the pricing of the Securities, through the
offering described in this Prospectus Supplement. The purchase price paid to
CITSF for the Contracts will be added to CITSF's general funds and will be
available for general corporate purposes, including the purchase of new
recreational vehicle installment sales contracts and the payment of the
purchase price to CITCF-NY for those Initial Contracts acquired by CITSF from
CITCF-NY.
S-43
<PAGE>
THE CIT GROUP/SALES FINANCING, INC., SERVICER
GENERAL
As of June 30, 1996, CITSF serviced for itself and others approximately
199,967 contracts (consisting primarily of recreational vehicle, home equity,
marine and manufactured housing contracts), representing an outstanding
balance of approximately $4.6 billion. Of this portfolio, approximately 54,523
contracts (representing approximately $1.2 billion outstanding balance)
consisted of recreational vehicle contracts. CITSF entered into an agreement
in 1996 to service additional manufactured housing contracts for an
unaffiliated third party, which increased substantially the total number of
contracts serviced by CITSF.
SERVICING
The following table shows the composition of CITSF's servicing portfolio,
including recreational vehicle contracts serviced by CITSF on the dates
indicated:
THE CIT GROUP/SALES FINANCING, INC.
CONTRACTS BEING SERVICED BY PRODUCT LINE
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------------------------------------------------------------------------------------
1991 1992 1993 1994 1995
------------------- ------------------- ------------------- ------------------- -------------------
(NUMBER) (DOLLARS) (NUMBER) (DOLLARS) (NUMBER) (DOLLARS) (NUMBER) (DOLLARS) (NUMBER) (DOLLARS)
-------- ---------- -------- ---------- -------- ---------- -------- ---------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RV--Owned....... 33,820 $ 729,056 38,926 $ 845,982 43,530 $ 961,382 39,454 $ 847,142 29,984 $ 662,468
RV--Bulk
Purchases...... 5,828 116,545 4,383 84,344 3,331 60,386 3,522 50,882 2,648 36,058
RV--Servicing
Retained(1).... 0 0 0 0 0 0 4,827 118,267 19,494 445,716
Total RV........ 39,648 845,601 43,309 930,326 46,861 1,021,768 47,803 1,016.291 52,126 1,144,242
Total MH........ 31,811 509,400 49,640 805,345 47,898 809,670 39,599 878,152 69,277 1,368,513
Home Equity..... 0 0 0 0 3,545 131,322 13,545 570,772 27,122 1,039,044
Other........... 6,942 101,022 1,126 19,485 1,572 41,944 1,310 74,823 6,196 159,003
------ ---------- ------ ---------- ------ ---------- ------- ---------- ------- ----------
Total Contracts
Serviced....... 78,401 $1,456,023 94,075 $1,755,156 99,876 $2,004,704 102,257 $2,540,038 154,721 $3,710,802
====== ========== ====== ========== ====== ========== ======= ========== ======= ==========
<CAPTION>
AT JUNE 30,
-------------------
1996
-------------------
(NUMBER) (DOLLARS)
-------- ----------
<S> <C> <C>
RV--Owned....... 26,089 $ 558,304
RV--Bulk
Purchases...... 2,284 30,047
RV--Servicing
Retained(1).... 26,150 601,495
Total RV........ 54,523 1,189,846
Total MH........ 102,703 1,772,001
Home Equity..... 32,338 1,350,258
Other........... 10,403 255,386
------- ----------
Total Contracts
Serviced....... 199,967 $4,567,491
======= ==========
</TABLE>
- --------
MH= Manufactured Housing
RV= Recreational Vehicle
(1)Represents contracts sold by CITSF in previous securitizations which CITSF
is servicing.
S-44
<PAGE>
DELINQUENCY AND LOAN LOSS EXPERIENCE
The following Delinquency Experience and Loan Loss Experience tables set
forth data for CITSF's recreational vehicle portfolio. The following table
sets forth the delinquency experience for the five years ended December 31,
1995 and the six months ended June 30, 1996 of the portfolio of recreational
vehicle contracts originated and serviced by CITSF, excluding contracts
acquired by CITSF through portfolio purchases and contracts in repossession.
DELINQUENCY EXPERIENCE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------------------- ----------
1991 1992 1993 1994(3) 1995(3) 1996(3)
-------- -------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Number of Contracts..... 33,820 38,926 43,530 44,281 49,478 52,239
Principal Balance of
Contracts Serviced..... $729,056 $845,982 $961,382 $965,409 $1,108,184 $1,159,799
Principal Balance of De-
linquent Contracts(1):
30-59 Days............ $ 4,363 $ 4,412 $ 6,478 $ 4,986 $ 9,218 $ 10,600
60-89 Days............ 1,304 1,378 2,211 1,959 3,071 3,893
90 Days or More....... 3,406 4,140 3,383 2,785 4,456 6,000
-------- -------- -------- -------- ---------- ----------
Total Principal Balance
of Delinquent Con-
tracts................. $ 9,073 $ 9,930 $ 12,072 $ 9,730 $ 16,745 $ 20,493
======== ======== ======== ======== ========== ==========
Delinquencies as a
Percent of Principal
Balances(2)............ 1.24% 1.17% 1.26% 1.01% 1.51% 1.77%
</TABLE>
- --------
(1) The period of delinquency is based on the number of days payments are
contractually past due (assuming 30-day months). Consequently, a contract
due on the first day of a month is not 30 days delinquent until the first
day of the next month.
(2) Based on dollar percent delinquent.
(3) Includes Recreational Vehicle contracts sold by CITSF in previous
securitizations which CITSF is servicing.
S-45
<PAGE>
The following table sets forth the loan loss experience for the five years
ended December 31, 1995 and the six months ended June 30, 1996, of the
portfolio of recreational vehicle contracts originated and serviced by CITSF,
excluding contracts acquired by CITSF through portfolio purchases. "Net
Losses" are equal to the aggregate balance of all contracts which are
determined to be uncollectible in the period less any recoveries and
liquidation proceeds on contracts charged-off in the period or any prior
periods. Net Losses include expenses associated with outside collection
agencies. Other expenses associated with collection, repossession, and
disposition of the vehicle are excluded. These other expenses are not material
to the data presented.
LOAN LOSS/LIQUIDATION EXPERIENCE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------------------- ----------
1991 1992 1993 1994(4) 1995(4) 1996(3)
-------- -------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Number of Contracts(1).. 33,820 38,926 43,530 44,281 49,478 52,239
Principal Balance of
Contracts Serviced(1).. $729,056 $845,982 $961,382 $965,409 $1,108,184 $1,159,799
Net Losses:
Dollars(2)............ $ 3,942 $ 4,040 $ 3,917 $ 4,887 $ 4,762 $ 3,736
Percentage(3)......... 0.54% 0.48% 0.41% 0.51% 0.43% 0.64%(5)
</TABLE>
Notes:
- --------
(1) As of period end and excludes contracts in repossession.
(2) The calculation of net loss includes all expenses of repossession and
liquidation.
(3) As a percentage of the principal balance of contracts as of period end.
(4) Includes Recreational Vehicle contracts sold by CITSF in previous
securitizations which CITSF is servicing.
(5) Annualized.
The data presented in the foregoing tables is for illustrative purposes
only. Such data relates to the performance of CITSF's entire portfolio of
installment sale contracts secured by recreational vehicles and is not
historical data regarding solely the portion of CITSF's portfolio constituting
the Contracts. Most of CITSF's portfolio of installment sale contracts secured
by recreational vehicles was originated under underwriting guidelines in
effect prior to August 1994. However, in August 1994 CITSF adopted a risk-
adjusted pricing policy and changed its credit criteria and underwriting
guidelines in effect prior to August 1994 as described under "The CIT
Group/Sales Financing, Inc., Servicer--CITSF's Underwriting Guidelines" in the
Prospectus. In connection with this change, the minimum credit score for
approval of a new credit was reduced, in order to permit credit to be extended
to less creditworthy borrowers than under the credit criteria previously in
effect. The interest rates charged on recreational vehicle contracts
originated since August 1994 reflect CITSF's evaluation of the relative risk
associated with an individual's application. It is expected that, in addition
to the effects of seasoning, the changes in CITSF's underwriting standards
will result in higher delinquency and loan loss experience than is shown in
the above tables since the recreational vehicle contracts included in such
tables include contracts which were originated using CITSF's former
underwriting guidelines. All of the Initial Contracts were originated and all
or most of the Subsequent Contracts, if any, will be originated under these
new credit criteria adopted by CITSF in August 1994. Accordingly, the data
presented in the foregoing tables should not necessarily be considered as a
basis for assessing the likelihood, amount or severity of delinquency or
losses on the Contracts, and no assurance can be given that the delinquency
and loan loss experience presented in the preceding tables will be indicative
of the experience on the Contracts.
During 1996, CITSF experienced higher credit losses on recreational vehicle
contracts. CITSF attributes the higher loss experience to the combined effect
of current economic conditions and a
S-46
<PAGE>
business decision by CITSF to change the credit mix of receivables originated
since August 1994. This has resulted in an increase in delinquency and losses,
but thus far is consistent with CITSF's expectations. CITSF currently
anticipates that increased customer interest rates on these receivables and
higher recoveries from the sale of repossessions than experienced historically
should offset the increased losses and servicing expense. However, no
assurance as to future delinquencies, losses or results of repossessions and
sales of recreational vehicles can be given.
THE CERTIFICATES
The Certificates offered hereby will be issued pursuant to the Trust
Agreement, a form of which has been filed as an exhibit to the Registration
Statement of which this Prospectus Supplement is a part. The following summary
does not purport to be complete and is subject to, and qualified in its
entirety by reference to, the Trust Agreement.
GENERAL
The CIT RV Trust 1996-B % Asset-Backed Certificates (the "Certificates")
will represent fractional undivided interests in the Trust. The Trust will
issue $14,400,000 aggregate principal amount of Certificates pursuant to a
Trust Agreement, to be dated as of August 1, 1996 between the Seller and the
Owner Trustee (the "Trust Agreement"), a form of which was filed as an exhibit
to the Registration Statement of which this Prospectus Supplement forms a
part. A copy of the Trust Agreement will be available from the Company, upon
request, to holders of the Notes or Certificates and will be filed with the
Commission following the issuance of the Notes and the Certificates. Payments
in respect of the Certificates will be subordinated to payments on the Notes
to the limited extent described herein. The following summary describes
certain terms of the Certificates and the Trust Agreement. The summary does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, all of the provisions of the Certificates and the Trust
Agreement. Where particular provisions or terms used in the Trust Agreement
are referred to, the actual provisions (including definitions of terms) are
incorporated by reference as part of such summary.
The Certificates will be offered for purchase in minimum denominations of
$20,000 and integral multiples of $1,000 in excess thereof and will be
available in book-entry form only; provided, however, that one Certificate may
be issued in a denomination other than an integral multiple of $1,000 such
that the Affiliated Purchaser may be issued at least 1% of the Original
Certificate Balance. The Certificates will initially be represented by a
single Certificate registered in the name of the nominee of DTC, except as
provided below. The Company has been informed by DTC that DTC's nominee will
be Cede & Co. ("Cede"). No person acquiring an interest in the Certificates
through the facilities of DTC (a "Certificate Owner") will be entitled to
receive a Definitive Certificate representing such person's interest in the
Certificates, except as set forth under "Certain Information Regarding The
Securities--Definitive Securities" in the Prospectus. Unless and until
Definitive Certificates are issued under the limited circumstances described
herein and in the Prospectus, all references to actions by Certificateholders
shall refer to actions taken by DTC upon instructions from its Participants,
and all references herein to distributions, notices, reports and statements to
Certificateholders shall refer to distributions, notices, reports and
statements to DTC in accordance with DTC procedures. See "Certain Information
Regarding The Securities--Definitive Securities" in the Prospectus.
Payments of interest and principal on the Certificates with respect to each
Due Period will be made on the fifteenth day of each month or, if any such day
is not a Business Day, on the next succeeding Business Day (each, a
"Distribution Date"), commencing September 1996. With respect to any
Distribution Date, the "Due Period" will be the calendar month preceding the
month of such
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Distribution Date. The first Due Period will commence on and include August 1,
1996 and will end on and include August 31, 1996. Payments on the Securities
on each Distribution Date will be made to the holders of record of the related
Securities on the day immediately preceding such Distribution Date or, in the
event Definitive Securities have been issued, at the close of business of the
last day of the month immediately preceding the month in which such
Distribution Date occurs (each, a "Record Date"). A "Business Day" is any day
other than a Saturday, Sunday or any day on which banking institutions or
trust companies in the states of New York, Delaware or Oklahoma are authorized
or required by law, regulation or executive order to be closed.
DISTRIBUTION OF INTEREST
The Certificates will bear interest at the rate of % per annum (the "Pass-
Through Rate"). Interest will be paid to the Certificateholders of record on
the related Record Date, on each Distribution Date, subject to the remaining
Available Amount and the Available Reserve Amount on such Distribution Date,
(i) in an amount equal to one-twelfth of the product of the Pass-Through Rate
and the Certificate Balance, immediately preceding such Distribution Date or
(ii) in the case of the first Distribution Date, in an amount equal to
interest accruing at the Pass-Through Rate (computed on the basis of a 360-day
year consisting of twelve 30-day months) from August , 1996 to but excluding
September 15, 1996, on the Original Certificate Balance (the "Certificate
Interest Distribution Amount"). Distributions of interest on the Certificates
will be funded to the extent of the Available Amount after the Servicer has
been paid the Servicer Payment and interest and principal has been paid in
respect of the Notes on such Distribution Date or, to the extent such
Available Amount is insufficient, will be funded through a payment from the
Reserve Account, subject to the Available Reserve Amount (as defined herein),
under the circumstances described herein. Interest accrued as of any
Distribution Date but not paid on such Distribution Date will be due, without
interest, on the next Distribution Date. The rights of Certificateholders to
receive distributions of interest will be subordinated to the rights of the
Noteholders to receive payment in full of all amounts of interest and
principal which the Noteholders are entitled to be paid on such Distribution
Date. Interest to Certificateholders may be provided from payments from the
Reserve Account, to the extent of the Available Reserve Amount, in the event
there are not sufficient funds (after payment of the Servicer Payment to the
Servicer and interest and principal on the Notes) to make such payments from
payments made by or on behalf of the Obligors or in respect of the Contracts,
including Monthly Advances made by the Servicer.
DISTRIBUTION OF PRINCIPAL
On each Distribution Date prior to the Cross-Over Date, the
Certificateholders will not be entitled to any payments of principal, except
to the extent of the Principal Liquidation Loss Amount.
On each Distribution Date on and after the Cross-Over Date, principal of the
Certificates will be payable, subject to the remaining Available Amount and
the Available Reserve Amount, in an amount equal to the Principal Distribution
Amount for the related Due Period. (See "The Notes--Payments of Principal").
Such principal payments will be funded to the extent of the Available Amount
remaining after the Servicer has been paid the Servicer Payment, and payment
of interest and principal in respect of the Notes, if any, and interest in
respect to the Certificates has been made or, to the extent such Available
Amount is insufficient, will be funded through a payment from the Reserve
Account to the extent of the Available Reserve Amount. The rights of
Certificateholders to receive distributions of interest and principal will be
subordinated to the rights of Noteholders to receive distributions of interest
and principal to the extent described herein. The Certificate Balance of the
Certificates, to the extent not previously paid, will be due on the
Distribution Date occurring in December 2017 (the "Certificate Final Scheduled
Distribution Date"). The actual date on which the aggregate outstanding
principal
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amount of the Certificates is paid may be earlier than the Certificate Final
Scheduled Distribution Date based on a variety of factors including an
Optional Purchase or Auction Sale.
On each Distribution Date prior to the Cross-Over Date, the
Certificateholders will be entitled to receive, subject to the remaining
Available Amount and the Available Reserve Amount, the Principal Liquidation
Loss Amount for such Distribution Date. Such principal payments will be funded
to the extent of the Available Amount remaining after the Servicer has been
paid the Servicer Payment, the principal and interest due on the Notes has
been paid and the interest on the Certificates has been paid, or to the extent
such remaining Available Amount is insufficient, will be funded through a
payment from the Reserve Account to the extent of the Available Reserve
Amount. The "Principal Liquidation Loss Amount" for any Distribution Date will
equal the amount, if any, by which the sum of the aggregate outstanding
principal balance of the Notes and the Certificate Balance (after giving
effect to all distributions of principal on such Distribution Date) exceeds
the sum of the Pool Balance (excluding Liquidated Contracts and Repurchased
Contracts) plus the amounts (other than investment earnings) remaining on
deposit in the Pre-Funding Account, if any, at the close of business on the
last day of the related Due Period. The Principal Liquidation Loss Amount
represents future principal payments on the Contracts that, because of the
subordination of the Certificates and liquidation losses on the Contracts,
will not be paid to the Certificateholders. See "Enhancement--Subordination of
Certificates."
If, on any Distribution Date, the amount distributed to Certificateholders
in respect of principal is less than the Principal Liquidation Loss Amount
prior to the Cross-Over Date or, on or after the Cross-Over Date, the
Principal Distribution Amount (or the portion thereof distributable to
Certificateholders on the Cross-Over Date), the Certificate Balance will be
reduced by the amount of such deficiency (the "Allocated Losses") until it has
been reduced to zero. On any Distribution Date, the sum of the Allocated
Losses on all prior Distribution Dates, less any amount theretofor distributed
to Certificateholders in respect of such Allocated Losses, is equal to the
"Aggregate Allocated Loss Amount" for such Distribution Date. On each
Distribution Date, the Certificateholders will be paid the Aggregate Allocated
Loss Amount to the extent of the Available Amount remaining after the Servicer
has been paid the Servicer Payment, the principal and interest then due on the
Notes has been paid, the interest on the Certificates has been paid and the
Principal Liquidation Loss Amount or the Principal Distribution Amount (which
ever is applicable) has been paid to Certificateholders.
REDEMPTION
The Certificates will be redeemed in part, on a pro rata basis, on the
Distribution Date on or immediately following the last day of the Funding
Period in the event that more than $100,000 of the Pre-Funded Amount remains
on deposit in the Pre-Funding Account after giving effect to the purchase of
all Subsequent Contracts, including any such purchase on such date. The
aggregate principal amount of the Certificates to be redeemed will be an
amount equal to the Pre-Funded Percentage allocable to the Certificates of the
amount then on deposit in the Pre-Funding Account.
In the event of an Optional Purchase or Auction Sale, the Certificates will
be redeemed at a redemption price equal to the Certificate Balance plus
accrued interest thereon at the Pass-Through Rate. An Optional Purchase of all
the Contracts by CITSF may occur at CITSF's option, on any Distribution Date
on which the Pool Balance as of the last day of the related Due Period is 10%
or less of the Initial Pool Balance. An Auction Sale may occur, and may result
in the sale of the Contracts remaining in the Trust, within ten days following
the first Distribution Date on which the Pool Balance as of the last day of
the related Due Period is 5% or less of the Initial Pool Balance. The "Initial
Pool Balance" equals the sum of (i) the Pool Balance as of the Initial Cut-off
Date and (ii) the aggregate principal balance of all Subsequent Contracts
added to the Trust as of their respective Subsequent Cut-off Dates.
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If an Insolvency Event with respect to the Affiliated Purchaser occurs, the
Indenture Trustee (or, if no Notes are outstanding, the Owner Trustee) will
promptly sell, dispose of or otherwise liquidate the Contracts in a
commercially reasonable manner on commercially reasonable terms, except under
certain limited circumstances. The net proceeds from any such sale,
disposition or liquidation of the Contracts (after payment of the Servicer
Payment) will be treated as collections on the Contracts and deposited in the
Collection Account. Distributions will be made first, to the payment of the
Servicer Payment, second to the payment of interest and principal on the Notes
as provided below and third, to the payment of interest and principal on the
Certificates. If the net proceeds from the liquidation of the Contracts (after
payment of the Servicer Payment) and any amounts on deposit in the Note
Distribution Account and the Certificate Distribution Account are not
sufficient to pay the principal amount of and accrued interest on the Notes
and the Certificate Balance of the Certificates in full, the amount of
principal returned to the Certificateholders will be reduced and such
Certificateholders will incur a loss, except to the extent of payments,
subject to the Available Reserve Amount, made to the Certificateholders from
the Reserve Account.
THE NOTES
GENERAL
The CIT RV Trust 1996-B Class A-1 % Asset-Backed Notes (the "Class A-1
Notes"), the Class A-2 % Asset-Backed Notes (the "Class A-2 Notes") and the
Class A-3 % Asset-Backed Notes (the "Class A-3 Notes" and together with the
Class A-1 Notes and the Class A-2 Notes, the "Notes" and, together with the
Certificates, the "Securities") will represent obligations of the Trust
secured by assets of the Trust (other than the Certificate Distribution
Account and the Reserve Account). The Trust will issue $88,000,000 aggregate
principal amount of Class A-1 Notes, $75,000,000 aggregate principal amount of
Class A-2 Notes and $62,600,000 aggregate principal amount of Class A-3 Notes
pursuant to the terms of an Indenture, to be dated as of August 1, 1996 (as
amended and supplemented from time to time, the "Indenture") between The Bank
of New York, as trustee (the "Indenture Trustee"), a form of which was filed
as an exhibit to the Registration Statement of which this Prospectus
Supplement forms a part. A copy of the Indenture will be available from the
Company, upon request, to the holders of the Notes or Certificates and will be
filed with the Securities and Exchange Commission (the "Commission") following
the issuance of the Notes and Certificates. The following summary describes
certain terms of the Notes and the Indenture. The summary does not purport to
be complete and is subject to, and is qualified in its entirety by reference
to, all of the provisions of the Notes and the Indenture. Where particular
provisions or terms used in the Indenture are referred to, the actual
provisions (including definitions of terms) are incorporated by reference as
part of such summary.
The Notes will be issued in minimum denominations of $1,000 and integral
multiples of $1,000 in excess thereof and will be available in book-entry form
only. Each class of the Notes will initially be represented by a single Note
registered in the name of Cede, the nominee of DTC. No person acquiring an
interest in the Notes through the facilities of DTC (a "Note Owner") will be
entitled to receive a Note representing such person's interest in the Notes,
except as set forth under "Certain Information Regarding the Securities--
Definitive Securities" in the Prospectus, and such persons will hold their
interests in the Notes through DTC in the United States or Cedel or Euroclear
in Europe. Unless and until Definitive Notes are issued under the limited
circumstances described herein, all references to actions by Noteholders shall
refer to actions taken by DTC upon instructions from its Participants, and all
references herein to distributions, notices, reports and statements to
Noteholders shall refer to distributions, notices, reports and statements to
DTC in accordance with DTC procedures. See "Certain Information Regarding The
Securities--Definitive Securities" in the Prospectus and Annex I hereto.
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Payments of interest and principal on the Notes with respect to each Due
Period will be made on each Distribution Date, commencing September 1996.
Payments on the Securities on each Distribution Date will be made to the
holders of record of the related Securities on the related Record Date.
PAYMENTS OF INTEREST
The Class A-1 Notes will bear interest at the rate of % per annum (the
"Class A-1 Interest Rate"), the Class A-2 Notes will bear interest at the rate
of % per annum (the "Class A-2 Interest Rate") and the Class A-3 Notes will
bear interest at the rate of % per annum (the "Class A-3 Interest Rate"). The
interest rates for the various classes of Notes are referred to herein
collectively as "Interest Rates." Interest payments to all classes of
Noteholders will have the same priority. Under certain circumstances, the
amount available for interest payments could be less than the amount of
interest payable on the Notes on any Distribution Date, in which case each
class of Noteholders will receive their ratable share (based upon the
aggregate amount of interest due to such class of Noteholders) of the
aggregate amount available to be distributed in respect of interest on the
Notes. Interest will be paid to the Noteholders of record on the related
Record Date, on each Distribution Date, to the extent of the Available Amount
remaining on such Distribution Date (i) in an amount equal to one-twelfth of
the product of the applicable Interest Rate and the outstanding principal
balance on the class of Notes, as of the preceding Distribution Date (after
giving effect to distributions of principal and interest to be made on such
Distribution Date) or (ii) in the case of the first Distribution Date, in an
amount equal to interest accruing at the applicable Interest Rate (computed on
the basis of a 360-day year consisting of twelve 30-day months) from August
, 1996 to but excluding September 15, 1996, on the outstanding principal
balance of the class of Notes as of the Closing Date (the "Note Interest
Distribution Amount"). Interest accrued as of any Distribution Date but not
paid on such Distribution Date will be due, without interest, on the next
Distribution Date.
PAYMENTS OF PRINCIPAL
Principal payments will be made to the Noteholders on each Distribution Date
to the extent of the remaining Available Amount in an amount equal to the
Principal Distribution Amount. The "Principal Distribution Amount" on each
Distribution Date is equal to the sum of the following amounts with respect to
the related Due Period, in each case calculated in accordance with the method
specified in each Contract: (i) all payments of principal (including all
Principal Prepayments applied during the related Due Period) made on each
Contract during the related Due Period, (ii) the Stated Principal Balance of
each Contract which, during the related Due Period, was purchased by CITSF or
the Servicer pursuant to the Sale and Servicing Agreement, and (iii) the
Stated Principal Balance of each Contract that became a Liquidated Contract
during the related Due Period; provided, however, that (x) payments of
principal (including Principal Prepayments) with respect to a Liquidated
Contract or a Repurchased Contract received after the last day of the Due
Period in which the Contract became a Liquidated Contract or a Repurchased
Contract shall not be included in the Principal Distribution Amount, and (y)
if a Liquidated Contract is purchased by CITSF or the Servicer pursuant to the
Sale and Servicing Agreement on the Deposit Date immediately following the Due
Period in which it became a Liquidated Contract, no amount will be included
with respect to such Contract in the Principal Distribution Amount pursuant to
clause (iii) of the definition thereof. The Principal Distribution Amount on
the Note Final Scheduled Distribution Date of a class will be not less than
the outstanding principal balance of such class of Notes as of such date, and
the Principal Distribution Amount on the Certificate Final Distribution Date
will equal the Certificate Balance on such date. The Principal Distribution
Amount will not exceed the outstanding principal balance of the Notes or,
after the Cross-Over Date, the Certificate Balance (or, on the Cross-Over
Date, the sum of the principal balance of the Notes and the Certificate
Balance). The "Stated Principal Balance" of a Contract for any Due Period is
its unpaid principal balance at the end of the related Due Period, but without
giving effect to any adjustments due to bankruptcy or similar proceedings. A
"Liquidated Contract" is a defaulted Contract as to which the Servicer has
recovered all amounts that it expects to recover either by sale or disposition
of the related
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Financed Vehicle or otherwise, but in any event a Contract shall be deemed to
become a Liquidated Contract no later than the date on which the Servicer has
received proceeds from the sale or disposition of such Financed Vehicle.
"Principal Prepayment" means a payment or other recovery of principal on a
Contract (including insurance proceeds and Net Liquidation Proceeds applied to
principal on a Contract) which is received in advance of its due date and
applied upon receipt to reduce the outstanding principal amount of such
Contract prior to the date or dates on which such principal amount is
scheduled to be paid. "Net Liquidation Proceeds" means the monies collected
(from whatever source) during a Due Period on a Liquidated Contract, net of
the sum of (a) Liquidation Expenses, plus (b) any payments required by law to
be remitted to the Obligor. "Liquidation Expenses" means all reasonable fees
of third parties and other expenses incurred by the Servicer in the course of
converting any defaulted Contract or Financed Vehicle into cash proceeds
(including, without limitation, expenses relating to recovery, repossession
and sale of such Financed Vehicle).
No principal payments will be made (i) on the Class A-2 Notes until the
Class A-1 Notes have been paid in full, or (ii) on the Class A-3 Notes until
the Class A-2 Notes have been paid in full. The outstanding principal amount
of the Class A-1 Notes, to the extent not previously paid, will be payable on
the August 2003 Distribution Date (the "Class A-1 Note Final Scheduled
Distribution Date"); the outstanding principal amount of the Class A-2 Notes,
to the extent not previously paid, will be payable on the February 2007
Distribution Date (the "Class A-2 Note Final Scheduled Distribution Date");
and the outstanding principal amount of the Class A-3 Notes, to the extent not
previously paid, will be payable on the December 2017 Distribution Date (the
"Class A-3 Final Scheduled Distribution Date").
No principal will be paid in respect of the Notes until the Servicer Payment
has been paid and until the entire Note Interest Distribution Amount has been
paid for the related Distribution Date. The "Servicer Payment" is equal on
each Distribution Date to the sum of the reimbursement then due to the
Servicer for outstanding Monthly Advances and the Servicing Fee (including any
unpaid Servicing Fees for past Distribution Dates); provided, however, that if
CITSF or one of its affiliates is the Servicer, the Servicing Fee (including
any unpaid Servicing Fees for past Distribution Dates) shall not be included
in the Servicer Payment but instead shall be payable to the Servicer on each
Distribution Date only from the Available Amount, if any, remaining after the
principal and interest payable on the Securities on such Distribution Date
have been paid. The principal balance of each class of Notes, to the extent
not previously paid, will be due to the holders of such class of the Notes on
the applicable Note Final Scheduled Distribution Date. The actual date on
which the aggregate outstanding principal amount of each class of Notes is
paid may be earlier than their respective Note Final Scheduled Distribution
Date based on a variety of factors including an Optional Purchase or Auction
Sale.
REDEMPTION
The Class A-1 Notes will be redeemed in part, on a pro rata basis, on the
Distribution Date on or immediately following the last day of the Funding
Period in the event that $100,000 or less of the Pre-Funded Amount remains on
deposit in the Pre-Funding Account after giving effect to the purchase of all
Subsequent Contracts, including any such purchase on such date. In the event
that more than $100,000 remains, all classes of the Notes will be subject to
mandatory redemption in part on such Distribution Date in accordance with the
Pre-Funded Percentage allocable to each class of the Notes.
In the event of an Optional Purchase or Auction Sale, the outstanding Notes
will be redeemed in whole, but not in part, at a redemption price equal to the
unpaid principal amount of the Notes plus accrued and unpaid interest thereon
at the applicable Interest Rates. An "Optional Purchase" of all the Contracts
by CITSF may occur at CITSF's option, on any Distribution Date on which the
Pool Balance as of the last day of the related Due Period is 10% or less of
the Initial Pool Balance. An "Auction Sale" may occur, and may result in the
sale of the Contracts remaining in the Trust, within ten days following the
first Distribution Date on which the Pool Balance as of the last day of the
related Due Period is 5% or less of the Initial Pool Balance.
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Upon the occurrence of an Event of Default under the Indenture, the assets
of the Trust may be sold which may result in early retirement of the Notes. If
the net proceeds from the liquidation of the Contracts (after payment of the
Servicer Payment) and any amounts on deposit in the Note Distribution Account
are not sufficient to pay the principal amount of and accrued interest on the
Notes in full, holders of the Notes will incur a loss. Such net proceeds
together with amounts on deposit in the Note Distribution Account will be
applied first, to the payment of interest on the Notes pro rata and second, to
principal of the Class A-1, Class A-2 and Class A-3 Notes in that order. See
"--Indenture" and "The Notes--The Indenture--Events of Default; Rights Upon
Event of Default" in the Prospectus.
Upon the occurrence of an Insolvency Event with respect to the Affiliated
Purchaser, the Trust shall be terminated and the assets of the Trust will be
sold (unless, within ninety days after such occurrence, the Owner Trustee
shall have received written instructions from (a) each of the
Certificateholders (other than the Affiliated Purchaser) and (b) each of the
Noteholders, to the effect that each such party disapproves of the liquidation
of the Contracts and termination of the Trust). Distributions will be made
first, to the payment of the Servicer Payment, second, to the payment of
interest and principal on the Notes and third, to the payment of interest and
principal on the Certificates. If the net proceeds from the liquidation of the
Contracts (after payment of the Servicer Payment) and any amounts on deposit
in the Note Distribution Account are not sufficient to pay the principal
amount of and accrued interest on the Notes in full, holders of the Notes will
incur a loss. Such net proceeds together with amounts on deposit in the Note
Distribution Account will be applied first, to the payment of interest on the
Notes pro rata and second, to principal of the Class A-1, Class A-2 and Class
A-3 Notes in that order.
INDENTURE
"Events of Default" under the Indenture will consist of: (i) any failure to
pay interest on any Note as and when the same becomes due and payable, which
failure continues unremedied for five days; (ii) any failure (a) to make any
installment of the principal of any Note as and when the same becomes due and
payable or (b) to observe or perform in any material respect any other
covenants or agreements in the Indenture, which failure in the case of a
default under clause (ii)(b) materially and adversely affects the rights of
Noteholders, and which failure in either case continues for thirty days after
the giving of written notice of such failure to the Issuer and the Seller (or
the Servicer, as applicable), by the Indenture Trustee or to the Issuer and
the Seller (or the Servicer, as applicable), and the Indenture Trustee by the
holders of not less than 25% of the aggregate outstanding principal amount of
the Notes; (iii) failure to pay in full the outstanding principal balance of
any class of Notes on or prior to the Note Final Scheduled Distribution Date
for such class; and (iv) certain events of insolvency, readjustment of debt,
marshaling of assets and liabilities or similar proceedings and certain
actions by the Trust indicating its insolvency, reorganization pursuant to
bankruptcy proceedings or inability to pay its obligations. However, the
amount of principal required to be paid to Noteholders under the Indenture
will generally be limited to amounts available to be deposited in the Note
Distribution Account. Therefore, the failure to pay principal on a class of
Notes generally will not result in the occurrence of an Event of Default until
the Note Final Scheduled Distribution Date for such class.
Following an Insolvency Event or following a declaration upon an Event of
Default that the Notes are immediately due and payable, any money or property
collected will be distributed to Securityholders (after payment of the fees
and expenses of the Indenture Trustee and the Servicer Payment) in the
following order of priority: (i) to Noteholders for amounts due and unpaid on
the Notes for interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for interest, (ii) to
the holders of the Class A-1 Notes for amounts due and unpaid on the Class A-1
Notes for principal, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Class A-1 Notes for principal,
until the principal amount of the Class A-1 Notes is reduced to zero, (iii) to
the holders of the Class A-2 Notes for amounts due and
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unpaid on the Class A-2 Notes for principal, ratably, without preference or
priority of any kind, according to the amounts due and payable on the Class A-
2 Notes for principal, until the principal amount of the Class A-2 Notes is
reduced to zero, (iv) to the holders of the Class A-3 Notes for amounts due
and unpaid on the Class A-3 Notes for principal, ratably, without preference
or priority of any kind, according to the amounts due and payable on the Class
A-3 Notes for principal, until the principal amount of the Class A-3 Notes is
reduced to zero, (v) to the Certificateholders for amounts due and unpaid on
the Certificates for interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Certificates for
interest and (vi) to the Certificateholders for amounts due and unpaid on the
Certificates for the Certificate Balance and the Aggregate Allocated Loss
Amount, ratably, without preference or priority of any kind, according to the
amounts due and payable on the Certificates for the Certificate Balance and
the Aggregate Allocated Loss Amount.
ENHANCEMENT
Subordination of Certificates. The rights of Certificateholders to receive
distributions of interest and principal are subordinated to the rights of
Noteholders to receive payment in full of all amounts of interest and
principal to which the Noteholders are entitled to receive on the related
Distribution Date. Consequently, no distribution will be made to the
Certificateholders on any Distribution Date in respect of (i) interest until
the full amount of interest and principal on the Notes payable on such
Distribution Date has been distributed to the Noteholders, other than payments
from the Reserve Account and (ii) principal until the Notes have been paid in
full, other than distributions in respect of the Principal Liquidation Loss
Amount.
Reserve Account. The only credit enhancement for the Certificates is the
Reserve Account. With respect to any Distribution Date, the amount available
to be withdrawn from the Reserve Account as payment to the Certificateholders
will not exceed the Available Reserve Amount. The Available Reserve Amount
will be reduced by payments from the Reserve Account previously made therefrom
to Certificateholders and generally will be reduced as the Pool Balance is
reduced. At any time that the Available Reserve Amount is zero (which will be
the case on the Closing Date), holders of Certificates will bear the risk of
all liquidation losses on the defaulted Contracts and may suffer a loss. The
Certificate Balance will be reduced to the extent that prior to the Cross-Over
Date distributions are not made in respect of the Principal Loss Liquidation
Amount and on or after the Cross-Over Date distributions are not made in
respect of the Principal Distribution Amount. As a result of such reductions,
less interest will accrue on the Certificates than would otherwise be the case
and the Certificateholders may not receive a full return of their original
investment.
On the Closing Date, an account (the "Reserve Account") will be established
pursuant to the Sale and Servicing Agreement. The Owner Trustee will have the
right to withdraw or cause to be withdrawn payments from the Reserve Account
under certain circumstances specified below. The Reserve Account will not be
funded on the Closing Date. After the Closing Date, the Reserve Account will
be funded with the Excess Collections (as defined herein), if any, and certain
investment earnings on funds deposited in the Reserve Account.
The Reserve Account will be an Eligible Account (as defined in the
Prospectus). Funds on deposit in the Reserve Account will be invested in
certain investments which satisfy the criteria established by each of the
Ratings Agencies (which may include obligations of CIT). The Reserve Account
and any amounts therein shall be held by or on behalf of the Owner Trustee in
accordance with the Sale and Servicing Agreement for the benefit of the
Certificateholders and the Trust.
The Reserve Account will be terminated following the earlier to occur of (a)
the date on which the Certificate Balance and any Aggregate Allocated Loss
Amount is paid in full and any funds remaining therein have been paid to the
Affiliated Purchaser or (b) the Certificate Final Scheduled Distribution Date.
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On each Distribution Date, the amount available to be withdrawn from the
Reserve Account for the benefit of the Certificateholders (the "Available
Reserve Amount") will be equal to the lesser of (i) the Specified Reserve
Amount and (ii) the amount on deposit in the Reserve Account, before giving
effect to any deposit to be made to the Reserve Account on such Distribution
Date.
On each Determination Date, the Servicer will determine the amounts, if any,
required to be withdrawn from the Reserve Account, up to the Available Reserve
Amount, on the related Distribution Date for payment to the
Certificateholders. The Owner Trustee will withdraw or cause to be withdrawn
such amount from the Reserve Account and will deposit or cause to be deposited
such amount into the Certificate Distribution Account on the Business Day
before the Distribution Date with respect to which such withdrawal was made.
On each Distribution Date, the Servicer will deposit Excess Collections, if
any, into the Reserve Account in an amount sufficient to increase the amount
on deposit in the Reserve Account to the Specified Reserve Amount for the next
Distribution Date. Excess Collections, if any, not so required to be deposited
in the Reserve Account will be paid to the Affiliated Purchaser. On each
Distribution Date, the Owner Trustee will withdraw or cause to be withdrawn
from the Reserve Account an amount equal to the amount by which the Available
Reserve Amount (after taking into account any deposits to and withdrawals from
the Reserve Account pursuant to the Sale and Servicing Agreement on such
Distribution Date) exceeds the Specified Reserve Amount for the next
Distribution Date and pay such amount, to the Affiliated Purchaser. Any such
amounts paid to the Affiliated Purchaser will not be available for
distribution to Certificateholders.
"Excess Collections" for any Distribution Date will equal the amounts
collected or deposited in respect of the Contracts in the related Due Period
and which remain in the Collection Account on such Distribution Date after
taking into account distributions to be made on the Securities, the Servicer
Payment made to the Servicer on such Distribution Date, and the Servicing Fee
(including any unpaid Servicing Fees for past Distribution Dates) paid on such
Distribution Date.
In the event that the Certificates are outstanding on the Certificate Final
Scheduled Distribution Date (after taking into account distributions on such
date), the Owner Trustee will withdraw or cause to be withdrawn from the
Reserve Account an amount equal to the Certificate Balance and the Aggregate
Allocated Loss Amount, and will distribute such amount to the
Certificateholders in retirement of the Certificates, to the extent funds are
available therefor in the Reserve Account.
The Specified Reserve Amount with respect to any Distribution Date will
equal 1.0% of the Pool Balance as of the first day of the related Due Period,
but in no event less than $1,200,000. If, with respect to any Distribution
Date, (a) the average of the principal balance of Contracts 60 days or more
delinquent (including Contracts relating to Financed Vehicles that have been
repossessed) as a percentage of the Pool Balance for the three preceding Due
Periods exceeds 1.75% or (b) the average of the principal balances of all
Contracts which became Liquidated Contracts in the three preceding Due
Periods, less any Net Liquidation Proceeds on Liquidated Contracts, expressed
as an annualized percentage of the average outstanding Pool Balance of the
three preceding Due Periods exceeds 1.75%, then the Specified Reserve Amount
with respect to such Distribution Date shall be 4.50% of the Pool Balance as
of the first day of the related Due Period, but in no event (i) less than
$1,200,000 or (ii) greater than $2,400,000. The Specified Reserve Amount shall
never be greater than the outstanding Certificate Balance and may be reduced
from time to time (to amounts less than the Specified Reserve Amount
calculated pursuant to the two preceding sentences) if the Rating Agencies
shall have given prior written notice to the Seller, the Servicer and the
Issuer that such reduction will not result in a downgrade or withdrawal of the
then current rating of the Notes or the Certificates. In several circumstances
the Servicer must determine on a Distribution Date the Specified Reserve
Amount for the next Distribution Date; in order to make the calculations
required by clauses (a) and (b) of the preceding sentences, the Servicer will
use the data for the three Due Periods preceding the Due Period related to
such next Distribution Date.
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The sole source of funding for the Reserve Account will be the Excess
Collections, and there can be no assurance that the Excess Collections will be
sufficient to fund the Reserve Account in an amount equal to the Specified
Reserve Amount or to replenish the Reserve Account after funds are withdrawn
to make payments on the Certificates. Neither the Seller nor the Servicer will
be obligated to deposit any of their own funds into the Reserve Account in the
event that the Excess Collections are not sufficient to fund the Reserve
Account in an amount equal to the Specified Reserve Amount. Accordingly, there
can be no assurance of the Distribution Date, if ever, by which the Reserve
Account will be funded in an amount equal to the Specified Reserve Amount for
such Distribution Date.
THE PURCHASE AGREEMENTS AND THE TRUST DOCUMENTS
DISTRIBUTIONS
On each Determination Date, the Servicer will determine the amount in the
Collection Account available for distribution on the related Distribution Date
and inform the Indenture Trustee, who shall allocate such amounts between the
Notes and the Certificates and make distributions to Securityholders, all as
described below.
On each Distribution Date, the Indenture Trustee will withdraw the Available
Amount from the Collection Account to make the following payments (to the
extent sufficient funds are available therefor) in the following order:
(a) the Servicer Payment will (to the extent not previously retained by
the Servicer) be paid to the Servicer;
(b) the Note Interest Distribution Amount, including any overdue Note
Interest Distribution Amount, will be deposited into the Note Distribution
Account, for pro rata payment to the Noteholders;
(c) on and prior to the Cross-Over Date, the Principal Distribution
Amount, including any overdue Principal Distribution Amount, will be
deposited into the Note Distribution Account, for payment to the
Noteholders in the following order of priority: (i) to the principal
balance of the Class A-1 Notes until the principal balance of the Class A-1
Notes is reduced to zero; (ii) to the principal balance of the Class A-2
Notes until the principal balance of the Class A-2 Notes is reduced to
zero; and (iii) to the principal balance of the Class A-3 Notes until the
principal balance of the Class A-3 Notes is reduced to zero;
(d) the Certificate Interest Distribution Amount, including any overdue
Certificate Interest Distribution Amount, will be deposited into the
Certificate Distribution Account, for payment to the Certificateholders;
(e) prior to the Cross-Over Date, the Principal Liquidation Loss Amount,
if any, will be deposited into the Certificate Distribution Account, for
payment to the Certificateholders;
(f) on and after the Cross-Over Date, the Principal Distribution Amount,
will be deposited into the Certificate Distribution Account, for payment to
the Certificateholders;
(g) the Aggregate Allocated Loss Amount will be deposited into the
Certificate Distribution Account for payment to the Certificateholders;
(h) if CITSF or one of its affiliates is the Servicer, the Servicing Fee
(including any unpaid Servicing Fees for past Distribution Dates) will (to
the extent not previously paid to the Servicer) be paid to the Servicer;
(i) the amount by which the Specified Reserve Amount for the next
Distribution Date exceeds the amount on deposit in the Reserve Account will
be deposited into the Reserve Account; and
(j) the balance, if any, will be distributed to the Affiliated Purchaser.
To the extent that the Available Amount is insufficient to satisfy the
distributions set forth in clauses (d), (e), (f) or (g) above on any
Distribution Date, the Owner Trustee will withdraw or cause to
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be withdrawn from the Reserve Account, to the extent available, the difference
between the aggregate amounts described in clauses (d), (e), (f) and (g) and
the Available Amount remaining after payment of the amounts described in
clauses (a), (b) and (c). Any amount so withdrawn from the Reserve Account by
or on behalf of the Owner Trustee will be deposited into the Certificate
Distribution Account for distribution to the Certificateholders.
The principal balance of the Class A-1 Notes, to the extent not previously
paid, will be due on the Class A-1 Note Final Scheduled Distribution Date; the
principal balance of the Class A-2 Notes, to the extent not previously paid,
will be due on the Class A-2 Note Final Scheduled Distribution Date; and the
principal balance of the Class A-3 Notes, to the extent not previously paid,
will be due on the Class A-3 Note Final Scheduled Distribution Date. The
actual date on which the aggregate outstanding principal amount of any class
of Notes is paid may be earlier than the respective Note Final Scheduled
Distribution Dates set forth above based on a variety of factors, including
those described under "Maturity and Prepayment Considerations--Weighted
Average Life of the Securities" herein.
The Affiliated Purchaser may at any time, without consent of the
Securityholders, sell, transfer, convey or assign in any manner its rights to
receive the distributions to be made pursuant to clause (j) above and/or
distributions to be made to it from the Reserve Account, provided that (i) the
Rating Agency Condition is satisfied, (ii) the Affiliated Purchaser provides
to the Trustees an opinion of counsel that such action will not cause the
related Trust to be classified as an association (or publicly traded
partnership) taxable as a corporation for federal income tax purposes and
(iii) such transferee or assignee agrees in writing to take positions for
federal income tax purposes consistent with the federal income tax positions
agreed to be taken by the Affiliated Purchaser.
The "Available Amount" on any Distribution Date is equal to the excess of
(A) the sum of (i) all amounts on deposit in the Collection Account
attributable to collections or deposits made in respect of the Contracts
(including any Late Fees (as defined in the Prospectus)) in the related Due
Period and (ii) the Purchase Price for any Contract repurchased by CITSF as a
result of breaches of certain representations and warranties or purchased by
the Servicer as a result of breaches of certain covenants and any Monthly
Advances made by the Servicer, if such Purchase Price or Monthly Advance is
paid on the Deposit Date immediately preceding such Distribution Date, over
(B) the sum of the following amounts (to the extent that the Servicer has not
already withheld such amounts from collections on the Contracts): (i) any
repossession profits on Liquidated Contracts, Liquidation Expenses incurred
and taxes and insurance advanced by the Servicer in respect of Financed
Vehicles that are reimbursable to the Servicer under the Sale and Servicing
Agreement, (ii) any amounts incorrectly deposited in the Collection Account,
(iii) net investment earnings on the funds in the Collection Account, and (iv)
any other amounts permitted to be withdrawn from the Collection Account by the
Servicer (or to be retained by the Servicer from collections on the Contracts)
pursuant to the Sale and Servicing Agreement.
MODIFICATION OF CONTRACTS
The Servicer may not reduce or defer scheduled payments, extend any Contract
or otherwise modify the terms of any Contract; except that, consistent with
its customary servicing procedures, the Servicer may, in its discretion,
arrange with an Obligor to defer, reschedule, extend or modify the payment
schedule of any Contract for credit related reasons that would be acceptable
to the Servicer with respect to a comparable Contract secured by a new or used
recreational vehicle that it services for itself or others, if (i) the
maturity of such Contract would not extend beyond the 180th day prior to the
Certificate Final Scheduled Distribution Date and (ii) the deferral,
rescheduling, extension or other modification of the terms of the Contract
would not constitute a cancellation of such Contract and the creation of a new
installment sale contract. The Servicer may, in accordance with its customary
servicing procedures, in its discretion, waive any Late Fees that may be due
and payable under any Contract.
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SERVICING COMPENSATION
The Servicer will be entitled to receive, out of collections on the
Contracts, a monthly fee (the "Servicing Fee") for each Due Period, payable on
the following Distribution Date, equal to the sum of (i) one-twelfth of the
product of 0.50% (the "Servicing Fee Rate") and the Pool Balance as of the
last day of the second preceding Due Period (or, in the case of the first
Distribution Date, as of the Initial Cut-off Date) and (ii) any investment
earnings (net of investment expenses and losses) on amounts on deposit in the
Collection Account, the Note Distribution Account and the Certificate
Distribution Account; provided, however, if CITSF or an affiliate thereof is
not the Servicer, the Servicing Fee Rate shall be a rate determined at the
time of the appointment of a successor Servicer but not to exceed 1.00%. If
CITSF or one of its affiliates is the Servicer, the Servicing Fee (including
any unpaid Servicing Fees for past Distribution Dates) shall not be included
in the Servicer Payment but instead shall be payable to the Servicer on each
Distribution Date only from the Available Amount, if any, remaining after the
principal and interest payable on the Securities on such Distribution Date
have been paid.
TERMINATION
In order to avoid excessive administrative expenses, CITSF will be permitted
at its option to purchase from the Trust, on any Distribution Date on which
the Pool Balance as of the last day of the related Due Period is 10% or less
of the Initial Pool Balance, all remaining Contracts at a price equal to the
aggregate Purchase Price for the Contracts (including defaulted Contracts),
plus the appraised value of any other property held by the Trust (less
Liquidation Expenses) (the "Optional Purchase"). Exercise of such right will
effect early retirement of the Securities.
Within ten days after the first Distribution Date on which the Pool Balance
as of the last day of the related Due Period is 5% or less of the Initial Pool
Balance, the Indenture Trustee (or, if the Notes have been paid in full and
the Indenture has been discharged in accordance with its terms, the Owner
Trustee) shall solicit bids for the purchase of the Contracts remaining in the
Trust (the "Auction Sale"). In the event that satisfactory bids are received
as described in the Prospectus, the net sale proceeds (after paying the
Servicer Payment) will be distributed to Securityholders on the second
Distribution Date succeeding such Due Period. Any purchaser of the Contracts
must agree to the continuation of CITSF as Servicer on terms substantially
similar to those in the Trust Documents. Any such sale will effect early
retirement of the Securities. See "The Certificates--Redemption," "The Notes--
Redemption" and "The Purchase Agreements and The Trust Documents--Termination"
in the Prospectus.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
CERTAIN FEDERAL TAX CONSEQUENCES WITH RESPECT TO THE NOTES
Tax Characterization of the Notes and the Trust. Schulte Roth & Zabel has
advised the Trust that, based on the terms of the Notes and the transactions
relating to the Contracts as set forth herein, the Notes will be treated as
debt for Federal income tax purposes. However, there is no specific authority
with respect to the characterization for Federal income tax purposes of
securities having the same terms as the Notes.
Schulte Roth & Zabel is also of the opinion that, based on the applicable
provisions of the Trust Documents and related documents, for Federal income
tax purposes, (i) the Trust will not be classified as an association taxable
as a corporation and (ii) the Trust will not be treated as a publicly traded
partnership taxable as a corporation. However, there are no authorities
directly dealing with similar transactions. If the IRS were to successfully
characterize the Trust as an association taxable as a corporation for Federal
income tax purposes, the income from the Contracts (reduced by deductions,
possibly including interest on the Notes) would be subject to Federal income
tax at corporate rates, which could reduce the amounts available to make
payments on the Notes. Likewise, if the Trust were subject to state or local
income or franchise tax, the amount of cash available to make payment on the
Notes could be reduced.
If, contrary to the opinion of Schulte Roth & Zabel, the IRS successfully
asserted that the Notes were not debt for Federal income tax purposes, the
Notes might be treated as equity interests in the Trust. If so, and if the
Trust were taxable as a corporation with the adverse consequences described
above, the taxable corporation would not be able to deduct interest on the
Notes. The remainder of this discussion assumes that the Notes will be treated
as debt and that the Trust will not be taxable as a corporation.
Interest Income on the Notes. The stated interest on the Notes will be
taxable to a Noteholder as ordinary income when received or accrued in
accordance with such Noteholder's method of tax accounting. Some or all of the
Notes may be issued with "original issue discount" within the meaning of
Section 1273 of the Code ("OID"). The amount of OID on the Notes will equal
the difference between the issue price and the principal amount of the Notes
unless the OID is less then a statutorily defined de minimus amount.
OID will accrue to the Noteholders over the life of the Notes, taking
account of a reasonable prepayment assumption, based on a constant yield to
maturity method, using semi-annual compounding, and properly adjusted for
actual prepayments on the Contracts. The portion of OID that accrues during
the time a Noteholder owns the Notes (i) constitutes interest includable in
the Noteholder's gross income for federal income tax purposes and (ii) is
added to the Noteholder's tax basis for purposes of determining gain or loss
on the maturity, redemption, prior sale, or other disposition of the Notes.
Thus, the effect of OID is to increase the amount of taxable income above the
actual interest payments during the life of the Notes.
Sale or Other Disposition. If a Noteholder sells a Note, the holder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale and the holder's adjusted tax basis in the Note. The
adjusted tax basis of a Note to a particular Noteholder will equal the
holder's cost for the Note, increased by any OID, market discount and gain
previously included by such Noteholder in income with respect to the Note and
decreased by the amount of any bond premium previously amortized and by the
amount of principal payments previously received by such Noteholder with
respect to such Note. Subject to the rules of the Code concerning market
discount on the Notes, any such gain or loss will be capital gain or loss if
the Note was held as a capital asset. Capital losses generally may be deducted
to the extent the Noteholder has capital gains for the taxable year, and
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non-corporate Noteholders can deduct a limited amount of such losses in excess
of available capital gains.
Foreign Holders. If interest paid (or accrued) to a Noteholder who is a
nonresident alien, foreign corporation or other non-United States person (a
"foreign person") is not effectively connected with the conduct of a trade or
business within the United States by the foreign person, the interest
generally will be considered "portfolio interest," and generally will not be
subject to United States Federal income tax and withholding tax, if the
foreign person (i) is not actually or constructively a "10 percent
shareholder" of the Trust (including a holder of 10% of the outstanding
Certificates) or the Affiliated Purchaser nor a "controlled foreign
corporation" with respect to which the Trust or the Affiliated Purchaser is a
"related person" within the meaning of the Code and (ii) provides the person
otherwise required to withhold U.S. tax with an appropriate statement, signed
under penalties of perjury, certifying that the beneficial owner of the Note
is a foreign person and providing the foreign person's name and address. If
the information provided in the statement changes, the foreign person must so
inform the person otherwise required to withhold U.S. tax within 30 days of
such change. The statement generally must be provided in the year a payment
occurs or in either of the two preceding years. If a Note is held through a
securities clearing organization or certain other financial institutions, the
organization or institution may provide a signed statement to the withholding
agent. However, in that case, the signed statement must be accompanied by a
Form W-8 or substitute form provided by the foreign person that owns the Note.
If such interest is not portfolio interest, then any payment of such interest
will be subject to United States Federal withholding tax at a rate of 30%,
unless reduced or eliminated pursuant to an applicable income tax treaty.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a Note by a foreign person will be exempt from United
States Federal income and withholding tax, provided that (i) the gain is not
effectively connected with the conduct of a trade or business in the United
States by the foreign person and (ii) in the case of an individual foreign
person, the foreign individual is not present in the United States for 183
days or more in the taxable year or does not have a tax home in the United
States.
If the interest, gain or income on a Note held by a foreign person is
effectively connected with the conduct of a trade or business in the United
States by the foreign person (although exempt from the withholding tax
previously discussed if the holder provides an appropriate statement), the
holder generally will be subject to United States Federal income tax on the
interest, gain or income at regular Federal income tax rates. In addition, if
the foreign person is a foreign corporation, it may be subject to a branch
profits tax equal to 30% of its "effectively connected earnings and profits"
within the meaning of the Code for the taxable year, as adjusted for certain
items, unless it qualifies for a lower rate under an applicable income tax
treaty (as modified by the branch profits tax rules).
On April 15, 1996, the IRS issued proposed Treasury Regulations that would
revise the procedures for securing an exemption from the 30% United States
Federal withholding tax (the "Proposed Regulations"). If adopted in final
form, the Proposed Regulations would apply to payments made after December 31,
1997, and would replace current IRS Forms W-8, 1001 and 4224 with a single
form which would be called a Form W-8. The Proposed Regulations would also
provide certain alternative means for qualifying for interest withholding
exemptions.
Information Reporting and Backup Withholding. The Trust will be required to
report annually to the IRS, and to each Noteholder of record, the amount of
interest paid on the Notes (and the amount of accrued OID, if any, and
interest withheld for Federal income taxes, if any) for each calendar year,
except as to exempt holders (generally, holders that are corporations, tax-
exempt organizations, qualified pension and profit-sharing trusts, individual
retirement accounts, or nonresident aliens who provide certification as to
their status as nonresidents). Accordingly, each holder (other than exempt
holders who are not subject to the reporting requirements) will be required to
provide, under penalties
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of perjury, a certificate containing the holder's name, address, correct
Federal taxpayer identification number and a statement that the holder is not
subject to backup withholding. Should a non-exempt Noteholder fail to provide
the required certification, the Trust will be required to withhold 31% of the
amount otherwise payable to the holder, and remit the withheld amount to the
IRS as a credit against the holder's Federal income tax liability.
If the Proposed Regulations are adopted in final form, certain corporate
holders of Notes would be required to provide documentation to payors that
indicates or certifies the holders' corporate status (and therefore its
exemption from information reporting and backup withholding).
CERTAIN FEDERAL TAX CONSEQUENCES WITH RESPECT TO THE CERTIFICATES
Tax Characterization of the Trust. The Affiliated Purchaser and the Servicer
have agreed, and the Certificateholders will agree by their purchase of
Certificates, to treat the Trust as a partnership for purposes of Federal
income tax, with the assets of the partnership being the assets held by the
Trust, the partners of the partnership being the Certificateholders and the
Notes being debt of the partnership. However, the proper characterization of
the arrangement involving the Trust, the Certificates, the Notes, the
Affiliated Purchaser, and the Servicer is not clear because there is no
authority on transactions closely comparable to that contemplated herein.
If the Trust were held to be an "association" taxable as a corporation for
Federal income tax purposes, rather than a partnership, the Trust would be
subject to a corporate level income tax. Any such corporate income tax could
materially reduce or eliminate cash that would otherwise be distributable with
respect to the Certificates (and Certificateholders could be liable for any
such tax that is unpaid by the Trust). See also the discussion above under "--
Certain Federal Tax Consequences with Respect to the Notes--Tax
Characterization of the Notes and the Trust." However, in the opinion of
Schulte Roth & Zabel, the Trust will not be classified as an association
taxable as a corporation because of the nature of its income and because it
will not have certain "corporate" characteristics necessary for a business
trust to be an association taxable as a corporation.
Nonetheless, because of the lack of cases or rulings on similar
transactions, a variety of alternative characterizations are possible in
addition to the position to be taken by Certificateholders that the
Certificates represent equity interests in a partnership. For example, because
the Certificates have certain features characteristic of debt, the
Certificates might be considered debt of the Trust or of the Seller. The
remainder of this summary assumes that the Certificates represent equity
interests in a partnership that owns the Contracts.
Partnership Taxation. As a partnership, the Trust will not be subject to
federal income tax, but each Certificateholder will be required to separately
take into account such holder's allocated share of income, gains, losses,
deductions and credits of the Trust. In certain instances, however, the Trust
could have an obligation to make payments of withholding tax on behalf of a
Certificateholder. See "--Backup Withholding" and "--Tax Consequences to
Foreign Owners of Certificates." The Trust's income will consist primarily of
interest accrued on the Contracts (including appropriate adjustments for
market discount (as discussed below), and any original issue discount and bond
premium), investment income from investments in the Trust Accounts and
Certificate Distribution Account and any gain upon collection or disposition
of the Contracts. The Trusts deductions will consist primarily of interest
accruing with respect to the Notes, servicing and other fees and losses or
deductions upon collection or disposition of the Contracts.
The tax items of a partnership are allocable to the partners in accordance
with the Code, Treasury regulations and the partnership agreement (here, the
Trust Agreement and Related Documents). The Trust Agreement will provide that
the Certificateholders will be allocated taxable income, if any, of the Trust
for each Interest Period equal to the sum of (i) the amount of any interest
that accrues on the
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Certificates for such interest accrual period based on the Certificate Rate;
(ii) an amount equivalent to any overdue interest on the Certificates that
accrued during a prior interest accrual period (to the extent that no
allocation of taxable income has previously been made for such amount under
clause (i) or this clause (ii)); and (iii) any Trust income attributable to
discount on the Contracts that corresponds to any excess of the principal
amount of the Certificates over their initial issue price. All remaining
taxable income of the Trust will be allocated to the Affiliated Purchaser. It
is believed that this allocation will be valid under applicable Treasury
regulations, although no assurance can be given that the IRS would not require
a greater amount of income to be allocated to Certificateholders. Moreover,
under the foregoing method of allocation, holders may be allocated income
greater than the amount of interest accruing on the Certificates based on the
Pass-Through Rate or may be allocated income greater than the amount of cash
distributed to them.
An individual taxpayer may generally deduct miscellaneous itemized
deductions (which do not include interest expenses) only to the extent they
exceed two percent of the individual's adjusted gross income. Those
limitations would apply to an individual Certificateholder's share of expenses
of the Trust (including fees paid to the Servicer) and might result in such
holder having net taxable income that exceeds the amount of cash actually
distributed to such holder over the life of the Trust. In addition, Section 68
of the Code provides that the amount of certain itemized deductions otherwise
allowable for the taxable year of an individual whose adjusted gross income
exceeds an inflation-adjusted threshold amount specified in the Code ($176,956
for taxable years beginning in 1996, in the case of a joint return) will be
reduced by the lesser of (i) 3% of the excess of adjusted gross income over
the specified threshold amount or (ii) 80% of the amount of itemized
deductions otherwise allowable for such taxable year.
The Trust intends to make all tax calculations relating to income and
allocations to Certificateholders on an aggregate basis. If the IRS were to
require that such calculations be made separately for each of the Contracts,
the Trust might be required to incur additional expense, but it is believed
that there would not be a material adverse effect on Certificateholders.
Market Discount. To the extent that the Contracts are purchased by the Trust
for a price that is less than the aggregate stated redemption price at
maturity of the Contracts, the Trust must account for "market discount" on the
Contracts pursuant to Section 1276 of the Code. Any market discount will be
accounted for each of the Contracts on an individual basis, and the Trust will
make an election to calculate such market discount as it economically accrues.
Any income resulting from the accrual of market discount will be allocated to
the Certificateholders as described above.
Original Issue Discount and Bond Premium. It is believed that the Contracts
were not and will not be issued with OID or at a premium, and, therefore, the
Trust should not have OID income or amortizable bond premium.
Section 708 Termination. Under Section 708 of the Code, a partnership will
be deemed to terminate for Federal income tax purposes if 50% or more of the
capital and profits interests in the partnership are sold or exchanged within
a 12-month period. If such a termination occurs, the partnership will be
considered to distribute its assets to the partners, who would then be treated
as recontributing those assets to a new partnership. The Trust may not comply
with certain technical requirements that might apply when such a constructive
termination occurs. As a result, the Trust may be subject to certain tax
penalties and may incur additional expenses if it is required to comply with
those requirements. Furthermore, the Trust might not be able to comply due to
lack of data.
Disposition of Certificates. Generally, capital gain or loss will be
recognized on a sale of a Certificate in an amount equal to the difference
between the amount realized and the seller's tax basis in the Certificate
sold. A Certificateholder's tax basis in a Certificate will generally equal
his cost increased by his share of Trust income that is includable in his
gross income and decreased by any distributions received with respect to such
Certificate. In addition, both the tax basis in the Certificate
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and the amount realized on a sale of a Certificate would include the holder's
share of the Notes and other liabilities of the Trust. A holder acquiring
Certificates at different prices may be required to maintain a single
aggregate adjusted tax basis in such Certificates, and, upon sale or other
disposition of some of the Certificates, allocate a pro rata portion of such
aggregate tax basis to the Certificates sold (rather than maintaining a
separate tax basis in each Certificate for purposes of computing gain or loss
on a sale of that Certificate).
Any gain on the sale of a Certificate attributable to the holder's share of
unrecognized accrued market discount on the Contracts would generally be
treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The Trust does not expect to have any other assets
that would give rise to such special reporting requirements. Thus, to avoid
these special reporting requirements, the Trust will elect to include any such
market discount in income as it accrues.
If a Certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed miscellaneous itemized
deductions described above) over the life of the Certificates that exceeds the
aggregate cash distributions with respect thereto, such excess will generally
give rise to a capital loss upon the retirement of the Certificates.
Allocations Between Transferor and Transferee. In general, the Trust's
taxable income and losses will be determined monthly and the tax items for a
particular calendar month will be apportioned among the Certificateholders in
proportion to the principal amount of Certificates owned by them as of the
close of the last day of such month. As a result, a holder purchasing
Certificates may be allocated tax items (which will affect the tax liability
and tax basis of the holder) attributable to periods before the actual
purchase takes place.
The use of such a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed (or is allowed only for
transfers of less than all of the partner's interest), taxable income or
losses of the Trust might be reallocated among the Certificateholders. The
Affiliated Purchaser is authorized to revise the Trust's method of allocation
between transferors and transferees to conform to a method permitted by any
future authority.
Section 754 Election. In the event that a Certificateholder sells a
Certificate at a profit (or loss), the purchasing Certificateholder will have
a higher (or lower) basis in the Certificate than the selling
Certificateholder had. The tax basis of the Trust's assets will not be
adjusted to reflect that higher (or lower) basis unless the Trust files an
election under Section 754 of the Code. In order to avoid the administrative
complexities that would be involved in keeping accurate accounting records, as
well as potentially onerous information reporting requirements, the Trust will
not make such an election. As a result, Certificateholders might be allocated
a greater or lesser amount of Trust income than would be appropriate based on
their own purchase price for Certificates.
Administrative Matters. The Servicer, on behalf of the Trust, is required to
keep or cause to be kept complete and accurate books of the Trust. Such books
will be maintained for financial reporting and tax purposes on an accrual
basis and the taxable year of the Trust will be the calendar year. The
Affiliated Purchaser will file a partnership information return (IRS Form
1065) with the IRS for each taxable year of the Trust and will report to
holders (and to the IRS) each Certificateholder's allocable share of items of
Trust income and expense on Schedule K-1. The Trust will provide the Schedule
K-1 information to nominees that fail to provide the Trust with the
information statement described below and such nominees will be required to
forward such information to the beneficial owners of the Certificates.
Generally, holders must file tax returns that are consistent with the
information returns filed by the Trust or be subject to penalties unless the
holder notifies the IRS of all such inconsistencies.
Under Section 6031 of the Code, any person that holds Certificates as a
nominee on behalf of another person at any time during a calendar year is
required to furnish the Trust with a statement
S-63
<PAGE>
containing certain information on the nominee, the beneficial owners and the
Certificates so held. Such information includes (i) the name, address and
taxpayer identification number of the nominee and (ii) as to each beneficial
owner (x) the name, address and taxpayer identification number of such person,
(y) whether such person is a United States person, a tax-exempt entity or a
foreign government, an international organization, or any wholly-owned agency
or instrumentality of either of the foregoing and (z) certain information
concerning Certificates that were held, acquired or transferred on behalf of
such person throughout the year. In addition, brokers and financial
institutions that hold Certificates through a nominee are required to furnish
directly to the Trust information as to themselves and their ownership of
Certificates. A clearing agency registered under Section 17A of the Exchange
Act that holds Certificates as a nominee is not required to furnish any such
information statement to the Trust. The information referred to above for any
calendar year must be furnished to the Trust on or before the following
January 31. Nominees, brokers and financial institutions that fail to provide
the Trust with the information described above may be subject to penalties.
The Trust will provide the Schedule K-1 information to nominees that fail to
provide the Trust with the information described above and such nominees will
be required to forward such information to the beneficial owners of the
Certificates.
The Affiliated Purchaser, as the "tax matters partner," will be responsible
for representing the Certificateholders in any dispute with the IRS with
respect to partnership items. The Code provides for administrative examination
of a partnership as if the partnership were a separate and distinct taxpayer.
Generally, the statute of limitations for partnership items does not expire
before three years after the date on which the partnership information return
is filed. Any adverse determination following an audit of the return of the
Trust by the appropriate taxing authorities could result in an adjustment of
the returns of the Certificateholders, and, under certain circumstances, a
Certificateholder may be precluded from separately litigating a proposed
adjustment to the items of the Trust. An adjustment could also result in an
audit of a Certificateholder's returns and adjustments of items not related to
the income and losses of the Trust.
Backup Withholding. Distributions made on the Certificates and proceeds from
the sale of the Certificates may be subject to a "backup" withholding tax of
31% if, in general, the Certificateholder fails to comply with certain
identification procedures, unless the holder is an exempt recipient under
applicable provisions of the Code. If the Proposed Regulations are adopted in
final form, certain corporate holders of Certificates would be required to
provide documentation to payors that indicates or certifies the holder's
corporate status (and therefore its exemption from backup withholding).
Tax Consequences to Foreign Owners of Certificates. As discussed below, an
investment in a Certificate is not suitable for any non-U.S. person which is
not eligible for a complete exemption from U.S. withholding tax on interest
under a tax treaty with the United States. Accordingly, no interest in a
Certificate should be acquired by or on behalf of any such non-U.S. person.
No regulations, published rulings or judicial decisions exist that would
discuss the characterization for Federal withholding tax purposes with respect
to non-U.S. persons of a partnership with activities substantially the same as
the Trust. However, it is not expected that the Trust would be considered to
be engaged in a trade or business in the United States for purposes of Federal
withholding taxes with respect to non-U.S. persons. If the Trust were
considered to be engaged in a trade or business in the United States for such
purposes, the income of the Trust allocable to a non-U.S. person would be
subject to Federal withholding tax at a rate of 35% for persons taxable as a
corporation and 39.6% for all other non-U.S. persons. Also, in such cases, a
non-U.S. owner of a Certificate that is a corporation may be subject to the
branch profits tax. If the Trust is notified that an owner of a Certificate is
a foreign person, the Trust may withhold as if it were engaged in a trade or
business in the United States in order to protect the Trust from possible
adverse consequences of a failure to withhold. Subsequent adoption of Treasury
regulations or the issuance of other administrative pronouncements may require
the Trust to change its withholding procedures.
S-64
<PAGE>
Each foreign owner of a Certificate might be required to file a U.S.
individual or corporate income tax return (including in the case of a
corporation, the branch profits tax) on its share of the Trust's income. Each
foreign owner of a Certificate must obtain a taxpayer identification number
from the IRS and submit that number to the withholding agent on Form W-8 in
order to assure appropriate crediting of any taxes withheld. A foreign owner
of a Certificate generally would be entitled to file with the IRS a claim for
refund with respect to withheld taxes, taking the position that no taxes were
due because the Trust was not engaged in a U.S. trade or business. However,
interest payments made to (or accrued by) an owner of a Certificate who is a
foreign person may be considered guaranteed payments to the extent such
payments are determined without regard to the income of the Trust and for that
reason or because of the nature of the Contracts, the interest will likely not
be considered "portfolio interest." As a result, even if the Trust is not
considered to be engaged in a U.S. trade or business, foreign owners of
Certificates will likely be subject to United States Federal income tax which
must be withheld at a rate of 30 percent on their share of the Trust's income
(without reduction for interest expense), unless reduced or eliminated
pursuant to an applicable income tax treaty. If the Trust is notified that an
owner of a Certificate is a foreign person, the Trust may be required to
withhold and pay over such tax, which can exceed the amounts otherwise
available for distribution to such owner. A foreign owner would generally be
entitled to file with the IRS a refund claim for such withheld taxes, taking
the position that the interest was portfolio interest and therefore not
subject to U.S. tax. However, the IRS may disagree and no assurance can be
given as to the appropriate amount of tax liability. As a result, each
potential foreign owner of a Certificate should consult its tax advisor as to
whether the tax consequences of holding an interest in a Certificate make it
an unsuitable investment. For additional information concerning proposed
regulations which would modify the procedures that a beneficial owner of a
Certificate must comply with to avoid United States withholding tax on
payments to such owner, see the discussion above under "Certain Federal Tax
Consequences with Respect to the Notes--Foreign Holders."
CERTAIN STATE TAX CONSEQUENCES
The activities to be undertaken by the Servicer in servicing and collecting
the Contracts will take place in Oklahoma. The State of Oklahoma imposes a
state income tax on individuals, nonresident aliens (with respect to Oklahoma
taxable income), corporations, certain foreign corporations, and trusts and
estates with Oklahoma taxable income. No ruling on any of the issues discussed
below will be sought from the Oklahoma Tax Commission.
Because of the variation in each state's tax laws based in whole or in part
upon income, it is impossible to predict tax consequences to holders of Notes
and Certificates in all of the state taxing jurisdictions in which they are
already subject to tax. Noteholders and Certificateholders are urged to
consult their own tax advisors with respect to state tax consequences arising
out of the purchase, ownership and disposition of Notes and Certificates.
TAX CONSEQUENCES WITH RESPECT TO THE NOTES
Crowe & Dunlevy, P.C., Oklahoma Tax Counsel to the Seller ("Oklahoma Tax
Counsel") will advise the Trust that, assuming the Notes will be treated as
debt for federal income tax purposes, the Notes will be treated as debt for
Oklahoma income tax purposes, and the Noteholders not otherwise subject to
taxation in Oklahoma should not become subject to taxation in Oklahoma solely
because of a holder's ownership of Notes. However, a Noteholder already
subject to Oklahoma's income tax could be required to pay additional Oklahoma
tax as a result of the holder's ownership or disposition of Notes.
S-65
<PAGE>
TAX CONSEQUENCES WITH RESPECT TO THE CERTIFICATES ISSUED BY A TRUST TREATED AS
A PARTNERSHIP
Oklahoma Tax Counsel will deliver its opinion that if the arrangement
created by the Trust Agreement is treated as a partnership (not taxable as a
corporation) for federal income tax purposes, the same treatment should also
apply for Oklahoma income tax purposes.
Under current law, Certificateholders that are nonresidents of Oklahoma and
are not otherwise subject to Oklahoma income tax should not be subject to
Oklahoma income tax on the income from the Trust because it is unlikely that
the Trust has established a nonunitary business or commercial situs in
Oklahoma. In any event, classification of the arrangement as a "partnership"
would not cause a Certificateholder not otherwise subject to taxation in
Oklahoma to pay Oklahoma income tax on income beyond that derived from the
Certificates.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Section 4975 of the Code prohibit a pension, profit
sharing or other employee benefit plan, as well as individual retirement
accounts and certain types of Keogh Plans (each, a "Benefit Plan"), from
engaging in certain transactions with persons that are "parties in interest"
under ERISA or "disqualified persons" under the Code with respect to such
Benefit Plan. A violation of these "prohibited transaction" rules may generate
excise tax and other liabilities under ERISA and the Code for such persons.
THE CERTIFICATES
An interest in the Certificates may not be acquired by (i) an employee
benefit plan (as defined in Section 3(3) of ERISA) that is subject to the
provisions of Title I of ERISA, (ii) a plan described in Section 4975(e)(1) of
the Code, or (iii) any entity whose underlying assets include plan assets by
reason of a plan's investment in the entity (other than an insurance company
purchasing the Certificates for its general accounts). By its acceptance of a
Certificate or its acquisition of an interest in a Certificate through a
Participant or DTC, each Certificateholder or Certificate Owner will be deemed
to have represented and warranted that it is not subject to the foregoing
limitation.
A plan fiduciary considering the purchase of the Notes should consult its
tax and/or legal advisors regarding whether the assets of the Trust would be
considered plan assets, the possibility of exemptive relief from the
prohibited transaction rules and other issues and their potential
consequences.
THE NOTES
The acquisition or holding of Notes by or on behalf of a Benefit Plan could
be considered to give rise to a prohibited transaction if the Seller, the
Trust or any of their respective affiliates is or becomes a party in interest
or a disqualified person with respect to such Benefit Plan. Certain exemptions
from the prohibited transaction rules could be applicable to the purchase and
holding of Notes by a Benefit Plan depending on the type and circumstances of
the plan fiduciary making the decision to acquire such Notes. Included among
these exemptions are: Prohibited Transaction Class Exemption ("PTCE") 90-1,
regarding investments by insurance company pooled separate accounts; PTCE 91-
38 regarding investments by bank collective investment funds; PTCE 95-60
regarding investments by life insurance company general accounts; PTCE 96-23
regarding transactions effected by "in-house asset managers"; and PTCE 84-14,
regarding transactions effected by "qualified professional asset managers."
S-66
<PAGE>
PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement") among CITSF, the Company and Salomon Brothers
Inc, BA Securities, Inc. and UBS Securities LLC (the "Underwriters"), the
Company has agreed to sell to the Underwriters, and the Underwriters have
severally agreed to purchase, the respective principal amount of the
Certificates and the Notes offered hereby, as set forth opposite their
respective names below:
CLASS A-1 NOTES
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
----------------
<S> <C>
Salomon Brothers Inc............. $
BA Securities, Inc............... $
UBS Securities LLC............... $
----
Total.......................... $
====
</TABLE>
CLASS A-2 NOTES
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
----------------
<S> <C>
Salomon Brothers Inc............. $
BA Securities, Inc............... $
UBS Securities LLC............... $
----
Total.......................... $
====
</TABLE>
CLASS A-3 NOTES
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
----------------
<S> <C>
Salomon Brothers Inc............. $
BA Securities, Inc............... $
UBS Securities LLC............... $
----
Total.......................... $
====
</TABLE>
CERTIFICATES
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
----------------
<S> <C>
Salomon Brothers Inc............. $
BA Securities, Inc............... $
UBS Securities LLC............... $
----
Total.......................... $
====
</TABLE>
The Underwriting Agreement provides that the obligation of the Underwriters
to pay for and accept delivery of the Certificates or Notes is subject to the
approval of certain legal matters by their counsel and to certain other
conditions. The Underwriters are obligated to take and pay for all of the
Certificates and Notes if any are taken.
The Underwriters have advised the Company that they propose to offer the
Certificates and Notes directly to the public at the public offering price set
forth on the cover page hereof and to certain dealers at a price that
represents a concession not in excess of % of the principal balance of the
Certificates and not in excess of % of the principal amount of the Class A-1
Notes, % of the
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<PAGE>
principal amount of the Class A-2 Notes and % of the principal amount of the
Class A-3 Notes. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of % of the principal balance of the Certificates
and not in excess of % of the principal amount of the Class A-1 Notes, % of
the principal amount of the Class A-2 Notes and % of the principal amount of
the Class A-3 Notes to certain other dealers. After the initial public
offering, the public offering price and concessions and discounts to dealers
may be changed by the Underwriters.
CITSF has agreed to indemnify the Underwriters against certain liabilities,
including civil liabilities under the Securities Act or to contribute to
payments which the Underwriters may be required to make in respect thereof.
The Trust may, from time to time, invest the funds of the Trust in Eligible
Investments acquired from the Underwriters.
The closing of the sale of the Notes is conditioned on the closing of the
sale of the Certificates, and the closing of the sale of the Certificates is
conditioned on the closing of the sale of the Notes.
RATINGS
It is a condition to the issuance of each class of the Notes that each class
of the Notes be rated "AAA" by Standard & Poor's Ratings Service, a division
of The McGraw-Hill Companies, Inc. ("S&P") and "Aaa" by Moody's Investors
Service, Inc. ("Moody's")(each, a "Rating Agency"). It is a condition to the
issuance of the Certificates that the Certificates be rated at least "BBB" by
S&P and "Baa2" by Moody's. The ratings of the Notes will be based primarily on
the Initial Contracts, the Capitalized Interest Account, the Pre-Funding
Account, and the terms of the Securities, including the subordination provided
by the Certificates. The ratings of the Certificates will be based primarily
on the Initial Contracts, the Capitalized Interest Account, the Pre-Funding
Account and the Reserve Account. The foregoing ratings do not address the
likelihood that the Securities will be retired following the sale of the
Contracts by the Trustee. A security rating is not a recommendation to buy,
sell or hold securities and may be subject to revision or withdrawal at any
time by the assigning rating agency. The security ratings of the Securities
should be evaluated independently of similar security ratings assigned to
other kinds of securities.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Schulte Roth &
Zabel, New York, New York, for the Trust by Richards, Layton & Finger,
Wilmington, Delaware, and for the Underwriters by Stroock & Stroock & Lavan,
New York, New York. The material federal income tax consequences of the
Securities will be passed upon for the Company by Schulte Roth & Zabel. The
material Oklahoma state income tax consequences of the Securities will be
passed upon for the Company by Crowe & Dunlevy, P.C. Certain legal matters
will be passed upon for CITSF by its Senior Vice President and General
Counsel, Norman Rosen, Esq.
S-68
<PAGE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Notes of CIT
RV Trust 1996-B (the "Global Securities") will be available only in book-entry
form. Investors in the Global Securities may hold such Global Securities
through any of DTC, Cedel or Euroclear. The Global Securities will be tradable
as home market instruments in both the European and U.S. domestic markets.
Initial settlement and all secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities through
Cedel and Euroclear will be conducted in the ordinary way in accordance with
their normal rules and operating procedures and in accordance with
conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities through
DTC will be conducted according to the rules and procedures applicable to U.S.
corporate debt obligations.
Secondary cross-market trading between Cedel or Euroclear and DTC
Participants holding Notes will be effected on a delivery-against payment
basis through the respective Depositories of Cedel and Euroclear (in such
capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing
organizations or their Participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
Cede as nominee of DTC. Investors' interests in the Global Securities will be
represented through financial institutions acting on their behalf as direct
and indirect Participants in DTC. As a result, Cedel and Euroclear will hold
positions on behalf of their Participants through their respective
Depositories, which in turn will hold such positions in accounts as DTC
Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices specified by the Underwriters. Investor securities
custody accounts will be credited with their holdings against payment in same-
day funds on the settlement date.
Investors electing to hold their Global Securities through Cedel or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global
securities and no "lock-up" or restricted period. Global Securities will be
credited to the securities custody accounts on the settlement date against
payment in same-day funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to insure that settlement can be made on the desired
value date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled in same-day funds.
Trading between Cedel and/or Euroclear Participants. Secondary market
trading between Cedel Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
S-69
<PAGE>
Trading between DTC Seller and Cedel or Euroclear Purchaser. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a Cedel Participant or a Euroclear Participant, the purchaser will
send instructions to Cedel or Euroclear through a Cedel Participant or
Euroclear Participant at least one business day prior to settlement. Cedel or
Euroclear will instruct the respective Depository, as the case may be, to
receive the Global Securities against payment. Payment will include interest
accrued on the Global Securities from and including the last coupon payment
date to and excluding the settlement date, on the basis of the actual number
of days in such accrual period and year assumed to consist of 360 days. For
transactions settling on the 31st of the month, payment will include interest
accrued to and excluding the first day of the following month. Payment will
then be made by the respective Depository of the DTC Participant's account
against delivery of the Global Securities. After settlement has been
completed, the Global Securities will be credited to the respective clearing
system and by the clearing system, in accordance with its usual procedures, to
the Cedel Participant's or Euroclear Participant's account. The securities
credit will appear the next day (European time) and the cash debt will be
back-valued to, and the interest on the Global Securities will accrue from,
the value date (which would be the preceding day when settlement occurred in
New York). If settlement is not completed on the intended value date (i.e.,
the trade fails), the Cedel or Euroclear cash debt will be valued instead as
of the actual settlement date.
Cedel Participants and Euroclear Participants will need to make available to
the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to preposition funds for
settlement, either from cash on hand or existing lines of credit, as they
would for any settlement occurring within Cedel or Euroclear. Under this
approach, they may take on credit exposure to Cedel or Euroclear until the
Global Securities are credited to their accounts one day later.
As an alternative, if Cedel or Euroclear has extended a line of credit to
them, Cedel Participants or Euroclear Participants can elect not to
preposition funds and allow that credit line to be drawn upon the finance
settlement. Under this procedure, Cedel Participants or Euroclear Participants
purchasing Global Securities would incur overdraft charges for one day,
assuming they cleared the overdraft when the Global Securities were credited
to their accounts. However, interest on the Global Securities would accrue
from the value date. Therefore, in many cases the investment income on the
Global Securities earned during that one-day period may substantially reduce
or offset the amount of such overdraft charges, although this result will
depend on each Cedel Participant's or Euroclear Participant's particular cost
of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities
to the respective European Depository for the benefit of Cedel Participants or
Euroclear Participants. The sale proceeds will be available to the DTC seller
on the settlement date. Thus, to the DTC Participants a cross-market
transaction will settle no differently than a trade between two DTC
Participants.
Trading between Cedel or Euroclear Seller and DTC Purchaser. Due to time
zone differences in their favor, Cedel Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing system, through
the respective Depository, to a DTC Participant. The seller will send
instructions to Cedel or Euroclear through a Cedel Participant or Euroclear
Participant at least one business day prior to settlement. In these cases
Cedel or Euroclear will instruct the respective Depository, as appropriate, to
deliver the Global Securities to the DTC Participant's account against
payment. Payment will include interest accrued on the Global Securities from
and including the last payment to and excluding the settlement date on the
basis of the actual number of days in such accrual period and a year assumed
to consist of 360 days. For transactions settling on the 31st of the month,
payment will include interest accrued to and excluding the first day of the
following month. The payment will then be reflected in the account
S-70
<PAGE>
of the Cedel Participant or Euroclear Participant the following day, and
receipt of the cash proceeds in the Cedel Participant's or Euroclear
Participant's account would be back-valued to the value date (which would be
the preceding day, when settlement occurred in New York). Should the Cedel
Participant or Euroclear Participant have a line of credit with its respective
clearing system and elect to be in debt in anticipation of receipt of the sale
proceeds in its account, the back-valuation will extinguish any overdraft
incurred over that one-day period. If settlement is not completed on the
intended value date (i.e., the trade fails), receipt of the cash proceeds in
the Cedel Participant's or Euroclear Participant's account would instead be
valued as of the actual settlement date.
Finally, day traders that use Cedel or Euroclear and that purchase Global
Securities from DTC Participants for delivery to Cedel Participants or
Euroclear Participants should note that these trades would automatically fail
on the sale side unless affirmative action were taken. At least three
techniques should be readily available to eliminate this potential problem:
(i) borrowing through Cedel or Euroclear for one day (until the purchase
side of the day trade is reflected in their Cedel or Euroclear accounts) in
accordance with the clearing system's customary procedures;
(ii) borrowing the Global Securities in the U.S. from a DTC Participant
no later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their Cedel or Euroclear
account in order to settle the sale side of the trade; or
(iii) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC Participant is at
least one day prior to the value date for the sale to the Cedel Participant
or Euroclear Participant.
CERTAIN U.S. FEDERAL WITHHOLDING TAXES AND DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities through Cedel or Euroclear (or
through DTC if the holder has an address outside the U.S.) will be subject to
30% U.S. withholding tax that generally applies to payments of interest
(including original issue discount) on registered debt issued by U.S. Persons,
unless (i) each clearing system, bank or other financial institution that
holds customer's securities in the ordinary course of its trade or business in
the chain of intermediaries between such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements
and (ii) such beneficial owners take one of the following steps to obtain an
exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of Global
Securities 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 changes, a new Form W-8 must be filed
within 30 days of such change.
Exemption for non-U.S. Persons with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its
conduct of a trade or business in the United States, can obtain an exemption
from the withholding tax by filing Form 4224 (Exemption from Withholding of
Tax on Income Effectively Connected with the Conduct of a Trade or Business in
the United States).
Exemption or reduced rate for non-U.S. Persons resident in treaty countries
(Form 1001). Non-U.S. Persons that are beneficial owners of Global Securities
residing in a country that has a tax treaty with the United States can obtain
an exemption or reduced tax rate (depending on the treaty terms) by filing
Form 1001 (Ownership, Exemption or Reduced Rate Certificate). If the treaty
provides 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
Noteholder or his agent.
S-71
<PAGE>
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The holder of a Global
Securities or, in the case of a Form 1001 or a Form 4224 filer, his agent,
files by submitting the appropriate form to the person through whom it holds
(the clearing agency, in the case of persons holding directly on the books of
the clearing agency). Form W-8 and Form 1001 are effective for three calendar
years and Form 4224 is effective for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United States,
(ii) a corporation or partnership organized in or under the laws of the United
States or any political subdivision thereof or (iii) an estate or trust the
income of which is includable in gross income for United States tax purposes,
regardless of its source. This summary of documentation requirements does not
deal with all aspects of U.S. Federal income tax withholding that may be
relevant to foreign holders of the Global Securities. Investors are advised to
consult their own tax advisors for specific tax advice concerning their
holding and disposing of the Global Securities.
S-72
<PAGE>
INDEX OF PRINCIPAL TERMS
<TABLE>
<S> <C>
ABS........................................................................ S-37
ABS Table.................................................................. S-38
Affiliated Purchaser....................................................... S-23
Aggregate Allocated Loss Amount............................................ S-49
Allocated Losses........................................................... S-49
Auction Sale............................................................... S-58
Available Amount........................................................... S-9
Available Reserve Amount................................................... S-15
Bankruptcy Code............................................................ S-22
Benefit Plan............................................................... S-66
Business Day............................................................... S-9
Capitalized Interest Account............................................... S-8
Cede....................................................................... S-4
Cedel...................................................................... S-1
Certificate Balance........................................................ S-10
Certificate Final Scheduled Distribution Date.............................. S-9
Certificate Interest Distribution Amount................................... S-10
Certificate Owner.......................................................... S-26
Certificate Owners......................................................... S-4
Certificate Pool Factor.................................................... S-43
Certificates............................................................... S-1
CIT........................................................................ S-3
CITCF-NY................................................................... S-6
CITSF...................................................................... S-3
Class A-1 Interest Rate.................................................... S-13
Class A-1 Note Final Scheduled Distribution Date........................... S-9
Class A-1 Notes............................................................ S-1
Class A-2 Interest Rate.................................................... S-13
Class A-2 Note Final Scheduled Distribution Date........................... S-9
Class A-2 Notes............................................................ S-1
Class A-3 Final Scheduled Distribution Date................................ S-9
Class A-3 Interest Rate.................................................... S-13
Class A-3 Note Final Scheduled Distribution Date........................... S-9
Class A-3 Notes............................................................ S-1
Closing Date............................................................... S-6
Code....................................................................... S-20
Commission................................................................. S-50
Company.................................................................... S-1
Contract Files............................................................. S-27
Contract Pool.............................................................. S-28
Contract Rate.............................................................. S-31
Contracts.................................................................. S-2
Cross-Over Date............................................................ S-10
Dealers.................................................................... S-6
Deposit Date............................................................... S-27
Depository................................................................. S-26
Determination Date......................................................... S-9
Distribution Date.......................................................... S-2
DTC........................................................................ S-1
Due Period................................................................. S-9
</TABLE>
S-73
<PAGE>
<TABLE>
<S> <C>
ERISA...................................................................... S-20
Euroclear.................................................................. S-1
Excess Collections......................................................... S-16
Financed Vehicles.......................................................... S-2
Funding Period............................................................. S-7
Indenture.................................................................. S-4
Indenture Trustee.......................................................... S-1
Initial Contracts.......................................................... S-2
Initial Cut-off Date....................................................... S-2
Initial Cut-off Date Pool Principal Balance................................ S-28
Initial Financed Vehicles.................................................. S-2
Initial Pool Balance....................................................... S-18
Interest Rate.............................................................. S-2
Interest Rates............................................................. S-51
Interest Shortfall......................................................... S-17
Issuer..................................................................... S-1
Liquidated Contract........................................................ S-51
Liquidation Expenses....................................................... S-52
Monthly Advance............................................................ S-17
Moody's.................................................................... S-19
Net Liquidation Proceeds................................................... S-52
Net Losses................................................................. S-46
Note Interest Distribution Amount.......................................... S-51
Note Owner................................................................. S-26
Note Owners................................................................ S-4
Note Pool Factor........................................................... S-43
Notes...................................................................... S-1
Obligor.................................................................... S-7
OID........................................................................ S-60
Optional Purchase.......................................................... S-58
Original Certificate Balance............................................... S-3
Owner Trustee.............................................................. S-1
Paid-Ahead Contract........................................................ S-37
Paid-Ahead Period.......................................................... S-37
Pass-Through Rate.......................................................... S-2
Permitted Investments...................................................... S-34
Pool Balance............................................................... S-12
Pre-Funded Amount.......................................................... S-7
Pre-Funded Percentage...................................................... S-12
Principal Distribution Amount.............................................. S-51
Principal Liquidation Loss Amount.......................................... S-2
Principal Prepayment....................................................... S-52
Proposed Regulations....................................................... S-60
Prospectus................................................................. S-2
PTCE....................................................................... S-66
Purchase Agreement......................................................... S-6
Rating Agency.............................................................. S-19
Record Date................................................................ S-8
Repurchase Event........................................................... S-5
</TABLE>
S-74
<PAGE>
<TABLE>
<S> <C>
Repurchased Contract....................................................... S-5
Required Capitalized Interest Amount....................................... S-25
Reserve Account............................................................ S-15
S&P........................................................................ S-19
Sale and Servicing Agreement............................................... S-2
Securities................................................................. S-1
Seller..................................................................... S-1
Servicer................................................................... S-3
Servicer Payment........................................................... S-11
Servicing Fee.............................................................. S-18
Servicing Fee Rate......................................................... S-18
Simple Interest Contract................................................... S-30
Specified Reserve Amount................................................... S-16
Stated Principal Balance................................................... S-51
Subsequent Contracts....................................................... S-2
Subsequent Cut-off Date.................................................... S-2
Subsequent Financed Vehicles............................................... S-2
Subsequent Purchase Agreement.............................................. S-6
Subsequent Transfer Agreement.............................................. S-6
Subsequent Transfer Date................................................... S-7
Trust...................................................................... S-1
Trust Agreement............................................................ S-3
Trustees................................................................... S-3
Underwriters............................................................... S-67
Underwriting Agreement..................................................... S-67
</TABLE>
S-75
<PAGE>
PROSPECTUS DATED JULY 24, 1996
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
CIT RV TRUSTS
ASSET-BACKED NOTES
ASSET-BACKED CERTIFICATES
THE CIT GROUP SECURITIZATION CORPORATION II, SELLER
THE CIT GROUP/SALES FINANCING, INC., SERVICER
The Asset-Backed Certificates (the "Certificates") and the Asset-Backed
Notes (the "Notes" and, collectively with the Certificates, the "Securities")
described herein may be sold from time to time in one or more series, in
amounts, at prices and on the terms to be determined at the time of sale and
to be set forth in a supplement to this Prospectus (a "Prospectus
Supplement"). Each series of Securities will include either one or more
classes of Certificates or, if Notes are issued as part of a series, one or
more classes of Notes and one or more classes of Certificates, as set forth in
the related Prospectus Supplement.
The Certificates and the Notes, if any, of any series of Securities will be
issued by a trust (a "Trust") to be formed with respect to such series by The
CIT Group Securitization Corporation II (the "Company" or the "Seller").
The assets of each Trust will primarily include a pool of retail installment
sale contracts (the "Initial Contracts") secured by the new and used
recreational vehicles financed thereby (the "Initial Financed Vehicles"),
certain monies received under the Initial Contracts on and after the Initial
Cut-off Date specified in the related Prospectus Supplement (the "Initial Cut-
off Date"), an assignment of the security interests in the Initial Financed
Vehicles, the proceeds from claims under certain insurance policies in respect
of individual Initial Financed Vehicles or the related Obligors and certain
other property, as more fully described herein and in the related Prospectus
Supplement. In addition, if so specified in the related Prospectus Supplement,
the assets of each Trust will include specified credit or cash flow
enhancement and monies on deposit in one or more trust accounts, which may
include a Pre-Funding Account which would be used to purchase from time to
time additional retail installment sale contracts (the "Subsequent Contracts"
and, together with the Initial Contracts, the "Contracts") secured by the new
and used recreational vehicles financed thereby (the "Subsequent Financed
Vehicles" and, together with the Initial Financed Vehicles, the "Financed
Vehicles"), certain monies received under the Subsequent Contracts on and
after the related subsequent cut-off dates (each, a "Subsequent Cut-off
Date"), an assignment of the security interests in the Subsequent Financed
Vehicles and proceeds from claims under certain insurance policies in respect
of individual Subsequent Financed Vehicles or the related Obligors, to the
extent specified in the related Prospectus Supplement.
(Continued on following page)
A DISCUSSION OF CERTAIN RISK FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE PURCHASERS OF THE SECURITIES OFFERED HEREBY CAN BE FOUND ON PAGE
18 HEREIN AND IN THE RELATED PROSPECTUS SUPPLEMENT.
THE SECURITIES WILL REPRESENT INTERESTS IN OR OBLIGATIONS OF A TRUST AND
WILL NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF THE CIT GROUP SECURITIZATION
CORPORATION II, THE CIT GROUP/SALES FINANCING, INC., THE CIT GROUP HOLDINGS,
INC. OR ANY OF THEIR RESPECTIVE AFFILIATES (EXCEPT TO THE LIMITED EXTENT, IF
ANY, DESCRIBED HEREIN AND IN THE RELATED PROSPECTUS SUPPLEMENT).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Retain this Prospectus for future reference. This Prospectus may not be used
to consummate sales of securities offered hereby unless accompanied by a
Prospectus Supplement.
The date of this Prospectus is July 24, 1996.
<PAGE>
(continued from preceding page)
Each Trust will be formed pursuant to either (i) a Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement") to be entered into among the
Seller, The CIT Group/Sales Financing, Inc. (the "Servicer") and the Trustee
specified in the related Prospectus Supplement (the "Trustee") or (ii) a Trust
Agreement (the "Trust Agreement") to be entered into among the Seller, the
Trustee and certain other parties as specified in the related Prospectus
Supplement. If the Trust is formed pursuant to a Trust Agreement, a Sale and
Servicing Agreement (the "Sale and Servicing Agreement") will be entered into
among the Seller, the Servicer and the Trustee. The Pooling and Servicing
Agreement or the Trust Agreement and the Sale and Servicing Agreement are
collectively referred to herein as the "Trust Documents." The Notes, if any,
of a series of Securities will be issued and secured pursuant to an Indenture
(the "Indenture") between the Trust and the Indenture Trustee specified in the
related Prospectus Supplement (the "Indenture Trustee").
The Certificates will represent fractional undivided interests in the
related Trust. Except as otherwise provided in the related Prospectus
Supplement, each class of Securities of any series will represent the right to
receive a specified amount of payments of principal and interest on the
related Contracts, in the amounts, at the rates, on the dates and in the
manner described herein and in the related Prospectus Supplement. The right of
each class of Securities to receive payments may be senior or subordinate to
the rights of one or more of the other classes of such series. A series may
include two or more classes of Certificates or Notes which differ as to the
timing and priority of payment, interest rate or amount of distributions in
respect of principal or interest or both. A series may include one or more
classes of Certificates or Notes entitled to distributions in respect of
principal, with disproportionate, nominal or no interest distributions, or to
distributions of interest, with disproportionate, nominal or no distributions
in respect of principal. Distributions on Certificates of any series will be
subordinated in priority to payments due on the related Notes, if any, to the
extent described herein and in the related Prospectus Supplement.
The rate of distributions in respect of principal on Certificates and
payment in respect of principal on Notes, if any, of any class will depend on
the priority of payment of such class and the rate and timing of payments
(including prepayments, liquidations and repurchases of Contracts) on the
related Contracts.
If specified in the related Prospectus Supplement, a financial guaranty
insurance policy, letter of credit, surety bond, limited guarantee by The CIT
Group Holdings, Inc. ("CIT"), reserve fund, or other form of credit
enhancement, or any combination thereof, may be provided with respect to a
Trust or any class of Securities.
Unless otherwise provided in the related Prospectus Supplement, the
Certificates and the Notes, if any, of any series initially will be
represented by certificates and notes registered in the name of Cede & Co.,
the nominee of The Depository Trust Company ("DTC"). The interests of
beneficial owners of the Securities will be represented by book entries on the
records of the participating members of DTC and, in the case of the Notes,
Cedel Bank, societe anonyme ("Cedel") and the Euroclear System ("Euroclear").
Definitive Securities will be available only under limited circumstances to
the extent described herein and in the related Prospectus Supplement.
There currently is no secondary market for the Securities and there is no
assurance that one will develop. The Underwriters (as defined herein) expect,
but are not obligated, to make a market in the Securities. There is no
assurance that any such market will develop, or if one does develop, that it
will continue or provide sufficient liquidity.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE SECURITIES
AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") on behalf of each Trust a Registration Statement (together with
all amendments and exhibits thereto, the "Registration Statement"), of which
this Prospectus is a part, under the Securities Act of 1933, as amended, with
respect to the Securities offered pursuant to this Prospectus. This Prospectus
does not contain all of the information set forth in the Registration
Statement, certain parts of which have been omitted in accordance with the
rules and regulations of the Commission. For further information, reference is
made to the Registration Statement, including exhibits filed as part thereof,
which is available for inspection without charge at the public reference
facilities of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, and the regional offices of the Commission at Suite 1400 Northwestern
Atrium Center, 500 West Madison Street, Chicago, Illinois 60661, and Seven
World Trade Center, New York, New York 10048. Copies of such information can
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Both registrants
also file electronically. The Commission maintains a Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The address of the
Commission's Web site is http://www.sec.gov. Statements made in this
Prospectus as to the contents of any contract, agreement or other document
filed as an exhibit to the Registration Statement, while complete in all
material respects, do not necessarily describe all terms or provisions of such
contract, agreement or other document. For a complete description, reference
is made to each such contract, agreement or other document filed as an exhibit
to the Registration Statement. The Servicer, on behalf of each Trust, will
also file or cause to be filed with the Commission such periodic reports as
are required under The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Commission thereunder. However, in accordance
with the Exchange Act and the rules and regulations of the Commission
thereunder, the Company expects that each Trust's obligation to file such
reports will be terminated following the end of the year in which such Trust
is formed. Such reports and other information filed on behalf of each Trust
will be available for inspection as set forth above.
REPORTS TO SECURITYHOLDERS
Unless otherwise provided in the related Prospectus Supplement, unless and
until Definitive Securities are issued, monthly and annual unaudited reports
containing information concerning each Trust will be prepared by the Servicer
and sent on behalf of each Trust only to the Trustee for the
Certificateholders, the Indenture Trustee for the Noteholders and Cede & Co.
("Cede"), as nominee of DTC and registered holder of the Notes and the
Certificates. Securityholders may elect to hold their securities through any
of DTC (in the United States) and, in the case of Noteholders, Cedel or
Euroclear (in Europe). DTC will forward such reports to Participants, Indirect
Participants, Cedel Participants and Euroclear Participants. See "Certain
Information Regarding the Securities--Book-Entry Registration" and "--
Statements to Securityholders." Certificateholders and Noteholders are
collectively referred to herein as the "Securityholders." Certificate Owners
or Note Owners may receive such reports, upon written request, together with a
certification that they are Certificate Owners or Note Owners and payment of
reproduction and postage expenses associated with the distribution of such
reports, from the Trustee, with respect to Certificate Owners, or the
Indenture Trustee, with respect to Note Owners, at the addresses specified in
the related Prospectus Supplement. Such reports will not constitute financial
statements prepared in accordance with generally accepted accounting
principles. Neither the Seller, the Servicer nor CIT intends to send any of
its financial reports to Securityholders.
3
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed with the Commission by CIT are incorporated by
reference in this Prospectus:
(a) CIT's Annual Report on Form 10-K for the year ended December 31, 1995
together with the report of KPMG Peat Marwick LLP, independent certified
public accountants;
(b) CIT's Quarterly Report on Form 10-Q for the quarter ended March 31,
1996; and
(c) CIT's Current Reports on Form 8-K dated April 11, 1996, April 12,
1996 and July 16, 1996.
All documents filed by CIT pursuant to Sections 13(a) and (c), 14, or 15(d)
of the Exchange Act after the date hereof and prior to the termination of the
offering of the securities offered hereby shall be deemed to be incorporated
by reference herein and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute part of this Prospectus.
CIT WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS PROSPECTUS IS
DELIVERED, UPON REQUEST, A COPY OF ANY OR ALL OF THE FOREGOING DOCUMENTS
DESCRIBED ABOVE WHICH HAVE BEEN OR MAY BE INCORPORATED BY REFERENCE IN THIS
PROSPECTUS OTHER THAN EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH EXHIBITS ARE
SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS). SUCH REQUEST
SHOULD BE DIRECTED TO:
CORPORATE SECRETARY
THE CIT GROUP HOLDINGS, INC.
1211 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
(212) 536-1950
4
<PAGE>
SUMMARY
This Summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus and by reference to the
information with respect to the Securities contained in the related Prospectus
Supplement to be prepared and delivered in connection with the offering of each
series of Securities. Certain capitalized terms used in the Summary are defined
elsewhere in this Prospectus and in the related Prospectus Supplement.
Reference is made to the "Index of Principal Terms" for the location herein of
defined terms.
Issuer...................... With respect to each series of Securities, a
trust (the "Trust" or the "Issuer"), will be
formed by the Seller pursuant to either a
Pooling and Servicing Agreement among the
Seller, the Servicer and the Trustee specified
in the related Prospectus Supplement, or a Trust
Agreement among the Seller, the Trustee
specified in the related Prospectus Supplement
and certain other parties as specified in the
related Prospectus Supplement.
Seller...................... The CIT Group Securitization Corporation II (the
"Company" or the "Seller"), a wholly-owned,
limited purpose subsidiary of The CIT Group
Holdings, Inc. ("CIT"). Except if and to the
extent specified in the related Prospectus
Supplement, neither CIT nor any of its
affiliates, including the Company and The CIT
Group/Sales Financing, Inc. ("CITSF"), has
guaranteed, insured or is otherwise obligated
with respect to the Securities. See "Risk
Factors--Limited Obligations."
Servicer.................... The CIT Group/Sales Financing, Inc. (in such
capacity referred to herein as the "Servicer"),
a wholly-owned subsidiary of CIT. The Servicer
will be responsible for managing, administering,
servicing and making collections on the
Contracts held by each Trust.
Trustee..................... The Trustee pursuant to a Pooling and Servicing
Agreement or the Owner Trustee pursuant to a
Trust Agreement, in each case as specified in
the related Prospectus Supplement. The Trustee
or Owner Trustee for any Trust will be referred
to in this Prospectus as the "Trustee" or the
"Owner Trustee," although the Prospectus
Supplement relating to an owner trust that
issues Notes will refer to the Trustee as the
"Owner Trustee" in order to distinguish the
Owner Trustee and the Indenture Trustee for such
Series. See "The Trusts--The Trustee."
Indenture Trustee........... With respect to any series of Securities
including one or more classes of Notes, the
Indenture Trustee specified in the related
Prospectus Supplement (the "Indenture Trustee").
The Owner Trustee and the Indenture Trustee for
a series are referred to herein collectively as
the "Trustees."
5
<PAGE>
Risk Factors................ Certain potential risks and other considerations
are particularly relevant to a decision to
invest in any securities sold hereunder. See
"Risk Factors."
The Certificates............ Each series of Securities will include one or
more classes of Asset-Backed Certificates which
will be issued pursuant to the related Trust
Documents. The Certificates (the "Certificates")
will represent fractional undivided interests in
the related Trust, and will have the Original
Certificate Balance specified in the related
Prospectus Supplement. See "The Certificates--
General."
Payments in respect of the Certificates will be
subordinated to payments on the Notes of the
same series to the extent described in the
related Prospectus Supplement. See "The
Certificates--General."
Unless otherwise specified in the related
Prospectus Supplement, the Certificates will be
issued in minimum denominations of $20,000 and
integral multiples of $1,000 in excess thereof
in book-entry form only; provided, however, that
one Certificate of each series may be issued in
a denomination other than an integral multiple
of $1,000 such that the applicable Affiliated
Purchaser, if any, specified in the related
Prospectus Supplement (the "Affiliated
Purchaser") may be issued at least 1% of the
Original Certificate Balance. Unless otherwise
specified in the related Prospectus Supplement,
persons ("Certificate Owners") acquiring
beneficial interests in the Certificates will
hold their interests through The Depository
Trust Company ("DTC"). Definitive Certificates
will be issued only under the limited
circumstances described herein or in the related
Prospectus Supplement. Unless and until
Certificates of a class are issued in definitive
form, all references herein to distributions,
notices, reports and statements to and to
actions by and effects upon the related
Certificateholders will refer to the same
actions and effects with respect to DTC or Cede
& Co. ("Cede"), as the case may be, for the
benefit of the related Certificate Owners in
accordance with the DTC procedures. See "Certain
Information Regarding the Securities--Book-Entry
Registration" and "--Definitive Securities."
Unless otherwise specified in the related
Prospectus Supplement, each class of
Certificates will have a stated Certificate
Balance (as defined in the related Prospectus
Supplement) and will accrue interest on such
Certificate Balance at a specified rate (with
respect to each class of Certificates, the
"Pass-Through Rate"). Each class of Certificates
may have a different Pass-Through Rate, which
6
<PAGE>
may be a fixed, variable or adjustable Pass-
Through Rate, or any combination of the
foregoing. The related Prospectus Supplement
will specify the Pass-Through Rate for each
class of Certificates, or the initial Pass-
Through Rate and the method for determining
subsequent changes to the Pass-Through Rate.
A series may include two or more classes of
Certificates which differ as to timing of
distributions, sequential order, priority of
payment, seniority, allocation of losses, Pass-
Through Rate or amount of distributions in
respect of principal or interest, or as to which
distributions in respect of principal or
interest on any class may or may not be made
upon the occurrence of specified events or on
the basis of collections from designated
portions of the Contract Pool (as defined
herein). In addition, a series may include one
or more classes of Certificates ("Stripped
Certificates") entitled to (i) distributions in
respect of principal with disproportionate,
nominal or no interest distributions, or
(ii) interest distributions, with
disproportionate, nominal or no distributions in
respect of principal.
If CITSF exercises its option to purchase the
Contracts of a Trust or if the Contracts are
sold by the Trustee on the terms and conditions
described under "The Purchase Agreements and the
Trust Documents--Termination and --Insolvency
Event," Certificate Owners may receive an amount
in respect of the Certificates as specified in
the related Prospectus Supplement. In addition,
if the related Prospectus Supplement provides
that the property of a Trust will include a Pre-
Funding Account (as such term is defined in the
related Prospectus Supplement, the "Pre-Funding
Account"), Certificate Owners may receive a
distribution in respect of principal on or
immediately following the end of the funding
period specified in the related Prospectus
Supplement (the "Funding Period") in an amount
and manner specified in the related Prospectus
Supplement.
The Notes................... Each series of Asset-Backed Notes (the "Notes"
and, together with the Certificates, the
"Securities") will represent obligations of a
Trust secured by assets of such Trust (other
than the accounts or other property specified in
the related Prospectus Supplement). See "The
Notes--General."
The Notes will be issued pursuant to an Indenture
between the Issuer and the Indenture Trustee
(the "Indenture"). See "The Notes--General."
7
<PAGE>
Unless otherwise specified in the related
Prospectus Supplement, the Notes will be issued
in minimum denominations of $1,000 and integral
multiples of $1,000 in excess thereof and will
be available in book-entry form only. Unless
otherwise specified in the related Prospectus
Supplement, persons ("Note Owners") acquiring
beneficial interests in the Notes will hold
their interests through DTC in the United States
or Cedel Bank, societe anonyme ("Cedel") or the
Euroclear System ("Euroclear") in Europe, and
Definitive Notes will be issued only under the
limited circumstances described herein or in the
related Prospectus Supplement. Unless and until
Notes of a class are issued in definitive form,
all references herein to distributions, notices,
reports and statements to and to actions by and
effects upon the related Noteholders will refer
to the same actions and effects with respect to
DTC or Cede, as the case may be, for the benefit
of the related Note Owners in accordance with
the DTC procedures. See "Certain Information
Regarding the Securities--Book-Entry
Registration" and "--Definitive Securities."
Unless otherwise specified in the related
Prospectus Supplement, each class of Notes will
have a stated principal amount and will bear
interest at a specified rate or rates (with
respect to each class of Notes, the "Interest
Rate"). Each class of Notes may have a different
Interest Rate, which may be a fixed, variable or
adjustable Interest Rate, or any combination of
the foregoing. The related Prospectus Supplement
will specify the Interest Rate and the method
for determining subsequent changes to the
Interest Rate.
A series may include two or more classes of Notes
which differ as to the timing and priority of
payment, seniority, allocations of loss,
Interest Rate or amount of payments of principal
or interest, or as to which payments of
principal may or may not be made upon the
occurrence of specified events or on the basis
of collections from designated portions of the
Contract Pool (as defined herein). In addition,
a series may include one or more classes of
Notes ("Stripped Notes") entitled to (i)
principal payments with disproportionate,
nominal or no interest payments or (ii) interest
payments with disproportionate, nominal or no
principal payments.
If CITSF exercises its option to purchase the
Contracts of a Trust or if the Contracts are
sold by the Trustee on the terms and conditions
described under "The Purchase Agreements and the
Trust Documents--Termination and --Insolvency
Event," the outstanding Notes, if any, of such
series will be redeemed as set forth in the
related
8
<PAGE>
Prospectus Supplement. In addition, if the
related Prospectus Supplement provides that the
property of a Trust will include a Pre-Funding
Account, all or certain classes of the
outstanding Notes, if any, of such series will
be subject to partial redemption on or
immediately following the end of the Funding
Period in an amount and manner specified in the
related Prospectus Supplement.
Property of a Trust......... The property of a Trust will primarily include
(i) a pool (the "Contract Pool") of retail
installment sale contracts (the "Initial
Contracts") secured by the new and used
recreational vehicles financed thereby (the
"Initial Financed Vehicles"), (ii) certain
monies received under the Initial Contracts on
and after the Initial Cut-off Date specified in
the related Prospectus Supplement (the "Initial
Cut-off Date"), (iii) an assignment of the
security interests in the Initial Financed
Vehicles, (iv) the Collection Account (as
defined herein), including all investments
therein, all income from the investment of funds
therein and all proceeds thereof, certain other
accounts and the proceeds thereof and certain
other rights under the Trust Documents specified
in the related Prospectus Supplement, and (v)
the proceeds from claims under certain insurance
policies in respect of individual Initial
Financed Vehicles or the related Obligors (as
defined herein). In addition, if so specified in
the related Prospectus Supplement, the property
of a Trust will include specified credit or cash
flow enhancement and monies on deposit in a Pre-
Funding Account to be established with the
Indenture Trustee or the Trustee, which will be
used to purchase Subsequent Contracts (as
defined herein) from the Seller from time to
time during the Funding Period, as well as any
Subsequent Contracts so purchased. See "The
Trust Property."
If and to the extent provided in the related
Prospectus Supplement, a Trust will be obligated
to purchase from the Seller (subject to the
satisfaction of certain conditions described in
the applicable Trust Documents) from time to
time during the Funding Period, from monies on
deposit in the Pre-Funding Account, additional
retail installment sale contracts (the
"Subsequent Contracts" and, together with the
Initial Contracts, the "Contracts") secured by
the new and used recreational vehicles financed
thereby (the "Subsequent Financed Vehicles" and,
together with the Initial Financed Vehicles, the
"Financed Vehicles"), certain monies received
under the Subsequent Contracts on and after the
related Subsequent Cut-off Dates (specified in
the related Prospectus Supplement), an
assignment of the security interests in the
Subsequent Financed Vehicles, and proceeds from
claims under certain insurance policies in
9
<PAGE>
respect of individual Subsequent Financed
Vehicles or the related Obligors. It is expected
that the Subsequent Contracts will have an
aggregate principal balance approximately equal
to the Pre-Funded Amount (as defined herein) on
the related Closing Date (as defined herein).
The Financed Vehicles consist of motor homes,
travel trailers and other types of recreational
vehicles. See "The Contract Pool."
CITSF will be obligated to repurchase Contracts
(a "Repurchased Contract") upon the occurrence
of certain breaches of representations and
warranties (a "Repurchase Event"). See "The
Purchase Agreements and the Trust Documents--
Sale and Assignment of the Contracts" and "--
Servicing Procedures."
The Contracts............... The property of a Trust will consist primarily of
installment sale contracts for recreational
vehicles originated by recreational vehicle
dealers ("Dealers") in the ordinary course of
business and acquired by CITSF or The CIT
Group/Consumer Finance, Inc. (NY) ("CITCF-NY")
or other affiliates of CITSF in the ordinary
course of its business, or if specified in the
related Prospectus Supplement, originated
directly by CITSF or one of its affiliates in
the ordinary course of business or purchased by
CITSF or one of its affiliates from unaffiliated
third parties. On or prior to the date of
issuance of a series of the Securities (the
"Closing Date"), CITCF-NY will sell certain
contracts that will constitute a portion of the
Initial Contracts to CITSF pursuant to a
purchase agreement, and CITSF will sell the
Initial Contracts to the Company pursuant to a
purchase agreement (the "Purchase Agreement"),
and the Company will sell the Initial Contracts
to a Trust pursuant to the Trust Documents. If
and to the extent specified in the related
Prospectus Supplement, CITSF or the Seller or
one of their respective affiliates may retain
the right to receive a portion of the interest
accruing on some or all of the Contracts sold to
a Trust. See "The Purchase Agreements and the
Trust Documents--Sale and Assignment of the
Contracts."
The Contracts will generally be prepayable at any
time without penalty to the purchaser of the
related Financed Vehicles or other person or
persons who are obligated to make payments
thereunder (each, an "Obligor"). Certain
information with respect to each Contract Pool
as of the Initial Cut-off Date or such other
date specified in the related Prospectus
Supplement, including the proportions of each
type of Financed Vehicle financed, the weighted
average annual percentage rate, the weighted
average
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remaining maturity, and information on any
Contracts which bear interest other than at a
simple interest basis, will be set forth in the
related Prospectus Supplement.
If and to the extent specified in the related
Prospectus Supplement, from time to time during
the Funding Period, CITSF will be obligated to
sell, and the Company will be obligated to
purchase, pursuant to a purchase agreement (the
"Subsequent Purchase Agreement") subject to the
satisfaction of certain conditions described
therein, Subsequent Contracts at a purchase
price which, unless otherwise specified in the
related Prospectus Supplement, will be equal to
the aggregate principal amounts thereof as of
the first day in the related month of transfer
designated by CITSF and the Company (each, a
"Subsequent Cut-off Date"). A portion of such
Subsequent Contracts may be acquired by CITSF
from CITCF-NY or other affiliates of CITSF.
Pursuant to one or more subsequent transfer
agreements (each, a "Subsequent Transfer
Agreement") between the Company and the related
Trust, and subject to the satisfaction of
certain conditions described therein, the
Company will in turn sell the Subsequent
Contracts to such Trust at a purchase price
equal to the amount paid by the Company to CITSF
for such Subsequent Contracts, which purchase
price shall be paid from monies on deposit in
the Pre-Funding Account. Subsequent Contracts
will be transferred from CITSF to the Company
and from the Company to such Trust on the
Business Day (as defined herein) specified by
CITSF and the Company during the month in which
the related Subsequent Cut-off Date occurs
(each, a "Subsequent Transfer Date").
The Pre-Funding Account..... If the Prospectus Supplement for a series of the
Securities specifies that a portion of the
proceeds of the offering will be deposited in a
Pre-Funding Account, the Pre-Funding Account
will be maintained as an Eligible Account (as
defined herein), which account may be maintained
with the Owner Trustee or the Indenture Trustee,
and the funds on deposit therein will be
invested solely in Permitted Investments (as
defined herein or in the related Prospectus
Supplement), that mature not later than one
Business Day prior to the next succeeding
Distribution Date, until such funds are applied
during the Funding Period to pay to the Company
the purchase price for Subsequent Contracts. See
"The Purchase Agreements and the Trust
Documents--Accounts." Monies on deposit in the
Pre-Funding Account will not be available to
cover losses on or in respect of the Contracts.
On the Closing Date, the Pre-Funding Account will
be created with an initial deposit, from the
proceeds of the Securities, in the amount, if
any, specified in the related Prospectus
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Supplement (the "Pre-Funded Amount"). The Pre-
Funded Amount will not exceed one-third of the
sum of the Original Certificate Balance and the
initial principal amount of the Notes. Unless
otherwise specified in the related Prospectus
Supplement, the "Funding Period" will be the
period from the Closing Date until the earliest
to occur of (i) the date on which the amount on
deposit in the Pre-Funding Account (exclusive of
investment earnings) is less than $100,000,
(ii) the date on which an Event of Default
occurs under the Indenture (if any), (iii) the
date on which an Event of Termination occurs
under the Trust Documents, (iv) the insolvency
of the Company, CITSF, CITCF-NY or CIT, or (v)
the close of business on the date specified in
the related Prospectus Supplement (which date
will occur in the third calendar month after the
month in which the Closing Date occurred).
During the Funding Period, on one or more
Subsequent Transfer Dates, the Pre-Funded Amount
will be applied to purchase Subsequent Contracts
from the Company. Unless otherwise specified in
the related Prospectus Supplement, the Company
expects that the Pre-Funded Amount will be
reduced to less than $100,000 by the end of the
Funding Period, although no assurance can be
given that this will in fact occur. Unless
otherwise specified in the related Prospectus
Supplement, any portion of the Pre-Funded Amount
remaining on deposit in the Pre-Funding Account
at the end of the Funding Period will be payable
as principal to Noteholders and
Certificateholders in accordance with the Pre-
Funded Percentage (as defined herein) on the
first Distribution Date thereafter or, if the
end of the Funding Period is on a Distribution
Date, then on such date.
Capitalized Interest If the Prospectus Supplement for a series of the
Account.................... Securities specifies that a portion of the
proceeds of the offering will be deposited in a
Capitalized Interest Account, on the Closing
Date a portion of the proceeds from the sale of
the Securities (in an amount specified in the
related Prospectus Supplement) will be deposited
into an account (the "Capitalized Interest
Account") maintained as an Eligible Account,
which account may be maintained with the Owner
Trustee or the Indenture Trustee, and the funds
on deposit therein will be invested solely in
Permitted Investments that mature no later than
one Business Day prior to the next Distribution
Date. Amounts deposited in the Capitalized
Interest Account will be used on each
Distribution Date to pay interest on the
Securities, in the amount or in accordance with
the formula specified in the related Prospectus
Supplement. Monies on deposit in the Capitalized
Interest Account will not be available to cover
losses on or in respect of the Contracts.
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On each Distribution Date any amount remaining in
the Capitalized Interest Account in excess of
the Required Capitalized Interest Amount (as
defined in the related Prospectus Supplement)
shall be released to the Affiliated Purchaser,
if any, or other person specified in the related
Prospectus Supplement. Unless otherwise
specified in the related Prospectus Supplement,
any amounts remaining in the Capitalized
Interest Account on the last day of the Funding
Period and not used for such purposes will be
deposited in the Collection Account and will be
available for distributions, as described herein
or in the related Prospectus Supplement, on the
first Distribution Date thereafter or, if the
end of the Funding Period is on a Distribution
Date, then on such date.
Distribution Dates.......... Unless otherwise specified in the related
Prospectus Supplement, payments of interest and
principal on the Securities will be made on the
fifteenth day of each month or, if any such day
is not a Business Day, on the next succeeding
Business Day (each, a "Distribution Date"),
commencing on the date specified in the related
Prospectus Supplement. Unless otherwise
specified in the related Prospectus Supplement,
payments on the Securities on each Distribution
Date will be made to the holders of record of
the related Securities at the close of business
on the Business Day immediately preceding such
Distribution Date or, in the event Definitive
Securities have been issued, at the close of
business on the last Business Day of the month
immediately preceding the month in which such
Distribution Date occurs (each, a "Record
Date").
To the extent not previously paid in full prior
to such time, the outstanding principal amount
of the Notes and the Certificates will be
payable on the Distribution Date occurring in
the month or months specified in the related
Prospectus Supplement (the "Note Final Scheduled
Distribution Date" and the "Certificate Final
Scheduled Distribution Date").
A "Business Day" is any day other than a
Saturday, Sunday or any day on which banking
institutions or trust companies in the states of
New York, Oklahoma and such other states (if
any) specified in the related Prospectus
Supplement are authorized by law, regulation or
executive order to be closed.
Interest Accrual Period..... Unless otherwise specified in the related
Prospectus Supplement, the period for which
interest is payable on a Distribution Date on
the Securities shall be the one-month period
from the most recent Distribution Date to but
excluding the following Distribution Date, or in
the case of
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the initial Distribution Date from the date
specified in the related Prospectus Supplement
to but excluding the initial Distribution Date
(each, an "Interest Accrual Period").
Due Period.................. With respect to any Distribution Date, the "Due
Period" is the period during which principal,
interest and other amounts will be collected on
the Contracts for application towards the
payment of principal and interest to the
Securityholders and the payment of fees on such
Distribution Date. Unless otherwise specified in
the related Prospectus Supplement, the "Due
Period" will be the calendar month immediately
preceding the Distribution Date.
Determination Date.......... Unless otherwise specified in the related
Prospectus Supplement, the "Determination Date"
is the third Business Day prior to each
Distribution Date. On each Determination Date,
the Servicer will determine the Available Amount
(as defined herein) for distribution on the
related Distribution Date, allocate such amounts
between the Notes, the Certificates and the
Servicer Payment (as defined herein), and advise
the Trustees (or the paying agent appointed
pursuant to the Trust Documents) of the amounts
of the payments to be made to Securityholders,
all as described under "The Purchase Agreements
and the Trust Documents--Distributions." The
"Servicer Payment" is equal on each Distribution
Date to the sum of the reimbursement then due to
the Servicer for outstanding Monthly Advances
and the Servicing Fee (as defined herein)
(including any unpaid Servicing Fees for past
Distribution Dates).
Unless otherwise specified in the related
Prospectus Supplement, the "Available Amount"
with respect to each Trust on any Distribution
Date is equal to the excess of (A) the sum of
(i) all amounts on deposit in the Collection
Account attributable to collections or deposits
made in respect of such Contracts (including any
late fees, prepayment charges, extension fees or
other administrative fees or similar charges
allowed by applicable law with respect to the
Contracts ("Late Fees")) in the related Due
Period, and (ii) the Purchase Price (as defined
herein) for any Contract repurchased by CITSF as
a result of breaches of certain representations
and warranties or purchased by the Servicer as a
result of breaches of certain covenants and any
Monthly Advances (as defined herein) and any
Non-Reimbursable Payments (as defined herein)
made by the Servicer, if such Purchase Price,
Monthly Advance or Non-Reimbursable Payment is
paid on the Deposit Date (as defined herein)
immediately preceding such Distribution Date,
over (B) the sum of the following amounts (to
the
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<PAGE>
extent that the Servicer has not already
withheld such amounts from collections on the
Contracts): (i) any repossession profits on
liquidated Contracts, Liquidation Expenses (as
defined in the Trust Documents) incurred and
taxes and insurance advanced by the Servicer in
respect of Financed Vehicles that are
reimbursable to the Servicer under the Trust
Documents, (ii) any amounts incorrectly
deposited in the Collection Account, (iii) net
investment earnings on the funds in the
Collection Account, and (iv) any other amounts
permitted to be withdrawn from the Collection
Account by the Servicer (or to be retained by
the Servicer from collections on the Contracts)
pursuant to the Trust Documents.
Subordination of the The rights of the Certificateholders to receive
Certificates............... distributions with respect to the Contracts will
be subordinated to the rights of the Noteholders
of the same series, to the extent described in
the related Prospectus Supplement. This
subordination is intended to enhance the
likelihood of timely receipt by Noteholders of
the full amount of interest and principal
required to be paid to them, and to afford the
Noteholders limited protection against losses in
respect of the Contracts.
The protection afforded to the Noteholders by the
subordination feature described above will be
effected by the preferential right of the
Noteholders to receive, to the extent described
in the related Prospectus Supplement, current
distributions from collections on or in respect
of the Contracts prior to the application of
such collections to payments in respect of the
Certificates.
If and to the extent specified in the related
Prospectus Supplement, one or more classes of
Notes of a series may be subordinated to the
rights of one or more other classes of Notes of
the same series.
Enhancement................. If and to the extent specified in the related
Prospectus Supplement with respect to a Trust,
the enhancement applicable to a class of
Securities may include any one or more of the
following: a financial guaranty insurance
policy, a letter of credit, a CIT Limited
Guarantee (as defined herein), a reserve fund, a
third party guarantee, a cash collateral
account, a derivative product, a credit
facility, a liquidity facility, another form of
credit enhancement, or any combination thereof.
The enhancement with respect to any class of
Securities may be structured to provide
protection against delinquencies and/or losses
on the Contracts, against changes in interest
rates, or other risks, or to supplement the
interest rate on specified Contracts, in each
case to the extent and under the conditions
specified in the related Prospectus Supplement.
Unless otherwise specified
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<PAGE>
in the related Prospectus Supplement, any form
of enhancement will have certain limitations and
exclusions from coverage thereunder, which will
be described in the related Prospectus
Supplement. Further information regarding any
provider of credit enhancement, including
financial information when material, will be
included (or incorporated by reference) in the
related Prospectus Supplement. See "The
Certificates--Enhancement."
Monthly Advances............ Unless otherwise specified in the related
Prospectus Supplement, with respect to each
Contract as to which there has been an Interest
Shortfall (as defined herein) during the related
Due Period, the Servicer shall advance funds in
the amount of such Interest Shortfall (each, a
"Monthly Advance"), but only to the extent that
the Servicer, in its good faith judgment,
expects to recover such Monthly Advance from
subsequent collections with respect to interest
payments on such Contract made by or on behalf
of the Obligor thereunder or from net
liquidation proceeds or insurance proceeds with
respect to such Contract. The Servicer shall be
reimbursed for any Monthly Advance from
subsequent collections with respect to such
Contract. If the Servicer determines in its good
faith judgment that an unreimbursed Monthly
Advance shall not ultimately be recoverable from
subsequent collections, the Servicer shall be
reimbursed for such Monthly Advance from
collections on all Contracts. In determining
whether an advance is or will be nonrecoverable,
the Servicer need not take into account that it
might receive any amounts in a deficiency
judgment against an Obligor. Unless otherwise
specified in the related Prospectus Supplement,
the Servicer will not make a Monthly Advance in
respect of (i) the principal component of any
scheduled payment, or (ii) an Interest Shortfall
arising from a Contract which has been prepaid
in full or which has been subject to a Relief
Act Reduction (as defined herein) during the
related Due Period. See "The Purchase Agreements
and the Trust Documents--Monthly Advances."
Unless otherwise specified in the related
Prospectus Supplement, "Interest Shortfall"
means with respect to any Contract and any
Distribution Date, the excess of (A) the product
of (i) the sum of (a) one-twelfth of the
weighted average of the Pass-Through Rate and
the Interest Rate and (b) one-twelfth of the
Servicing Fee Rate (as defined herein) and (ii)
the outstanding principal amount of such
Contract as of the last day of the second
preceding Due Period (or, in the case of the
first Due Period ending after the Contract was
acquired by the related Trust, as of the Initial
Cut-off Date or the Subsequent Cut-off Date, as
the case may be), over (B) the amount of
interest, if any, collected on such Contract in
the related Due Period.
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<PAGE>
Non-Reimbursable Payments... If and to the extent specified in the related
Prospectus Supplement, with respect to each
Contract as to which there has been an Interest
Shortfall in the related Due Period arising from
either a prepayment in full of such Contract or
a Relief Act Reduction in respect of such
Contract during such Due Period, the Trust
Documents may require the Servicer to deposit
into the Collection Account on the Business Day
immediately preceding the following Distribution
Date, without the right of subsequent
reimbursement, an amount equal to such Interest
Shortfall (a "Non-Reimbursable Payment"). If the
related Prospectus Supplement does not specify
that the Servicer will make Non-Reimbursable
Payments, the Servicer will not be obligated to
make such payments with respect to the Trust.
Servicing Fees.............. Unless otherwise specified in the related
Prospectus Supplement, with respect to each
series of Securities, the Servicer shall receive
a monthly fee (the "Servicing Fee"), payable on
each Distribution Date, equal to the sum of (i)
one-twelfth of the product of the percentage
specified in the related Prospectus Supplement
as the "Servicing Fee Rate" and the Pool Balance
(as defined herein) as of the last day of the
second preceding Due Period (or, in the case of
the first Distribution Date, as of the Initial
Cut-off Date) and (ii) any investment earnings
on amounts on deposit in the Collection Account,
the Certificate Distribution Account (as defined
herein) and the Note Distribution Account (as
defined herein), if any; provided, however, that
the Servicing Fee Rate applicable to a Trust may
be increased to a rate (or maximum rate)
specified in the related Prospectus Supplement
if CITSF or an affiliate thereof is not the
Servicer. See "The Purchase Agreements and the
Trust Documents--Servicing Compensation."
Optional Purchase of the Unless otherwise specified in the related
Contracts.................. Prospectus Supplement, with respect to each
series of Securities, at its option, CITSF may
purchase all the Contracts in the related Trust
on any Distribution Date on which the aggregate
principal balance of the Contracts (the "Pool
Balance") as of the last day of the related Due
Period is equal to or less than a percentage
specified in the related Prospectus Supplement
of the Initial Pool Balance, at a purchase price
determined as described under "The Purchase
Agreements and the Trust Documents--
Termination." Unless otherwise specified in the
related Prospectus Supplement, the "Initial Pool
Balance" equals the sum of (i) the Pool Balance
as of the Initial Cut-off Date and (ii) the
aggregate principal balance of all Subsequent
Contracts added to the related Trust as of their
respective Subsequent Cut-off Dates.
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<PAGE>
Auction Sale................ Unless otherwise specified in the related
Prospectus Supplement, with respect to each
series of Securities, within ten days after the
first Distribution Date on which the Pool
Balance as of the last day of the related Due
Period is equal to or less than a percentage
specified in the related Prospectus Supplement
of the Initial Pool Balance, the Indenture
Trustee (or, if the series did not include Notes
or the Notes have been paid in full and the
Indenture has been discharged in accordance with
its terms, the Owner Trustee) shall solicit bids
for the purchase of the Contracts remaining in
the related Trust. In the event that
satisfactory bids are received as described in
"The Purchase Agreements and the Trust
Documents--Termination," the net sale proceeds
will be distributed to Securityholders, in the
same order of priority as collections received
in respect of the Contracts, on the second
Distribution Date succeeding such Due Period. If
satisfactory bids are not received, such Trustee
shall decline to sell the Contracts and shall
not be under any obligation to solicit any
further bids or otherwise negotiate any further
sale of the Contracts. See "The Purchase
Agreements and the Trust Documents--
Termination."
Ratings..................... As a condition of issuance, the Securities of
each series offered pursuant to this Prospectus
will be rated in one of the four highest rating
categories by at least one nationally recognized
statistical rating organization specified in the
Prospectus Supplement (each, a "Rating Agency").
The ratings of the Securities should be
evaluated independently from similar ratings on
other types of securities. The ratings do not
address the possibility that Securityholders may
suffer a lower than anticipated yield. The
ratings do not address the likelihood that the
Securities will be retired following the sale of
the Contracts by the Trustee as described above
under "--Auction Sale" or "--Optional Purchase
of the Contracts." See "Ratings."
There can be no assurance that any rating will
remain in effect for any given period of time or
that a rating will not be lowered or withdrawn
by the assigning Rating Agency if, in its
judgment, circumstances so warrant. In the event
that the rating initially assigned to any of the
Securities is subsequently lowered or withdrawn
for any reason, no person or entity will be
obligated to provide any additional credit
enhancement with respect to such Securities.
There can be no assurance whether any other
rating agency will rate any of the Securities,
or if one does, what rating would be assigned by
any such other rating agency. A security rating
is not a recommendation to buy, sell or hold
securities.
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Certain Federal Income Tax
Considerations............. If the related Prospectus Supplement states that
a Trust is structured as an owner trust, in the
opinion of Counsel to the Seller, for Federal
income tax purposes: (1) the Notes will
constitute indebtedness; and (2) the
Certificates will constitute interests in a
trust fund that will not be treated as an
association taxable as a corporation. Each
Noteholder, by acceptance of a Note, will agree
to treat the Notes as indebtedness, and each
Certificateholder, by the acceptance of a
Certificate, will agree to treat the Trust as a
partnership in which the Certificateholders are
partners for Federal income tax purposes.
Alternative characterizations of the Trust, the
Notes and the Certificates are possible, but
would not result in materially adverse tax
consequences to Noteholders or
Certificateholders. See "Certain Federal Income
Tax Consequences."
ERISA Considerations........ Fiduciaries of employee benefit plans subject to
ERISA, or plans subject to Section 4975 of the
Internal Revenue Code of 1986 (the "Code")
should carefully review with their legal
advisors whether the purchase or holding of the
Certificates offered hereby could give rise to a
transaction prohibited or not otherwise
permissible under ERISA or the Code. See "ERISA
Considerations."
The related Prospectus Supplement will provide
further information with respect to the
eligibility of a class of Certificates for
purchase by employee benefit plans. See "ERISA
Considerations" herein and in the related
Prospectus Supplement.
Subject to certain considerations discussed under
"ERISA Considerations" herein and in the related
Prospectus Supplement, and unless otherwise
specified in the related Prospectus Supplement,
the Notes will be eligible for purchase by
employee benefit plans that are subject to the
Employee Retirement Income Security Act of 1974,
as amended ("ERISA").
Legal Investment............ The appropriate characterization of the
Certificates and the Notes under various legal
investment restrictions applicable to the
investment activities of certain institutions,
and thus the ability of investors subject to
these restrictions to purchase the Certificates
and the Notes, may be subject to significant
interpretive uncertainties. All investors whose
investment authority is subject to legal
restrictions should consult their own legal
advisors to determine whether, and to what
extent, the Certificates and the Notes will
constitute legal investments for them.
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<PAGE>
RISK FACTORS
Prospective Securityholders should consider the following risk factors in
connection with the purchase of the Securities:
1. Limited Obligations. The Securities will not represent an interest in or
an obligation of The CIT Group Holdings, Inc. ("CIT"), The CIT Group
Securitization Corporation II (the "Company"), any Affiliated Purchaser (as
hereinafter defined) specified in the related Prospectus Supplement, or any
Servicer (including The CIT Group/Sales Financing, Inc. ("CITSF")) or any of
their respective affiliates. Unless and to the extent otherwise specified in
the related Prospectus Supplement, the Securities will not be insured or
guaranteed by any government agency or instrumentality, CIT or any of its
affiliates (including the Company, any Affiliated Purchaser, and CITSF), the
Underwriters (as hereinafter defined) or any of their affiliates, or any other
Servicer or any of its affiliates.
2. Risk of Loss. An investment in the Securities may be affected by, among
other things, a downturn in regional or local economic conditions. These
regional or local economic conditions are often volatile and historically have
affected the delinquency, loan loss and liquidation experience of pools of
installment sale contracts secured by recreational vehicles. The credit
criteria and underwriting guidelines under which CITSF originates recreational
vehicle installment sale contracts were changed in 1994. The delinquency and
loan loss experience for CITSF's portfolio will be affected adversely by this
change in credit criteria. See "The CIT Group/Sales Financing, Inc.,
Servicer--Delinquency and Loan Loss Experience" herein and in the related
Prospectus Supplement. Since the market value of recreational vehicles
generally declines with age and since in certain states the Trustees may not
have a first perfected security interest in the Financed Vehicles, the
Servicer may not recover the entire amount owing under a defaulted Contract.
See "Certain Legal Aspects of the Contracts." In such a case, the
Securityholders may suffer a corresponding loss. The market value of the
Financed Vehicles could be or could become lower than the outstanding
principal balances of the Contracts that they secure. Sufficiently high
liquidation losses on the Contracts will have the effect of reducing, and
could eliminate (a) the protection against loss afforded to the Noteholders by
the subordination of the Certificates or by the Enhancement, if any,
applicable to the Notes and (b) the protection against loss afforded to the
Certificateholders by the Enhancement (as specified in the related Prospectus
Supplement), if any. If the amount available under the Enhancement (as defined
herein), if any, is reduced to zero, holders of the Certificates will bear the
risk of loss resulting from default by Obligors and will have to look
primarily to the value of the related Financed Vehicles for recovery of the
outstanding principal and unpaid interest on the defaulted Contracts. If the
Certificate Balance (as defined herein) is reduced to zero, the holders of the
Notes will bear the risk of loss resulting from default by Obligors and will
have to look primarily to the value of the related Financed Vehicles for
recovery of the outstanding principal and unpaid interest on the defaulted
Contracts.
3. Security Interests and Certain Other Aspects of the Contracts. Each
Contract will be secured by a security interest in a Financed Vehicle.
Perfection of security interests in the Financed Vehicles and enforcement of
rights to realize upon the value of the Financed Vehicles as collateral for
the Contracts are subject to a number of state laws, including the Uniform
Commercial Code (the "UCC") as adopted in each state and certificate of title
statutes. The steps necessary to perfect a security interest in a Financed
Vehicle vary from state to state. Unless otherwise specified in the related
Prospectus Supplement, all Contracts in the Contract Pool (as defined herein)
were purchased by CITSF or The CIT Group/Consumer Finance, Inc. (NY) ("CITCF-
NY") from recreational vehicle dealers ("Dealers") and name the Dealer as
obligee and as secured party. All Contracts in the Contract Pool were assigned
by the related Dealer to CITSF or CITCF-NY. In each case, CITSF or CITCF-NY is
named as the secured party on the certificate of title for the related
Financed Vehicle. Due to the expense and administrative inconvenience
involved, CITSF will not amend any certificate of title to name the Company or
any Trustee as the lienholder and the Company will not deliver any certificate
of title to such Trustee or note thereon such Trustee's interest.
Consequently, in some states, in the
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absence of such an amendment to the certificate of title to reflect the
successive assignments by CITCF-NY to CITSF, by CITSF to the Company, and by
the Company to the Trust, the security interest in the Financed Vehicle may
not be effective or such security interest may not be perfected, and the
assignment of the security interest in the Financed Vehicle to the Trust may
not be effective against other creditors of the related Obligor or a trustee
in bankruptcy.
In addition, numerous federal and state consumer protection laws impose
requirements on sellers under installment sale contracts, such as the
Contracts, and the failure by the seller of goods to comply with such
requirements could give rise to liabilities of assignees for amounts due or
paid under such agreements and the right to set-off against claims by such
assignees. These laws would apply to a Trust as assignee of the Contracts.
From time to time, CITSF has been involved in litigation under consumer or
debtor protection laws, some of which have been class actions. The Trust is
subject to the risk of similar litigation. With respect to each series of
Securities, pursuant to the Trust Documents, CITSF will represent and warrant
as of the Initial Cut-off Date (as defined herein) with respect to each
Initial Contract (as defined herein), and as of the related Subsequent Cut-off
Date (as defined herein) with respect to each Subsequent Contract (as defined
herein), that each Contract complies with all requirements of law and CITSF
will provide certain warranties relating to the validity, perfection and
priority of the security interest in each Financed Vehicle securing a
Contract. A breach by CITSF of any such warranty that materially and adversely
affects the related Trust's interest in any Contract would require CITSF to
repurchase such Contract unless such breach is cured. If CITSF does not honor
its purchase obligation in respect of a Contract and the Obligor for such
Contract were to default, recovery of amounts due on such Contract would be
primarily dependent on repossession and resale of the Financed Vehicle
securing such Contract. Certain other factors may limit the ability of the
Securityholders to realize upon the Financed Vehicles or may limit the amount
realized to less than the amount due. See "Certain Legal Aspects of the
Contracts."
Under California law and most state vehicle dealer licensing laws, sellers
of recreational vehicles are required to be licensed to sell vehicles at
retail sale. Numerous other federal and state consumer protection laws impose
requirements applicable to the origination and assignment of retail
installment sale contracts, including the Truth in Lending Act, the Federal
Trade Commission Act, the Fair Credit Billing Act, the Fair Credit Reporting
Act, the Equal Credit Opportunity Act, the Fair Debt Collection Practices Act
and the Uniform Consumer Credit Code. In the case of some of these laws, the
failure to comply may affect the enforceability of the related Contract. A
Trust and the Company may not have obtained the licenses required under any
federal or state consumer laws or regulations, and the absence of such
licenses may impede the enforcement of certain rights or give rise to certain
defenses in actions seeking enforcement of such rights which may prevent a
Trust from collecting amounts due under the Contracts. In addition, with
respect to used vehicles, the Federal Trade Commission's Rule on Sale of Used
Vehicles requires that all sellers of used vehicles prepare, complete, and
display a "Buyer's Guide" which explains the warranty coverage for such
vehicles. Furthermore, Federal Odometer Regulations promulgated under the
Motor Vehicle Information and Cost Savings Act require that all sellers of
used vehicles furnish a written statement signed by the seller certifying the
accuracy of the odometer reading. If a seller is not properly licensed or if
either a Buyer's Guide or Odometer Disclosure Statement was not provided to
the purchaser of a Financed Vehicle, the obligor may be able to assert a
defense against the seller of the Financed Vehicle which defense may prevent a
Trust from collecting amounts due under the affected Contracts. See "Certain
Legal Aspects of the Contracts."
Any shortfall in payments on or in respect of Contracts, or any liability of
a Trust to Obligors, as a result of noncompliance with the laws summarized
above and under "Certain Legal Aspects of the Contracts" could result in
losses to the Securityholders.
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4. Certain Matters Relating to Insolvency. CITSF and the Company intend that
each transfer of Contracts from CITCF-NY to CITSF, from CITSF to the Company
and from the Company to the related Trust constitutes a sale, rather than a
pledge of the Contracts to secure indebtedness. However, if CITCF-NY, CITSF or
the Company were to become a debtor under Title 11 of the United States Code,
11 U.S.C.((S)) 101 et seq. (the "Bankruptcy Code"), it is possible that a
creditor, receiver, other party in interest or trustee in bankruptcy of CITCF-
NY, CITSF or the Company, or CITCF-NY, CITSF or the Company as debtor-in-
possession, may argue that the sale of the Contracts by CITCF-NY to CITSF, by
CITSF to the Company, or by the Company to the related Trust, respectively,
was a pledge of the Contracts rather than a sale and that, accordingly, such
Contracts should be part of such assigning entity's bankruptcy estate. Such a
position, if presented to a court, even if ultimately unsuccessful, could
result in a delay in or reduction of distributions to the Securityholders. See
"Certain Legal Aspects of the Contracts--Certain Matters Relating to
Insolvency."
If and to the extent specified in the related Prospectus Supplement, the
Affiliated Purchaser, if any, specified in the related Prospectus Supplement,
will own a Certificate evidencing the portion of the Original Certificate
Balance specified in the related Prospectus Supplement. Such Affiliated
Purchaser will have the same rights with regard to the related Trust as all
other Certificateholders based on its percentage ownership of the Certificate
Balance. Unless otherwise specified in the related Prospectus Supplement, each
Trust Document will provide that if an Insolvency Event (as defined herein)
with respect to the Affiliated Purchaser occurs, subject to certain
conditions, the related Trust will dissolve. Certain steps will be taken in
structuring the transactions contemplated hereby that are intended to make it
less likely that an Insolvency Event with respect to the Affiliated Purchaser
will occur. These steps will include the formation of the Affiliated Purchaser
as a separate, limited-purpose corporation pursuant to a certificate of
incorporation containing certain limitations (including restrictions on the
nature of the Affiliated Purchaser's business and a restriction on the
Affiliated Purchaser's ability to commence a voluntary case or proceeding
under the Bankruptcy Code or similar applicable state laws ("Insolvency Laws")
without the prior affirmative unanimous vote of its directors). However, an
Insolvency Event with respect to the Affiliated Purchaser may occur
nonetheless.
Unless otherwise specified in the related Prospectus Supplement, if an
Insolvency Event with respect to the Affiliated Purchaser occurs, the
Indenture Trustee (or, if no Notes are outstanding, the Owner Trustee) will
promptly sell, dispose of or otherwise liquidate the related Contracts in a
commercially reasonable manner on commercially reasonable terms, except under
certain limited circumstances. The net proceeds from any such sale,
disposition or liquidation of the Contracts will be treated as collections on
the Contracts and deposited in the Collection Account. Distributions will be
made first, to the payment of the Servicer Payment, second, to the payment of
interest and principal on the Notes and third, to the payment of interest and
principal on the Certificates. If the net proceeds from the liquidation of the
Contracts (after payment of the Servicer Payment and payment of the principal
amount of and accrued interest on the Notes of a series) and any amounts on
deposit in the Certificate Distribution Account are not sufficient to pay the
principal amount of and accrued interest on the Certificates of a series in
full, the amount of principal returned to the Certificateholders will be
reduced and such Certificateholders will incur a loss, except to the extent of
payments to the Certificateholders from the Enhancement, if any. If the net
proceeds from the liquidation of the Contracts (after payment of the Servicer
Payment) and any amounts on deposit in the Note Distribution Account are not
sufficient to pay the principal amount of and accrued interest on the Notes in
full, holders of the Notes also will incur a loss, except to the extent of
payments to the Noteholders from the Enhancement, if any, applicable to the
Notes. See "The Purchase Agreements and the Trust Documents--Insolvency
Event."
5. Limited Liquidity. There is currently no market for the Securities of any
series. Although the Company expects that the underwriters of any particular
series will make a secondary market for such Securities, they will have no
obligation to do so. There can be no assurance that a secondary market
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will develop for the Securities of any series or, if it does develop, that it
will provide any of the Securityholders with liquidity of investment or that
it will continue for the term of any series of Securities. Unless otherwise
specified in the related Prospectus Supplement, the Securities will be issued
in book-entry, rather than physical, form and, as a result, the liquidity of
the Securities in the secondary market and the ability of the Certificate
Owners and Note Owners to pledge the Securities may be adversely affected.
6. The Subsequent Contracts and the Pre-Funding Account. If and to the
extent specified in the related Prospectus Supplement, the conveyance of
Subsequent Contracts by CITSF during the Funding Period will be subject to the
conditions described in the related Prospectus Supplement under "The Contract
Pool." If CITSF does not originate contracts satisfying such criteria during
the Funding Period, CITSF will have insufficient contracts to sell to the
related Trust on Subsequent Transfer Dates, thereby resulting in prepayments
of principal to Noteholders and Certificateholders as described below.
Unless otherwise specified in the related Prospectus Supplement, to the
extent that amounts on deposit in the Pre-Funding Account have not been fully
applied to the purchase of Subsequent Contracts by the related Trust by the
end of the Funding Period, Noteholders and Certificateholders will receive a
prepayment of principal in an amount equal to the Pre-Funded Percentage
allocable to the Noteholders and the Certificateholders, respectively, of the
Pre-Funded Amount remaining in the Pre-Funding Account at such time, which
prepayment will be made on the first Distribution Date following the end of
the Funding Period or, if the Funding Period ends on a Distribution Date, on
such date. Unless otherwise specified in the related Prospectus Supplement,
the "Pre-Funded Percentage" with respect to the Notes or the Certificates is
the percentage derived from the fraction, the numerator of which is the
initial principal balance of the Notes or the Original Certificate Balance, as
the case may be, and the denominator of which is the sum of the initial
principal balance of the Notes and the Original Certificate Balance. It is
anticipated that the principal amount of Subsequent Contracts purchased by the
Trust will not be exactly equal to the amount on deposit in the Pre-Funding
Account and that therefore there will be at least a nominal amount of
principal prepaid to the Noteholders and the Certificateholders at the end of
the Funding Period.
Each Subsequent Contract must satisfy the eligibility criteria specified in
the related Prospectus Supplement and the Trust Documents at the time of its
sale to the Trust. Unless otherwise specified in the related Prospectus
Supplement, the Company (the seller of any Subsequent Contracts to the related
Trust) will certify that all such eligibility criteria have been satisfied and
CITSF (the seller of any Subsequent Contracts to the Company) will certify
that all conditions precedent to the sale of the Subsequent Contracts to the
Trust have been satisfied. Unless otherwise specified in the related
Prospectus Supplement, it is a condition to the sale of any Subsequent
Contracts to the Trust that each Rating Agency, after receiving prior notice
of the proposed transfer of Subsequent Contracts to the Trust, shall not have
advised the Seller or the Trustees that the conveyance of such Subsequent
Contracts will result in a qualification, modification or withdrawal of its
then current rating of either the Notes or the Certificates. Following the
transfer of Subsequent Contracts to the Contract Pool the aggregate
characteristics of the Contracts then held in the Contract Pool may vary from
those of the Initial Contracts included therein.
The ability of a Trust to invest in Subsequent Contracts is entirely
dependent upon whether CITSF is able to originate recreational vehicle
contracts that meet the requirements for transfer on a Subsequent Transfer
Date under the Trust Documents. The ability of CITSF to originate such
contracts may be affected by a variety of economic and social factors.
Moreover, such factors may affect the ability of the Obligors thereunder to
perform their obligations thereunder, which may cause contracts originated by
CITSF or its affiliates to fail to meet the requirements for transfer under
the Trust Documents. Economic factors include interest rates, unemployment
levels, the rate of inflation and consumer perception of economic conditions
generally. However, CITSF is unable to determine and has no basis to predict
whether or to what extent economic or social factors will affect CITSF's
ability to originate Subsequent Contracts.
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7. Prepayment from the Pre-Funding Account. If and to the extent specified
in the related Prospectus Supplement, if the Pre-Funded Amount has not been
fully applied by the related Trust to purchase Subsequent Contracts by the end
of the Funding Period, then the Pre-Funded Amount will be payable as principal
to Noteholders and Certificateholders in accordance with the Pre-Funded
Percentage on the first Distribution Date following the end of the Funding
Period, or, if the end of the Funding Period is on a Distribution Date, then
on such date.
In the event that amounts remain on deposit in the Pre-Funding Account at
the end of the Funding Period and are applied to the payment of principal to
the Noteholders and Certificateholders, such partial retirement of the Notes
and Certificates may shorten the average life of the Securities and may cause
the Noteholders and Certificateholders to experience a lower yield on the
Securities. In addition, any reinvestment risk resulting from such partial
retirement will be borne by the holders of such Securities.
8. Limited Assets. Unless otherwise specified in the related Prospectus
Supplement, each Trust will covenant to sell the Contracts (a) if directed to
do so by the related Indenture Trustee in accordance with the related
Indenture following an acceleration of a series of Notes upon an Event of
Default, (b) upon the occurrence of an Insolvency Event with respect to any
Affiliated Purchaser, and (c) in other circumstances specified in the related
Prospectus Supplement. However, there is no assurance that the market value of
the related Contracts will at any time be equal to or greater than the
aggregate outstanding principal balance of such Notes. Therefore, upon an
Event of Default with respect to such Notes or an Insolvency Event, there can
be no assurance that sufficient funds will be available to repay Noteholders
in full. In addition, the amount of principal required to be distributed to
Noteholders under the Indenture is generally limited to amounts available to
be deposited in the Note Distribution Account. Therefore, the failure to pay
principal on the Notes may not result in the occurrence of an Event of Default
until the Note Final Scheduled Distribution Date. Furthermore, upon a sale by
the Trust of the Contracts, the net proceeds from such sale remaining after
payment of all amounts due to the Servicer and the Noteholders may not be
sufficient to pay the Certificate Balance and interest accrued thereon.
If and to the extent specified in the related Prospectus Supplement, one or
more Enhancements will be available to pay principal and/or interest on the
Notes and/or the Certificates on any Distribution Date. However, unless
otherwise specified in the related Prospectus Supplement, the amount of any
Enhancement will be limited and will be reduced as the Pool Balance is
reduced. If the amounts available under the applicable Enhancement are
exhausted, a Trust will depend solely on payments on or with respect to the
Contracts, Monthly Advances and Non-Reimbursable Payments (as hereinafter
defined) to make distributions to the Securityholders.
9. Ratings of the Securities. It is a condition to the issuance of a series
of Securities offered pursuant to this Prospectus that the Securities be rated
in one of the four highest rating categories by at least one Rating Agency.
The ratings do not address the likelihood that the Securities will be retired
following the sale of the Contracts by the Trustee as described under "The
Purchase Agreement and the Trust Documents--Termination." There can be no
assurance that any rating will remain in effect for any given period of time
or that a rating will not be lowered or withdrawn by the Rating Agency if, in
its judgment, circumstances so warrant. In the event that the rating initially
assigned to the Securities is subsequently lowered or withdrawn for any
reason, no person or entity will be obligated to provide any additional credit
enhancement with respect to such Securities. There can be no assurance that
any other rating agency will rate the Notes or the Certificates, or if one
does, what rating would be assigned by any such other rating agency. A
security rating is not a recommendation to buy, sell or hold securities.
10. Book Entry Registration. Unless otherwise specified in the related
Prospectus Supplement, the Securities will be offered for purchase in book-
entry form only and will be initially registered in the
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name of the nominee of The Depository Trust Company ("DTC" and, together with
any successor depository selected by the Company, the "Depository"). No person
acquiring an interest in the Notes through the facilities of DTC (a "Note
Owner") will be entitled to receive a Note representing such person's interest
in the Notes, except as set forth under "Certain Information Regarding the
Securities--Definitive Securities," and such persons will hold their interests
in the Notes through DTC in the United States or Cedel Bank, societe anonyme
("Cedel") or Euroclear in Europe. No person acquiring an interest in the
Certificates through the facilities of DTC (a "Certificate Owner") will be
entitled to receive a Definitive Certificate representing such person's
interest in the Certificates, except as set forth under "Certain Information
Regarding The Securities--Definitive Securities," and such persons will hold
their interests in the Certificates through the DTC. Unless and until
Definitive Securities are issued under the limited circumstances described
herein and in the related Prospectus Supplement, all references to actions by
Securityholders shall refer to actions taken by DTC upon instructions from its
Participants (as defined herein), and all references herein to distributions,
notices, reports and statements to Securityholders shall refer to
distributions, notices, reports and statements to DTC in accordance with DTC
procedures. See "Certain Information Regarding The Securities--Definitive
Securities."
11. Risk of Commingling. At any time that the requirements as specified
under "The Purchase Agreements and the Trust Documents--Collections," are met,
the Servicer may deposit payments on or with respect to the Contracts and
proceeds of Contracts into the Collection Account monthly on the Business Day
immediately preceding the next Distribution Date (the "Deposit Date"). Pending
such a monthly deposit into the Collection Account, collections on the
Contracts may be invested by the Servicer at its own risk and for its own
benefit and will not be segregated from its own funds. If the Servicer were
unable to remit such funds or if the Servicer became insolvent, the holders of
the Securities could incur a loss with respect to collections not deposited in
the Collection Account.
THE TRUSTS
With respect to each series of Securities, the Seller will establish a Trust
pursuant to the related Trust Documents. Prior to the sale and assignment of
the related Contracts pursuant to the related Trust Documents, the Trust will
have no assets or obligations. After its formation, the Trust will not engage
in any activity other than (i) acquiring, holding and managing the Contracts
and the other assets of the Trust and proceeds therefrom, (ii) issuing the
Certificates and the Notes, if any, (iii) making payments on the Certificates
and the Notes, if any, (iv) entering into agreements and transactions in
connection with the Enhancement, if any, for the related series of Securities,
and (v) engaging in other activities that are necessary, suitable or
convenient to accomplish the foregoing or are incidental thereto or connected
therewith.
Each Certificate will represent a fractional undivided interest in, and each
Note, if any, will represent an obligation of, the related Trust.
Each Trust will initially be capitalized with equity equal to the "Original
Certificate Balance" specified in the related Prospectus Supplement. Unless
otherwise specified in the related Prospectus Supplement, Certificates with an
aggregate original principal balance of at least the amount specified in the
related Prospectus Supplement will be owned by the Affiliated Purchaser
specified in the related Prospectus Supplement (the "Affiliated Purchaser")
and Certificates representing the remainder of the Original Certificate
Balance will be sold to third party investors that are expected to be
unaffiliated with the Affiliated Purchaser, the Seller, the Servicer or their
affiliates. The equity in a Trust, together with the proceeds of the initial
sale of the Notes, if any, will be used by the Trust to purchase the Initial
Contracts from the Seller pursuant to the Trust Documents and, if specified in
the related Prospectus
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Supplement, to fund the deposit of the Pre-Funded Amount and the deposit to
the Capitalized Interest Account and for such other purposes as are specified
in the related Prospectus Supplement.
The Servicer will service the Contracts held by each Trust and will receive
fees for such services. See "The Purchase Agreement and the Trust Documents--
Servicing Compensation." Unless otherwise specified in the related Prospectus
Supplement, CITSF will be appointed as custodian on behalf of each Trust, and
will hold the original installment sales contract (or promissory note) as well
as copies of documents and instruments relating to each Contract and
evidencing the security interest in the Financed Vehicle securing each
Contract (the "Contract Files").
THE TRUSTEE
The Trustee for each Trust will be specified in the related Prospectus
Supplement. The Trustee will perform limited administrative functions,
including making distributions from the Certificate Distribution Account. The
Trustee's liability in connection with the issuance and sale of the Securities
is limited solely to the express obligations of the Trustee as set forth in
the Trust Documents. The Trustee may appoint a co-trustee to act as co-trustee
pursuant to a co-trustee agreement with the Trustee.
A Trustee may resign at any time, in which event the Servicer will be
obligated to appoint a successor trustee. The Servicer may also remove the
Trustee if the Trustee ceases to be eligible to continue as Trustee under the
related Trust Documents or if the Trustee becomes insolvent. In such
circumstances, the Servicer will be obligated to appoint a successor trustee.
Any resignation or removal of a Trustee and appointment of a successor trustee
will be subject to any conditions or approvals specified in the related
Prospectus Supplement and will not become effective until acceptance of the
appointment by the successor trustee.
Unless otherwise specified in the related Prospectus Supplement, the Trust
Documents will provide that the Servicer will pay the Trustees' fees. The
Trust Documents will further provide that the Trustees will be entitled to
indemnification by the Servicer for, and will be held harmless against, any
loss, liability or expense incurred by the Trustees not resulting from its own
willful misfeasance, bad faith or negligence (other than by reason of a breach
of any of its representations or warranties set forth in the Trust Documents).
THE TRUST PROPERTY
Each Certificate will represent a fractional undivided interest in the
related Trust. Each series of the Notes, if any, will be an obligation of the
related Trust and will be secured by assets of the Trust (other than the
Certificate Distribution Account and other accounts or property specified in
the related Prospectus Supplement). The property of each Trust will include,
among other things, (i) a pool (the "Contract Pool") of retail installment
sale contracts secured by new and used recreational vehicles between Dealers
and Obligors, consisting of the Initial Contracts and the Subsequent Contracts
(if any); (ii) all monies received under the Initial Contracts on or after the
Initial Cut-off Date and the Subsequent Contracts (if any) on or after the
related Subsequent Cut-off Date; (iii) such amounts as from time to time may
be held in one or more accounts established and maintained by the Servicer
pursuant to the Trust Documents (including all investments in such accounts
and all income from the funds therein and all proceeds thereof, other than
investment earnings on any account so specified in the related Prospectus
Supplement) as described herein; (iv) if specified in the related Prospectus
Supplement, specified credit or cash flow enhancement and all monies on
deposit in the Pre-Funding Account, the Capitalized Interest Account and any
other account specified in the related Prospectus Supplement (including,
unless otherwise specified in the related Prospectus Supplement, all
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investments in such accounts and all income from the funds therein and all
proceeds thereof, other than investment earnings on any account so specified
in the related Prospectus Supplement);(v) assignments of the security
interests in the Financed Vehicles and any accessions thereto; (vi) the right
to proceeds from physical damage, credit life and disability insurance
policies, if any, covering individual Financed Vehicles or Obligors, as the
case may be; (vii) the rights of the Trust under the Trust Documents; and
(viii) any and all proceeds of the foregoing.
Pursuant to agreements between CITSF and many of the Dealers, each Dealer is
obligated after origination to repurchase from CITSF recreational vehicle
contracts which do not meet certain representations and warranties made by
such Dealer. Such representations and warranties relate primarily to the
origination of the contracts and the perfection of the security interests in
the related recreational vehicles, and do not typically relate to the
creditworthiness of the related Obligors or the collectability of such
Contracts. Unless otherwise specified in the related Prospectus Supplement,
any Dealer agreement with respect to the Contracts will not be assigned by
CITSF to the Company or by the Company to the Trust. However, unless otherwise
specified in the related Prospectus Supplement, the Trust Documents will
authorize CITSF to transfer a Contract to a Dealer upon a repurchase by a
Dealer pursuant to a Dealer agreement and will require that any recovery of
amounts with respect to a Contract by CITSF pursuant to Dealer repurchase
obligations be deposited in the Collection Account for the related Trust in
satisfaction of CITSF's repurchase obligations under the Trust Documents to
the extent, if any, that CITSF has not already satisfied that obligation. The
assignments by the Dealers of Contracts to CITSF do not generally provide for
recourse to the Dealer for unpaid amounts in the event of a default by an
Obligor, other than in connection with the breach of the Dealer's
representations and warranties.
THE CONTRACT POOL
Each pool of Contracts with respect to a Trust (a "Contract Pool") will
consist of retail installment sales contracts (collectively, the "Contracts")
to finance the purchase of new and used recreational vehicles. The Contracts
will be originated or purchased by CITSF or its affiliates (including CITCF-
NY) in the ordinary course of business. Except as otherwise specified in the
related Prospectus Supplement, the Contracts will (i) be fully amortizing,
(ii) bear interest at a fixed or variable rate (the "Contract Rate"), and
(iii) be simple interest Contracts.
For simple interest Contracts, the principal balance of the Contract is
amortized over a series of equal monthly payments. Each monthly interest
payment is calculated by multiplying the outstanding principal balance of the
loan by the stated interest rate. Such product is then multiplied by a
fraction, the numerator of which is the number of days elapsed since the
preceding payment of interest was made and the denominator of which is either
365 or 360, depending on applicable state law. Payments received on a simple
interest Contract are applied first to interest accrued to the date payment is
received and second to reduce the unpaid principal balance of the Contract.
Accordingly, if an Obligor makes a payment on the Contract less than 30 days
after the previous payment, the interest collected for the period since the
preceding payment was made will be less than 30 days' interest, and the amount
of principal repaid in such month will be correspondingly greater. Conversely,
if an Obligor makes a payment on the Contract more than 30 days after the
previous payment, the interest collected for the period since the preceding
payment was made will be greater than 30 days' interest, and the amount of
principal repaid in the month will be correspondingly reduced. As a result,
based on the payment characteristics of a particular Obligor, the principal
due on the final due date of a simple interest Contract may vary from the
principal payment that would be made if payments for such Contract were always
made on their due dates.
If an Obligor pays more than one installment on a simple interest Contract
at a time, the regular installment will be treated as described above.
However, the entire amount of the additional installment
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or installments will be treated as a principal payment and applied to reduce
the principal balance of the related Contract. The Obligor will not be
required to make any payments on such a Contract (a "Paid-Ahead Contract"),
for the number of due dates (the "Paid-Ahead Period") for which it has paid in
advance the full installment. However, during the Paid-Ahead Period interest
will continue to accrue on the principal balance of the Contract, as reduced
by the application of the early installment. As a result, when the Paid-Ahead
Period ends and the Obligor pays the next required installment, such payment
may be insufficient to cover the interest that has accrued since the last
payment by the Obligor. Notwithstanding such insufficiency, the Contract would
be considered to be current. This situation would continue until the monthly
installments are once again sufficient to cover all accrued interest and to
reduce the principal balance of the Contract. Depending on the principal
balance and interest rate of the related Contract and on the number of
installments paid in advance of their due dates, there may be extended periods
of time during which simple interest Contracts that are not amortizing are
considered current.
Unless otherwise specified in the related Prospectus Supplement, each
Contract provides that an Obligor may prepay its Contract, in whole or in
part, at any time, without a prepayment premium.
The Financed Vehicles will consist of motor homes, travel trailers and other
types of recreational vehicles. Motor homes are recreational camping and
travel vehicles built on or as an integral part of a self-propelled motor
vehicle chassis. A motor home may provide kitchen, sleeping and bathroom
facilities, is equipped with the ability to carry fresh water and sewage and
may be one of the following types:
Motor Home: The living unit has been constructed on a bare, specially
designed motor vehicle chassis.
Van Camper: A panel-type truck to which the manufacturer typically adds
any two of the following conveniences: sleeping, kitchen and toilet
facilities. The manufacturer also typically adds electrical hookup, water
storage, water hookup and top extension to provide more headroom.
Mini Motor Home: This unit is built on an automotive manufactured van
frame with an attached cab section typically having a gross vehicle weight
rating of 6,500 pounds or more, with an overall height of less than eight
feet. The manufacturer completes the body section containing the living
area and attaches it to the cab section.
Compact Motor Home: This unit is built on an automotive manufactured cab
and chassis typically having a gross vehicle weight rating of less than
6,500 pounds. It may provide any or all of the features of the larger
units.
Travel trailers are trailers designed to be towed by a motorized vehicle
(e.g., automobile, van or pickup truck) and are of a size and weight that does
not require a special highway movement permit. A travel trailer is designed to
provide temporary living quarters for recreational, camping or travel use,
does not require permanent on-site hookup and may be one of the following
types:
Conventional Travel Trailer: This unit ranges typically from 12 feet to
35 feet in length, and is towed by means of a bumper or frame hitch
attached to the towing vehicle.
Park Trailer: These units are designed for seasonal or temporary living.
When set up, the unit may be connected to utilities necessary for operation
of installed fixtures and appliances. The unit is built on a single chassis
mounted on wheels. Park trailers are no more than 40 feet in overall body
length and no more than 12 feet in overall body width when in the traveling
mode. The unit is designed for set-up by persons without special skills
using only hand tools.
Fifth-Wheel Travel Trailer: This unit can be equipped in the same way as
the conventional travel trailer, but is constructed with a raised forward
section that allows a bi-level floor plan. This style is designed to be
towed by a vehicle equipped with a device known as a fifth-wheel hitch.
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Folding Camping Trailer: This is a portable unit mounted on wheels and
constructed with collapsible partial sidewalls which fold for towing by
another vehicle and unfold at the campsite to provide temporary living
quarters for recreational, camping or travel use.
Slide-In Camper: This is a portable unit designed to be loaded onto and
unloaded from the bed of a pickup truck, constructed to provide temporary
living quarters for recreational travel or camping use.
Certain detailed information regarding the Contract Pool as of the Initial
Cut-off Date or such other date specified therein for each Trust will be set
forth in the related Prospectus Supplement.
YIELD AND PREPAYMENT CONSIDERATIONS
Unless otherwise specified in the related Prospectus Supplement, the
Contracts will be simple interest retail installment sales contracts and
promissory notes. Payments on simple interest obligations are applied first to
interest accrued through the payment date, and the remainder is applied to
reduce the unpaid principal balance. Accordingly, if an Obligor pays an
installment before its due date, the portion of the payment allocable to
interest for the period will be less than if the payment had been made on the
due date, the portion of the payment applied to reduce the principal balance
will be correspondingly greater, and the principal balance will be amortized
more rapidly than scheduled. Conversely, if an Obligor pays an installment
after its due date, the portion of payment allocable to interest will be
greater than if the payment had been made on the due date, the portion of the
payment applied to reduce the principal balance will be correspondingly less,
and the principal balance will be amortized more slowly than scheduled, in
which case a larger portion of the principal balance may be due on the final
scheduled payment date.
Unless otherwise specified in the related Prospectus Supplement, each
Contract provides that it is prepayable, without premium, by the Obligor at
any time. Prepayments (or, for this purpose, equivalent payments to a Trust)
also may result from liquidations due to default, receipt of proceeds from
insurance policies, repurchases by CITSF due to breach of a representation or
warranty or breach of a covenant in the Trust Documents, or as a result of
CITSF exercising its option to purchase the Contract Pool. See "The Purchase
Agreements and the Trust Documents." The rate of prepayments on the Contracts
may be influenced by a variety of economic, social and other factors. No
assurance can be given that prepayments on the Contracts will conform to any
estimated or actual historical experience, and no prediction can be made as to
the actual prepayment rates which will be experienced on the Contracts.
Certificateholders and Noteholders will bear all reinvestment risk resulting
from the timing of payments of principal on the Certificates or the Notes, as
the case may be.
POOL FACTORS
Unless otherwise specified in the related Prospectus Supplement, the
"Certificate Pool Factor" for each class of Certificates is a seven-digit
decimal which the Servicer will compute each month indicating the remaining
Certificate Balance as of the Distribution Date, as a fraction of the Original
Certificate Balance. The Certificate Pool Factor will be 1.0000000 as of the
Initial Cut-off Date, and thereafter will decline to reflect reductions in the
outstanding principal balance of the Certificates. A Certificateholder's
portion of the aggregate outstanding Certificate Balance is the product of (i)
the original denomination of the Certificateholder's Certificate and (ii) the
Certificate Pool Factor.
Unless otherwise specified in the related Prospectus Supplement, the "Note
Pool Factor" for each class of Notes, if any, is a seven-digit decimal which
the Servicer will compute each month indicating the remaining outstanding
principal balance of the Notes as of the Distribution Date, as a fraction of
the initial outstanding principal balance of the Notes. The Note Pool Factor
will be 1.0000000 as of the
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Initial Cut-off Date, and thereafter will decline to reflect reductions in the
outstanding principal balance of the Notes. A Noteholder's portion of the
aggregate outstanding principal balance of the Notes is the product of (i) the
original denomination of the Noteholder's Note, and (ii) the Note Pool Factor.
With respect to each Trust and pursuant to the related Trust Documents,
unless otherwise specified in the related Prospectus Supplement, on each
Distribution Date, the Certificateholders and Noteholders, if any, will
receive monthly reports concerning the payments received on the Contracts, the
Pool Balance, the Certificate Pool Factor, the Note Pool Factor, if any, and
various other items of information. Securityholders of record (which in most
cases will be Cede & Co.) during any calendar year will be furnished
information for tax reporting purposes not later than the latest date
permitted by law. Certificate Owners and Note Owners, if any, may receive such
reports, upon written request, together with a certification that they are
Certificate Owners or Note Owners, as the case may be, and payment of any
expenses associated with the distribution of such reports, from the Trustee
and the Indenture Trustee (if any) at the addresses specified in the related
Prospectus Supplement. See "Certain Information Regarding the Securities--
Statements to Securityholders."
USE OF PROCEEDS
Unless otherwise specified in the related Prospectus Supplement, the Company
will sell the Initial Contracts to a Trust concurrently with the sale of the
Securities and the net proceeds from the sale of the Securities will be
applied by such Trust to the purchase of the Initial Contracts, to the payment
of certain expenses connected with pooling the Contracts and issuing the
Securities, to the deposit of the Pre-Funded Amount in the Pre-Funding
Account, if any, to the deposit of the initial amount into the Capitalized
Interest Account, if any, and to the deposit of the initial amount, if any,
into a Reserve Fund (as defined herein), if any. Such net proceeds less the
payment of such expenses, the Pre-Funded Amount, if any, and the initial
deposit into the Capitalized Interest Account, if any, and the Reserve Fund,
if any, represent the purchase price paid by a Trust to the Company for the
sale of the Initial Contracts to such Trust. Such amount will be determined as
a result of the pricing of the Securities, through the offering described in
the related Prospectus Supplement. The net proceeds to be received by the
Company from the sale of the Initial Contracts to a Trust will be paid by the
Company to CITSF as the purchase price for the Contracts and will be added to
CITSF's general funds and will be available for general corporate purposes,
including the purchase of new recreational vehicle installment sales contracts
and the payment of the purchase price to CITCF-NY for any Contracts acquired
by CITSF from CITCF-NY.
THE CIT GROUP HOLDINGS, INC.
CIT is a successor to a company founded in St. Louis, Missouri on February
11, 1908. It has its principal executive offices at 1211 Avenue of the
Americas, New York, New York 10036, and its telephone number is (212) 536-
1950. CIT, operating directly or through its subsidiaries primarily in the
United States, engages in financial services activities through a nationwide
distribution network. CIT provides financing primarily on a secured basis to
commercial borrowers, ranging from middle-market to larger companies and to a
lesser extent to consumers. While these secured lending activities reduce the
risk of losses from extending credit, CIT's results of operations can also be
affected by other factors, including general economic conditions, competitive
conditions, the level of volatility of interest rates, concentrations of
credit risk and government regulation and supervision. CIT does not finance
the development or construction of commercial real estate. CIT has eight
strategic business units which offer commercial and consumer financing, and
factoring products and services to clients. The Corporation had 2,738
employees at December 31, 1995, up from 2,689 employees at December 31, 1994.
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The Dai-Ichi Kangyo Bank, Limited ("DKB") owns eighty percent (80%) of the
issued and outstanding shares of common stock of CIT. DKB purchased a sixty
percent (60%) common stock interest in CIT from Manufacturers Hanover
Corporation ("MHC") at year-end 1989 and acquired an additional twenty percent
(20%) common stock interest in CIT on December 15, 1995 from CBC Holding
(Delaware) Inc. (formerly known as MHC Holdings (Delaware) Inc.) ("CBC
Holding"). DKB has a five-year option, expiring December 15, 2000, to purchase
the remaining twenty percent (20%) common stock interest from CBC Holding.
CBC Holding became a direct, wholly owned subsidiary of Chemical Banking
Corporation ("CBC") after the merger between MHC and CBC on December 31, 1991.
On March 31, 1996, CBC was merged into The Chase Manhattan Corporation
("CMC"), and CMC became the sole stockholder of CBC Holding.
In accordance with a stockholders agreement among DKB, CMC, as direct
successor to CBC and indirect successor to MHC, and CIT, dated as of December
29, 1989, as amended by an Amendment to Stockholders' Agreement, dated
December 15, 1995 (the "Stockholders Agreement"), one nominee of the Board of
Directors is designated by CMC. The Stockholders Agreement also contains
restrictions with respect to the transfer of the stock of CIT to third
parties.
CIT is subject to the informational requirements of the Exchange Act and, in
accordance therewith, files reports and other information with the Commission.
Such reports and other information can be inspected and copied at the offices
of the Commission and at the offices of the New York Stock Exchange, Inc. See
"Additional Information."
THE CIT GROUP SECURITIZATION CORPORATION II, SELLER
The CIT Group Securitization Corporation II (the "Company") was incorporated
in the State of Delaware on June 24, 1994, and is a wholly-owned, limited
purpose finance subsidiary of CIT. The Company maintains its principal office
at 650 CIT Drive, Livingston, New Jersey 07039. Its telephone number is (201)
535-3514.
As described herein, the obligations of the Company with respect to the
Securities are limited. The Company will make no representations or warranties
with respect to the Contracts and will have no ongoing servicing obligations
or responsibilities with respect to the Contract Pool. CITSF is an affiliate
of the Company. The Company will acquire the Contract Pool in a privately
negotiated transaction from CITSF.
Unless otherwise specified in the related Prospectus Supplement, neither CIT
nor any of its affiliates, including the Company and CITSF, will be obligated
with respect to the Securities. Accordingly, the Company has determined that
financial statements of CITSF and the Company are not material to the offering
of the Securities.
THE CIT GROUP/SALES FINANCING, INC., SERVICER
GENERAL
The CIT Group/Sales Financing, Inc., a Delaware corporation ("CITSF"), is a
wholly-owned subsidiary of CIT. It has its principal executive office at 650
CIT Drive, Livingston, New Jersey 07039, and its telephone number is (201)
740-5000.
CITSF originates, purchases, sells and services conditional sales contracts
for recreational vehicles, manufactured housing, marine products and other
consumer goods throughout the United
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States. CITSF has been a lender to the recreational vehicle industry for more
than 30 years. CITSF has Regional Business Centers in five cities and a
centralized asset service facility (the "Asset Service Center") in Oklahoma
City, Oklahoma. Working through Dealers and manufacturers, CITSF offers retail
installment credit. In addition to purchasing recreational vehicle contracts
from Dealers on an individual basis, CITSF makes bulk purchases of
recreational vehicle contracts. These bulk purchases may be from the
portfolios of other lending institutions or finance companies, the portfolios
of governmental agencies or instrumentalities or the portfolios of other
entities that purchase and hold recreational vehicle contracts.
The Asset Service Center of CITSF services consumer credit transactions in
50 states and the District of Columbia. It provides full servicing for
recreational vehicle, home equity, marine products and manufactured housing
retail installment contracts. The Asset Service Center is supplemented by
outside collectors and field remarketers located throughout the United States.
CITSF's general policies with regard to the origination of recreational
vehicle installment sale contracts are described under "--Contract
Origination" and "--CITSF's Underwriting Guidelines." See "--Servicing" for a
description of certain of CITSF's servicing policies.
CONTRACT ORIGINATION
Although CITSF does purchase recreational vehicle installment sale contracts
in bulk from other lenders, unless otherwise specified in the related
Prospectus Supplement, all of the Contracts in the Contract Pool have been
originated by CITSF or CITCF-NY through the purchase of such Contracts from
Dealers.
Through its Regional Business Centers, CITSF arranges to purchase
recreational vehicle contracts from recreational vehicle Dealers located
throughout the United States. Regional Business Center personnel contact the
Dealers located in their territories and explain CITSF's available financing
plans, terms, prevailing rates and credit and financing policies. If the
Dealer wishes to use CITSF's available customer financing, the Dealer must
make an application for Dealer approval. Upon satisfactory results of CITSF's
investigation of the Dealer's creditworthiness and general business
reputation, CITSF and the Dealer execute a Dealer agreement. CITSF also
originates recreational vehicle installment loan agreements directly. In
addition, CITSF purchases portfolios of recreational vehicle contracts from
other lending institutions or finance companies.
Contracts that CITSF purchases from Dealers or originates itself (as opposed
to portfolios of contracts purchased from other lenders) are purchased on an
individually approved basis in accordance with CITSF's underwriting
guidelines.
If CITSF believes that an obligor on a recreational vehicle contract
(including one of the Contracts) is likely to refinance the contract as a
result of interest rate changes or other reasons, CITSF may in its discretion
attempt to retain such obligor as a customer by soliciting the obligor to
refinance the contract with CITSF.
CITSF'S UNDERWRITING GUIDELINES
All recreational vehicle contracts that are purchased by CITSF from Dealers
are written on forms provided or approved by CITSF and are purchased on an
individually approved basis. With respect to each retail recreational vehicle
contract to be purchased from a Dealer, CITSF's general practice is to have
the Dealer submit the customer's credit application, manufacturer's invoice
(if the contract is for a new vehicle) and certain other information relating
to the contract to the applicable Regional Business Center. Personnel at the
Regional Business Center prepare an analysis of the creditworthiness of the
customer and of other aspects of the proposed transaction.
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All credit applications are entered into an application processing system.
CITSF's underwriting guidelines require, and have required, a credit officer
at a Regional Business Center with the appropriate level of credit authority
to examine each applicant's credit history, residence history, employment
history and debt-to-income payment ratio. Although, with respect to these
criteria, CITSF has, and has had, certain minimum requirements, as described
below, CITSF's management does not believe that these minimum requirements are
themselves generally sufficient to warrant credit approval of an applicant.
Thus, there were and are no requirements on the basis of which, if they are
met, credit is routinely approved without review by a credit officer. Based on
credit score and other risk factors, each applicant is either approved,
declined or, if necessary, referred to a credit officer with a higher credit
authority.
The retail customer generally has had a stable residence, employment and
credit history, a minimum of two years in his or her present job, a debt ratio
(the ratio of total installment debt and housing expenses to gross monthly
income) of 40% or less, a down payment of at least 10% and an overall
favorable credit profile. Approval of retail customers that do not meet the
above-described retail customer profile is considered by the appropriate level
credit officer, on a case by case basis. Such approval, if granted, is based
on the applicant's length and likelihood of continued employment, ability to
pay, and a review of the applicants' paying habits. No guarantors, endorsers
or co-signers are considered in determining whether to accept or reject an
application. The maximum amount CITSF will advance to such targeted customers
is (i) in the case of a new financed vehicle, 100% of the unpaid cash balance,
not to exceed 110% of the manufacturer's invoice price plus taxes, fees and
insurance, and (ii) in the case of a used financed vehicle, 100% of the unpaid
cash balance, not to exceed 110% of the wholesale value as determined by the
Kelly blue book. Funding of a contract is authorized after verification of the
conditions of approval of the application and satisfactory delivery of the
related recreational vehicle.
In August 1994, CITSF's credit criteria were changed to permit greater
reliance on credit scores and overall evaluation instead of using specific
disqualifying criteria (e.g., a minimum of two years of employment). The
interest rate charged on each recreational vehicle contract originated since
August 1994 reflects CITSF's evaluation of the relative risk associated with
an individual's application.
The credit review and approval practices of each Regional Business Center
are subject to internal reviews and internal audits that, through sampling,
examine the nature of the verification of credit histories, residence
histories, employment histories, debt ratios of the applicants and evaluate
the credit risks associated with the contracts purchased through such regional
office by rating the obligors on such contracts according to their credit
histories, employment histories, debt ratios and housing ratios.
SERVICING
Through its Asset Service Center, CITSF services recreational vehicle,
manufactured housing, home equity, and other consumer loans. CITSF services
all of the recreational vehicle contracts it originates or purchases, whether
on an individual basis or in bulk. CITSF is actively seeking arrangements
pursuant to which it will service recreational vehicle contracts held by other
entities, including contracts which were not purchased by CITSF or sold to
such other entities by CITSF. Generally, such servicing responsibilities are,
and would be, also carried out through CITSF's Asset Service Center. Servicing
responsibilities include collecting principal and interest payments, taxes,
insurance premiums, where applicable, and other payments from obligors and,
where such contracts have been sold, remitting principal and interest payments
to the holders thereof, to the extent such holders are entitled thereto.
Collection procedures include repossession and resale of recreational vehicles
securing defaulted contracts and, if deemed advisable by CITSF, entering into
workout arrangements with obligors under certain defaulted contracts. Although
decisions as to whether to repossess any recreational vehicle are made on an
individual basis, CITSF's general policy is to
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institute repossession procedures promptly after Asset Service Center
personnel determine that it is unlikely that a defaulted contract will be
brought current, and thereafter to diligently pursue the resale of such
recreational vehicles if the market is favorable. The Asset Service Center has
developed a nationwide auction network to facilitate resale efforts on such
repossessions.
DELINQUENCY AND LOAN LOSS EXPERIENCE
Each Prospectus Supplement will include information on CITSF's loss and
delinquency experience with respect to its servicing portfolio of recreational
vehicle contracts. However, there can be no assurance that such experience
will be indicative of the performance of the Contracts included in a
particular Contract Pool. Unless otherwise specified in the related Prospectus
Supplement, the tables setting forth the delinquency experience for the
portfolio of recreational vehicle contracts originated and serviced by CITSF
will exclude contracts acquired by CITSF through portfolio purchases and
contracts in repossession.
THE CERTIFICATES
With respect to each Trust, one or more classes of Certificates of a given
series will be issued pursuant to the Trust Documents (as defined herein) to
be entered into among the Seller, the Servicer, and the Trustee, forms of
which have been filed as exhibits to the Registration Statement of which this
Prospectus forms a part.
GENERAL
A series of Securities may include one or more classes of Asset-Backed
Certificates (the "Certificates") issued pursuant to the Trust Documents.
Payments in respect of the Certificates will be subordinated to payments on
the Notes, if any, to the extent described in the related Prospectus
Supplement. The following summary describes certain terms of the Certificates
and the Trust Documents. The summary does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, all of the
provisions of the Certificates and the Trust Documents, and the following
summary will be supplemented in whole or in part by the related Prospectus
Supplement. Where this summary refers to particular provisions or terms used
in the Trust Documents, the actual provisions (including definitions of terms)
are incorporated by reference as part of such summary.
Unless otherwise specified in the related Prospectus Supplement, the
Certificates will be offered for purchase in minimum denominations of $20,000
and integral multiples of $1,000 in excess thereof and will be available in
book-entry form only; provided, however, that one Certificate of each series
may be issued in a denomination other than an integral multiple of $1,000 such
that the applicable Affiliated Purchaser specified in the related Prospectus
Supplement, if any, may be issued at least the portion of the Original
Certificate Balance specified in the related Prospectus Supplement. Unless
otherwise specified in the related Prospectus Supplement, each class of the
Certificates will initially be represented by a single Certificate registered
in the name of the nominee of DTC, except as provided below. Unless otherwise
specified in the related Prospectus Supplement, DTC's nominee will be Cede &
Co. ("Cede"). No person acquiring an interest in the Certificates through the
facilities of DTC (a "Certificate Owner") will be entitled to receive a
Certificate representing such person's interest in the Certificates, except as
set forth under "Certain Information Regarding The Securities--Definitive
Securities." Unless and until Definitive Certificates are issued under the
limited circumstances described in the related Prospectus Supplement and
herein, all references to actions by Certificateholders shall refer to actions
taken by DTC upon instructions from its Participants, and all references
herein to distributions, notices, reports and statements to Certificateholders
shall refer to distributions, notices, reports and statements to DTC in
accordance with DTC procedures. See "Certain Information Regarding The
Securities--Definitive Securities."
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DISTRIBUTION OF PRINCIPAL AND INTEREST ON THE CERTIFICATES
The Certificates will bear interest at the rate specified in the related
Prospectus Supplement (the "Pass-Through Rate"). The timing and priority of
distributions, seniority, allocations of loss, Pass-Through Rate and amount of
or method of determining distributions with respect to principal and interest
(or, where applicable, with respect to principal only or interest only) on the
Certificates of any series will be described in the related Prospectus
Supplement. Distributions of interest on the Certificates will be made on the
dates specified in the related Prospectus Supplement (each, a "Distribution
Date") and, unless otherwise specified in the related Prospectus Supplement,
will be made prior to distributions with respect to principal. A series may
include one or more classes of Stripped Certificates entitled to (i)
distributions in respect of principal with disproportionate, nominal or no
interest distribution, or (ii) interest distributions, with disproportionate,
nominal or no distributions in respect of principal. Each class of
Certificates may have a different Pass-Through Rate, which may be a fixed,
variable or adjustable Pass-Through Rate (and which may be zero for certain
classes of Stripped Certificates), or any combination of the foregoing. The
related Prospectus Supplement will specify the Pass-Through Rate for each
class of Certificates, or the initial Pass-Through Rate and the method for
determining the Pass-Through Rate. Unless otherwise specified in the related
Prospectus Supplement, interest on the Certificates will be calculated on the
basis of a 360-day year consisting of twelve 30-day months. Unless otherwise
specified in the related Prospectus Supplement, distributions in respect of
the Certificates will be subordinate to payments in respect of the Notes, if
any, as more fully described in the related Prospectus Supplement.
Distributions in respect of principal of any class of Certificates will be
made on a pro rata basis among all of the Certificateholders of such class.
In the case of a series of Certificates which includes two or more classes
of Certificates, the timing, sequential order, priority of payment or amount
of distributions in respect of principal, and any schedule or formula or other
provisions applicable to the determination thereof, of each such class shall
be as set forth in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, payments of
interest and principal on the Certificates will be made on the fifteenth day
of each month or, if any such day is not a Business Day, on the next
succeeding Business Day (each, a "Distribution Date"), commencing on the date
specified in the related Prospectus Supplement. Unless otherwise specified in
the related Prospectus Supplement, with respect to any Distribution Date, the
Due Period will be the calendar month preceding the month of such Distribution
Date. Unless otherwise specified in the related Prospectus Supplement,
payments on the Certificates on each Distribution Date will be made to the
holders of record of the related Certificates on the day immediately preceding
such Distribution Date or, in the event Definitive Certificates have been
issued, at the close of business of the last day of the month immediately
preceding the month in which such Distribution Date occurs (each, a "Record
Date"). A "Business Day" is any day other than a Saturday, Sunday or any day
on which banking institutions or trust companies in the states of New York,
Oklahoma and such other states (if any) specified in the related Prospectus
Supplement are authorized or required by law, regulation or executive order to
be closed.
THE NOTES
GENERAL
A series of Securities may include one or more classes of Asset-Backed Notes
(the "Notes" and, together with the Certificates, the "Securities") issued
pursuant to an Indenture (as amended and supplemented from time to time, the
"Indenture") between a Trust and an Indenture Trustee specified in the related
Prospectus Supplement (the "Indenture Trustee"), a form of which has been
filed as an exhibit to the Registration Statement of which this Prospectus
forms a part. Unless otherwise specified in the related Prospectus Supplement,
no Notes will be issued as part of any series. The following
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summary does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all of the provisions of the Notes and the
Indenture, and the following summary will be supplemented in whole or in part
by the related Prospectus Supplement. Where this summary refers to particular
provisions or terms used in the Indenture, the actual provisions (including
definitions of terms) are incorporated by reference as part of such summary.
Unless otherwise specified in the related Prospectus Supplement, the Notes
will be offered for purchase in minimum denominations of $1,000 and integral
multiples of $1,000 in excess thereof in book-entry form only. Unless
otherwise specified in the related Prospectus Supplement, each class of Notes
will initially be represented by a single Note registered in the name of Cede,
the nominee of DTC, except as provided below. No person acquiring an interest
in the Notes through the facilities of DTC (a "Note Owner" and, together with
a Certificate Owner, a "Security Owner") will be entitled to receive a Note
representing such person's interest in the Notes, except as set forth under
"Certain Information Regarding The Securities--Definitive Securities" and such
persons will hold their interests in the Notes through DTC in the United
States or Cedel or Euroclear in Europe. Unless and until Definitive Notes are
issued under the limited circumstances described in the related Prospectus
Supplement and herein, all references to actions by Noteholders shall refer to
actions taken by DTC upon instructions from its Participants, and all
references in the related Prospectus Supplement and herein to distributions,
notices, reports and statements to Noteholders shall refer to distributions,
notices, reports and statements to DTC in accordance with DTC procedures. See
"Certain Information Regarding The Securities--Definitive Securities."
PAYMENT OF PRINCIPAL AND INTEREST ON THE NOTES
The timing and priority of payment, seniority, allocations of loss, Interest
Rate and amount of or method of determining payments of principal and interest
on each class of Notes will be described in the related Prospectus Supplement.
The right of holders of any class of Notes to receive payments of principal
and interest may be senior or subordinate to the rights of holders of any
class or classes of Notes of such series, or any class of Certificates, as
described in the related Prospectus Supplement. Unless otherwise provided in
the related Prospectus Supplement, payments of interest on the Notes will be
made prior to payments of principal thereon. A series may include one or more
classes of Stripped Notes entitled to (i) principal payments with
disproportionate, nominal or no interest payment, or (ii) interest payments
with disproportionate, nominal or no principal payments. Each class of Notes
may have a different Interest Rate, which may be a fixed, variable or
adjustable Interest Rate (and which may be zero for certain classes of
Stripped Notes), or any combination of the foregoing. The related Prospectus
Supplement will specify the Interest Rate for each class of Notes, or the
initial Interest Rate and the method for determining the Interest Rate. One or
more classes of Notes of a series may be redeemable under the circumstances
specified herein and in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, payments in
respect of interest to Noteholders of all classes within a series will have
the same priority. Under certain circumstances, the amount available for such
payments could be less than the aggregate amount of interest payable on the
Notes on any of the dates specified for payments in the related Prospectus
Supplement, in which case each class of Noteholders will receive its ratable
share (based upon the aggregate amount of interest due to such class of
Noteholders) of the aggregate amount then available to be distributed in
respect of interest on the Notes. In the case of a series of Securities which
includes two or more classes of Notes, the sequential order and priority of
payment in respect of principal and interest, and any schedule or formula or
other provisions applicable to the determination thereof, of each such class
will be set forth in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, payments of
interest and principal on the Notes will be made on each Distribution Date,
commencing on the date specified in the related Prospectus Supplement. Unless
otherwise specified in the related Prospectus Supplement,
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with respect to any Distribution Date, the Due Period will be the calendar
month preceding the month of such Distribution Date. Unless otherwise
specified in the related Prospectus Supplement, payments on the Notes on each
Distribution Date will be made to the holders of record of the related Notes
on the related Record Date.
THE INDENTURE
A form of Indenture has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. CITSF will provide a copy of
the applicable Indenture (without exhibits) upon request to a holder of Notes
issued thereunder.
Modification of Indenture without Noteholder Consent. With respect to each
Trust, the Issuer and the related Indenture Trustee may, without consent of
the Noteholders, enter into one or more supplemental indentures for any of the
following purposes: (i) to correct or amplify the description of the
collateral or add additional collateral; (ii) to provide for the assumption of
the Note and the Indenture obligations by a permitted successor to the Trust;
(iii) to add additional covenants for the benefit of the related Noteholders,
or to surrender any rights or power conferred upon the Trust; (iv) to convey,
transfer, assign, mortgage or pledge any property to or with the Indenture
Trustee; (v) to cure any ambiguity or correct or supplement any provision in
the Indenture or any supplemental indenture which may be inconsistent with any
other provision of the Indenture or in any supplemental indenture; (vi) to
provide for the acceptance of the appointment of a successor Indenture Trustee
or to add to or change any of the provisions of the Indenture as shall be
necessary and permitted to facilitate the administration by more than one
trustee; (vii) to modify, eliminate or add to the provisions of the Indenture
in order to comply with the Trust Indenture Act of 1939, as amended; or (viii)
to add any provisions to, change in any manner, or eliminate any of the
provisions of, the Indenture, or modify in any manner the rights of
Noteholders under such Indenture; provided that any action specified in this
clause (viii) subject to other conditions set forth in the Indenture, shall
not, as evidenced by an opinion of counsel, adversely affect in any material
respect the interests of any Noteholder unless Noteholder consent is otherwise
obtained as described in the Indenture. Any action specified in clause (viii)
shall be taken only upon satisfaction of the Rating Agency Condition.
"Rating Agency Condition" with respect to any action means, the condition
that the Rating Agency or Agencies specified in the related Prospectus
Supplement shall have notified the Seller, the Servicer and the Issuer in
writing that such action will not result in the downgrade or withdrawal of the
then current ratings of the Notes or the Certificates.
Modification of Indenture with Noteholder Consent. With respect to each
Trust, with the consent of the holders of not less than a majority of the
aggregate outstanding principal amount of the Notes, and with prior notice to
the Rating Agencies, the Issuer and the Indenture Trustee may execute a
supplemental indenture to add provisions to, change in any manner or eliminate
any provisions of, the Indenture, or modify in any manner the rights of the
related Noteholders.
Without the consent of the holder of each outstanding related Note affected
thereby, however, no supplemental indenture may: (i) change the due date of
any installment of principal of or interest on any Note or reduce the
principal amount thereof, the interest rate specified thereon or the
redemption price with respect thereto or change any place of payment where or
the coin or currency in which any Note or any interest thereon is payable;
(ii) impair the right to institute suit for the enforcement of certain
provisions of the Indenture regarding payment; (iii) reduce the percentage of
the aggregate principal amount of the outstanding Notes the consent of the
holders of which is required for any such supplemental indenture or the
consent of the holders of which is required for any waiver of compliance with
certain provisions of the Indenture or of certain defaults thereunder and
their consequences as provided for in the Indenture; (iv) modify or alter the
provisions of the Indenture regarding the voting of Notes held by the related
Trust, any other obligor on the Notes, the Seller or an affiliate of any of
them; (v) reduce the percentage of the aggregate outstanding amount of the
Notes the consent of the holders
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of which is required to direct the Indenture Trustee to sell or liquidate the
Contracts if the proceeds of such sale would be insufficient to pay the
principal amount and accrued but unpaid interest on the outstanding Notes;
(vi) decrease the percentage of the aggregate principal amount of the Notes
required to amend the sections of the Indenture which specify the applicable
percentage of aggregate principal amount of the Notes necessary to amend the
Indenture or certain other related agreements; or (vii) permit the creation of
any lien ranking prior to or on a parity with the lien of the Indenture with
respect to any of the collateral for the Notes or, except as otherwise
permitted or contemplated in the Indenture, terminate the lien of the
Indenture on any such collateral or deprive the holder of any Note of the
security afforded by the lien of the Indenture.
Events of Default; Rights Upon Event of Default. With respect to each Trust,
unless otherwise specified in the related Prospectus Supplement, "Events of
Default" under the Indenture will consist of: (i) any failure to pay interest
on any Note as and when the same becomes due and payable, which failure
continues unremedied for five days; (ii) any failure (a) to make any
installment of the principal of any Note as and when the same becomes due and
payable which failure continues unremedied for thirty days or (b) to observe
or perform in any material respect any other covenants or agreements in the
Indenture, which failure in the case of a default under clause (ii)(b)
materially and adversely affects the rights of Noteholders, and which failure
in either case continues for thirty days after the giving of written notice of
such failure to the Issuer and the Seller (or the Servicer, as applicable), by
the Indenture Trustee or to the Issuer and the Seller (or the Servicer, as
applicable), and the Indenture Trustee by the holders of not less than 25% of
the aggregate outstanding principal amount of the Notes; (iii) failure to pay
in full the outstanding principal balance of any Notes on or prior to the Note
Final Scheduled Distribution Date; and (iv) certain events of insolvency,
readjustment of debt, marshaling of assets and liabilities or similar
proceedings and certain actions by the Trust indicating its insolvency,
reorganization pursuant to bankruptcy proceedings or inability to pay its
obligations. However, unless otherwise specified in the related Prospectus
Supplement, the amount of principal required to be paid to Noteholders under
the Indenture will generally be limited to amounts available to be deposited
in the Note Distribution Account. Therefore, unless otherwise specified in the
related Prospectus Supplement, the failure to pay principal on a class of
Notes generally will not result in the occurrence of an Event of Default until
the Note Final Scheduled Distribution Date.
Unless otherwise specified in the related Prospectus Supplement, if an Event
of Default should occur and be continuing with respect to the Notes of any
series, the related Indenture Trustee or holders of not less than a majority
in aggregate outstanding principal amount of such Notes may declare the
principal of the Notes to be immediately due and payable. Such declaration
may, under certain circumstances, be rescinded by the holders of not less than
a majority of the aggregate outstanding principal amount of the Notes.
Unless otherwise specified in the related Prospectus Supplement, if the
Notes of any series are due and payable following an Event of Default with
respect thereto, the related Indenture Trustee may institute proceedings to
collect amounts due or foreclose on Trust property, exercise remedies as a
secured party under the related Contracts, sell the related Contracts or elect
to have the Trust maintain possession of such Contracts and continue to apply
collections on such Contracts as if there had been no declaration of
acceleration. Unless otherwise specified in the related Prospectus Supplement,
the Indenture Trustee, however, is prohibited from selling the related
Contracts following an Event of Default, unless (i) the holders of all the
outstanding related Notes consent to such sale, (ii) the proceeds of such sale
are sufficient to pay in full the principal of and the accrued interest on
such outstanding related Notes at the date of such sale, or (iii) the
Indenture Trustee determines that the proceeds of the Contracts would not be
sufficient on an ongoing basis to make all payments on the Notes as such
payments would have become due if such obligations had not been declared due
and payable, and the Indenture Trustee obtains the consent of the holders of
not less than a majority of the aggregate outstanding principal amount of the
Notes. Unless otherwise specified in the related
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Prospectus Supplement, following a declaration upon an Event of Default that
the Notes are immediately due and payable, (i) Noteholders will be entitled to
ratable repayment of principal on the basis of their respective unpaid
principal balances, and (ii) repayment in full of the accrued interest on and
unpaid principal balances of the Notes will be made prior to any further
payment of interest on the Certificates or in respect of the Certificate
Balance (other than payments of the Principal Liquidation Loss Amount (as
defined in the related Prospectus Supplement) and other payments from the
Enhancement (if any) applicable to the Certificates).
Subject to the provisions of the Indenture relating to the duties of the
Indenture Trustee, if an Event of Default occurs and is continuing with
respect to a series of Notes, the Indenture Trustee will be under no
obligation to exercise any of the rights or powers under the Indenture at the
request or direction of any of the holders of such Notes, if the Indenture
Trustee reasonably believes it will not be adequately indemnified against the
costs, expenses and liabilities which might be incurred by it in complying
with such request. Subject to the provisions for indemnification and certain
limitations contained in the Indenture, the holders of not less than a
majority in aggregate outstanding principal amount of the Notes will have the
right to direct the time, method and place of conducting any proceeding for
any remedy available to the Indenture Trustee and the holders of not less than
a majority in aggregate outstanding principal amount of such Notes may, in
certain cases, waive any past default with respect thereto, except a default
(i) in the payment of principal of or interest on any of the Notes or (ii) in
respect of a covenant or provision of the Indenture that cannot be modified or
amended without the consent of the Holder of each Note.
No holder of a Note of any series will have the right to institute any
proceeding with respect to the related Indenture, unless (i) such holder
previously has given to the Indenture Trustee written notice of a continuing
Event of Default, (ii) the holders of not less than 25% in aggregate
outstanding principal amount of the Notes have made written request of the
Indenture Trustee to institute such proceeding in its own name as Indenture
Trustee, (iii) such holder or holders have offered the Indenture Trustee
reasonable indemnity, (iv) the Indenture Trustee has for sixty days after its
receipt of such notice, request and offer of indemnity failed to institute
such proceeding, and (v) no direction inconsistent with such written request
has been given to the Indenture Trustee during such sixty-day period by the
holders of not less than a majority in aggregate outstanding principal amount
of such Notes.
If an Event of Default occurs and is continuing and if it is known to the
Indenture Trustee, the Indenture Trustee will mail to each Noteholder notice
of the Event of Default within ninety days after it occurs. Except in the case
of a failure to pay principal of or interest on any Note, the Indenture
Trustee may withhold the notice if and so long as it determines in good faith
that withholding the notice is in the interests of Noteholders.
In addition, each Indenture Trustee and the related Noteholders, by
accepting the related Notes, will covenant that they will not, for a period of
one year and one day after the termination of the Indenture, institute against
the Affiliated Purchaser, if any, the Company or the related Trust any
bankruptcy, reorganization or other proceeding under any federal or state
bankruptcy or similar law.
Neither the Indenture Trustee nor the Owner Trustee in its individual
capacity, nor any holder of a Certificate including, without limitation, the
Affiliated Purchaser (if any) or the Company, nor any of their respective
owners, beneficiaries, agents, officers, directors, employees, affiliates,
successors or assigns will, in the absence of an express agreement to the
contrary, be personally liable for the payment of the principal of or interest
on the related Notes or for the agreements of the related Trust contained in
the Indenture.
Certain Covenants. Unless otherwise specified in the related Prospectus
Supplement, each Indenture will provide that the related Trust may not
consolidate with or merge with or into any other entity, unless (i) the entity
formed by or surviving such consolidation or merger is organized under the
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laws of the United States, any state or the District of Columbia, (ii) such
entity expressly assumes the Trust's obligation to make due and timely
payments upon the Notes and the performance or observance of every agreement
and covenant of the Trust under the Indenture, (iii) no Event of Default shall
have occurred and be continuing immediately after such merger or
consolidation, (iv) the Trust has been advised that the rating of the related
Notes or Certificates then in effect would not be reduced or withdrawn by the
Rating Agencies as a result of such merger or consolidation, (v) any action as
is necessary to maintain the lien and security interest created by the
Indenture shall have been taken, and (vi) the Trust has received an opinion of
counsel to the effect that such consolidation or merger will have no material
adverse tax consequences to the Trust or to any related Noteholder or
Certificateholder.
Unless otherwise specified in the related Prospectus Supplement, each Trust
will covenant that it will not, among other things, (i) except as expressly
permitted by the Indenture, the Purchase Agreements (as defined herein) or the
Trust Documents (as defined herein) (collectively, the "Related Documents"),
sell, convey, transfer, exchange or otherwise dispose of any of the assets of
the Trust, (ii) claim any credit on or make any deduction from the principal
or interest payable in respect of the related Notes (other than amounts
withheld under the Code or applicable state law) or assert any claim against
any present or former holder of such Notes because of the payment of taxes
levied or assessed upon the Trust, (iii) dissolve or liquidate in whole or in
part, (iv) permit the validity or effectiveness of the related Indenture to be
impaired or permit the lien of the Indenture to be amended, hypothecated,
subordinated, terminated or discharged, or permit any person to be released
from any covenants or obligations with respect to the related Notes under such
Indenture except as may be expressly permitted thereby or (v) permit any lien,
charge, excise, claim, security interest, mortgage or other encumbrance (other
than the lien of the Indenture) to be created on or extend to or otherwise
arise upon or burden the assets of the Trust or any part thereof, or any
interest therein or the proceeds thereof.
No Trust will incur, assume or guarantee any indebtedness other than
indebtedness incurred pursuant to the related Notes and the related Indenture
or otherwise in accordance with the Related Documents.
Annual Compliance Statement. Each Trust will be required to file annually
with the related Indenture Trustee a written statement as to the fulfillment
of its obligations under the Indenture.
Indenture Trustee's Annual Report. The Indenture Trustee will be required to
mail each year to all related Noteholders a brief report relating to its
eligibility and qualification to continue as Indenture Trustee under the
related Indenture, any amounts advanced by it under the Indenture, the amount,
interest rate and maturity date of certain indebtedness owing by the Trust to
the Indenture Trustee in its individual capacity, the property and funds
physically held by the Indenture Trustee as such and any action taken by it
that materially affects the Notes and that has not been previously reported.
Satisfaction and Discharge of Indenture. An Indenture will be discharged
with respect to the assets of the Trust securing the related Notes upon the
delivery to the related Indenture Trustee for cancellation of all such Notes
or, with certain limitations, upon deposit with the Indenture Trustee of funds
sufficient for the payment in full of all of such Notes.
The Indenture Trustee. The Indenture Trustee for a series of Notes will be
specified in the related Prospectus Supplement. The Indenture Trustee may
resign at any time, in which event the Servicer, or its successor, will be
obligated to appoint a successor trustee. The Servicer may also remove the
Indenture Trustee if the Indenture Trustee ceases to be eligible to continue
as such under the Indenture or if the Indenture Trustee becomes insolvent. In
such circumstances, the Servicer will be obligated to appoint a successor
trustee. Any resignation or removal of the Indenture Trustee and appointment
of a successor trustee will not become effective until acceptance of the
appointment by
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the successor trustee and will be subject to any conditions or approvals, if
any, specified in the related Prospectus Supplement.
The Trust Documents will provide that the Servicer will pay the Indenture
Trustee's fees. The Trust Documents will further provide that the Indenture
Trustee will be entitled to indemnification by the Servicer for, and will be
held harmless against, any cost, loss, liability, claim, damage or expense
incurred by the Indenture Trustee in connection with the acceptance or
performance of the trusts and duties contained in the Indenture in accordance
with the terms and conditions therein, not resulting from its own willful
misfeasance, bad faith or gross negligence (other than by reason of a breach
of any of its representations or warranties set forth in the Indenture).
Trust Indenture Act. Each Indenture will comply with all applicable
provisions of the Trust Indenture Act of 1939, as amended.
ENHANCEMENT
General. The Prospectus Supplement will specify whether there is Enhancement
for any class of the Securities of a series and, if so, the material terms of
such Enhancement. Any Enhancement may be intended (i) to enhance the
likelihood of receipt by the Certificateholders and/or the Noteholders, if
any, of the full amount of principal and interest due thereon and to decrease
the likelihood that the Certificateholders and/or the Noteholders, if any,
will experience losses, or (ii) to provide protection against changes in
interest rates or against other risks, or (iii) to supplement the interest
rate on Contracts, in each case to the extent and under the conditions
specified in the related Prospectus Supplement. Unless otherwise specified in
the related Prospectus Supplement, any Enhancement for a class of Securities
will not provide protection against all risks of loss and will not guarantee
repayment of the entire principal and interest thereon. If losses occur which
exceed the amount covered by any Enhancement or which are not covered by any
Enhancement, Securityholders will bear their allocable share of such losses.
In addition, if a form of Enhancement covers more than one class of Securities
of a series, Securityholders of any such class will be subject to the risk
that such Enhancement will be exhausted by the claims of Securityholders of
other classes.
Subordination of Certificates. Unless otherwise specified in the related
Prospectus Supplement, the rights of Certificateholders to receive
distributions of interest and principal are subordinated to the rights of
Noteholders to receive payment in full of all amounts of interest and
principal which the Noteholders are entitled to receive on the related
Distribution Date. Consequently, unless otherwise specified in the related
Prospectus Supplement, no distribution will be made to the Certificateholders
on any Distribution Date in respect of (i) interest until the full amount of
interest and principal on the Notes payable on such Distribution Date has been
distributed to the Noteholders, other than payments from the applicable
Enhancement, if any, and (ii) principal until the Notes have been paid in
full, other than distributions in respect of the Principal Liquidation Loss
Amount to the extent, if any, set forth in the related Prospectus Supplement.
To the extent specified in the related Prospectus Supplement, the rights of
one or more classes of Notes of a series to receive distributions of interest
and principal may be subordinated to the rights of one or more other classes
of Notes of a series to receive payment in full of all amounts of interest and
principal which are payable thereon on each Distribution Date.
Other Enhancement. The amounts and types of credit or cash flow enhancement
arrangements (each, an "Enhancement"), if any, with respect to each class of
Securities will be set forth in the related Prospectus Supplement. If and to
the extent provided in the related Prospectus Supplement, Enhancement may be
in the form of a financial guaranty insurance policy, letter of credit, CIT
Limited Guarantee, reserve fund, third party guarantee, cash collateral
account, derivative product, credit facility, yield supplement agreement,
overcollateralization, guaranteed investment contract, guaranteed
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rate agreement, other agreements with respect to third party payments or other
support, or other form of credit or cash flow enhancement, or any combination
thereof, as may be described in the related Prospectus Supplement. If
specified in the related Prospectus Supplement, Enhancement for a class of
Securities of a series may cover one or more other classes of Securities in
such series. Further information regarding providers of Enhancement, including
financial information when material, will be included in the related
Prospectus Supplement.
Reserve Fund. If so provided in the related Prospectus Supplement, an
account (a "Reserve Fund") may be established and funded by any combination of
cash, one or more irrevocable letters of credit, Eligible Investments, one or
more derivative products, amounts otherwise distributable to one or more
classes of Securityholders or to the owners of any Retained Yield (as defined
herein), or any other instrument satisfactory to any Rating Agency. A Reserve
Fund may be funded from the Available Amount remaining on each Distribution
Date after all amounts then due have been paid to the Certificateholders, the
Noteholders, if any, the Servicer, and any provider of Enhancement. In
addition, with respect to any series of Securities as to which Enhancement
includes a letter of credit or a derivative product, if so specified in the
related Prospectus Supplement, under certain circumstances the remaining
amount of the letter of credit may be drawn by the Trustee or the termination
payment under a derivative product may be demanded by the Trustee, and in each
case deposited in a Reserve Fund. Funds in a Reserve Fund will be applied,
invested and maintained in the manner and under the conditions specified in
such Prospectus Supplement. Amounts in a Reserve Fund may be distributed to
Securityholders, applied to reimburse the Servicer for outstanding advances,
or may be used for other purposes, in the manner and to the extent specified
in the related Prospectus Supplement. In the event that a Reserve Fund is
funded through the application of the Available Amount remaining on each
Distribution Date after all amounts then due have been paid to the
Certificateholders, the Noteholders, if any, the Servicer and any provider of
Enhancement, it may be referred to as a "Spread Account." In the event that a
Reserve Fund is applied to supplement the monthly interest payments on certain
Contracts in the Contract Pool, it may be referred to as a "Yield Supplement
Account." In the event that the Reserve Fund is funded through the proceeds of
a loan to the Trust by a third party lender, it may be referred to as a "Cash
Collateral Account." The related Prospectus Supplement will specify whether
any Reserve Fund will be established as part of the Trust or held outside the
Trust by a collateral agent or similar third party (who may be a Trustee
acting in a different capacity). The related Prospectus Supplement will
describe the required levels of funding of a Reserve Fund, the circumstances
under which a Reserve Fund may be applied to make distributions on a class of
Securities, and the circumstances in which funds in a Reserve Fund may be
released to persons other than Securityholders. A Trust may contain more than
one Reserve Fund, each of which may apply only to a specified class of
Securities or to specified Contracts.
The Seller or the Affiliated Purchaser, if any, may at any time, without
consent of the Securityholders, sell, transfer, convey or assign in any manner
its rights to and interests in distributions from the Reserve Fund provided
that (i) the Rating Agency Condition is satisfied, (ii) the Seller or the
Affiliated Purchaser, as the case may be, provides to the Trustees an opinion
from independent counsel that such action will not cause the related Trust to
be classified as an association (or publicly traded partnership) taxable as a
corporation for federal income tax purposes, and (iii) such transferee or
assignee agrees in writing to take positions for federal income tax purposes
consistent with the federal income tax positions agreed to be taken by the
Seller or the Affiliated Purchaser, as the case may be.
Limited Guarantee. If specified in the related Prospectus Supplement,
certain payments on a class of the Securities of a series, certain
deficiencies in principal or interest payments on the Contracts, or certain
liquidation losses on the Contracts, may be covered by a limited guarantee or
other similar instrument (the "Limited Guarantee"), limited in scope and
amount, issued by CIT. If not so specified, the Securityholders will have no
recourse to CIT for any amounts due on the Securities.
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If so specified, CIT may be obligated to take one or more of the following
actions in the event the Company fails to do so: make deposits to an account,
make advances, or purchase defaulted Contracts. Any such Limited Guarantee
will be limited in an amount and a portion of the coverage of any such Limited
Guarantee may be separately allocated to certain events. The scope, amount
and, if applicable, the allocation of any Limited Guarantee will be described
in the related Prospectus Supplement.
Credit Facility. With respect to a series of Securities, one or more classes
may be entitled to the benefit of one or more letters of credit, guarantees,
limited guarantees, surety bonds or similar credit facilities (each, a "Credit
Facility"). Each such Credit Facility may be in an amount greater than, equal
to or less than the Certificate Balance of the Certificates of each class (or
the principal balance of the Notes of each class) entitled to the benefits
thereof, and may be subject to reduction or be limited as to duration, all as
described in the related Prospectus Supplement. To the extent specified in the
related Prospectus Supplement, amounts realized under a Credit Facility
supporting any class of Securities may be used for the same purposes as
amounts on deposit in a Reserve Fund. A Credit Facility may be held by a
Trustee as part of the related Trust or may be held by a collateral agent or
other third party (who may be the Trustee acting in a different capacity). The
related Prospectus Supplement will contain a description of the material terms
of any Credit Facility and any arrangement pursuant to which the Credit
Facility is held outside of the Trust and will state whether the Trust, the
Seller, the Servicer or a third party will pay the fees of the provider of the
Credit Facility (the "Credit Facility Provider"). Such Prospectus Supplement
will also contain certain information concerning the Credit Facility Provider,
which information will have been provided to the Seller by the Credit Facility
Provider for use in such Prospectus Supplement. CIT, CITSF or an affiliate
thereof may be a Credit Facility Provider.
If specified in the related Prospectus Supplement, a Credit Facility, rather
than guaranteeing distributions of particular amounts to the holders of
Certificates of particular classes, may, instead, guarantee certain
collections on the related Contract Pool. These guaranteed collections may be
attributable to all or a portion of amounts due on Contracts in liquidation,
all or a portion of the scheduled monthly payments due on the Contracts or
other amounts. The extent to which any such collections are guaranteed under a
Credit Facility which functions in this manner will be described in the
related Prospectus Supplement.
Liquidity Facility. With respect to a series of Securities, one or more
classes may be entitled to the benefit of one or more purchase agreements or
other liquidity facilities (each, a "Liquidity Facility"), pursuant to which
the provider of such Liquidity Facility (the "Liquidity Facility Provider")
will provide funds to be used to purchase some or all of such Securities.
Unless otherwise specified in the related Prospectus Supplement, a Liquidity
Facility will be held outside of the Trust by a third party (which may be a
Trustee acting in another capacity). The related Prospectus Supplement will
contain a description of the material terms of any such Liquidity Facility and
any arrangement pursuant to which it is held outside of the Trust, and will
contain certain information concerning the Liquidity Facility Provider, which
information will have been provided to the Seller by the Liquidity Facility
Provider for use in such Prospectus Supplement. CIT, CITSF or an affiliate
thereof may be a Liquidity Facility Provider. If specified in the related
Prospectus Supplement, a Reserve Fund or Credit Facility may also serve as a
Liquidity Facility.
Replacement. If specified in the related Prospectus Supplement, the Seller
may replace the Enhancement for any class of Securities with another form of
Enhancement without the consent of Securityholders, provided the Rating Agency
Condition is satisfied.
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CERTAIN INFORMATION REGARDING THE SECURITIES
BOOK-ENTRY REGISTRATION
Unless otherwise specified in the related Prospectus Supplement, persons
acquiring beneficial ownership interests in the Notes may hold their interests
through DTC in the United States or Cedel or Euroclear in Europe and persons
acquiring beneficial ownership interests in the Certificates may hold their
interests through DTC. Unless otherwise specified in the related Prospectus
Supplement, Securities will be registered in the name of Cede as nominee for
DTC. Cedel and Euroclear will hold omnibus positions with respect to the Notes
on behalf of Cedel Participants and Euroclear Participants, respectively,
through customers' securities accounts in Cedel's and Euroclear's name on the
books of their respective depositories (collectively, the "Depositories")
which in turn will hold such positions in customers' securities accounts in
the Depositories' names on the books of DTC.
DTC is a limited-purpose trust company organized under the laws of the State
of New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934. DTC accepts securities for deposit from its
participating organizations ("Participants") and facilitates the clearance and
settlement of securities transactions between Participants in such securities
through electronic book-entry changes in accounts of its Participants, thereby
eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers, banks, trust companies and clearing
corporations and may include certain other organizations. Indirect access to
the DTC system is also available to others such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly ("Indirect Participants").
Security Owners who are not Participants or Indirect Participants but desire
to purchase, sell or otherwise transfer ownership of Securities may do so only
through Participants or Indirect Participants (unless and until Definitive
Securities are issued). In addition, Security Owners will receive all
distributions of principal and interest on the Securities through DTC and its
Participants. Under a book-entry format, Security Owners will receive payments
after the related Distribution Date because such payments will be forwarded by
the Trustees on the Distribution Date to Cede, as nominee for DTC. DTC will
forward such payments to its Participants which thereafter will forward them
to Indirect Participants or Security Owners. It is anticipated that the only
"Holder" or "Securityholder," as such terms are used herein, will be Cede, as
nominee of DTC. Security Owners will not be recognized by the Trustees as
Securityholders, as such term will be used, in the Trust Documents. Security
Owners will only be permitted to exercise the rights of Securityholders or to
communicate with other Securityholders indirectly through DTC and its
Participants which in turn will exercise their rights through DTC. Security
Owners will not have access to the list of Security Owners of a series, which
may impede the ability of Security Owners to communicate with each other.
Security Owners will not receive or be entitled to receive Definitive Notes or
Definitive Certificates representing their respective interests in the
Securities, except under the limited circumstances described below and such
other circumstances, if any, as may be specified in the related Prospectus
Supplement.
Transfers between Participants will occur in accordance with DTC Rules.
Transfers between Cedel Participants and Euroclear Participants will occur in
accordance with their respective rules and operating procedures.
Due to time zone differences, credits of securities received in Cedel or
Euroclear as a result of a transaction with a Participant will be made during
subsequent securities settlement processing and dated the business day
following the DTC settlement date. Such credits or any transactions in such
securities settled during such processing will be reported to the relevant
Euroclear or Cedel Participant on such business day. Cash received in Cedel or
Euroclear as result of sales of Securities by or
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through a Cedel Participant or Euroclear Participant to a DTC Participant will
be received with value on the DTC settlement date but will be available in the
relevant Cedel or Euroclear cash account only as of the business day following
settlement in DTC.
Cross-market transfers between persons directly or indirectly holding Notes
through DTC, on the one hand, and directly or indirectly through Cedel
Participants or Euroclear Participants, on the other, will be effected in DTC
in accordance with DTC Rules on behalf of the relevant European international
clearing system by its Depository; however, such cross-market transactions
will require delivery of instructions to the relevant European international
clearing system by the counterparty in such system in accordance with its
rules and procedures and within its established deadline (European time). The
relevant European international clearing system will, if the transaction meets
its settlement requirements, deliver instructions to its Depository to take
action to effect final settlement on its behalf by delivering or receiving
securities in DTC, and making or receiving payment in accordance with normal
procedures for same day funds settlement applicable to DTC. Cedel Participants
and Euroclear Participants may not deliver instructions directly to the
Depositories.
With respect to any series of Securities, while the Securities are
outstanding (except under the circumstances described below), under the rules,
regulations and procedures creating and affecting DTC and its operations (the
"DTC Rules"), DTC will be required to make book-entry transfers among
Participants on whose behalf it acts with respect to the Notes and
Certificates and will be required to receive and transmit distributions of
principal and interest on the Securities. Participants and Indirect
Participants with which Security Owners have accounts with respect to the
Securities will be similarly required to make book-entry transfers and receive
and transmit such payments on behalf of their respective Security Owners.
Since DTC can only act on behalf of Participants, who in turn act on behalf
of Indirect Participants, the ability of a Security Owner to pledge Notes or
Certificates to persons or entities that do not participate in the DTC system,
or otherwise take actions in respect of such Securities, may be limited due to
the lack of physical certificates for such Securities. Issuance of the
Securities in book-entry form may reduce the liquidity of such Securities in
the secondary market since certain potential investors may be unwilling to
purchase Securities for which they cannot obtain physical certificates.
Cedel is incorporated under the laws of Luxembourg as a professional
depository. Cedel holds securities for its participating organizations ("Cedel
Participants") and facilitates the clearance and settlement of securities
transactions between Cedel Participants through electronic book-entry changes
in accounts of Cedel Participants, thereby eliminating the need for physical
movement of certificates. Transactions may be settled in Cedel in any of 28
currencies, including United States dollars. Cedel provides to its Cedel
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. Cedel interfaces with domestic markets in several
countries. As a professional depository, Cedel is subject to regulation by the
Luxembourg Monetary Institute. Cedel Participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. Indirect access to Cedel is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Cedel Participant, either directly or
indirectly.
The Euroclear System was created in 1968 to hold securities for its
participants ("Euroclear Participants") and to clear and settle transactions
between Euroclear Participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical movement
of certificates and any risk from lack of simultaneous transfers of securities
and cash. Transactions may be settled in any of 32 currencies, including
United States dollars. The Euroclear System includes various other services,
including securities lending and borrowing and interfaces with domestic
markets in several countries generally similar to the arrangements for cross-
market transfers with DTC described above. The Euroclear System is operated by
the Brussels, Belgium Office of
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Morgan Guaranty Trust Company of New York (the "Euroclear Operator" or
"Euroclear"), under contract with Euroclear Clearance Systems, S.C., a Belgian
cooperative corporation (the "Cooperative"). All operations are conducted by
the Euroclear Operator, and all Euroclear securities clearance accounts and
Euroclear cash accounts are accounts with the Euroclear Operator, not the
Cooperative. The Cooperative establishes policy for the Euroclear System on
behalf of the dealers and other professional financial intermediaries.
Indirect access to Euroclear is also available to other firms that clear
through, or maintain a custodial relationship with, a Euroclear Participant,
either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it
is regulated and examined by the Board of Governors of the Federal Reserve
System and the New York State Banking Department, as well as the Belgian
Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian
law (collectively, the "Terms and Conditions"). The Terms and Conditions
govern transfers of securities and cash within the Euroclear System,
withdrawals of securities and cash from the Euroclear System, and receipts of
payments with respect to securities in Euroclear. All securities in Euroclear
are held on a fungible basis without attribution of specific certificates to
specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear Participants and has no
record of or relationship with persons holding through Euroclear Participants.
Distributions with respect to Notes held through Cedel or Euroclear will be
credited to the cash accounts of Cedel Participants or Euroclear Participants
in accordance with the relevant system's rules and procedures, to the extent
received by its Depository. Such distributions will be subject to tax
reporting in accordance with relevant United States tax laws and regulations.
Cedel or the Euroclear Operator, as the case may be, will take any other
action permitted to be taken by a beneficial holder of Notes under the
Indenture on behalf of a Cedel Participant or Euroclear Participant only in
accordance with its relevant rules and procedures and subject to its
Depository's ability to effect such actions on its behalf through DTC.
Unless and until Definitive Securities are issued, Security Owners who are
not Participants may transfer ownership of Notes and Certificates only through
Participants by instructing such Participants to transfer such Notes and
Certificates, by book-entry transfer, through DTC for the account of the
purchasers of such Securities, which account is maintained with their
respective Participants. Under the DTC Rules and in accordance with DTC's
normal procedures, transfers of ownership of Securities will be executed
through DTC and the accounts of the respective Participants at DTC will be
debited and credited. Similarly, the respective Participants will make debits
or credits, as the case may be, on their records on behalf of the selling and
purchasing Securities Owners.
DTC has advised the Company that, unless and until Definitive Securities are
issued, DTC will take any action permitted to be taken by a Securityholder
under the Trust Documents only at the direction of one or more Participants to
whose DTC accounts the Securities are credited. Additionally, DTC has advised
the Company that it will take such actions with respect to specified
percentages of a class of the Securities only at the direction of Participants
whose holdings include principal amounts of the Securities that satisfy such
percentages. DTC may take conflicting actions with respect to other principal
amounts of the Securities to the extent that such actions are taken on behalf
of Participants whose holdings include such principal amounts of the
Securities.
NEITHER THE TRUST, THE SELLER, THE SERVICER, CIT, ANY AFFILIATED PURCHASER,
THE OWNER TRUSTEE, THE INDENTURE TRUSTEE, NOR ANY OF THE UNDERWRITERS WILL
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HAVE ANY RESPONSIBILITY OR OBLIGATION TO ANY PARTICIPANTS, CEDEL PARTICIPANTS
OR EUROCLEAR PARTICIPANTS OR SECURITY OWNERS WITH RESPECT TO (1) THE ACCURACY
OF ANY RECORDS MAINTAINED BY DTC, CEDEL, EUROCLEAR OR ANY PARTICIPANT, (2) THE
PAYMENT BY DTC, CEDEL, EUROCLEAR OR ANY PARTICIPANT OF ANY AMOUNT DUE TO ANY
SECURITY OWNER IN RESPECT OF THE PRINCIPAL AMOUNT OF, OR INTEREST ON, THE
SECURITIES, (3) THE DELIVERY BY ANY PARTICIPANT, CEDEL PARTICIPANT OR
EUROCLEAR PARTICIPANT OF ANY NOTICE TO ANY SECURITY OWNER WHICH IS REQUIRED OR
PERMITTED UNDER THE TERMS OF THE INDENTURE OR THE TRUST DOCUMENTS TO BE GIVEN
TO SECURITYHOLDERS OR (4) ANY OTHER ACTION TAKEN BY DTC AS THE SECURITYHOLDER.
DEFINITIVE SECURITIES
With respect to any series of Securities, unless otherwise specified in the
related Prospectus Supplement, the Notes and Certificates will be issued in
fully registered, certificated form ("Definitive Notes" and "Definitive
Certificates," respectively, and, together "Definitive Securities") to
Security Owners or their nominees, rather than to DTC or its nominee, only if
(i) the Servicer advises the Trustees in writing that DTC is no longer willing
or able to discharge properly its responsibilities as Depository with respect
to the Securities and the Servicer is unable to locate a qualified successor,
(ii) the Servicer, at its option, elects to terminate the book-entry system
through DTC or (iii) after the occurrence of an Event of Default or an Event
of Termination, Note Owners or Certificate Owners or representing in the
aggregate not less than a majority of the outstanding principal balance of the
Notes of a series or the Certificate Balance of a series advise DTC through
Participants in writing that the continuation of a book-entry system through
DTC (or a successor thereto) is no longer in the best interest of such Note
Owners or Certificate Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the related Trustee is required to notify DTC of the
availability of Definitive Securities. Upon surrender by DTC of the global
notes and global certificates representing the Notes and Certificates of a
series and instructions for re-registration, the Trustee will issue the Notes
of a series as Definitive Notes and the Certificates of a series as Definitive
Certificates, and thereafter the Trustees will recognize the holders of such
Definitive Notes and Definitive Certificates as Noteholders and
Certificateholders, respectively, under the Trust Documents ("Noteholders" and
"Certificateholders" respectively, and together "Securityholders" or
"Holders").
Unless otherwise specified in the related Prospectus Supplement,
distributions of principal of the Securities and interest on the Securities
thereafter will be made by the related Trustee directly to Holders in
accordance with the procedures set forth herein and in the Trust Documents.
Distributions of principal and interest on each Distribution Date will be made
to Holders in whose names the Definitive Securities were registered on the
Record Date. Such distributions will be made by check mailed to the address of
such Holder as it appears on the register maintained by the Trustee or other
person appointed pursuant to the Trust Documents. The final payment on any
Securities (whether Definitive Securities or the Securities registered in the
name of Cede representing the Securities), however, will be made only upon
presentation and surrender of such Note or Certificate at the office or agency
specified in the notice of final distribution to Holders.
Unless otherwise specified in the related Prospectus Supplement, Definitive
Securities will be transferable and exchangeable at the offices of the related
Trustee. No service charge will be imposed for any registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge imposed in connection therewith.
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LIST OF SECURITYHOLDERS
Unless otherwise specified in the related Prospectus Supplement, if
Definitive Certificates have been issued, the related Trustee will, upon
written request by three or more Certificateholders or by holders of
Certificates evidencing not less than 25% of the Certificate Balance, within
five Business Days after receipt of such request, afford such
Certificateholders access during normal business hours to the current list of
Certificateholders for purposes of communicating with other Certificateholders
with respect to their rights under the Purchase Agreements and the Trust
Documents provided such Certificateholders (i) state that they wish to
communicate with other Certificateholders with respect to their rights under
the Purchase Agreements, the Trust Documents or under the Certificates and(ii)
provide the Trustee and the Servicer with a copy of the proposed
communication. The Purchase Agreements and Trust Documents will not provide
for the holding of any annual or other meetings of Certificateholders.
Unless otherwise specified in the related Prospectus Supplement, if
Definitive Notes have been issued, the Indenture Trustee will, upon written
request by three or more Noteholders within five Business Days after receipt
of such request, afford such Noteholders access during business hours to the
current list of Noteholders for purposes of communicating with other
Noteholders with respect to their rights under the Indenture provided such
Noteholders (i) state that they wish to communicate with other Noteholders
with respect to their rights under the Indenture and (ii) provide the
Indenture Trustee and the Servicer with a copy of the proposed communication.
The Indenture will not provide for the holding of any annual or other meetings
of Noteholders.
STATEMENTS TO SECURITYHOLDERS
On each Distribution Date, the Servicer will prepare and provide to the
Trustees a statement, to be delivered on the Distribution Date to each
Securityholder. Unless otherwise specified in the related Prospectus
Supplement, the statement will set forth at least the following information
for the related Due Period:
(i) the amount of collections on the Contracts during the immediately
preceding Due Period;
(ii) the Available Amount for payment of all amounts distributable in
respect of the Securities and the Servicer Payment;
(iii) the amount of the distribution allocable to principal of the Notes
(if applicable) and to the Certificate Balance of the Certificates,
including any overdue principal;
(iv) the amount of the distribution allocable to interest on or with
respect to each class of Securities, including any overdue interest;
(v) the Pool Balance, the Note Pool Factor (if applicable) and the
Certificate Pool Factor as of the end of the related Due Period;
(vi) the Servicer Payment for such Distribution Date;
(vii) the amount of Monthly Advances and Non-Reimbursable Payments, if
any, on such date;
(viii) the amount, if any, withdrawn from any Enhancement (if applicable)
and distributed to the Securityholders with respect to such Distribution
Date;
(ix) the amount available under any Enhancement (if applicable), after
giving effect to any deposit to or withdrawal from the Enhancement with
respect to such Distribution Date, and such amount expressed as a
percentage of the Pool Balance;
(x) the aggregate principal balance of all Contracts which were
delinquent 30, 60 and 90 days or more as of the last day of the related Due
Period;
(xi) the amount of investment earnings, net of losses and investment
expenses, on amounts on deposit in the Collection Account;
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(xii) during the Funding Period, if any, the amount of funds on deposit
in the Pre-Funding Account;
(xiii) during the Funding Period, if any, the number and aggregate
principal balance of Subsequent Contracts;
(xiv) during the Funding Period, if any, the number and aggregate
principal balance of Subsequent Contracts purchased by the Trust since the
preceding Distribution Date;
(xv) during the Funding Period, if any, the amount, if any, withdrawn
from the Capitalized Interest Account, if any, to make payments of interest
on the Securities;
(xvi) during the Funding Period, if any, the amount remaining on deposit
in the Capitalized Interest Account, if any;
(xvii) during the Funding Period, if any, the amount of investment
earnings, net of losses and investment expenses, on amounts on deposit in
the Pre-Funding Account;
(xviii) during the Funding Period, if any, the amount of investment
earnings, net of losses and investment expenses, on amounts on deposit in
the Capitalized Interest Account, if any;
(xix) on the Distribution Date immediately following the end of the
Funding Period (or if the Funding Period ends on a Distribution Date on
such Distribution Date), if any, the aggregate principal amount and
percentage of each of the Notes, if any, and Certificates which are being
redeemed;
(xx) the aggregate principal balance of all Contracts which became either
"Defaulted Contracts" or "Liquidated Contracts" (as defined in the related
Prospectus Supplement) during the related Due Period (if the related
Prospectus Supplement includes definitions of such term or terms);
(xxi) the number and aggregate principal amount of Contracts which were
prepaid, in part or in whole, during the related Due Period;
(xxii) the aggregate outstanding principal balance of the Notes (if
applicable) as of such Distribution Date (after giving effect to any
distributions thereon and reductions thereto on such Distribution Date);
(xxiii) the Certificate Balance as of such Distribution Date (after
giving effect to any distributions on such Distribution Date);
(xxiv) the amount, if any, by which the amount due to be distributed to
Noteholders (if applicable) and Certificateholders exceeds the actual
amount distributed on the related Distribution Date to Noteholders (if
applicable) and Certificateholders, respectively;
(xxv) if applicable, the amount of surplus to be distributed to the
Affiliated Purchaser, if any, after all payments have been made in respect
of the Securities, the Servicer Payment has been paid and all deposits to
any Reserve Fund and payments to a Credit Facility Provider have been made;
and
(xxvi) such other information as may be specified in the related
Prospectus Supplement.
If the Limited Guarantee is issued by CIT with respect to a series of
Securities, the monthly and annual reports will include a statement to the
following effect: The CIT Group Holdings, Inc. is subject to the requirements
of the Securities Exchange Act of 1934, as amended, and, in accordance
therewith, files reports and other information with the Securities and
Exchange Commission. As a result of the limited guarantee by The CIT Group
Holdings, Inc., information relating to The CIT Group Holdings, Inc. which is
material will be available through such reports and other information.
Within a reasonable period of time after the end of each calendar year, but
not later than the latest date permitted by law (where applicable law
specifies such date), the Servicer will mail to each person
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who at any time during such calendar year shall have been a Securityholder,
and received any payment thereon, a statement containing the relevant amounts
described above for such calendar year for the purposes of such
Securityholder's preparation of federal income tax returns. See "Certain
Federal Income Tax Consequences."
Unless and until Definitive Certificates or Definitive Notes are issued,
such reports with respect to a series of Securities will be sent on behalf of
the related Trust to the Trustees and Cede & Co., as registered holder of the
Certificates and the Notes and the nominee of DTC. Certificate Owners and Note
Owners may receive copies of such reports upon written request, together with
a certification that they are Certificate Owners or Note Owners, as the case
may be, and payment of reproduction and postage expenses associated with the
distribution of such reports, from the Trustee or the Indenture Trustee, as
applicable. See "--Statements to Securityholders" and "--Book-Entry
Registration" above.
THE PURCHASE AGREEMENTS AND THE TRUST DOCUMENTS
Unless otherwise specified in the related Prospectus Supplement, the
following summary describes certain terms of the Purchase Agreement and any
Subsequent Purchase Agreement (together, the "Purchase Agreements") and the
Sale and Servicing Agreement, any Subsequent Transfer Agreements and the Trust
Agreement or the Pooling and Servicing Agreement (collectively, the "Trust
Documents"). Forms of the Purchase Agreements and the Trust Documents have
been filed as exhibits to the Registration Statement of which this Prospectus
forms a part. CITSF will provide a copy of such agreements (without exhibits)
upon request to a holder of Securities described therein. This summary does
not purport to be complete and is subject to, and qualified in its entirety by
reference to, all of the provisions of the Purchase Agreements and the Trust
Documents, and the following summary will be supplemented in whole or in part
by the related Prospectus Supplement. Where this summary refers to particular
provisions or terms used in the Purchase Agreements or Trust Documents, the
actual provisions (including definitions of terms) are incorporated by
reference as part of such summary.
SALE AND ASSIGNMENT OF THE CONTRACTS
On or prior to the Closing Date for a series of Securities and each
Subsequent Transfer Date, pursuant to the Purchase Agreement or a Subsequent
Purchase Agreement, as the case may be, between CITSF and the Company, CITSF
will sell and assign to the Company, without recourse, its entire interest in
and to the Initial Contracts and Subsequent Contracts, respectively, including
its security interests in the related Financed Vehicles. On the Closing Date
and each Subsequent Transfer Date, the Company will sell and assign to the
Trust, without recourse, all of its right, title and interest in and to such
Contracts, including its security interests in the Financed Vehicles. Unless
otherwise specified in the related Prospectus Supplement, certain of the
Contracts will be purchased by CITSF from CITCF-NY before they are sold to the
Company. Each Contract will be identified in a schedule appearing as an
exhibit to each of the Purchase Agreement and the Trust Documents (the "List
of Contracts") which includes, among other things, the Contract Rate, Initial
Cut-off Date Principal Balance and date of the last scheduled payment for each
Contract. The Trustee or its designated agent will, concurrently with the sale
and assignment of the Initial Contracts to the Trust, execute, authenticate
and deliver the Certificates and the Notes, if any, to the Company in exchange
for the Initial Contracts. The Company will sell the Certificates and the
Notes, if any, to the Underwriters.
CITSF will make certain representations and warranties in the Trust
Documents with respect to each Initial Contract as of the Closing Date,
including, unless otherwise specified in the related Prospectus Supplement,
that (i) as of the Initial Cut-off Date, the most recent scheduled payment of
principal and interest was made by or on behalf of the related Obligor or was
not delinquent more than
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thirty days; (ii) no provision of a Contract has been waived, altered or
modified in any respect, except by instruments or documents contained in the
Contract File; (iii) each Contract is a legal, valid and binding obligation of
the related Obligor and is enforceable in accordance with its terms (except as
may be limited by laws affecting creditors' rights generally); (iv) no
Contract is or will be subject to any right of rescission, set-off,
counterclaim or defense, including the defense of usury, and, to the knowledge
of CITSF, no such right has been asserted with respect to any Contract; (v)
the Obligor on each Contract is required to maintain physical damage insurance
covering the related Financed Vehicle in accordance with CITSF's normal
requirements or, if the related Financed Vehicle is not so covered by an
Obligor's insurance, it is covered by a blanket insurance policy maintained by
CITSF or the Servicer; (vi) neither CITSF nor the Servicer has obtained Force-
Placed Insurance (as defined herein) with respect to any Contract; (vii) no
Contract was originated in or is subject to the laws of any jurisdiction whose
laws would prohibit the transfer of the Contract to the Company under the
Purchase Agreement, to the Trust pursuant to the Trust Documents or pursuant
to a transfer of the Notes and Certificates, or the ownership of the Contracts
by the Trust; (viii) each Contract complies with all requirements of law in
all material respects; (ix) no Contract has been satisfied, subordinated in
whole or in part or rescinded, and no Financed Vehicle has been released from
the security interest of the related Contract in whole or in part; (x) each
Contract creates a valid and enforceable first priority security interest in
favor of CITSF, CITCF-NY or the related Dealer in the Financed Vehicle covered
thereby (which security interest, if in favor of the related Dealer or CITCF-
NY, has been assigned to CITSF), such security interest has been assigned by
CITSF to the Company and by the Company to the Trust, and all necessary action
with respect to such Contract has been taken to perfect the security interest
in the related Financed Vehicle in favor of CITSF or CITCF-NY; (xi) all
parties to each Contract had capacity to execute such Contract; (xii) no
Contract has been sold, assigned or pledged by CITSF to any person other than
the Company (or by the Company to any person other than the Trust) and, prior
to the transfer of the Contracts by CITSF to the Company and the transfer
thereof by the Company to the Trust, CITSF or the Company, respectively, had
good and marketable title to each Contract, free and clear of any lien,
encumbrance, equity, loan, pledge, charge, claim or security interest, and was
the sole owner and had full right to transfer such Contract to the Company and
the Trust, respectively; (xiii) as of the Initial Cut-off Date, there was no
default, breach, violation or event permitting acceleration under any Contract
and, no event which with notice and the expiration of any grace or cure period
would constitute a default, breach, violation or event permitting acceleration
under such Contract (except for payment delinquencies permitted by clause (i)
above), and CITSF has not waived any of the foregoing (except for payment
delinquencies permitted by clause (i) above); (xiv) there are no liens or
claims which have been filed for work, labor or materials affecting a Financed
Vehicle securing a Contract, which are or may be liens prior to or equal or
coordinate with the security interest of the Contract; (xv) each Contract is a
fully-amortizing loan with interest at the stated Contract Rate and provides
for level payments over the term of such Contract; (xvi) each Contract
contains customary and enforceable provisions such as to render the rights and
remedies of the holder thereof adequate for realization against the collateral
of the benefits of the security (except as may be limited by creditors' rights
generally); (xvii) the description of each Contract set forth in the List of
Contracts is true and correct as of its date; (xviii) no Obligor is the United
States of America or any state or any agency, department, instrumentality or
political subdivision thereof; (xix) if the Obligor is in the military
(including an Obligor who is a member of the National Guard or is in the
reserves) and the Contract is subject to the Soldiers' and Sailors' Civil
Relief Act of 1940, as amended (the "Soldiers' and Sailors' Civil Relief
Act"), or the California Military Reservist Relief Act of 1991 (the "Military
Reservist Relief Act"), such Obligor (each, a "Relief Act Obligor") has not
made a claim to CITSF that (A) the amount of interest on the Contract should
be limited to 6% pursuant to the Soldiers' and Sailors' Civil Relief Act
during the period of such Obligor's active duty status, or (B) payments on the
Contract should be delayed pursuant to the Military Reservist Relief Act, in
either case unless a court has ordered otherwise upon application of CITSF;
(xx) there is only one original executed copy of each Contract, which,
immediately prior to the execution of the Trust Documents, was in the
possession of CITSF; (xxi) the Contract is "chattel paper" as defined in the
New Jersey UCC; (xxii) the Contract satisfies the
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selection criteria set forth in the related Prospectus Supplement; (xxiii) all
of the right, title and interest of CITSF, the Company and, if applicable,
CITCF-NY in the Contract has been validly sold, transferred and assigned to
the Trust and all filings necessary to evidence such sale, transfer and
conveyance have been made in all appropriate jurisdictions; and (xxiv) no
adverse selection procedure was utilized in selecting the Contracts for sale
by CITSF to the Company.
Unless otherwise specified in the related Prospectus Supplement, the Trust
Documents will require CITSF to make on each Subsequent Transfer Date the same
representations and warranties with respect to each individual Subsequent
Contract as it is required to make with respect to each Initial Contract sold
to the Trust except that each such representation and warranty shall be made
as of the Subsequent Cut-off Date relating to such Subsequent Contract. In
addition, no Subsequent Contract will be sold to the Trust on a Subsequent
Transfer Date unless such Subsequent Contract satisfies the criteria described
in the related Prospectus Supplement. Unless otherwise specified in the
related Prospectus Supplement, the Subsequent Financed Vehicles will consist
of motor homes, travel trailers and other types of recreational vehicles.
Unless otherwise specified in the related Prospectus Supplement, under the
terms of the Trust Documents and subject to certain conditions specified in
the Trust Documents, CITSF will be obligated to purchase from the Trust for
the Purchase Price (as defined below) any Contract (a "Repurchased Contract")
not later than ninety days after CITSF becomes aware, or eighty-five days
after CITSF's receipt of written notice from a Trustee or the Servicer, of a
breach of any representation or warranty by CITSF in the Trust Documents that
materially and adversely affects the Trust's interest in such Contract if such
breach has not been cured. CITSF shall effect such repurchase from the Trust
by depositing the Purchase Price for such Contract in the Collection Account
on the Deposit Date immediately following the determination that such Purchase
Price is owed. Unless otherwise specified in the related Prospectus
Supplement, the "Purchase Price" for any Contract will be the remaining
principal amount outstanding on such Contract on the date of repurchase, plus
thirty days' interest thereon in an amount equal to the sum of (i) the product
of one-twelfth of the weighted average of the Pass-Through Rate and of the
Interest Rate and the remaining principal amount outstanding (without giving
effect to any reductions thereof for unrecoverable Monthly Advances) on the
Contract, and (ii) accrued and unpaid Servicing Fees thereon at the Servicing
Fee Rate to the date of such repurchase. Upon such repurchase, the Trust shall
transfer all right, title and interest in the Contract to CITSF, free and
clear of the lien of the applicable Trust Documents. Unless otherwise
specified in the related Prospectus Supplement, this repurchase obligation
constitutes the sole remedy available to the Trust and the Securityholders for
a breach of a representation and warranty under the Trust Documents with
respect to the Contracts (but not with respect to any other breach by CITSF of
its obligations under the Trust Documents).
Unless otherwise specified in the related Prospectus Supplement, CITSF, the
Company and the Trust will treat each of the transfers of the Contracts from
CITSF to the Company and from the Company to the Trust as a sale. As a result
of the sale of the Contracts by CITSF to the Company and by the Company to the
Trust, the Contracts should not be part of the assets of either CITSF or the
Company and should not be available to their respective creditors. However, in
the event of the insolvency of CITSF or the Company, it is possible that a
trustee in bankruptcy, conservator or receiver for, or a creditor of, CITSF or
the Company, as the case may be, may assert that the transaction between CITSF
and the Company or between the Company and the Trust, as the case may be, was
a pledge of the Contracts to secure a loan, rather than a true sale. This
position, if asserted, could prevent timely receipt by the Trust of payments
of amounts due on the Contracts and, if accepted by a court, may result in
delays or reductions in distributions of principal and interest on the
Securities. Since the Contracts will remain in CITSF's possession and will not
be stamped or otherwise marked to reflect the sale and assignment to the
Trust, the Trust's interest in the Contracts could be defeated if a subsequent
purchaser were to take physical possession of the Contracts without knowledge
of the sale and assignment. See "Certain Legal Aspects of the Contracts."
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If specified in the related Prospectus Supplement, the terms of the sale of
some or all of the Contracts from CITSF or the Seller or both to the related
Trust may provide for the retention by CITSF or the Seller or both, as the
case may be, of the right to receive a portion of the interest accruing
thereon (the "Retained Yield").
CUSTODY OF CONTRACT FILES
Unless otherwise specified in the related Prospectus Supplement, to reduce
administrative costs, each Trust will appoint CITSF as initial custodian of
the Contracts. Prior to the appointment of any custodian other than CITSF, the
Trust and such proposed successor custodian specified in the related
Prospectus Supplement shall enter into a custodian agreement pursuant to which
such successor custodian will agree to hold the Contract Files on behalf of
the related Trust. Any such custodian agreement may be terminated by the Trust
on thirty days' notice to such successor custodian.
Unless otherwise specified in the related Prospectus Supplement, to
facilitate servicing and reduce administrative costs, the documents will not
be physically segregated from other similar documents which are in CITSF's
possession. UCC financing statements will be filed in New Jersey and Oklahoma
reflecting the sale and assignment of the Contracts to the Trustee, and
CITSF's accounting records and computer systems will also reflect such sale
and assignment. The Contracts will not be stamped or otherwise marked to
reflect the transfer of the Contracts by CITSF to the Company and by the
Company to the Trust, and will not be segregated from the other installment
sale contracts of CITSF. The Obligors under the Contracts will not be notified
of the transfer of the Contracts to the Company or to the Trust. If, through
inadvertence or otherwise, any of the Contracts were sold to another party (or
a security interest therein were granted to another party) that purchased (or
took such security interest in) any of such Contracts in the ordinary course
of its business and took possession of such Contracts, the purchaser (or
secured party) would acquire an interest in the Contracts superior to the
interest of the related Trust if the purchaser (or secured party) acquired (or
took a security interest in) the Contracts for new value and without actual
knowledge of such Trust's interest. See "Certain Legal Aspects of the
Contracts."
ACCOUNTS
For each Trust, the Servicer will establish and maintain with a Trustee one
or more accounts, in the name of such Trustee on behalf of the
Certificateholders and Noteholders, if any, into which all payments made
(after the Initial Cut-off Date or the Subsequent Cut-off Date, as applicable)
on or with respect to the Contracts in the related Contract Pool will be
deposited (the "Collection Account") by the Servicer. See "--Collections." The
Servicer will establish and maintain with a Trustee (or its designated agent)
an account in the name of such Trustee on behalf of the Certificateholders,
into which amounts released from the Collection Account and any Enhancement
for payment to the Certificateholders will be deposited and from which
distributions to the Certificateholders will be made (the "Certificate
Distribution Account"). The Servicer will establish and maintain with the
Indenture Trustee (or its designated agent) an account in the name of the
Indenture Trustee on behalf of the Noteholders, if any, into which amounts
released from the Collection Account and from any Enhancement for payment to
the Noteholders will be deposited and from which distributions to the
Noteholders will be made (the "Note Distribution Account").
Amounts held in the Certificate Distribution Account and in such other
accounts as may be specified in the related Prospectus Supplement will not be
available to make payments of amounts due on the Notes, if any, and will not
be pledged to the Indenture Trustee as collateral security for the Notes.
Each Account will be an Eligible Account maintained with the Trustee, the
Indenture Trustee and/or other depository institutions. "Eligible Account"
means any account which is (i) an account
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maintained with an Eligible Institution (as defined below); (ii) an account or
accounts the deposits in which are fully insured by either the Bank Insurance
Fund or the Savings Association Insurance Fund of the FDIC; (iii) a
"segregated trust account" maintained with the corporate trust department of a
federal or state chartered depository institution or trust company with trust
powers and acting in its fiduciary capacity for the benefit of a Trustee,
which depository institution or trust company has capital and surplus (or, if
such depository institution or trust company is a subsidiary of a bank holding
company system, the capital and surplus of the bank holding company) of not
less than $50,000,000 and the securities of such depository institution (or,
if such depository institution is a subsidiary of a bank holding company
system and such depository institution's securities are not rated, the
securities of the bank holding company) have a credit rating from each Rating
Agency in one of its generic credit rating categories which signifies
investment grade; or (iv) an account that will not cause any Rating Agency to
downgrade or withdraw its then-current rating assigned to the Securities of
such series, as confirmed in writing by each Rating Agency. "Eligible
Institution" means any depository institution organized under the laws of the
United States or any state, the deposits of which are insured to the full
extent permitted by law by the Bank Insurance Fund (currently administered by
the Federal Deposit Insurance Corporation), whose short-term deposits have
been rated in one of the two highest rating categories or such other rating
category as will not adversely affect the ratings assigned to the Certificates
and/or Notes, if any, of such series.
Unless otherwise specified in the related Prospectus Supplement, all amounts
held in each of the accounts established by the Servicer on behalf of a Trust
shall be invested in Eligible Investments that mature not later than the
Business Day preceding the Distribution Date next succeeding the date of
investment. "Eligible Investments" are limited to investments, specified in
the applicable Trust Documents, which meet the criteria of each Rating Agency
from time to time as being consistent with their then-current ratings of the
Securities. Investment earnings on amounts on deposit in the Collection
Account, Certificate Distribution Account, Note Distribution Account, if any,
and any cash collateral account will not be available to make payments on the
Securities, unless otherwise specified in the related Prospectus Supplement.
SERVICING PROCEDURES
The Servicer will make reasonable efforts, consistent with the customary
servicing procedures employed by the Servicer with respect to Contracts owned
or serviced by it, to collect all payments due with respect to the Contracts
and, in a manner consistent with the Trust Documents, will continue such
normal collection practices and procedures as it follows with respect to
comparable recreational vehicle installment sale contracts that it services
for itself and others. See "Certain Legal Aspects of the Contracts." The
Servicer will follow such normal collection practices and procedures as it
deems necessary or advisable to realize upon any Contract with respect to
which it determines that eventual payment in full is unlikely or to realize
upon any defaulted Contract. The Servicer may sell the related Financed
Vehicle securing such Contract at a public or private sale, or take any other
action permitted by applicable law. See "Certain Legal Aspects of the
Contracts." The proceeds of such realization (net of expenses) will be
deposited in the Collection Account.
Unless otherwise specified in the related Prospectus Supplement, the
Servicer shall keep in force throughout the term of the Trust Documents (i) at
such time as the long-term debt of its parent is rated less than "A" by
Standard & Poor's Ratings Group (if it is a Rating Agency for the series of
Securities) or less than "A3" by Moody's Investors Service, Inc. (if it is a
Rating Agency for the series of Securities), a policy or policies of insurance
covering errors and omissions for failure to maintain insurance as required by
the Trust Documents and (ii) a fidelity bond. Such policy or policies and such
fidelity bond shall have such deductibles, and be in such form and amount as
is generally customary among persons which service a portfolio of recreational
vehicle contracts having an aggregate principal amount of $100 million or more
and which are generally regarded as servicers acceptable to institutional
investors.
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PURCHASE BY THE SERVICER
A breach of certain covenants made by the Servicer in the Trust Documents
that materially and adversely affects the Trust's interest in any Contract,
would require the Servicer to purchase such Contract for the Purchase Price,
unless such breach is cured within the period specified in the Trust
Documents. Unless otherwise specified in the related Prospectus Supplement,
such covenants will include covenants by the Servicer not to (i) release the
Financed Vehicle securing each Contract from the security interest granted by
the Contract except as contemplated by the Trust Documents and in accordance
with the terms of the Contract and applicable law, (ii) impair the rights of
the Trust in the Contracts or take any action inconsistent with the Trust's
ownership of the Contracts except as expressly provided in the Trust
Documents, (iii) increase the number of payments under a Contract, nor
increase the principal amount of such Contract which is used to finance the
purchase price of the related Financed Vehicles, nor extend or forgive
payments on a Contract, except as expressly provided in the Trust Documents,
and (iv) fail to comply with the provisions of any insurance policy covering a
Contract, if the failure to comply would impair the protection or benefit to
be afforded by such insurance policy.
MODIFICATION OF CONTRACTS
Consistent with its customary servicing procedures, the Servicer may, in its
discretion, arrange with an Obligor to defer, reschedule, extend or modify the
payment schedule on a Contract or otherwise to modify the terms of a Contract
provided that (i) the maturity of such Contract would not extend beyond the
180th day prior to the Note Final Scheduled Distribution Date (if applicable)
and (ii) the deferral, rescheduling, extension or other modification of the
terms of the Contract would not constitute a cancellation of such Contract and
the creation of a new installment sale contract.
REMOVAL OF CONTRACTS
Except as otherwise specified herein or in the related Prospectus
Supplement, neither the Seller nor the Servicer will have the right to remove
any Contracts from the Contract Pool after the Closing Date. In certain
circumstances CITSF or the Servicer may have the obligation to repurchase, or
CITSF may have the option to purchase, a Contract from the Trust, but all such
repurchases or purchases will be made at the Purchase Price.
SERVICING COMPENSATION
With respect to each series of the Securities, the Servicer will be entitled
to receive, out of collections on the Contracts, a monthly fee (the "Servicing
Fee") for each Due Period, payable on the following Distribution Date, equal,
unless otherwise specified in the related Prospectus Supplement, to the sum of
(i) one-twelfth of the product of the percentage specified in the related
Prospectus Supplement (the "Servicing Fee Rate") and the Pool Balance as of
the last day of the second preceding Due Period (or, in the case of the first
Distribution Date, as of the Initial Cut-off Date) and (ii) any investment
earnings (net of investment expenses and losses) on amounts on deposit in the
Collection Account, the Note Distribution Account, if any, and the Certificate
Distribution Account; provided, however, that the Servicing Fee Rate
applicable to a Trust may be increased to a rate (or maximum rate) specified
in the related Prospectus Supplement if CITSF or an affiliate thereof is not
the Servicer. Payments to the Servicer of such amounts will compensate the
Servicer for performing the functions of a third party servicer of
recreational vehicle contracts as an agent for the Trust, including collecting
and posting all payments, responding to inquiries of Obligors, investigating
delinquencies, reporting federal income tax information to Obligors,
monitoring the collateral in cases of Obligor default and handling the
foreclosure or other liquidation of the Financed Vehicle in appropriate
instances (subject to reimbursement of its expenses incurred in connection
with such foreclosure, liquidation or other realization on the Contracts).
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The Servicing Fee also will compensate the Servicer for administering the
Contracts, including reimbursing the Servicer for accounting for collections,
furnishing monthly and annual statements to the Trustee with respect to
distributions and generating federal income tax information. The Servicing Fee
also will compensate the Servicer for certain taxes, accounting fees, outside
auditor fees, data processing costs and other costs incurred in connection
with administering and servicing the Contracts.
COLLECTIONS
With respect to each series of the Securities, the Servicer will deposit all
payments on or with respect to the Contracts and all proceeds of Contracts
collected during each Due Period into the Collection Account not later than
two Business Days after receipt. Notwithstanding the foregoing, unless
otherwise specified in the related Prospectus Supplement, the Servicer may
make such deposits into the Collection Account monthly on the Deposit Date
following the last day of each Due Period, provided that (i) the Servicer or
the direct or indirect parent of the Servicer has and maintains a short-term
debt rating of at least A-1 by Standard & Poor's Ratings Group (if it is a
Rating Agency for the series of Securities), and either a short-term debt
rating of P-1 or a long-term debt rating of at least A2 by Moody's Investors
Service, Inc. (if it is a Rating Agency for the series of Securities) (the
"Required Servicer Ratings"), or (ii) the Servicer obtains a letter of credit,
surety bond or insurance policy (the "Servicer Letter of Credit") as will be
provided for in the related Trust Documents, under which demands for payment
may be made to secure timely remittance of monthly collections to the
Collection Account and, in the case of clause (ii) above, the Trustees are
provided with a letter from each Rating Agency to the effect that the
utilization of such alternative remittance schedule will not result in a
qualification, reduction or withdrawal of its then-current rating of the
Securities. As of the date of this Prospectus, CITSF, as Servicer, will be
permitted to remit collections to the Collection Account on a monthly basis by
virtue of clause (i) above. In the event that the Servicer is permitted to
make remittances of collections to the Collection Account on a monthly basis
pursuant to satisfaction of clause (ii) above, the Trust Documents will be
modified, to the extent necessary, without the consent of any Securityholder.
Pending such a monthly deposit into the Collection Account, collections on the
Contracts may be invested by the Servicer at its own risk and for its own
benefit and will not be segregated from its own funds. See "Risk Factors--Risk
of Commingling."
CITSF or the Servicer, as the case may be, will remit the aggregate Purchase
Price of any Contracts to be purchased from the Trust into the Collection
Account on or before the next succeeding Deposit Date.
Unless otherwise specified in the related Prospectus Supplement, the
Servicer will not be required to deposit in the Collection Account amounts
relating to the Contracts attributable to the following: (a) amounts received
with respect to each Contract (or property acquired in respect thereof) which
has been purchased by CITSF or the Servicer pursuant to the Trust Documents,
(b) net investment earnings on funds deposited in the Collection Account, the
Note Distribution Account, if any, and the Certificate Distribution Account,
(c) amounts to be reimbursed to the Servicer in respect of nonrecoverable
Monthly Advances, (d) amounts received in respect of the amounts, if any, of
insurance premiums added to the principal balance of a Contract after the
Initial Cut-off Date for each such Initial Contract, or after the related
Subsequent Cut-off Date for each such Subsequent Contract, (e) amounts
received as liquidation proceeds, to the extent the Servicer is entitled to
reimbursement of liquidation expenses related thereto, and (f) repossession
profits on liquidated Contracts.
MONTHLY ADVANCES
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Contract as to which there has been an Interest Shortfall
during the related Due Period, the Servicer shall advance funds in the amount
of such Interest Shortfall (each, a "Monthly Advance"), but only to the extent
that the Servicer, in its good faith judgment, expects to recover such Monthly
Advance from
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subsequent collections with respect to interest payments on such Contract made
by or on behalf of the obligor thereunder (the "Obligor"), or from net
liquidation proceeds or insurance proceeds with respect to such Contract. The
Servicer shall be reimbursed for any Monthly Advance from subsequent
collections with respect to such Contract. If the Servicer determines in its
good faith judgment that an unreimbursed Monthly Advance shall not ultimately
be recoverable from such collections, the Servicer shall be reimbursed for
such Monthly Advance from collections on all Contracts. In determining whether
an advance is or will be nonrecoverable, the Servicer need not take into
account that it might receive any amounts in a deficiency judgment. Unless
otherwise specified in the related Prospectus Supplement, the Servicer will
not make a Monthly Advance in respect of (i) the principal component of any
scheduled payment or (ii) an Interest Shortfall arising from a Contract which
has been prepaid in full or which has been subject to a Relief Act Reduction
during the related Due Period.
Unless otherwise specified in the related Prospectus Supplement, "Interest
Shortfall" means with respect to any Contract and any Distribution Date, the
excess of (A) the product of (i) the sum of (a) one-twelfth of the weighted
average of the Pass-Through Rate and the Interest Rate and (b) one-twelfth of
the Servicing Fee Rate and (ii) the outstanding principal amount of such
Contract as of the last day of the second preceding Due Period (or, in the
case of the first Due Period ending after the Contract was acquired by the
related Trust, as of the Initial Cut-off Date or the Subsequent Cut-off Date,
as the case may be) over (B) the amount of interest, if any, collected on such
Contract in the related Due Period.
Unless otherwise specified in the related Prospectus Supplement, the
Servicer will remit any Monthly Advance with respect to each Due Period into
the Collection Account not later than the Deposit Date following the Due
Period.
NON-REIMBURSABLE PAYMENT
When a payment of principal is made on or in respect of a simple-interest
Contract, interest is paid on the unpaid principal balance of such Contract
only to the date of such payment. If and to the extent specified in the
related Prospectus Supplement, with respect to each Contract as to which there
has been an Interest Shortfall in the related Due Period arising from either a
prepayment in full of such Contract or a Relief Act Reduction in respect of
such Contract during such Due Period, the Trust Documents will require the
Servicer to deposit into the Collection Account on the Business Day
immediately preceding the following Distribution Date, without the right of
subsequent reimbursement, an amount equal to such Interest Shortfall (a "Non-
Reimbursable Payment"). If the related Prospectus Supplement does not specify
that the Servicer will make Non-Reimbursable Payments, the Servicer will not
be obligated to make such payments with respect to the Trust.
DISTRIBUTIONS
With respect to each Trust, on or before the Determination Date preceding a
Distribution Date, the Servicer will make a determination and inform the
Trustees of the following amounts with respect to the preceding Due Period:
(i) the aggregate amount of collections on the Contracts; (ii) the aggregate
amount of Monthly Advances to be remitted by the Servicer; (iii) the aggregate
Purchase Price of Contracts to be purchased by CITSF or the Servicer; (iv) if
applicable, the aggregate amount to be distributed as principal and interest
on the Notes on the related Distribution Date; (v) the aggregate amount to be
distributed as principal and interest on the Certificates on the related
Distribution Date; (vi) the Servicing Fee; (vii) the aggregate amount of Non-
Reimbursable Payments (if any); (viii) the amounts required to be withdrawn
from the Enhancement (if any) for such Distribution Date, (ix) any amount
which is payable to the provider of the Enhancement (if any) or the Affiliated
Purchaser (if any); (x) any amounts to be deposited into the accounts
established pursuant to the Trust Documents; and (xi) the aggregate amount of
unreimbursed Monthly Advances to be reimbursed to the Servicer.
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Unless otherwise specified in the related Prospectus Supplement, the
"Available Amount" with respect to each Trust, on any Distribution Date is
equal to the excess of (A) the sum of (i) all amounts on deposit in the
Collection Account attributable to collections or deposits made in respect of
such Contracts (including any late fees, prepayment charges, extension fees or
other administrative fees or similar charges allowed by applicable law with
respect to the Contracts ("Late Fees")) during the Due Period preceding the
Distribution Date, and (ii) the Purchase Price for any Contract repurchased by
CITSF as a result of breaches of certain representations and warranties or
purchased by the Servicer as a result of breaches of certain covenants and any
Monthly Advances and any Non-Reimbursable Payments made by the Servicer, if
such Purchase Price, Monthly Advance or Non-Reimbursable Payment is paid on
the Deposit Date immediately preceding such Distribution Date, over (B) the
sum of the following amounts (to the extent that the Servicer has not already
withheld such amounts from collections on the Contracts): any repossession
profits on liquidated Contracts, Liquidation Expenses (as defined in the Trust
Documents) incurred and taxes and insurance advanced by the Servicer in
respect of Financed Vehicles that are reimbursable to the Servicer under the
Trust Documents; any amounts incorrectly deposited in the Collection Account;
net investment earnings on the funds in the Collection Account; and any other
amounts permitted to be withdrawn from the Collection Account by the Servicer
(or to be retained by the Servicer from collections on the Contracts) pursuant
to the Trust Documents.
With respect to each Trust, beginning on the Distribution Date specified in
the related Prospectus Supplement, distributions of principal and interest
(or, where applicable, of principal or interest only) on each class of
Securities entitled thereto will be made by the Trustee or the Indenture
Trustee, as applicable, to the Certificateholders and the Noteholders, if any,
from the Available Amount. Unless otherwise specified in the related
Prospectus Supplement, the Servicing Fee and any additional servicing
compensation will be paid from the Available Amount prior to distributions to
Certificateholders and Noteholders, if any. The timing, calculation,
allocation, order, source, priorities of and requirements for all
distributions to each class of Certificateholders and all payments to each
class of Noteholders, if any, will be set forth in the related Prospectus
Supplement.
NET DEPOSITS
Unless otherwise specified in the related Prospectus Supplement, as an
administrative convenience, the Servicer will be permitted to make deposits of
collections, Monthly Advances, Non-Reimbursable Payments and the aggregate
Purchase Price of Contracts for, or with respect to, a Due Period net of
distributions to be made to the Servicer with respect to such Due Period
(including, without limitation, the Servicing Fee, reimbursement of
nonrecoverable Monthly Advances and amounts to be deducted in the definition
of "Available Amount" set forth under "--Distributions" above). The Servicer,
however, will account to the Trustees and to the Securityholders as if all
such deposits and distributions were made on an aggregate basis for each type
of payment or deposit.
STATEMENTS TO TRUSTEES AND TRUST
Unless otherwise specified in the related Prospectus Supplement, on or
before each Determination Date, the Servicer will provide to the Trustees, any
paying agent and the Affiliated Purchaser (if any) as of the close of business
on the last day of the preceding Due Period, a statement setting forth
substantially the same information as is required to be provided in the
periodic reports provided to Securityholders described above under "Certain
Information Regarding The Securities--Statements to Securityholders." Each
such report will be accompanied by a statement from an appropriate officer of
the Servicer certifying the accuracy of such report and stating that the
Servicer has not defaulted in the performance of its obligations under the
Trust Documents (or, if such default has occurred, describing each such
default).
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Unless otherwise specified in the related Prospectus Supplement, the Trust
Documents will require that on or before March 31 of each year, the Servicer
will deliver to the Trustee a report of independent public accountants which
opines on, at a minimum, the servicing entity's compliance with the minimum
servicing standards set forth in the Uniform Single Attestation Program for
Mortgage Bankers (in accordance with the 1995 revisions made thereto). The
Trust Documents will require that such examination and report of independent
public accountants be prepared in accordance with the requirements set forth
in the Uniform Single Attestation Program for Mortgage Bankers (in accordance
with the 1995 revisions made thereto).
The Servicer, on request of the Trustees, will furnish to the Trustees such
reasonably pertinent underlying data on the Contracts as can be generated by
the Servicer's existing data processing system without undue modification or
expense.
CERTAIN MATTERS REGARDING THE SERVICER
Unless otherwise specified in the related Prospectus Supplement, the Trust
Documents will provide that the Servicer may not resign from its obligations
and duties as Servicer thereunder, except upon a determination that the
Servicer's performance of such duties is no longer permissible under
applicable law. Such resignation will not become effective until a Trustee or
a successor Servicer has assumed the Servicer's servicing obligations and
duties under the Trust Documents.
Unless otherwise specified in the related Prospectus Supplement, the Trust
Documents will further provide that neither the Servicer nor the Company nor
any of their shareholders, affiliates, directors, officers, employees and
agents shall be under any liability to the Trustees, the Trust or the
Securityholders for taking any action or for refraining from taking any action
pursuant to the Trust Documents or for errors in judgment; provided, however,
that neither the Servicer nor any such person will be protected against any
liability which otherwise would be imposed by reason of willful misfeasance,
bad faith or negligence in the performance of duties or by reason or reckless
disregard of obligations and duties thereunder. In addition, unless otherwise
specified in the related Prospectus Supplement, the Trust Documents will
provide that the Servicer is under no obligation to appear in, prosecute or
defend any legal action which arises under the Trust Documents and that, in
its opinion, may cause it to incur any expense or liability. The Servicer may,
however, undertake any reasonable action that it may deem necessary or
desirable in respect of the Trust Documents and the rights and duties of the
parties thereto and the interests of the Securityholders thereunder. In the
event that the Servicer or the Company, in its discretion, undertakes any
action which it deems necessary or desirable in connection with its rights and
duties under the Trust Documents or the interests of the Securityholders
thereunder, the legal expenses and costs of such action and any liability
resulting therefrom will be expenses, costs and liabilities of the Trust, and
the Servicer and the Company will be entitled to be reimbursed therefor out of
the Collection Account.
Unless otherwise specified in the related Prospectus Supplement, any
corporation or other entity into which the Servicer may be merged or
consolidated, or any corporation or other entity resulting from any merger,
conversion or consolidation to which the Servicer is a party, or any
corporation or other entity succeeding to the business of the Servicer, which
corporation or other entity assumes the obligations of the Servicer, will be
the successor of the Servicer under the Trust Documents.
The Servicer may sell, transfer, assign or convey its rights as Servicer to
any entity qualified to act as servicer under the Trust Documents, upon
written notice to the Trustees and the Rating Agencies, without the consent of
the Securityholders, provided that the Rating Agency Condition is satisfied.
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PHYSICAL DAMAGE INSURANCE
Unless otherwise specified in the related Prospectus Supplement, the Trust
Documents will provide that the Servicer, in accordance with its customary
servicing procedures, shall use its best efforts to require that each Obligor
shall have obtained and shall maintain physical damage insurance covering the
Financed Vehicle, provided that such insurance shall be in an amount no
greater than the outstanding principal balance of the related Contract or, if
such insurance covers the interest of the related Obligor in the Financed
Vehicle, no greater than the greater of the outstanding principal balance of
the related Contract and the value of the Financed Vehicle, or such lesser
amount permitted by applicable law. The Servicer shall enforce its rights
under the Contracts to require the Obligors to maintain physical damage
insurance, in accordance with the Servicer's customary practices and
procedures with respect to comparable new or used recreational vehicles
financed by installment sale contracts that it services for itself or others.
If an Obligor fails to maintain such insurance, the Servicer shall obtain such
physical damage insurance and advance such premiums for such insurance on the
behalf of such Obligor, as required under the terms of the applicable Contract
and the Trust Documents, each insurance policy naming the Servicer as an
additional insured and loss payee and issued by an insurer having a rating of
"A" or better by A.M. Best (such insurance being referred to herein as "Force-
Placed Insurance"). Such Force-Placed Insurance and any commissions or finance
charges collected by the Servicer in connection therewith shall be, to the
extent permitted by law, in an amount in accordance with customary servicing
procedures, but in no event in an amount greater than the outstanding
principal balance of the related Contract or, if such insurance also covers
the interest of the related Obligor in the Financed Vehicle, no greater than
the greater of the outstanding principal balance of the related Contract and
the value of the Financed Vehicle, or such lesser amount permitted by
applicable law. The Servicer shall be required to disclose to the related
Obligor all information with respect to such Force-Placed Insurance,
commissions and finance charges as required by applicable law.
The Servicer does not, under its customary servicing procedures, obtain
Force-Placed Insurance when the principal balance of the related Contract
falls below the level or levels periodically established in accordance with
such customary servicing procedures. In accordance with such customary
servicing procedures, the Servicer may periodically readjust such levels,
suspend Force-Placed Insurance or arrange other methods of protection of the
Financed Vehicles that it deems necessary or advisable, provided that the
Servicer determines that such actions do not materially and adversely affect
the interests of the Certificateholders or the Noteholders.
Any portion of the principal balance of a Contract attributable to premiums
for Force-Placed Insurance acquired after the Initial Cut-off Date, or the
related Subsequent Cut-off Date, will not be owned by the Trust, and amounts
allocable thereto will not be available for distribution in respect of the
Securities. Unless otherwise designated by the Obligor, the Servicer will not
allocate payments by the Obligor to pay Force-Placed Insurance premiums added
to the Contracts after the Initial Cut-off Date or a Subsequent Cut-off Date,
as the case may be, if any amount of principal or interest is due but unpaid
on the Contracts. The Servicer shall not deposit payments posted with respect
to such Force-Placed Insurance in the Collection Account and shall instead
promptly pay such amounts to an account of the Servicer maintained for that
purpose. In the event that an Obligor under a Contract with respect to which
the Servicer has advanced funds to obtain Force-Placed Insurance makes
scheduled payments under the Contract, but fails to make scheduled payments of
such Force-Placed Insurance as due, and the Servicer has determined that
eventual payment of such amount is unlikely, the Servicer may, but shall not
be required to, take any action available to it, including determining that
the related Contract is a defaulted Contract; provided, however, that any net
liquidation proceeds with respect to such Contract shall be applied first to
the accrued and unpaid interest at the Contract Rate, then to the principal
amount outstanding, and the remainder, if any, to repayment of any such Force-
Placed Insurance premiums added to the Initial Contracts after the Initial
Cut-off Date or to any Subsequent Contracts after the related Subsequent Cut-
off Date.
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Unless otherwise specified in the related Prospectus Supplement, the Trust
Documents will permit the Servicer or any affiliate of the Servicer, to the
extent permitted by law, to (i) enter into agreements with one or more
insurers or other persons pursuant to which the Servicer or such affiliate
will earn commissions and fees in connection with any insurance policy
purchased by an Obligor including, without limitation, any physical damage
insurance policy (whether or not such physical damage insurance policy is
force-placed pursuant to the provisions of any Contract), or any other
insurance policy whatsoever, and (ii) in connection with the foregoing, to
solicit, or permit and assist any insurer or any agent thereof to solicit
(including, without limitation, providing such insurer or agent a list of
Obligors including name, address or other information) any Obligor.
EVENT OF TERMINATION
Unless otherwise specified in the related Prospectus Supplement, an "Event
of Termination" under the Trust Documents will consist of (i) any failure by
the Servicer to make any deposit into an account required to be made under the
Trust Documents which failure continues unremedied for five (5) Business Days
after the Servicer becomes aware that such deposit was required; (ii) any
failure by the Servicer duly to observe or perform in any material respect any
other of its covenants or agreements in the Trust Documents (other than those
described in clause (i)) which materially and adversely affects the rights of
the Securityholders and which continues unremedied for 60 days after the
giving of written notice of such failure; (iii) any assignment or delegation
by the Servicer of its duties or rights under the Trust Documents, except as
specifically permitted under the Trust Documents, or any attempt to make such
an assignment or delegation; (iv) certain events of insolvency, readjustment
of debt, marshaling of assets and liabilities or similar proceedings regarding
the Servicer; or (v) any disqualification of the Servicer as an Eligible
Servicer (as defined in the Trust Documents). "Notice" as used herein means
notice to the Servicer by the Trustees or the Company, or to the Company, the
Servicer and the Trustees by the Certificateholders holding not less than 25%
of the outstanding Certificate Balance of such Trust, and by the Noteholders,
if any, holding not less than 25% of the aggregate outstanding principal
amount of the Notes issued by such Trust.
RIGHTS UPON EVENT OF TERMINATION
Unless otherwise specified in the related Prospectus Supplement, as long as
an Event of Termination under the Trust Documents remains unremedied, the
Indenture Trustee (or, if no Notes of the series are outstanding, the Trustee)
may, and at the written direction of the holders of related Notes evidencing
not less than a majority of the aggregate outstanding principal amount of the
Notes issued by such Trust (or, if no Notes are outstanding, the holders of
related Certificates evidencing not less than a majority of the Certificate
Balance of such series), will, unless prohibited by applicable law, terminate
all (but no less than all) of the rights and obligations of the Servicer with
respect to a Trust under the Trust Documents and in and to the Contracts, and
the proceeds thereof, whereupon (subject to applicable law) all authority and
power of the Servicer under the Trust Documents, whether with respect to the
Contracts, the Contract Files or otherwise, will pass to and be vested in the
Indenture Trustee (or, if no Notes of the series are outstanding, such
authority will pass to and be vested in the Trustee); provided, however, that
neither the Indenture Trustee (or, if no Notes of the series are outstanding,
the Trustee) nor any successor servicer will assume any obligation of CITSF to
repurchase Contracts for breaches of representations or warranties, and the
Indenture Trustee (or, if no Notes of the series are outstanding, the Trustee)
or the successor Servicer will not be liable for any acts or omissions of the
Servicer occurring prior to a transfer of the Servicer's servicing and related
functions or for any breach by the Servicer of any of its obligations
contained in the Trust Documents. Notwithstanding such termination, the
Servicer will be entitled to payment of certain amounts payable to it for
services rendered prior to such termination. No such termination will affect
in any manner CITSF's obligation to repurchase certain Contracts for breaches
of representations or warranties under the Trust Documents. In the event that
a Trustee would be obligated to succeed the Servicer but is
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unwilling or unable so to act, it may appoint, or petition to a court of
competent jurisdiction for the appointment of, a Servicer which meets the
requirements for an Eligible Servicer under the Trust Documents. Pending such
appointment, such Trustee is obligated to act in such capacity, unless it is
prohibited by law from so acting. The Indenture Trustee (or, if no Notes of
the series are outstanding, the Trustee) and such successor may agree upon the
servicing compensation to be paid, which in no event, without written consent
of not less than 66 2/3% in principal amount of the related Securityholders,
may be greater than the compensation to CITSF as Servicer under the Trust
Documents.
WAIVER OF PAST DEFAULTS
With respect to any series of Securities, unless otherwise specified in the
related Prospectus Supplement, the holders of Notes evidencing not less than a
majority of the aggregate outstanding principal amount of the Notes (or the
holders of the Certificates evidencing not less than a majority of the
Certificate Balance of such series, in the case that all the Notes have been
paid in full and the Indenture has been discharged in accordance with its
terms) may, on behalf of all such Noteholders and Certificateholders, waive
any default by the Servicer in the performance of its obligations under the
Trust Documents and its consequences, except an Event of Termination in making
any required deposits to or payments from any of the accounts in accordance
with the Trust Documents. No such waiver will impair such Noteholders' or
Certificateholders' right with respect to subsequent defaults.
AMENDMENT
Unless otherwise specified in the related Prospectus Supplement, the Trust
Documents may be amended by the parties thereto and, in the event that such
amendment affects the Indenture Trustee, the Indenture Trustee, without prior
notice to or the consent of the related Noteholders or Certificateholders (i)
to correct manifest error or cure any ambiguity; (ii) to correct or supplement
any provision therein which may be inconsistent with any other provision
therein; (iii) to add or amend any provision as requested by the Rating
Agencies to maintain or improve the rating of the Certificates or Notes, if
any; (iv) to add to the covenants, restrictions or obligations of the Company,
the Servicer or the Trustee or to provide for the delivery of or substitution
for an Enhancement or a Servicer Letter of Credit; (v) to evidence and provide
for the acceptance of the appointment of a successor trustee with respect to
the property owned by the related Trust and add to or change any provisions as
shall be necessary to facilitate the administration of the trusts under the
Trust Documents by more than one trustee; or (vi) to add, change or eliminate
any other provisions, provided that an amendment pursuant to clause (vi) will
not, in the opinion of counsel (which may be internal counsel to the Company
or the Servicer) adversely affect in any material respect the interests of the
Trust, the Certificateholders or the Noteholders, if any. Unless otherwise
specified in the related Prospectus Supplement, the Trust Documents may also
be amended by the parties thereto, with the consent of the holders of at least
a majority in principal amount of such then outstanding Notes and the holders
of such Certificates evidencing at least a majority of the Certificate Balance
of such series for the purpose of adding any provisions to or changing in any
manner or eliminating any provisions of the Trust Documents, or of modifying
in any manner the rights of such Noteholders or Certificateholders,
respectively; except, that no such amendment, may except as described above,
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, distributions that are required to be made on any related Note or
Certificate, the related Pass-Through Rate or the Interest Rate. Any action
specified in clauses (v) and (vi) shall be taken only upon satisfaction of the
Rating Agency Condition.
INSOLVENCY EVENT
Unless otherwise specified in the related Prospectus Supplement, if the
related Prospectus Supplement specifies a holder of a Certificate as the
"Affiliated Purchaser" and any of certain events of insolvency, readjustment
of debt, marshaling of assets and liabilities, or similar proceedings with
respect to such person indicating its insolvency or inability to pay its
obligations (each, an "Insolvency
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Event") occurs with respect to the Affiliated Purchaser specified in the
related Prospectus Supplement, the related Contract Pool shall be liquidated
and the related Trust will be terminated, unless, within 90 days after the
date of such Insolvency Event, the Owner Trustee shall have received written
instructions from (i) each of the Certificateholders (other than the
Affiliated Purchaser, if any), and (ii) each of the Noteholders, if any, to
the effect that each such party disapproves of the liquidation of such
Contracts and termination of such Trust. Promptly after the occurrence of any
Insolvency Event with respect to the Affiliated Purchaser, if any, notice
thereof is required to be given to the Noteholders, if any, and
Certificateholders; except that any failure to give such required notice will
not prevent or delay termination of the Trust. Upon termination of the Trust,
the Owner Trustee shall direct the Indenture Trustee promptly to sell the
assets of such Trust (other than the Certificate Distribution Account, the
Note Distribution Account, if any, or any cash collateral account) in a
commercially reasonable manner and on commercially reasonable terms. The net
proceeds from any such sale, disposition or liquidation of the Contracts will
be treated as collections on the Contracts and deposited in the related
Collection Account. If the net proceeds from the liquidation of the Contracts
(after payment of the Servicer Payment and payment of the principal amount of
and accrued interest on the Notes of a series), and any amounts on deposit in
the Certificate Distribution Account are not sufficient to pay the principal
amount of and accrued interest on the Certificates of a series in full, the
amount of principal returned to the Certificateholders will be reduced (to the
extent that the Enhancement, if any, is not sufficient to prevent such
reduction) and the Certificateholders will incur a loss. If the net proceeds
from the liquidation of the Contracts (after payment of the Servicer Payment)
and any amounts on deposit in the Note Distribution Account are not sufficient
to pay the principal amount of and accrued interest on the Notes in full,
holders of the Notes also will incur a loss, except to the extent of payments
to the Noteholders from the Enhancement, if any, applicable to the Notes.
AFFILIATED PURCHASER LIABILITY
Unless otherwise specified in the related Prospectus Supplement, under the
Trust Documents, the Affiliated Purchaser, if any, specified in the related
Prospectus Supplement, will agree to be liable directly to an injured party
for the entire amount of any losses, claims, damages, liabilities or expenses
(other than those incurred by (i) a Certificateholder or Noteholder, if any,
in the capacity of an investor and (ii) the Trust under any agreement relating
to the Enhancement, if any) of the Trust to the extent that the Affiliated
Purchaser would be liable if the Trust were a partnership under the Delaware
Revised Uniform Limited Partnership Act in which the Affiliated Purchaser were
a general partner.
TERMINATION
Unless otherwise specified in the related Prospectus Supplement, the
obligations of the Servicer, the Company, the Affiliated Purchaser, if any,
and the Trustees pursuant to the Trust Documents for a series of the
Securities will terminate upon the earliest to occur of (i) the maturity or
other liquidation of the last related Contract and the disposition of any
amounts received upon liquidation of any property remaining in the related
Trust, (ii) the payment to Securityholders of the series of all amounts
required to be paid to them pursuant to the Trust Documents, (iii) the
occurrence of either event described below, and (iv) as otherwise required by
law, as described in the Trust Documents.
Unless otherwise specified in the related Prospectus Supplement, with
respect to each series of Securities, in order to avoid excessive
administrative expenses, CITSF will be permitted at its option to purchase
from the Trust, on any Distribution Date on which the Pool Balance as of the
last day of the related Due Period is less than or equal to a percentage
specified in the related Prospectus Supplement of the Initial Pool Balance,
all remaining related Contracts at a price equal to the aggregate Purchase
Price for the Contracts (including defaulted Contracts), plus the appraised
value of any other property held by the Trust (less liquidation expenses).
CITSF will give notice to the Trustees and the Depository of the exercise of
such option no later than the Determination Date succeeding such Due Period
and will deposit the amount required to purchase such Contracts on the
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Deposit Date succeeding such Due Period. Exercise of such right will effect
early retirement of the Securities. Unless otherwise specified in the related
Prospectus Supplement, the "Initial Pool Balance" equals the sum of (i) the
Pool Balance as of the Initial Cut-off Date, and (ii) the aggregate principal
balance of all Subsequent Contracts added to the Trust as of their respective
Subsequent Cut-off Dates.
Unless otherwise specified in the related Prospectus Supplement, within ten
days after the first Distribution Date on which the Pool Balance as of the
last day of the related Due Period is less than or equal to a percentage
specified in the related Prospectus Supplement of the Initial Pool Balance,
the Indenture Trustee (or, if the Notes have been paid in full and the
Indenture has been discharged in accordance with its terms, the Owner Trustee)
shall solicit bids for the purchase of the Contracts remaining in the Trust.
In the event that satisfactory bids are received as described below, the sale
proceeds will be distributed to Securityholders on the second Distribution
Date succeeding such Due Period. Any purchaser of the Contracts must agree to
the continuation of CITSF as Servicer on terms substantially similar to those
in the Trust Documents. Any such sale will effect early retirement of the
Securities.
Unless otherwise specified in the related Prospectus Supplement, such
Trustee must receive at least two bids from prospective purchasers that are
considered at the time to be competitive participants in the market for
recreational vehicle retail installment sale contracts. The highest bid may
not be less than the fair market value of such Contracts and must equal the
sum of (i) the greater of (a) the aggregate Purchase Price for the Contracts
(including defaulted Contracts) plus the appraised value of any other property
held by the Trust (less liquidation expenses), or (b) an amount that when
added to amounts on deposit in the Collection Account available for
distribution to Securityholders for such second succeeding Distribution Date
would result in proceeds sufficient to distribute to Securityholders the
amounts of interest due to Securityholders for such Distribution Date and any
unpaid interest payable to the Securityholders with respect to one or more
prior Distribution Dates and the outstanding principal amount of the Notes and
the Certificate Balance, and (ii) the sum of (a) an amount sufficient to
reimburse the Servicer for any unreimbursed Monthly Advances for which it is
entitled to reimbursement, and (b) the Servicing Fee payable on such final
Distribution Date, including any unpaid Servicing Fees with respect to one or
more prior Due Periods. Such Trustee may consult with financial advisors,
including any Underwriter, to determine if a bid is equal to or greater than
the fair market value of such Contracts. Upon the receipt of such bids, such
Trustee shall sell and assign such Contracts to the highest bidder and the
Securities shall be retired on such Distribution Date. If any of the foregoing
conditions are not met, such Trustee shall decline to consummate such sale and
shall not be under any obligation to solicit any further bids or otherwise
negotiate any further sale of Contracts remaining in the Trust. In such event,
however, such Trustee may from time to time solicit bids in the future for the
purchase of such Contracts upon the same terms described above.
Unless otherwise specified in the related Prospectus Supplement, such
Trustee will give written notice of termination to each Securityholder of
record. The final distribution to each Securityholder will be made only upon
surrender and cancellation of such holder's Securities at any office or agency
of such Trustee specified for such purpose. Any funds remaining in the Trust,
after such Trustee has taken certain measures to locate a Securityholder and
such measures have failed, will be distributed to the Affiliated Purchaser, if
any, or as specified in the related Prospectus Supplement.
CERTAIN LEGAL ASPECTS OF THE CONTRACTS
The following discussion contains summaries of certain legal aspects of
recreational vehicle contracts, which are general in nature. Since such legal
aspects are governed by applicable state law (which laws may differ
substantially), the summaries do not purport to be complete nor to reflect the
laws of any particular state, nor to encompass the laws of all states in which
the security for the
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Contracts is situated. The summaries are qualified in their entirety by
reference to the applicable federal and state laws governing the Contracts.
GENERAL
As a result of the assignment of the Contracts to the Trust, each Trust will
succeed collectively to the rights (including the right to receive payment on
the Contracts), and will assume the obligations, of CITSF under the related
Contracts. Each Contract evidences both (a) the obligation of the obligor to
repay the loan evidenced thereby, and (b) the grant of a security interest in
the Financed Vehicle to secure repayment of such loan. Certain aspects of both
features of the Contracts are described more fully below.
The Contracts are "chattel paper" as defined in the Uniform Commercial Code
(the "UCC") as in effect in the various states of origination of the
Contracts. Pursuant to the UCC, the sale of chattel paper is treated in a
manner similar to perfection of a security interest in chattel paper. Under
the Trust Documents, the Servicer will retain possession of the Contracts as
custodian for the Trustee, and will make an appropriate filing of a UCC
financing statement in New Jersey to perfect the sale of the Contracts by the
Company to the Trustee. The Contracts and the related certificates of title
will not be stamped to reflect their assignment from CITCF-NY to CITSF, from
CITSF to the Company or from the Company to the Trust. The Contract Files will
not be physically segregated from the contract files for contracts owned by
CITSF. If, through inadvertence or otherwise, another party in good faith
purchases (or takes a security interest in) the Contracts for new value in the
ordinary course of its business, without actual knowledge of the Trust's
interest, and takes possession of the Contracts, such purchaser or secured
party may acquire an interest in the Contracts superior to the interest of the
Trust.
Under the Trust Documents, the Servicer will be obligated from time to time
to take such actions as are necessary to continue the perfection of the
Trust's interest in the Contracts and the proceeds thereof. CITSF will warrant
in the Trust Documents, with respect to each Contract, as of the Closing Date
for each Initial Contract, and as of the related Subsequent Transfer Date, for
each Subsequent Contract, if any, that the Contract has not been sold,
assigned or pledged by CITSF to any person other than the Company, that
immediately prior to the transfer and assignment of the Contract to the
Company, CITSF had good and marketable title thereto, free and clear of any
encumbrance, equity, loan, pledge, charge, claim or security interest and,
immediately upon the transfer thereof, the Company will have good and
marketable title to the Contract, free and clear of any encumbrance, equity,
loan, pledge, charge, claim or security interest and that the transfer has
been perfected under applicable law. In the event of an uncured breach of any
such warranty that materially adversely affects the interest of the Trust in a
Contract transferred by the Company to the Trust, the only recourse of the
Certificateholders, the Trustees, or the Trust would be to require CITSF to
repurchase such Contract.
SECURITY INTERESTS IN THE FINANCED VEHICLES
General. The Contracts are installment sale contracts that evidence the
credit sale of recreational vehicles by Obligors. The Contracts also
constitute personal property security agreements and include grants of
security interests in the related recreational vehicles under the UCC.
Perfection rules relating to security interests in recreational vehicles are
generally governed under state certificate of title statutes (Alabama,
Connecticut, Georgia, Maine, Massachusetts, Minnesota, Mississippi, New
Hampshire, New York, Rhode Island and Vermont have adopted the Uniform Motor
Vehicle Certificate of Title and Anti-Theft Act) or by the vehicle
registration laws of the state in which each recreational vehicle is located.
In states which have adopted the Uniform Motor Vehicle Certificate of Title
and Anti-Theft Act, security interests in recreational vehicles may be
perfected either by notation of the secured party's lien on the certificate of
title or by delivery of the certificate of title and payment of a fee to the
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state motor vehicle authority, depending on the particular state law. In
states in which perfection of a security interest in a particular motor
vehicle is not governed by a certificate of title statute, perfection is
usually accomplished by filing pursuant to the provisions of the UCC.
Notwithstanding the foregoing, in certain states, folding camping trailers
and/or slide-in campers are not subject to state titling and vehicle
registration laws and a security interest in such recreational vehicles is
perfected by filing pursuant to the provisions of the UCC. In most states, a
security interest in a recreational vehicle is perfected by notation of the
secured party's lien on the vehicle's certificate of title. Each Contract
prohibits the sale or transfer of the related Financed Vehicle without the
consent of CITSF.
Perfection of Sale. Pursuant to the Purchase Agreement, CITSF will sell and
assign its interests in the Contracts, including the security interests in the
Financed Vehicles granted thereunder, to the Company and, pursuant to the
Trust Documents, the Company will sell and assign its interest in the
Contracts, including the security interests in the Financed Vehicles granted
thereunder, to the Trustee. UCC financing statements will be filed to perfect
the sale of (i) CITSF's interests in the Contracts to the Company and (ii) the
Company's interests in the Contracts to the Trust.
Perfection of CITSF's or CITCF-NY's Security Interest in the Financed
Vehicles. CITSF and CITCF-NY take all actions necessary under the laws of the
state in which the related recreational vehicles are located at the time of
origination of the Contract to perfect their respective security interests in
such recreational vehicles, including, where applicable, having a notation of
their respective liens recorded on the related certificate of title or
delivering the required documents and fees, obtaining possession of the
certificate of title (if possible), or, where applicable, by perfecting its
security interest in the related recreational vehicles under the UCC. In the
event CITSF (or CITCF-NY) fails, due to clerical errors, to effect such
notation or delivery, or perfects the security interest under an inapplicable
statute (for example, under the UCC rather than under a motor vehicle title
law), the Trust may not have a first priority security interest in the
Financed Vehicle securing a Contract. In the Trust Documents, CITSF has
represented as of the Closing Date that each Contract creates a valid and
enforceable first priority security interest in favor of CITSF (or CITCF-NY)
or the related Dealer in the Financed Vehicle covered thereby (which security
interest, if in favor of the related Dealer (or CITCF-NY), has been assigned
to CITSF) and such security interest has been assigned by CITSF to the
Company, and all necessary action with respect to such Contract has been taken
to perfect the security interest in the related Financed Vehicle in favor of
CITSF (or CITCF-NY). A breach by CITSF of such warranty that materially
adversely affects the Trust's interest in any Contract would require CITSF to
purchase such Contract unless such breach is cured.
Possible Loss of Perfection or Priority of Trust's Security Interest in
Financed Vehicles or Proceeds Thereof. The certificate of title names CITSF
(or CITCF-NY) as the secured party. Because of the administrative burden and
expense, neither CITCF-NY, CITSF, the Company nor the Trust will amend any
certificate of title to note the lien of the Trust as the new secured party on
the certificate of title relating to the Financed Vehicles nor will any such
entity execute and file any transfer instruments (including, among other
instruments, UCC-3 assignments). In some states, in the absence of such an
amendment or execution, the assignment to the Trust of a security interest in
Financed Vehicles may not be perfected, such assignment of the security
interest to the Trust may not be effective against creditors or a trustee in
bankruptcy of CITSF or CITCF(NY), which continue to be specified as lienholder
on any certificates of title or as secured party of any UCC filing.
(i) California. A security interest in a motor vehicle registered in the
State of California (in which the greatest number of Financed Vehicles are
currently registered) may be perfected only by depositing with the Department
of Motor Vehicles a properly endorsed certificate of title for the vehicle
showing the secured party as "legal owner" thereon or if the vehicle has not
been previously registered, an application in usual form for an original
registration together with an application for registration of the secured
party as "legal owner." However, under the California Vehicle Code, a
transferee of a security interest in a motor vehicle is not required to
reapply to the Department of Motor
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Vehicles for a transfer of registration when the interest of the transferee
arises from the transfer of a security agreement by the "legal owner" to
secure payment or performance of an obligation. Accordingly, under California
law, an assignment such as that under each of the Purchase Agreement and the
Trust Documents is an effective conveyance of CITSF's and the Company's
perfected security interest, as the case may be, without such re-registration,
and under the Purchase Agreement the Company will succeed to CITSF's, and
under the Trust Documents the Trust will succeed to the Company's, rights as
secured party.
(ii) Other States. In most states, assignments such as those under the
Purchase Agreement and the Trust Documents are an effective conveyance of a
security interest without amendment of any lien noted on a vehicle's
certificate of title, and the assignee succeeds thereby to the assignor's
rights as secured party. However, in some states the Trust's security interest
will be unperfected because the Trust will not be noted as the secured party
on the certificates of title to the Financed Vehicles, and therefore the
Trust's security interest would be subordinate to, among others, subsequent
purchasers of such Financed Vehicles and holders of prior perfected security
interests therein. However, in the absence of fraud, forgery or administrative
error, the notation of CITSF's or CITCF- NY's lien on the certificates of
title will be sufficient in most states to protect the Trust against the
rights of subsequent purchasers of a Financed Vehicle, judgment creditors or
other creditors who take a security interest in a Financed Vehicle.
Continuity of Perfection. Under the laws of most states, a perfected
security interest in a recreational vehicle continues for four months after
the vehicle is moved to a new state (from the state in which a financing
statement was properly filed initially to perfect the security interest or in
which the certificate of title was issued) and thereafter until the owner re-
registers such recreational vehicle in the new state. A majority of states
require surrender of a certificate of title to obtain a new certificate of
title for the vehicle. In those states (including California) that call for
return of the certificate of title to the holder of the first security
interest noted thereon, the secured party would learn of the re-registration
through the request from the obligor under the related installment sale
contract to surrender possession of the certificate of title. In the case of
vehicles registered in states providing for perfection of a motor vehicle lien
by notation of the lien on the certificate of title without possession of the
certificate of title by the secured party, the secured party would receive
notice of surrender from the state of re-registration if the security interest
were noted on the certificate of title. Thus, the secured party would have the
opportunity to re-perfect its security interest in the vehicle in the state to
which the vehicle is moved. However, these procedural safeguards will not
protect the secured party if through fraud, forgery or administrative error,
the debtor somehow procures a new certificate of title that does not note the
secured party's lien. Additionally, in states that do not require a
certificate of title for registration of a vehicle, re-registration could
defeat perfection.
In the ordinary course of servicing the Contracts, CITSF will take steps to
effect re-perfection upon receipt of notice of re-registration or information
from the Obligor as to relocation. Similarly, when an Obligor sells a Financed
Vehicle, CITSF must surrender possession of the certificate of title or will
receive notice as a result of its lien noted thereon and accordingly will have
an opportunity to require satisfaction of the related Contract before release
of the lien. Under the Trust Documents, the Servicer will be obligated to take
appropriate steps, at its own expense, to maintain perfection of a security
interest in the Financed Vehicles.
In most states, CITSF, as Servicer, will hold certificates of title relating
to the Financed Vehicles in its possession as custodian for the Trust pursuant
to the Trust Documents. In some states, the certificate of title is held by
the Obligor, but only after it is endorsed by the state motor vehicle
department with a notation of CITSF's lien. In the Trust Documents, CITSF, as
Servicer, will covenant that it will not release its security interest in the
Financed Vehicle securing any Contract except as contemplated by the Trust
Documents. CITSF, as Servicer, will also covenant that it will not impair the
rights of the Trust in the Contacts or take any action inconsistent with the
Trust's ownership of the
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Contracts, except as permitted by the Trust Documents. A breach of either such
covenant that materially and adversely affects the Trust's interest in any
Contract, would require the Servicer to purchase such Contract unless such
breach is cured within the period specified in the Trust Documents.
Priority of Certain Liens Arising by Operation of Law. Under the laws of
California and of most states, liens for repairs performed on a recreational
vehicle and liens for certain unpaid taxes take priority over even a first
perfected security interest in such vehicle. The Internal Revenue Code of
1986, as amended, also grants priority to certain federal tax liens over the
lien of a secured party. The laws of certain states and federal law permit the
confiscation of motor vehicles by governmental authorities under certain
circumstances if used in unlawful activities, which may result in the loss of
a secured party's perfected security interest in a confiscated recreational
vehicle. CITSF will represent and warrant in the Trust Documents that, as of
the Closing Date, there were no liens or claims which have been filed for
work, labor or materials affecting a Financed Vehicle securing a Contract
which are or may be liens prior or equal to the lien of the Contract. However,
liens for repairs or taxes could arise at any time during the term of a
Contract. No notice will be given to the Trustees or Securityholders in the
event such a lien or confiscation arises and any such lien or confiscation
arising after the date of initial issuance of the Securities would not give
rise to an obligation of CITSF to purchase the Contract under the Trust
Documents.
REPOSSESSION
In the event of default by an obligor, the holder of the related installment
sale contract has all the remedies of a secured party under the UCC, except
where specifically limited by other state laws. The UCC remedies of a secured
party include the right to repossession by self-help means, unless such means
would constitute a breach of the peace. Self-help repossession is the method
employed by the Servicer in most cases and is accomplished simply by taking
possession of the related recreational vehicle. In cases where the obligor
objects or raises a defense to repossession, or if otherwise required by
applicable state law, a court order must be obtained from the appropriate
state court, and the vehicle must then be recovered in accordance with that
order. In some jurisdictions (not including California), the secured party is
required to notify the debtor of the default and the intent to repossess the
collateral and the debtor must be given a time period within which to cure the
default prior to repossession. In most states (including California), under
certain circumstances after the vehicle has been repossessed, the obligor may
reinstate the related contract by paying the delinquent installments and other
amounts due.
NOTICE OF SALE; REDEMPTION RIGHTS
In the event of default by the Obligor, some jurisdictions (not including
California) require that the Obligor be notified of the default and be given a
time period within which to cure the default prior to repossession. Generally,
this right of cure may only be exercised on a limited number of occasions
during the term of the related Contract.
The UCC and other state laws require the secured party to provide the
obligor with reasonable notice of the date, time and place of any public sale
and/or the date after which any private sale of the collateral may be held.
The obligor has the right to redeem the collateral prior to actual sale by
paying the secured party (i) the unpaid principal balance of the obligation,
accrued interest thereon plus reasonable expenses for repossessing, holding
and preparing the collateral for disposition and arranging for its sale, plus,
in some jurisdictions, reasonable attorneys' fees or (ii) in some states, the
delinquent installments or the unpaid principal balance of the related
obligation.
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DEFICIENCY JUDGEMENTS AND EXCESS PROCEEDS
The proceeds of resale of the Financed Vehicles generally will be applied
first to the expenses of resale and repossession and then to the satisfaction
of the related indebtedness. While some states impose prohibitions or
limitations on deficiency judgments if the net proceeds from resale do not
cover the full amount of the indebtedness, a deficiency judgment can be sought
in California and certain other states that do not prohibit or limit such
judgments. In addition to the notice requirement, the UCC requires that every
aspect of the sale or other disposition, including the method, manner, time,
place and terms, be "commercially reasonable." Some courts have held that when
a sale is not "commercially reasonable," the secured party loses its right to
a deficiency judgment and courts in some other states have held that when a
sale is not "commercially reasonable" there is a rebuttable presumption that
there is no deficiency. In addition, the UCC permits the debtor or other
interested party to recover for any loss caused by noncompliance with the
provisions of the UCC. Also, prior to a sale, the UCC permits the debtor or
other interested person to restrain the secured party from disposing of the
collateral if it is established that the secured party is not proceeding in
accordance with the "default" provisions under the UCC. A deficiency judgment
is a judgment against the obligor or guarantor for the shortfall; however, a
defaulting obligor or guarantor may have very little capital or sources of
income available following repossession. Therefore, in many cases, it may not
be useful to seek a deficiency judgment or, if one is obtained, it may be
settled at a significant discount or be uncollectible.
Occasionally, after resale of a recreational vehicle and payment of all
expenses and indebtedness, there is a surplus of funds. In that case, the UCC
requires the creditor to remit the surplus to any holder of a subordinate lien
with respect to such vehicle or, if no such lienholder exists, to the former
owner of the vehicle.
CERTAIN MATTERS RELATING TO INSOLVENCY
CITSF, CITCF-NY and the Company intend that the transfers of Contracts from
CITCF-NY to CITSF, from CITSF to the Company and from the Company to the Trust
constitute sales, rather than pledges of the Contracts to secure indebtedness.
However, if CITCF-NY, CITSF or the Company were to become a debtor under Title
11 of the United States Code, 11 U.S.C. -101 et seq. (the "Bankruptcy Code"),
it is possible that a creditor, receiver, other party in interest or trustee
in bankruptcy of CITCF-NY, CITSF or the Company, or CITCF-NY, CITSF or the
Company as debtor-in-possession, may contend that the sales of the Contracts
by CITCF-NY to CITSF, CITSF to the Company, or by the Company to the Trust,
respectively, were pledges of the Contracts rather than sales and that,
accordingly, such Contracts should be part of such entity's bankruptcy estate.
Such a position, if presented to a court, even if ultimately unsuccessful,
could result in a delay in or reduction of distributions to the
Securityholders.
Although other courts have held otherwise, a case (Octagon Gas Systems, Inc.
v. Rimmer, 995 F.2d 948 (10th Cir.), cert. denied 114 S.Ct. 554 (1993))
decided by the United States Court of Appeals for the Tenth Circuit contains
language to the effect that, under Article 9 of the UCC, "accounts" (as
defined in the UCC) sold by a debtor would remain property of the debtor's
bankruptcy estate, whether or not the sale of the accounts was perfected under
the UCC. UCC Article 9 applies to the sale of "chattel paper" (as defined in
the UCC) as well as the sale of "accounts" and, although the Contracts
constitute chattel paper under the UCC rather than accounts, perfection of a
security interest in both chattel paper and accounts may be accomplished under
the UCC by the filing of a UCC-1 financing statement. If, following a
bankruptcy of CITCF-NY, CITSF or of the Company, a court were to follow the
reasoning of the Tenth Circuit reflected in the case described above, then the
Contracts may be included in the bankruptcy estate of CITCF-NY, CITSF or the
Company, as the case may be, and delays in payments of collections on or in
respect of the Contracts, or loss of principal and interest in respect of the
Securities, could occur.
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The Company has taken steps in structuring the transactions described herein
that are intended to make it unlikely that the voluntary or involuntary
application for relief by or against CIT under the Bankruptcy Code or similar
applicable state laws (collectively, "Insolvency Laws") would result in
consolidation of the assets and liabilities of the Company with those of CIT.
These steps include the creation of the Company as a wholly-owned, limited
purpose subsidiary of CIT pursuant to a certificate of incorporation
containing certain limitations (including a requirement that the Company have
at least one "independent director" and restrictions on the nature of the
Company's business). Additionally, the Company's certificate of incorporation
prohibits merger, consolidation and the sale of all or substantially all of
its assets in certain circumstances or the commencement of a voluntary case or
proceeding under any insolvency law, without the prior affirmative unanimous
vote of its directors including any independent director. Notwithstanding the
foregoing, in the event that (i) a court concluded that the assets and
liabilities of the Company should be consolidated with those of CIT (or one of
its affiliates) in the event of the application of applicable insolvency laws
to CIT (or one of its affiliates) or following the bankruptcy or insolvency of
CIT (or one of its affiliates) the security interest in the Contracts granted
by the Company to the Trust should be avoided; (ii) a filing were made under
any insolvency law by or against the Company, or (iii) an attempt were made to
litigate any of the foregoing issues, delays in payments on the Securities and
possible reductions in the amount of such payments could occur.
The Affiliated Purchaser, if any, specified in the related Prospectus
Supplement, will own at least the portion of the Original Certificate Balance
specified in the related Prospectus Supplement. The Affiliated Purchaser will
have the same rights with regard to the Trust as all other Certificateholders
based on its percentage ownership of the Certificate Balance. The Trust
Documents will provide that if an Insolvency Event with respect to the
Affiliated Purchaser occurs, subject to certain conditions, the Trust will
dissolve. Certain steps will be taken in structuring the transactions
contemplated hereby that are intended to make it less likely that an
Insolvency Event with respect to the Affiliated Purchaser will occur. These
steps include the formation of the Affiliated Purchaser as a separate,
limited-purpose corporation pursuant to a certificate of incorporation
containing certain limitations (including restrictions on the nature of the
Affiliated Purchaser's business and a restriction on the Affiliated
Purchaser's ability to commence a voluntary case or proceeding under the
United States Bankruptcy Code or similar applicable state laws ("Insolvency
Laws") without the prior affirmative unanimous vote of its directors).
However, there can be no assurance that the activities or liabilities of the
Affiliated Purchaser would not result in an Insolvency Event.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon creditors and servicers involved in
consumer finance. These laws include the Truth-in-Lending Act, the Equal
Credit Opportunity Act, the Federal Trade Commission Act, the Fair Credit
Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices
Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B
and Z, the Soldiers' and Sailors' Civil Relief Act, the Military Reservist
Relief Act, state adaptations of the National Consumer Act and of the Uniform
Consumer Credit Code, state motor vehicle retail installment sales acts, state
retail installment sales acts and other similar laws. Also, the laws of
California and of certain other states impose finance charge ceilings and
other restrictions on consumer transactions and require contract disclosures
in addition to those required under federal law. These requirements impose
specific statutory liabilities upon creditors which fail to comply with their
provisions. In some cases, this liability could affect the ability of an
assignee such as the Trust to enforce consumer finance contracts such as the
Contracts.
The so-called "Holder-in-Due-Course Rule" of the Federal Trade Commission
(the "FTC Rule") has the effect of subjecting any assignee of the seller in a
consumer credit transaction to all claims and defenses which the obligor in
the transaction could assert against the seller of the goods. Liability under
the FTC Rule is limited to the amounts paid by the obligor under the contract,
and the holder of
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the contract may also be unable to collect any balance remaining due
thereunder from the obligor. The FTC Rule is generally duplicated by the
Uniform Consumer Credit Code, other state statutes or the common law in
certain states. Most of the Contracts will be subject to the requirements of
the FTC Rule. Accordingly, the Trust, as holder of the Contracts, will be
subject to any claims or defenses that the purchaser of the related Financed
Vehicle may assert against the seller of the Financed Vehicle. Such claims are
limited to a maximum liability equal to the amounts paid by the Obligor under
the related Contracts.
Under California law and most state vehicle dealer licensing laws, sellers
of recreational vehicles are required to be licensed to sell vehicles at
retail sale. Numerous other federal and state consumer protection laws impose
requirements applicable to the origination and assignment of retail
installment sale contracts, including the Truth-in-Lending Act, the Federal
Trade Commission Act, the Fair Credit Billing Act, the Fair Credit Reporting
Act, the Equal Credit Opportunity Act, the Fair Debt Collection Practices Act
and the Uniform Consumer Credit Code. In the case of some of these laws, the
failure to comply with provisions of these laws may affect the enforceability
of the related Contract. The Trust and the Company may not have obtained all
licenses required under any federal or state consumer laws or regulations, and
the absence of such licenses may impede the enforcement of certain rights or
give rise to certain defenses in enforcement actions. In addition, with
respect to used vehicles, the Federal Trade Commission's Rule on Sale of Used
Vehicles requires that all sellers of used vehicles prepare, complete, and
display a "Buyer's Guide" which explains the warranty coverage for such
vehicles. Furthermore, Federal Odometer Regulations promulgated under the
Motor Vehicle Information and Cost Savings Act require that all sellers of
used vehicles furnish a written statement signed by the seller certifying the
accuracy of the odometer reading. If a seller is not properly licensed or if
either a Buyer's Guide or Odometer Disclosure Statement was not provided to
the purchaser of a Financed Vehicle, the obligor may be able to assert a
defense against the seller of the Financed Vehicle, which defense may prevent
the Trust from collecting amounts due under the Contract.
Courts have applied general equitable principles to secured parties pursuing
repossession or litigation involving deficiency balances. These equitable
principles may have the effect of relieving an obligor from some or all of the
legal consequences of a default and be used as a defense to repayment of the
obligation.
In several cases, consumers have asserted that the self-help remedies of
secured parties under the UCC and related laws violate the due process
protections of the Fourteenth Amendment to the Constitution of the United
States of America. Courts have generally either upheld the notice provisions
of the UCC and related laws as reasonable or have found that the creditor's
repossession and resale do not involve sufficient state action to afford
constitutional protection to consumers.
CITSF will represent and warrant under the Trust Documents that each
Contract complies with all requirements of law in all material respects. A
breach of such representation and warranty that materially adversely affects
the interests of the Trust in any Contract will create an obligation of CITSF
to purchase such Contract. See "The Purchase Agreements and the Trust
Documents--Sale and Assignment of the Contracts."
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a creditor to
realize upon collateral or enforce a deficiency judgment. For example, in a
Chapter 13 proceeding under the federal bankruptcy law, a court may prevent a
creditor from repossessing a recreational vehicle, and, as part of the
rehabilitation plan, reduce the amount of the secured indebtedness to the
market value of the recreational vehicle at the time of bankruptcy (as
determined by the court), leaving the party providing financing as a general
unsecured creditor for the
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remainder of the indebtedness. A bankruptcy court may also reduce the monthly
payments due under the related contract or change the rate of interest and
time of repayment of the indebtedness.
Under the terms of the Soldiers' and Sailors' Civil Relief Act, an Obligor
who enters the military service after the origination of such Obligor's
Contract (including an Obligor who is a member of the National Guard or is in
reserve status at the time of the origination of the Obligor's contract and is
later called to active duty) may not be charged interest above an annual rate
of 6% during the period of such Obligor's active duty status, unless a court
orders otherwise upon application of the lender. In addition, pursuant to the
Military Reservist Relief Act, under certain circumstances California
residents called into active duty with the reserves can delay payments on
retail installment sale contracts, including the Contracts, for a period, not
to exceed 180 days, beginning with the order to active duty and ending 30 days
after release. It is possible that the foregoing could have an effect on the
ability of the Servicer to collect full amounts of interest on certain of the
Contracts. In addition, the Relief Acts impose limitations which would impair
the ability of the Servicer to repossess a Financed Vehicle subject to an
affected Contract during the Obligor's period of active duty status. Thus, in
the event that such a Contract goes into default, there may be delays and
losses caused by the inability to realize upon the related Financed Vehicle in
a timely fashion.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Set forth below and in the related Prospectus Supplement for each series of
the Securities is a summary of certain Federal income tax consequences of the
purchase, ownership and disposition of the Securities, applicable to initial
purchasers of the Securities. This summary does not deal with all aspects of
Federal income taxation applicable to all categories of holders of the
Securities, some of which may be subject to special rules or special treatment
under the Federal income tax laws. For example, it does not discuss the
specific tax treatment of Securityholders that are insurance companies, banks
and certain other financial institutions, regulated investment companies,
individual retirement accounts, tax-exempt organizations or dealers in
securities. Furthermore, this summary is based upon present provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), the regulations
promulgated thereunder, and judicial or ruling authority, all of which are
subject to change, which change may be retroactive. Moreover, there are no
cases or Internal Revenue Service ("IRS") rulings on similar transactions
involving a trust that issues debt and equity interests with terms similar to
those of the Notes and the Certificates. As a result, the IRS may disagree
with all or part of the discussion below and in the related Prospectus
Supplement.
Prospective investors are advised to consult their own tax advisors with
regard to the Federal income tax consequences of the purchase, ownership and
disposition of the Securities, as well as the tax consequences arising under
the laws of any state, foreign country or other jurisdiction. Each Trust will
be provided with an opinion of Schulte Roth & Zabel, counsel for the Seller,
regarding certain of the Federal income tax matters discussed below and in the
related Prospectus Supplement. An opinion of counsel, however, is not binding
on the IRS, and no ruling on any of the issues discussed below will be sought
from the IRS. For purposes of the following summary, references to the Trust,
the Notes, the Certificates and related terms, parties and documents will be
deemed to refer, unless otherwise specified herein, to each Trust and the
Notes, Certificates and related terms, parties and documents applicable to
such Trust.
The federal income tax consequences to Certificateholders will vary
depending on whether the Trust is intended to be treated as a partnership
under the Code or is intended to be given an alternative characterization for
Federal income tax purposes. The related Prospectus Supplement for each series
of Certificates will specify whether the Trust is intended to be treated as a
partnership for Federal income tax purposes and, if not, how the Trust is
intended to be treated.
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SCOPE OF THE TAX OPINIONS
It is expected that Schulte Roth & Zabel will, upon issuance of a series of
Notes and/or Certificates, deliver its opinions that the applicable Trust will
not be classified as an association (or publicly traded partnership) taxable
as a corporation for Federal income tax purposes. Further, with respect to
each series of Notes, Schulte Roth & Zabel expects to advise the Trust that
the Notes will be classified as debt for federal income tax purposes.
In addition, Schulte Roth & Zabel will render its opinion that it has or
reviewed the statements herein and in the related Prospectus Supplement under
the heading "Certain Federal Income Tax Consequences," and is of the opinion
that such statements are correct in all material respects. Such statements are
intended as an explanatory discussion for the possible effects of the
classification of the Trust as a partnership, as a grantor trust or other
classification, as the case may be, for Federal income tax purposes on
investors generally and of related tax matters affecting investors generally,
but do not purport to furnish information in the level of detail or with the
attention to the investor's specific tax circumstances that would be provided
by an investor's own tax adviser. Accordingly, each investor is advised to
consult its own tax advisers with regard to the tax consequences to it of
investing in the Notes and/or Certificates.
OTHER TAX CONSEQUENCES
No advice has been received as to local income, franchise, personal
property, or other taxation in any state or locality, or as to the tax effect
of ownership of the Securities in any state or locality. Securityholders are
advised to consult their own tax advisors with respect to any state or local
income, franchise, personal property, or other tax consequences arising out of
their ownership of the Securities.
ALTERNATIVE TAX TREATMENT
In the event that, as a result of a change in applicable laws or regulations
or the interpretation thereof, the Federal income tax characteristics of the
Notes or the Certificates are not anticipated to be as described above, the
related Prospectus Supplement will include a discussion of the anticipated
Federal income tax treatment of the Notes or Certificates.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Section 4975 of the Code prohibit a pension, profit
sharing or other employee benefit plan, as well as individual retirement
accounts and certain types of Keogh Plans (each a "Benefit Plan"), from
engaging in certain transactions with persons that are "parties in interest"
under ERISA or "disqualified persons" under the Code with respect to such
Benefit Plan. A violation of these "prohibited transaction" rules may generate
excise tax and other liabilities under ERISA and the Code for such persons.
THE CERTIFICATES
An interest in the Certificates may not be acquired by (a) an employee
benefit plan (as defined in Section 3(3) of ERISA) that is subject to the
provisions of Title I of ERISA, (b) a plan described in Section 4975(e)(1) of
the Code, or (c) any entity whose underlying assets include plan assets by
reason of a plan's investment in the entity (other than an insurance company
purchasing the Certificates for its general accounts). By its acceptance of a
Certificate or its acquisition of an interest in a Certificate through a
Participant or DTC, each Certificateholder or Certificate Owner will be deemed
to have represented and warranted that it is not subject to the foregoing
limitation.
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A plan fiduciary considering the purchase of the Notes should consult its
tax and or legal advisors regarding whether the assets of the Trust would be
considered plan assets, the possibility of exemptive relief from the
prohibited transaction rules and other issues and their potential
consequences.
THE NOTES
The acquisition or holding of Notes by or on behalf of a Benefit Plan could
be considered to give rise to a prohibited transaction if the Seller, the
Trust or any of their respective affiliates is or becomes a party in interest
or a disqualified person with respect to such Benefit Plan. Certain exemptions
from the prohibited transaction rules could be applicable to the purchase and
holding of Notes by a Benefit Plan depending on the type and circumstances of
the plan fiduciary making the decision to acquire such Notes. Included among
these exemptions are: Prohibited Transaction Class Exemption ("PTCE") 90-1,
regarding investments by insurance company pooled separate accounts; PTCE 91-
38 regarding investments by bank collective investment funds; and PTCE 84-14,
regarding transactions effected by "qualified professional asset managers."
PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement (the
"Underwriting Agreement") with respect to each Trust, the Seller will agree to
sell to each of the underwriters (the "Underwriters") named therein and in the
related Prospectus Supplement, and each of such Underwriters will severally
agree to purchase from the Seller, the principal amount of each class of
Securities of the related series set forth therein and in the related
Prospectus Supplement.
In each Underwriting Agreement, the several Underwriters will agree, subject
to the terms and conditions set forth therein, to purchase all the Securities
described therein which are offered hereby and by the related Prospectus
Supplement if any of such Securities are purchased. In the event of a default
by any such underwriter, each Underwriting Agreement will provide that, in
certain circumstances, purchase commitments of the nondefaulting Underwriters
may be increased, or the Underwriting Agreement may be terminated.
Each Prospectus Supplement will either (i) set forth the price at which each
class of Securities being offered thereby will be offered to the public and
any concessions that may be offered to certain dealers participating in the
offering of such Securities or (ii) specify that the related Securities are to
be resold by the Underwriters in negotiated transactions at varying prices to
be determined at the time of such sale. After the initial public offering of
any Securities, the public offering price and such concessions may be changed.
Each Underwriting Agreement will provide that CITSF and/or the Company will
indemnify the Underwriters against certain liabilities, including liabilities
under the Securities Act.
A Trustee may, from time to time, invest the funds of the Trust in Eligible
Investments acquired from the Underwriters.
FINANCIAL INFORMATION
The Company has determined that its financial statements are not material to
the offering made hereby.
Each Trust will be formed to own the related Contracts and the other Trust
assets and to issue the related Securities. Each Trust will have had no assets
or obligations prior to the issuance of the Securities and will not engage in
any activities other than those described herein and in the related
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Prospectus Supplement. Accordingly, no financial statements with respect to
each Trust are included in this Prospectus or in the related Prospectus
Supplement.
RATINGS
It is a condition to the issuance of any class of Securities offered
pursuant to this Prospectus that the Securities be rated in one of the four
highest rating categories by at least one nationally recognized statistical
rating organization rating such series of Securities (each, a "Rating
Agency"). The foregoing ratings do not address the likelihood that the
Securities will be retired following the sale of the Contracts by the Trust. A
security rating is not a recommendation to buy, sell or hold securities and
may be subject to revision or withdrawal at any time by the assigning rating
agency. The security ratings of the Securities should be evaluated
independently of similar security ratings assigned to other kinds of
securities.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Schulte Roth &
Zabel, New York, New York. The material federal income tax consequences of the
Securities will be passed upon for the Company by Schulte Roth & Zabel.
Certain legal matters will be passed upon for CITSF, CITCF-NY and the Company
by Norman H. Rosen, Esq., Senior Vice President and General Counsel. If the
Enhancement for a class of Securities includes a CIT Limited Guarantee,
certain legal matters will be passed upon for CIT by its Executive Vice
President and General Counsel, Ernest Stein, Esq. If a Trust is formed
pursuant to the laws of the State of Delaware, certain legal matters will be
passed upon for the Trust by its special Delaware counsel named in the related
Prospectus Supplement.
EXPERTS
The financial statements listed under the heading "Exhibits, Financial
Statement Schedule and Reports on Form 8-K" in CIT's 1995 Annual Report on
Form 10-K have been incorporated by reference herein in reliance upon the
report of KPMG Peat Marwick LLP, independent certified public accountants,
also incorporated by reference herein, and upon the authority of said firm as
experts in accounting and auditing. The report of KPMG Peat Marwick LLP refers
to a change in the method of accounting for postretirement benefits other than
pensions in 1993.
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INDEX OF PRINCIPAL TERMS
<TABLE>
<S> <C>
Affiliated Purchaser............................................... 6, 23
Asset Service Center............................................... 32
Auction Sale....................................................... 18
Available Amount................................................... 14, 58
Bankruptcy Code.................................................... 22, 69
Benefit Plan....................................................... 73
Business Day....................................................... 13, 35
Capitalized Interest Account....................................... 12
CBC................................................................ 31
CBC Holding........................................................ 31
Cede............................................................... 3, 6, 34
Cedel.............................................................. 2, 8, 25
Cedel Participants................................................. 45
Certificate Balance................................................ 6
Certificate Distribution Account................................... 53
Certificate Final Scheduled Distribution Date...................... 13
Certificate Owner.................................................. 25, 34
Certificate Owners................................................. 6
Certificate Pool Factor............................................ 29
Certificateholders................................................. 41
Certificates....................................................... 1, 6, 34
CIT................................................................ 2, 5, 20
CITCF-NY........................................................... 10, 20
CITSF.............................................................. 5, 20, 31
Closing Date....................................................... 10
CMC................................................................ 31
Code............................................................... 19, 63
Collection Account................................................. 53
Commission......................................................... 3
Company............................................................ 1, 5, 20, 31
Contract Files..................................................... 26
Contract Pool...................................................... 9, 26, 26
Contract Rate...................................................... 27
Contracts.......................................................... 1, 10, 27
Cooperative........................................................ 46
Credit Facility.................................................... 43
Credit Facility Provider........................................... 43
Dealers............................................................ 10, 20
Definitive Certificates............................................ 47
Definitive Notes................................................... 47
Definitive Securities.............................................. 47
Deposit Date....................................................... 25, 56
Depositories....................................................... 44
Depository......................................................... 25
Determination Date................................................. 14
Distribution Date.................................................. 13, 35
DKB................................................................ 31
DTC................................................................ 2, 25
DTC Rules.......................................................... 45
Due Period......................................................... 14
</TABLE>
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<TABLE>
<S> <C>
Eligible Account....................................................... 53
Eligible Institution................................................... 54
Eligible Investments................................................... 54
Enhancement............................................................ 41
ERISA.................................................................. 19, 73
Euroclear.............................................................. 2, 8, 46
Euroclear Operator..................................................... 46
Euroclear Participants................................................. 46
Event of Termination................................................... 61
Events of Default...................................................... 38
Financed Vehicles...................................................... 1, 9
Force-Placed Insurance................................................. 60
FTC Rule............................................................... 70
Funding Period......................................................... 7, 12
Holders................................................................ 47
Indenture.............................................................. 2, 7, 35
Indenture Trustee...................................................... 2, 5, 35
Indirect Participants.................................................. 44
Initial Contracts...................................................... 1, 9
Initial Cut-off Date................................................... 1, 9
Initial Financed Vehicles.............................................. 1, 9
Initial Pool Balance................................................... 17, 64
Insolvency Event....................................................... 63
Insolvency Laws........................................................ 22, 70
Interest Accrual Period................................................ 13
Interest Rate.......................................................... 8
Interest Shortfall..................................................... 16, 57
IRS.................................................................... 72
Issuer................................................................. 5
Late Fees.............................................................. 14, 58
Limited Guarantee...................................................... 42
Liquidity Facility..................................................... 43
Liquidity Facility Provider............................................ 43
List of Contracts...................................................... 50
MHC.................................................................... 31
Military Reservist Relief Act.......................................... 51
Monthly Advance........................................................ 17, 57
Non-Reimbursable Payment............................................... 15, 57
Note Distribution Account.............................................. 53
Note Final Scheduled Distribution Date................................. 13
Note Owner............................................................. 25, 36
Note Owners............................................................ 8
Note Pool Factor....................................................... 29
Noteholders............................................................ 47
Notes.................................................................. 1, 7, 35
Notice................................................................. 61
Obligor................................................................ 10, 57
Optional Purchase...................................................... 17
Original Certificate Balance........................................... 6, 25
Owner Trustee.......................................................... 5
Paid-Ahead Contract.................................................... 28
Paid-Ahead Period...................................................... 28
</TABLE>
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<TABLE>
<S> <C>
Participants........................................................... 44
Pass-Through Rate...................................................... 6, 35
Permitted Investments.................................................. 12
Pool Balance........................................................... 17
Pooling and Servicing Agreement........................................ 2
Pre-Funded Amount...................................................... 12
Pre-Funded Percentage.................................................. 23
Pre-Funding Account.................................................... 7
Principal Liquidation Loss Amount...................................... 39
Prospectus Supplement.................................................. 1
PTCE................................................................... 74
Purchase Agreement..................................................... 10
Purchase Agreements.................................................... 50
Purchase Price......................................................... 52
Rating Agency.......................................................... 18
Record Date............................................................ 13, 35
Registration Statement................................................. 2
Related Documents...................................................... 40
Relief Act Obligor..................................................... 51
Repurchase Event....................................................... 10
Repurchased Contract................................................... 10, 52
Required Capitalized Interest Amount................................... 13
Required Servicer Ratings.............................................. 56
Reserve Fund........................................................... 42
Retained Yield......................................................... 53
Sale and Servicing Agreement........................................... 2
Securities............................................................. 1, 7, 35
Security Owner......................................................... 35
Securityholders........................................................ 3, 47
Seller................................................................. 1, 5
Servicer............................................................... 2, 5
Servicer Letter of Credit.............................................. 56
Servicer Payment....................................................... 14
Servicing Fee.......................................................... 17, 55
Servicing Fee Rate..................................................... 17, 55
Soldiers' and Sailors' Civil Relief Act................................ 51
Spread Account......................................................... 42
Stockholders Agreement................................................. 31
Stripped Certificates.................................................. 7
Stripped Notes......................................................... 8
Subsequent Contracts................................................... 1, 9
Subsequent Cut-off Date................................................ 1, 11
Subsequent Financed Vehicles........................................... 1, 9
Subsequent Purchase Agreement.......................................... 11
Subsequent Transfer Agreement.......................................... 11
Subsequent Transfer Date............................................... 11
Terms and Conditions................................................... 46
Trust.................................................................. 1, 5
Trust Agreement........................................................ 2
Trust Documents........................................................ 2, 50
Trustee................................................................ 2, 5
Trustees............................................................... 5
</TABLE>
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<TABLE>
<S> <C>
UCC...................................................................... 20, 65
Underwriters............................................................. 74
Underwriting Agreement................................................... 74
Yield Supplement Account................................................. 42
</TABLE>
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS SUPPLE-
MENT AND THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, CITSF OR ANY UNDERWRITER. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPA-
NYING PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
SUCH DATE.
-----------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary.................................................................... 3
Risk Factors............................................................... 22
Structure of the Transaction............................................... 27
The Trust Property......................................................... 28
The Contract Pool.......................................................... 29
Maturity and Prepayment Considerations..................................... 35
Yield and Prepayment Considerations........................................ 42
Pool Factors............................................................... 43
Use of Proceeds............................................................ 43
The CIT Group/Sales Financing, Inc., Servicer.............................. 44
The Certificates........................................................... 47
The Notes.................................................................. 50
Enhancement................................................................ 54
The Purchase Agreements and the Trust Documents............................ 56
Certain Federal Income Tax Consequences.................................... 59
Certain State Tax Consequences ............................................ 65
ERISA Considerations....................................................... 66
Plan of Distribution....................................................... 67
Ratings.................................................................... 68
Legal Matters.............................................................. 68
Annex I.................................................................... 69
Index of Principal Terms................................................... 73
PROSPECTUS
Available Information...................................................... 3
Reports to Securityholders................................................. 3
Documents Incorporated by Reference........................................ 4
Summary.................................................................... 5
Risk Factors............................................................... 20
The Trusts................................................................. 25
The Trust Property......................................................... 26
The Contract Pool.......................................................... 27
Yield and Prepayment Considerations........................................ 29
Pool Factors............................................................... 29
Use of Proceeds............................................................ 30
The CIT Group Holdings, Inc................................................ 30
The CIT Group Securitization Corporation II, Seller........................ 31
The CIT Group/Sales Financing, Inc., Servicer.............................. 31
The Certificates........................................................... 34
The Notes.................................................................. 35
Enhancement................................................................ 41
Certain Information Regarding the Securities............................... 44
The Purchase Agreements and the Trust Documents............................ 50
Certain Legal Aspects of the Contracts..................................... 64
Certain Federal Income Tax Consequences.................................... 72
ERISA Considerations....................................................... 73
Plan of Distribution....................................................... 74
Financial Information...................................................... 74
Ratings.................................................................... 75
Legal Matters.............................................................. 75
Experts.................................................................... 75
Index of Principal Terms................................................... 76
</TABLE>
UNTIL NINETY DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL DEALERS
EFFECTING TRANSACTIONS IN THE SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS SUPPLEMENT AND THE PRO-
SPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PRO-
SPECTUS SUPPLEMENT AND THE PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RE-
SPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
$240,000,000
CIT RV
TRUST 1996-B
$88,000,000 CLASS A-1 %
ASSET-BACKED NOTES
$75,000,000 CLASS A-2 %
ASSET-BACKED NOTES
$62,600,000 CLASS A-3 %
ASSET-BACKED NOTES
$14,400,000 % ASSET-
BACKED CERTIFICATES
THE CIT GROUP
SECURITIZATION CORPORATION II,
SELLER
THE CIT GROUP/SALES
FINANCING, INC.,
SERVICER
SALOMON BROTHERS INC
BA SECURITIES, INC.
UBS SECURITIES
PROSPECTUS SUPPLEMENT
DATED AUGUST , 1996
