As filed with the Securities and Exchange Commission on January 26, 1996
Registration No. 33-65057
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO.1
TO
FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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CIT RV OWNER TRUST 1996-A
(Issuer with respect to the Certificates)
THE CIT GROUP SECURITIZATION CORPORATION II
(Originator of the Trust described herein)
(Exact name as specified in originator's charter)
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<S> <C> <C>
Delaware 6146 22-3328188
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
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The CIT Group Securitization Corporation II
650 CIT Drive
Livingston, New Jersey 07039
(201) 535-3514
(Address of principal executive offices)
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ERNEST D. STEIN
Executive Vice President, General Counsel & Secretary
The CIT Group Holdings, Inc.
1211 Avenue of the Americas
New York, New York 10036
(Name and address of agent for service)
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Copies to:
Paul N. Watterson, Esq. Reed D. Auerbach, Esq.
SCHULTE ROTH & ZABEL STROOCK & STROOCK & LAVAN
900 Third Avenue 7 Hanover Square
New York, New York 10022 New York, New York 10004
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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(1) Estimated solely for the purpose of calculating the registration fee on the
basis of the proposed maximum offering price per unit.
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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The CIT Group Securitization Corporation II
CIT RV Owner Trust 1996-A
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Cross Reference Sheet Furnished
Pursuant to Rule 501 (b) of Regulation S-K
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Caption or Location
Item and Caption in Form S-1 in Prospectus
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1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus........................... Forepart of Registration Statement
and Outside Front Cover
Page of Prospectus
2. Inside Front and Outside Back Cover Pages of Prospectus.......... Inside Front Cover Page and Outside
Back Cover Page of Prospectus
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges............................... Summary; Risk Factors;
The Contract Pool
4. Use of Proceeds.................................................. Use of Proceeds
5. Determination of Offering Price.................................. *
6. Dilution......................................................... *
7. Selling Security Holders......................................... *
8. Plan of Distribution............................................. Underwriting
9. Description of Securities to be Registered....................... Summary; Structure of the
Transaction; The Contract Pool; Pool
Factors; The Notes; The Certificates
10. Interests of Named Experts and Counsel........................... *
11. Information with Respect to the Registrant....................... The CIT Group Securitization
Corporation II, Seller
12. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities..................................... *
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* Answer negative or item inapplicable.
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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.
Subject To Completion
Dated January 26, 1996
Prospectus
$
CIT RV Owner Trust 1996-A
$ Class A % Asset Backed Notes
$ % Asset Backed Certificates
The CIT Group Securitization Corporation II, Seller
The CIT Group/Sales Financing, Inc., Servicer
The CIT RV Owner Trust 1996-A (the "Trust" or the "Issuer") will be formed
pursuant to a Trust Agreement, to be dated as of February 1, 1996, between The
CIT Group Securitization Corporation II (the "Company" or the "Seller") and
, as trustee (the "Owner Trustee"), and will issue Class A %
Asset Backed Notes (the "Class A Notes") in the principal amount of $
pursuant to an Indenture, to be dated as of February 1, 1996, between the Issuer
and , 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 $ .
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 February 1,
1996 (the "Initial Cut-off Date"), security interests in the Initial Financed
Vehicles, the Collection Account, the Note Distribution Account, the Certificate
Distribution Account, the Cash Collateral Account, the Capitalized Interest
Account and the Pre-Funding Account, in each case, together with the proceeds
thereof (other than investment earnings on the Cash Collateral Account), 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 February 1, 1996 (the "Sale and
Servicing Agreement"), among the Seller, the Servicer, and the Trust. From time
to time on or before , 1996, 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"), 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.
(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 16 herein.
THE SECURITIES WILL REPRESENT INTERESTS IN 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 THES A
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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Price to Underwriting Proceeds to the
Public(1) Discounts Company(1)(2)
Per Class A Note ....... % % %
Per Certificate ........ % % %
Total .................. $ $ $
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(1) Plus accrued interest at the Class A Rate and the Pass-Through Rate, as
appropriate, from , 1996.
(2) Before deduction of expenses payable by the Company estimated at $ .
The Notes and the Certificates 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 Notes and the Certificates 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 , 1996, against
payment therefor in immediately available funds.
The date of this Prospectus is February , 1996.
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(continued from preceding page)
The Notes will be secured by the assets of the Trust (other than the
Certificate Distribution Account and the Cash Collateral Account) pursuant to
the Indenture. The Class A Notes will bear interest at the rate of % per annum.
Interest on the Notes will generally be payable on the fifteenth day of each
month (each, a "Distribution Date"), commencing 15, 1996. Principal
on the Notes will be payable on each Distribution Date to the extent described
herein. 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 Class A
Notes and the Certificates will be the Distribution Date.
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.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") on behalf of the Trust a Registration Statement on Form S-1
(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 being offered hereby. 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 Judiciary Plaza, 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. 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 the 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. Such reports and other information
filed on behalf of the Trust will be available for inspection as set forth
above.
REPORTS TO SECURITYHOLDERS
Unless and until Definitive Certificates are issued, monthly and annual
unaudited reports containing information concerning the Contracts will be
prepared by the Servicer and sent on behalf of the Trust only to 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 "--Reports to
Securityholders." Such reports will not constitute financial statements prepared
in accordance with generally accepted accounting principles.
2
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SUMMARY
This Summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus. Certain capitalized terms
used in the Summary are defined elsewhere in this Prospectus. Reference is made
to the "Index of Principal Terms" for the location herein of defined terms.
Issuer ................... CIT RV Owner Trust 1996-A (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 February 1,
1996.
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.
Indenture Trustee ........ , as trustee under the
Indenture, to be dated as of February 1, 1996
(the "Indenture Trustee").
Owner Trustee ............ , as trustee
under the Trust Agreement, to be dated as of
February 1, 1996 (the "Owner Trustee" and,
together with the Indenture Trustee, the
"Trustees").
Risk Factors ............. Certain potential risks and other considerations
are particularly relevant to a decision to invest
in any securities sold hereunder. See "Risk
Factors".
The Notes ................ The CIT RV Owner Trust 1996-A Class A % Asset
Backed Notes (the "Notes" or the "Class A Notes")
will represent obligations of the Trust secured by
the assets of the Trust (other than the
Certificate Distribution Account and the Cash
Collateral Account). See "The Notes--General".
The Trust will issue $ aggregate
principal amount of Class A Notes pursuant to an
Indenture, to be dated as of February 1, 1996,
between the Issuer and the Indenture Trustee (the
"Indenture"). See "The Notes--General".
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.
Definitive Notes will be issued only under the
limited circumstances described herein. Persons
acquiring beneficial interests in the Notes will
hold their interests through The Depository Trust
Company ("DTC") in the United States or Cedel
Bank, societe anonyme ("Cedel") or the Euroclear
System ("Euroclear") in Europe. See "Certain
Information Regarding the Securities--Book-Entry
Registration" and "--Definitive Securities" and
Annex I hereto.
The Certificates ......... The CIT RV Owner Trust 1996-A % Asset Backed
Certificates (the "Certificates" and, together
with the Notes, the "Securities") will represent
fractional undivided interests in the Trust. See
"The Certificates--General".
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The Trust will issue $ aggregate
principal amount of Certificates (the "Original
Certificate Balance") pursuant to a Trust
Agreement, to be dated as of February 1, 1996,
between the Seller and the Owner Trustee (the
"Trust Agreement"). Payments in respect of the
Certificates will be subordinated to payments on
the Notes to the limited extent described herein.
See "The Certificates--General".
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 may be
issued in a denomination other than an integral
multiple of $1,000 such that the Affiliated
Purchaser (as defined herein) may be issued at
least 1% of the Certificate Balance (as described
herein). Persons acquiring beneficial interests in
the Certificates will hold their interests through
DTC. Definitive Certificates will be issued only
under the limited circumstances described herein.
See "Certain Information Regarding the
Securities--Book-Entry Registration" and
"--Definitive Securities".
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 February 1, 1996 (the
"Initial Cut-off Date"), (iii) security interests
in the Initial Financed Vehicles, (iv) the
Collection Account, the Note Distribution Account,
the Certificate Distribution Account, the Cash
Collateral Account, the Capitalized Interest
Account and the Pre-Funding Account, in each case
together with the proceeds thereof (other than
investment earnings on the Cash Collateral
Account), (v) the proceeds from claims under
certain insurance policies in respect of
individual Initial Financed Vehicles or the
related Obligors and (vi) certain rights under the
Sale and Servicing Agreement, to be dated as of
February 1, 1996 (the "Sale and Servicing
Agreement"), among the Seller, the Servicer and
the Trust.
From time to time on or before , 1996,
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, 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-FundAccount. See "The Trust Property".
The Contracts ............ The property of the 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") in
the ordinary course of its business. 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
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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 February 1, 1996, and CITSF will sell
the Initial Contracts to the Company pursuant to a
purchase agreement, to be dated as of February 1,
1996 (the "Purchase Agreement"), and the Company
will sell the Initial Contracts to the Trust
pursuant to the Sale and Servicing Agreement.
As of the Initial Cut-off Date, the Initial
Contracts had an aggregate principal balance of
$ , a weighted average original maturity
of months and a remaining weighted average
maturity of months. The final scheduled
payment date on the Initial Contract with the last
maturity occurs in . See "The Contract
Pool".
From time to time on or prior to ,
1996, pursuant to the Sale and Servicing
Agreement, CITSF will be obligated to sell, and
the Company will be obligated to purchase, subject
to the satisfaction of certain conditions
described therein, 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. Pursuant to the
Sale and Servicing Agreement and 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 described
therein, the Company will in turn sell the
Subsequent Contracts to the 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. The aggregate
principal balance of the Subsequent Contracts to
be conveyed to the Trust during the Funding Period
will not exceed $ . Subsequent
Contracts will be transferred from CITSF to the
Company and from the Company to the Trust on the
Business Day specified by CITSF and the Company
during the month in which the related Subsequent
Cut-off Date occurs (each, a "Subsequent Transfer
Date").
The Pre-Funding Account .. The Pre-Funding Account will be maintained with an
Eligible Institution (as defined herein), initially
, 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." 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 $ (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 Servicing Agreement, (iv) the
insolvency of the Company, CITSF, CITCF-NY or CIT
or (v) the close of business on , 1996.
During the Funding Period, on one or more Subse-
quent 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
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, 1996, although no assurance can be
given that this will in fact occur. 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 hereinafter defined) on
the first Distribution Date thereafter or, if the
end of the Funding Period is on a Distribution
Date, then on such date.
Capitalized Interest
Account ................ 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 1996,
1996 and 1996 Distribution Dates, if
applicable, to fund the excess, if any, of (i) the
product of (x) the weighted average of the Class A
Rate and the Pass-Through Rate as of the first day
of the related Interest Accrual Period 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 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.
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 (as hereinafter defined), on the next
succeeding Business Day (each, a "Distribution
Date"), commencing 15, 1995. 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 day
immediately preceding such Distribution Date or,
in the event Definitive Securities have been
issued, at the close of business on the last 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
Class A Notes and the Certificates will be payable
on the Distribution Date occurring in 20
(the "Class A 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,
Delaware, Illinois or Oklahoma are authorized by
law, regulation or executive order to be closed.
Interest Accrual Period .. 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 on which interest has been paid to but
excluding the following Distribution Date, or in
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the case of the initial Distribution Date from
February , 1996 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 fees 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
February 1, 1996 and will end on and include
February 29, 1996.
Determination Date ....... The "Determination Date" is the third Business Day
prior to each Distribution Date. On each
Determination Date, the Indenture Trustee will
determine the amount in the Collection Account
available for distribution on the related
Distribution Date, allocate such amounts between
the Notes and the Certificates and make payments
to Securityholders all as described under "The
Purchase Agreements and The Trust
Documents--Distributions".
Terms of the Notes ....... The principal terms of the Notes will be as
described below:
A. Interest Rate ....... The Class A Notes will bear interest at the rate
of % per annum (the "Class A Rate").
B. Interest ............ Interest accruing during the related Interest
Accrual Period (computed on the basis of a 360-day
year consisting of twelve 30-day months) 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 Class A Rate and
the outstanding principal balance on the 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 from
to but excluding the first
Distribution Date, on the outstanding principal
balance of the Notes as of the Closing Date. See
"The Notes--Payment of Interest".
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 (as defined
under "The Purchase Agreements and The Trust
Documents--Distributions" herein) remaining after
the Servicer has been reimbursed for any
outstanding Monthly Advances and has been paid the
Servicing Fee (including any unpaid Servicing Fee
with respect to one or more prior Due Periods)
(collectively, the "Servicer Payment") and
following the payment of interest due on the Notes
on such Distribution Date.
The unpaid principal balance of the Notes will be
payable on the Class A Final Scheduled
Distribution Date. See "The Notes--Payments of
Principal".
D. Redemption .......... The Notes will be subject to mandatory redemption
in part, on a pro rata basis, in the event that
any portion of the Pre-Funded Amount remains on
deposit in the Pre-Funding Account at the end of
the Funding Period. The aggregate principal amount
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of Notes to be redeemed on such date will be an
amount equal to the Pre-Funded Percentage allocable
to the Notes of the amount then on deposit in the
Pre-Funding Account. 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 initial Certificate Balance. See "The
Notes--Redemption" and "Certain Information
Regarding the Securities".
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 Class A Notes
plus accrued and unpaid interest thereon at the
Class A Rate. See "Summary--Optional Purchase of
the Contracts", "--Auction Sale", "The
Notes--Redemption" and "The Purchase Agreements and
The Trust Documents--Insolvency Event".
If an Insolvency Event (as defined herein) with
respect to the Affiliated Purchaser (as defined
herein) 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 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. If the proceeds from the liquidation of
the Contracts and any amounts on deposit in the
Note Distribution Account and the Certificate
Distribution Account are not sufficient to pay the
Notes and Certificates in full, distributions will
be made first, to the payment of interest and
principal on the Notes and second, to the payment
of interest and principal on the Certificates. In
such event, 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 Cash Collateral Account, subject to the
Available Cash Collateral Amount. See "The
Purchase Agreements and The Trust
Documents--Insolvency Event".
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 accruing during the related Interest
Accrual Period (computed on the basis of a 360-day
year consisting of twelve 30-day months) will be
paid to the Certificateholders 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 Pass-Through
Rate and the Certificate Balance, 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 from to but
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excluding the first Distribution Date, on the
Original Certificate Balance. 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 and payments of
any Principal Distribution Amount made to the
Certificateholders which are allocable to
principal, (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 Class A
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 reimbursed for any outstanding
Monthly Advances and 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 Cash Collateral Account, subject to the
Available Cash Collateral Amount (as hereinafter
defined), under the circumstances described herein.
The rights of Certificateholders to receive
distributions of interest will be subordinated to
the rights of Noteholders to receive 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 Cash Collateral
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 reimbursed
for any outstanding Monthly Advances and 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 Cash Collateral
Account, subject to the Available Cash Collateral
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
reimbursed for an outstanding Monthly Advances and
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 Cash Collateral Account, subject to the
Available Cash Collateral 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, 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. 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.
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 Cash Collateral Account (to the extent funds
are available therefor in the Cash Collateral
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, in the
event that any portion of the Pre-Funded Amount
remains on deposit in the Pre-Funding Account at
the end of the Funding Period. 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. See "The
Certificates--Redemption" and "Certain Information
Regarding The Securities".
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 and unpaid interest thereon at the
Pass-Through Rate. See "Summary--Optional Purchase
of the Contracts", "--Auction Sale", "The
Certificates--Redemption" and "The Purchase
Agreements and The Trust Documents--Insolvency
Event".
Mandatory Prepayment ..... The Notes and the Certificates will be prepaid 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 any portion of the Pre-Funded Amount remains
on deposit in the Pre-Funding Account 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
amount to be distributed to Noteholders and
Certificateholders in connection with any such
prepayment will equal the Pre-Funded Percentage
allocable to the Notes and the Certificates,
respectively, of the remaining Pre-Funded Amount.
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Subordination of
the Certificates ....... The rights of the Certificateholders to receive
distributions with respect to the Contracts will be
subordinated to the rights of the Class A
Noteholders, to the extent described herein. This
subordination is intended to enhance the likelihood
of timely receipt by Class A Noteholders of the
full amount of interest and principal required to
be paid to them, and to afford such Class A
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 Class A Notes
payable on such Distribution Date has been
distributed to the Class A Noteholders, other than
payments from the Cash Collateral Account, and
(ii) principal until the Class A Notes have been
paid in full, other than distributions in respect
of the Principal Liquidation Loss Amount.
The protection afforded to the Class A Noteholders
by the subordination feature described above will
be effected by the preferential right of the Class
A 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 making payments
in respect of the Certificates. There is no other
protection against losses on the Contracts
afforded the Class A Notes. The Cash Collateral
Account will not be available to provide a source
of funds to make payments of principal or interest
on the Notes.
Cash Collateral Account .. On the Closing Date, an account (the "Cash
Collateral 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 Cash Collateral
Account under certain circumstances specified
below. The Cash Collateral Account will be funded
on the Closing Date in the amount of $
(the "Initial Cash Collateral Amount") from the
proceeds of a loan (the "Loan") to be made by one
or more financial institutions selected by the
Company (the "Cash Collateral Depositor") pursuant
to a Cash Collateral Agreement among the Cash
Collateral Depositor, the Trust and the Servicer
(the "Cash Collateral Agreement"). The Cash
Collateral Depositor's only recourse against the
Trust for repayment of the Loan is from the Cash
Collateral Account Surplus (as hereinafter
defined), certain investment earnings on funds
deposited in the Cash Collateral Account and
payments from the Cash Collateral Account upon
maturity of the Loan, in each case as set forth in
the Cash Collateral Agreement. With respect to any
Distribution Date, the amount available to be
withdrawn from the Cash Collateral Account (the
"Available Cash Collateral Amount") will equal the
lesser of (i) the Required Cash Collateral Amount
and (ii) the amount on deposit in the Cash
Collateral Account, exclusive of interest and
earnings thereon and any investment losses and
expenses and before giving effect to any deposit
to be made to the Cash Collateral Account on such
Distribution Date. If the Available Amount on any
Distribution Date is insufficient (after
reimbursing the Servicer for Monthly Advances to
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the extent required by the Sale and Servicing
Agreement, 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 Cash Collateral Account an amount equal to
the lesser of the amount of such deficiency or the
Available Cash Collateral Amount. See "The Purchase
Agreement and The Trust Documents--Credit
Enhancement--Cash Collateral Account" and
"--Distributions." If the Available Cash Collateral
Amount is zero, holders of the Certificates will
bear the risk of loss resulting from default by
Obligors (as hereinafter defined) 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 into the Cash
Collateral Account in an amount sufficient to
increase the amount on deposit in the Cash
Collateral Account to the Required Cash Collateral
Amount and to make payments of principal or
interest on the Loan as required by the Cash
Collateral Agreement. Excess Collections, if any,
not so required to be deposited in the Cash
Collateral Account will be paid to the Affiliated
Purchaser (as defined herein). "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
are remaining 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 "Required Cash
Collateral Amount" with respect to any
Distribution Date means % of the Pool Balance
as of the first day of the related Due Period, but
in no event less than $ , subject to
adjustment based on delinquencies and losses on
the Contracts, provided that the Required Cash
Collateral Amount 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 and the Certificates. See
"The Purchase Agreement and The Trust
Documents--Credit Enhancement--Cash Collateral
Account."
If, on any Distribution Date, the Available Cash
Collateral Amount (after taking into account any
deposits to and withdrawals from the Cash
Collateral Account pursuant to the Sale and
Servicing Agreement on such Distribution Date)
exceeds the Required Cash Collateral Amount for
the next Distribution Date, such excess (the "Cash
Collateral Account Surplus") will, to the extent
required to make payments of principal and
interest on the Loan, be withdrawn from the Cash
Collateral Account and paid to the Cash Collateral
Depositor. The balance, if any, of such excess
will be withdrawn from the Cash Collateral Account
and paid to the Affiliated Purchaser. See "The
Purchase Agreement and The Trust Documents--Credit
Enhancement--Cash Collateral Account".
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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 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 judgement, 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"), 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 judgement 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
judgement. The Servicer will not advance funds in
respect of the principal component of any scheduled
payment. See "The Purchase Agreements and The Trust
Documents--Monthly Advances". "Interest Shortfall"
means with respect to any Contract and any
Distribution Date, the excess of (x) the sum of (i)
the product of one-twelfth of the weighted average
of the Pass-Through Rate and the Class A Rate
multiplied by 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 Trust, as of the Initial Cut-off Date or the
Subsequent Cut-off Date, as the case may be)
calculated on the basis of a 360-day year comprised
of twelve 30-day months and (ii) the product of (A)
one-twelfth of the Servicing Fee Rate and (B) 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 Trust, as of
the Initial Cut-off Date or the Subsequent Cut-off
Date, as the case may be), over (y) the amount of
interest, if any, collected on such Contract in the
related Due Period.
Non-Reimbursable
Payments ................ 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 Sale
and Servicing Agreement 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").
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 1.00% per annum (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
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amounts on deposit in the Collection Account, the
Note Distribution Account and the Certificate
Distribution Account. In addition, the Servicer
will be entitled to collect and retain 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"). See "The Purchase Agreements and The Trust
Documents--Servicing Compensation."
Optional Purchase
of the Contracts ....... At its option, CITSF may purchase all the
Contracts on any Distribution Date following any
Record Date on which the Pool Balance 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."
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 a Distribution Date
following the Record Date on which the Pool
Balance 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, "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 Record Date. 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 ................... It is a condition to the issuance of the
Securities that the Class A Notes be rated in the
highest rating category by at least one nationally
recognized rating agency (each, a "Rating
Agency") and the Certificates be rated in at least
the third highest rating category by at least one
Rating Agency. The ratings of the Class A Notes
will be based primarily on the value of the
Initial Contracts, 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 Cash Collateral Account. The
foregoing 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 judgement,
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 whether
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any other rating agency will rate the Class A 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.
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. 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.
Any benefit plan fiduciary considering the
purchase of the Securities 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>
RISK FACTORS
Prospective Securityholders should consider the following risks 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
hereinafter defined) or any Servicer (including The CIT Group/Sales Financing,
Inc. ("CITSF")). 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
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 repossession experience of pools of
installment sale contracts secured by recreational vehicles. CITSF's portfolio
of installment sale contracts secured by recreational vehicles has grown over
the past two years, and 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 by this growth and the change in credit criteria. See "The CIT
Group/Sales Financing, Inc., Servicer--Delinquency, Loan Loss and Liquidation
Experience" herein. Because the market value of recreational vehicles generally
declines with age and because of the failure of the Trustees to possess a first
perfected security interest in the Financed Vehicles in certain states, the
Servicer may not recover the entire amount owing under a Defaulted Contract (as
hereinafter defined). 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 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 and (b) the protection against loss afforded to the
Certificateholders by the Available Cash Collateral Amount (as hereinafter
defined). 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 Cash Collateral Amount is reduced to zero, holders
of the Certificates will bear the risk of loss resulting from default by
Obligors (as hereinafter defined) 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, in most states,
certificate of title statutes. The steps necessary to perfect the security
interest in a Financed Vehicle vary from state to state. All Contracts in the
Contract Pool 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 b y 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. Because of the expense and administrative
inconvenience involved, CITSF will not amend any certificate of title to name
the Company or either Trustee as the lienholder and the Company will not deliver
any certificate of title to either Trustee or note thereon either Trustee's
interest. Consequently, in some states, in the absence of such an amendment to
the certificate of title to reflect the successive assignments to the Company,
the Owner Trustee and the Indenture Trustee, 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 Owner Trustee and the Indenture Trustee may not be effective against
other creditors or a trustee in bankruptcy.
In addition, numerous federal and state consumer protection laws impose
requirements on lenders under installment sale contracts, such as the Contracts,
and the failure by the seller of goods to comply with such requirements could
16
<PAGE>
give rise to liabilities of assignees for amounts due under such agreements and
the right to set-off against claims by such assignees. These laws would apply to
the 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. See "Risk Factors--Litigation." Pursuant to the Sale
and Servicing Agreement, CITSF will represent and warrant as of the Initial
Cut-off Date with respect to each Initial Contract, and as of the related
Subsequent Cut-off Date with respect to each Subsequent Contract, that each
Contract complies with all requirements of law and 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 Trust's interest in any
Contract would require CITSF to repurchase such Contract unless such breach is
cured within 90 days. If CITSF does not honor its purchase obligation in respect
of a Contract and such Contract were to become defaulted, recovery of amounts
due on such Contract would be 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 lending pursuant to 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 their provisions may affect the enforceability of the
related Contract. Neither the Trust nor the Company has obtained any license
required under any federal or state consumer or mortgage banking 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. 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. See "Certain
Legal Aspects of the Contracts".
4. Certain Matters Relating to Insolvency. CITSF and the Company intend
that each transfer of Contracts from CITCF-NY to CITSF and 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. ss.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 or 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 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".
, an corporation and a wholly owned
subsidiary of CIT (the "Affiliated Purchaser"), will purchase at least 1% of the
principal balance of the Certificates. 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 herein) with respect to the
Affiliated Purchaser occurs, subject to certain conditions, the Trust will
dissolve. Certain steps have been 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 articles 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
17
<PAGE>
directors). However, there can be no assurance that the activities or
liabilities of the Affiliated Purchaser would not result in an Insolvency Event.
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 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. If the proceeds from the liquidation of the Contracts
and any amounts on deposit in the Note Distribution Account and the Certificate
Distribution Account are not sufficient to pay the Notes and Certificates in
full, distributions will be made first, to the payment of interest and principal
on the Notes and second, to the payment of interest and principal on the
Certificates. In such event, 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 Cash
Collateral Account, subject to the Available Cash Collateral Amount. See "The
Purchase Agreements and The Trust Documents--Insolvency Event".
5. Limited Liquidity. and (the
"Underwriters") intend to make a secondary market in the Securities, but have no
obligation to do so. There can be no assurance that a secondary market will
develop for the Securities or, if it does develop, that it will provide the
Holders of the Securities with liquidity of investment or that it will remain
for the term of the Securities.
6. The Subsequent Contracts and the Pre-Funding Account. The conveyance of
Subsequent Contracts by CITSF during the Funding Period is subject to the
conditions described herein under "The Contract Pool". If CITSF is unable to
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 prepayments of principal to 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, 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. 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 initial 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 initial 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
herein and in the Sale and Servicing Agreement at the time of its addition. 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 the Rating
Agencies, after receiving prior notice of the proposed transfer of Subsequent
Contracts to the Trust, have not 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 largely
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 social and economic
factors. Moreover, such factors may affect the ability of the Obligors
18
<PAGE>
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 the performance by such
Obligors and the availability of Subsequent Contracts.
7. Prepayment from the Pre-Funding Account. To the extent that the
Pre-Funded Amount has not been fully applied by the Trust to purchase Subsequent
Contracts by the end of the Funding Period, the amount remaining on deposit in
the Pre-Funding Account will be payable as principal to Noteholders and
Certificateholders in accordance with the Pre-Funded Percentage (as defined
herein) 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. Although the Trust will covenant to sell the Contracts
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, 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.
Therefore, upon an Event of Default with respect to the Notes there can be no
assurance that sufficient funds will be available to repay Noteholders in full.
In addition, the amount of principal required to be distributed to Noteholders
under the Indenture is generally limited to amounts available to be deposited in
the Note Distribution Account. Therefore, the failure to pay principal on the
Notes may not result in the occurrence of an Event of Default until the Class A
Final Scheduled Distribution Date.
Funds on deposit in the Cash Collateral Account which are available to pay
principal and interest on the Certificates on any Distribution Date will not
exceed the Available Cash Collateral Amount for such Distribution Date. In
addition, amounts to be deposited in the Cash Collateral Account are limited and
will be reduced as the Pool Balance is reduced. If funds in the Cash Collateral
Account are exhausted, the 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 Certificateholders.
9. Geographic Concentration of Recreational Vehicles. A significant
concentration of the Initial Contracts were originated in the states of
[California, Texas, Arizona, Florida, Oklahoma and Missouri]. Based on the
Initial Cut-off Date Pool Principal Balance, %, %, %, %, % and % of
the Initial Contracts were originated in [California, Texas, Arizona, Florida,
Oklahoma and Missouri], 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, Arizona, Florida, Oklahoma or Missouri] may have an adverse effect on the
ability of Obligors in such states to meet their payment obligations under the
Contracts.
10. 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 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. It cannot at this time be determined whether there is any basis for
a class action. The allegations of the complaint are very general and discovery
has only recently commenced. However, based on what it knows at this time, the
19
<PAGE>
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" 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.
STRUCTURE OF THE TRANSACTION
The Issuer, CIT RV Owner Trust 1996-A (the "Issuer" or the "Trust"), is a
business trust formed under the laws of the State of Delaware pursuant to a
Trust Agreement (as amended and supplemented from time to time, the "Trust
Agreement"), to be dated as of February 1, 1996 between the Seller and ,
acting thereunder not in its individual capacity but solely as trustee of the
Trust (the "Owner Trustee"). 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.
The Trust will initially be capitalized with equity equal to
$ (the "Original Certificate Balance"). Certificates with an
aggregate original principal balance of at least $ will be
sold to 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 and to fund the deposit of the Pre-Funded Amount.
The Trust's principal offices are in , Delaware in care of
as Owner Trustee, at the address listed in "--The Owner
Trustee" below.
Capitalization of the Trust
The following table illustrates the capitalization of the Trust as of the
Initial Cut-off Date, as if the issuance and sale of the Notes and the
Certificates offered hereby had taken place on such date:
Class A % Asset Backed Notes ........... $
% Asset Backed Certificates ........... $
-----------
Total ..................................... $
===========
The Owner Trustee
is the Owner Trustee under the Trust Agreement.
is a Delaware banking corporation and a wholly-owned subsidiary of
. The principal offices of are located at
. 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.
20
<PAGE>
THE TRUST PROPERTY
The Notes are an obligation of the Trust and will be secured by the assets
of the Trust (other than the Certificate Distribution Account and the Cash
Collateral 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, other than investment earnings on the
Cash Collateral Account) as described herein; (iv) all monies on deposit in the
Pre-Funding Account, the Cash Collateral 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, other than investment
earnings on the Cash Collateral Account); (v) 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.
21
<PAGE>
THE CONTRACT POOL
General
The Contract Pool will initially consist of conventional fixed-rate
simple interest installment sale contracts secured by recreational vehicles
(collectively, the "Initial Contracts") having an aggregate unpaid principal
balance as of the Initial Cut-off Date of $ (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 on or before the 1996
Distribution Date (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 February 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 February 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 Subsequent Purchase Agreement
and the Company will sell any Subsequent Contracts to the Trust pursuant to a
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;
(ii) such Subsequent Contracts will not be selected by either CIT or the Seller
in a manner that it believes is adverse to the interests of the Securityholders;
(iii) the weighted average Contract Rate of the Contracts (including the related
Subsequent Contracts) is not less than %; (iv) the weighted average remaining
term of the Contracts (including the Subsequent Contracts) as of the related
Subsequent Transfer Date is not greater than 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 of at least %; (ix) each
Subsequent Contract will provide for level monthly payments which provide
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 months; (x) as of the related Subsequent Cut-off Date, the most
recent scheduled payment 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 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 $ and not more than $ ; (xiv) the payment date on the
Subsequent Contract with the latest scheduled payment date will not be later
than 20 ; (xv) no more than % of the Contracts (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
originated by CITSF using the underwriting standards described under "The CIT
Group/Sales Financing, Inc., Servicer--CITSF's Underwriting Guidelines."
22
<PAGE>
Because the Subsequent Contracts will be originated after the Initial
Contracts, following their conveyance 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 in
the ordinary course of business. 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 %; (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 months; (iv) as of the
Initial Cut-off Date the most recent scheduled payment of principal and interest
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
$ and not more than $ . 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 on a 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
1995 and 1996. All Initial Contracts are installment sale contracts
secured by recreational vehicles originated by a Dealer in the ordinary course
of its business and purchased by CITCF-NY or CITSF in the ordinary course of its
business.
Approximately %, % and % 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 % of the Initial
Contracts, by Initial Cut-off Date Pool Principal Balance, represented financing
of recreational vehicles which were new and approximately % represented
financing of recreational vehicles which were used at the time the related
Initial Contract was 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 $ ,
$ and $ , respectively.
Based upon information presented by Obligors in their credit applications
the Initial Contracts were originated in states. Approximately % of the
Initial Contracts, by Initial Cut-off Date Pool Principal Balance, were
originated in the State of California, approximately % were originated in the
State of Texas, approximately % were originated in the State of Arizona,
approximately % were originated in the State of Florida, approximately %
were originated in the State of Oklahoma and approximately % were originated
in the State of Missouri. Each other state accounts for less than % of the
Initial Contracts by Initial Cut-off Date Pool Principal Balance.
All Initial Contracts have a Contract Rate of at least %. As of the
Initial Cut-off Date, the Initial Contracts have remaining maturities of at
least months but not more than months, original maturities of at least
months but not more than months, and a weighted average remaining term to
stated maturity of months. As of the Initial Cut-off Date, the weighted
average contract rate of the Initial Contracts was %. The final scheduled
payment dates on the Initial Contracts range from 199 to 20 . The
average remaining principal balance per contract, as of the Initial Cut-off
Date, was $ and the outstanding principal balances of the Initial
Contracts, as of the Initial Cut-off Date, ranged from $ to $ .
The weighted average original term to maturity of the Initial Contracts was
months.
Set forth below is a description of certain characteristics of the Initial
Contracts.
23
<PAGE>
Geographical Distribution of Initial Contracts by State of Origination
<TABLE>
<CAPTION>
% of Contract
% of Contract Pool by
Number of Pool by Number Aggregate Principal Principal Balance
Initial of Initial Balance Outstanding Outstanding
Contracts As of Contracts As of As of As of
State Initial Cut-off Date Initial Cut-off Date Initial Cut-off Date Initial Cut-off Date
- ---- ---------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Alabama ..........
Arizona ..........
Arkansas .........
California .......
Colorado .........
Connecticut ......
Delaware .........
Florida ..........
Georgia ..........
Idaho ............
Illinois .........
Indiana ..........
Iowa .............
Kansas ...........
Kentucky .........
Louisiana ........
Maine ............
Maryland .........
Massachusetts ....
Michigan .........
Minnesota ........
Mississippi ......
Missouri .........
Montana ..........
Nebraska .........
Nevada ...........
New Hampshire ....
New Jersey .......
New Mexico .......
New York .........
North Carolina ...
Ohio .............
Oklahoma .........
Oregon ...........
Pennsylvania .....
South Carolina ...
South Dakota .....
Tennessee ........
Texas ............
Utah .............
Virginia .........
Washington .......
Wisconsin ........
Wyoming ..........
----- ------- ----------- -------
Total ............ 100.00% $ 100.00%
===== ======= =========== =======
</TABLE>
24
<PAGE>
Range of Contract Rates
<TABLE>
<CAPTION>
% of Contract Pool
% of Contract Pool Aggregate Principal By Principal
Number of by Number of Balance Outstanding Balance Outstanding
Range of Initial Contracts As of Initial Contracts As of As of As of
Contract Rates Initial Cut-off Date Initial Cut-off Date Initial Cut-off Date Initial Cut-off Date
- -------------- -------------------- ----------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
--------- ------ ---------------- ------
Total ............ 100.00% $ 100.00%
========= ====== ================ ======
</TABLE>
Range of Remaining Maturities
<TABLE>
<CAPTION>
% of Contract Pool
% of Contract Pool Aggregate Principal By Principal
Number of by Number of Balance Outstanding Balance Outstanding
Range of Remaining Contracts As of Initial Contracts As of As of As of
Maturity in Months Initial Cut-off Date Initial Cut-off Date Initial Cut-off Date Initial Cut-off Date
- ------------------- -------------------- ----------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
--------- ------ ---------------- ------
Total ............ 100.00% $ 100.00%
========= ====== ================ ======
</TABLE>
Pre-Funding Account; Capitalized Interest Account
The Pre-Funding Account will be maintained with an Eligible Institution (as
defined herein), initially , 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." 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 $ (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 Servicing Agreement, (iv) the insolvency
of the Company, CITSF, CITCF-NY or CIT or (v) the close of business on
, 1996. During the Funding Period, on one or more Subsequent Transfer Dates,
25
<PAGE>
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 , 1996, although no assurance can be given that this
will in fact occur. 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 hereinafter defined) 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 Contract
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 filings, Officers' Certificates and legal 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
1996, 1996 and 1996 Distribution Dates, if
applicable, to fund the excess, if any, of (i) the product of (x) the weighted
average of the Class A Rate and the Pass-Through Rate as of the first day of the
related Interest Accrual Period 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 such Distribution Date) in excess of the
Required Capitalized Interest Amount on such Distribution Date shall be released
to the Seller 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 weighted average of the Class A Rate and the
Pass-Through Rate as of the first day of the related Interest Accrual Period
minus %, (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.
26
<PAGE>
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 hereinafter
defined), (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. See "The Purchase Agreements and The Trust
Documents--Termination." 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 is set forth
below. In evaluating the 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. ln 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 may differ from the Contracts.
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.
27
<PAGE>
The following table sets forth, with respect to all of the recreational
vehicles contracts originated by CITSF (excluding contracts purchased in bulk)
in each year since 1991, the aggregate initial principal balance of the
contracts originated in such year, the approximate aggregate principal balance
outstanding on the contracts originated in such year as of the last day of such
year and the approximate aggregate principal balance outstanding on the
contracts originated in such year as of the end of the subsequent year.
Information Regarding Principal Reduction on Recreational
Vehicle Contracts Originated by CITSF
(Dollars in Thousands)
Year of Origination
----------------------------------------------------
1991 1992 1993(3) 1994(4) 1995(5)
---- ---- ---- ---- ----
Approximate Volume (1) ... $332,700 $374,800 $405,900 $294,500
Approximate Aggregate
Principal Balance (2):
December 31, 1991 ... $282,600
December 31, 1992 ... $198,800 $322,700
December 31, 1993 ... $134,300 $233,700 $354,400
December 31, 1994 ... $ 84,100 $165,200 $274,000 $260,700
June 30, 1995 ....... $ 71,300 $142,900 $242,200 $236,600
- ----------
(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 Recreational Vehicle contracts sold by CITSF in January 1994 in
connection with another securitization which CITSF is servicing.
(4) Includes Recreational Vehicle contracts sold by CITSF in June 1995 in
connection with another securitization which CITSF is servicing.
(5) Includes Recreational Vehicle Contracts sold by CITSF in August 1995 in
connection with another securitization which CITSF is serving.
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"; however, no Monthly Advances will be made in
respect of principal in respect of a Paid-Ahead Contract. See "Yield
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
28
<PAGE>
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 % 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, the Absolute
Prepayment Model ("ABS"), represents an assumed rate of prepayment each month
relative to the original number of contracts in a pool of contracts. ABS further
assumes that all the Contracts are the same size and amortize at the same rate
and that each Contract in each month of its life will either be paid as
scheduled or be prepaid in full. For example, in a pool of contracts originally
containing 10,000 Contracts, a 1.0% ABS rate means that 100 Contracts prepay
each month. ABS does not purport to be a historical description of prepayment
experience or a prediction of the anticipated rate of prepayment of any pool of
contracts including the Contracts.
As the rate of payments of principal of the Notes and in respect of the
Certificate Balance will depend on the rate of payment (including prepayments)
of the principal balance of the Contracts, final payment of the Notes could
occur significantly earlier than the Class A Final Scheduled Distribution Date.
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 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 , 1996, (v) CITSF
exercises its option to purchase the Contracts as specified under "The Purchase
Agreements and The Trust Documents--Termination" and (vi) all of the Subsequent
Contracts are purchased by the Trust prior to the first Distribution Date. The
ABS Table indicates the projected weighted average life of the Notes and the
Certificates and sets forth the percent of the initial principal amount 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 variousconstant
ABS percentages.
The ABS Table also assumes that the Contracts have been aggregated into two
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 ........ $
Pool 2 ........ $
</TABLE>
29
<PAGE>
The actual characteristics and performance of the Contracts will differ
from the assumptions used in constructing the ABS Table. The assumptions used
are hypothetical and have been provided only to give a general sense of how the
principal cash flows might behave under varying prepayment scenarios. For
example, it is very unlikely that the Contracts will prepay at a constant level
of ABS until maturity or that all of the Contracts will prepay at the same level
of ABS. Moreover, the diverse terms of Contracts within each of the hypothetical
pools could produce slower or faster principal distributions than indicated in
the ABS Table at the various constant percentages of ABS specified, even if the
original and remaining terms to maturity of the Contracts are as assumed. Any
difference between such assumptions and actual characteristics and performance
of the Contracts or actual prepayment experience, will affect the percentages of
initial balances outstanding over time and weighted average lives of the Notes
and the Certificates.
Percent of Initial Note Principal Balance at Various ABS Percentages (1)
Distribution Date 0.0% 0.5% 1.0% 1.2% 1.4%
- ----------------- ---- ---- ---- ---- ----
Initial Percent ....................... 100% 100% 100% 100% 100%
Weighted Average Life (years)(2) ......
- ----------
(1) Assumes the exercise by CITSF of its option to purchase all of the Contracts
on the Distribution Date following the Record Date on which the Pool Balance
is 10% or less of the Initial Pool Balance.
(2) The weighted average life of a Class 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.
30
<PAGE>
Percent of Initial Certificate Balance at Various ABS Percentages(1)
Distribution Date 0.0% 0.5% 1.0% 1.2% 1.4%
- ----------------- ---- ---- ---- ---- ----
Initial Percent ....................... 100% 100% 100% 100% 100%
Weighted Average Life (years)(2) ......
- ----------
(1) Assumes the exercise by CITSF of its option to purchase all of the Contracts
on the Distribution Date following the Record Date on which the Pool Balance
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.
31
<PAGE>
YIELD CONSIDERATIONS
Thirty days of interest on the Contracts will be paid to the Noteholders on
each Distribution Date to the extent of the remaining Available Amount, in an
amount equal to one-twelfth of the product of the Class A Rate and the
outstanding principal balance of the Notes as of the preceding Distribution Date
(after giving effect to any distributions of principal to be made on such
Distribution Date) or, in the case of the first Distribution Date, the
outstanding principal balance of the Notes as of the Initial Cut-off Date. See
"The Notes--Distributions of Principal". Thirty days of interest on the
Contracts will be passed through to Certificateholders on each Distribution Date
to the extent of the remaining Available Amount and the Available Cash
Collateral Amount, in an amount equal to one-twelfth of the product of the
Pass-Through Rate and the Certificate Balance as of the preceding Distribution
Date (after giving effect to distributions of principal on the Certificates and
other reductions in the Certificate Balance to be made on such Distribution
Date) or, in the case of the first Distribution Date, the Original Certificate
Balance. 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
which are allocable to principal, (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
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,
Non-Reimbursable Payments 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.
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 Defaulted Contracts. Because Monthly Advances and
Non-Reimbursable Payments are calculated at rates that are less than the
Contract Rate, in the event of such a payment, there will be less interest
available to cover losses on Defaulted Contracts. A similar result occurs when
CITSF purchases a Contract at the Purchase Price (as hereinafter defined).
POOL FACTORS
The "Note Pool Factor" is a seven-digit decimal which the Servicer will
compute each month indicating the remaining outstanding principal balance of the
Notes as of the Distribution Date, as a fraction of the initial outstanding
principal balance of the Notes. The Note Pool Factor will be 1.0000000 as of the
Initial Cut-off Date, and thereafter will decline to reflect reductions in the
outstanding principal balance of the Notes. A Noteholder's portion of the
aggregate outstanding principal balance of the Notes is the product of (i) the
original denomination of the Noteholder's Note and (ii) the Note Pool Factor.
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 initial 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.
Pursuant to the Indenture, 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. See
"Certain Information Regarding the Securities--Statements to Securityholders."
32
<PAGE>
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 Trustees 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 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. The net proceeds
to be received from the sale of the Initial Contracts will be paid 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 those Initial Contracts acquired by CITSF from
CITCF-NY.
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 The CIT Group Holdings, Inc., a Delaware
corporation ("CIT"), which is a successor to a company founded in St. Louis,
Missouri, in February 1908. CIT is 80% owned by The Dai-Ichi Kangyo Bank, Ltd.
and 20% by MHC Holdings (Delaware) Inc., a subsidiary of Chemical Banking
Corporation. 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 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.
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 and other consumer goods
throughout the United 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, marine products and manufactured housing retail
installment credit supplemented by outside collectors and field remarketers
located throughout the United States.
As of , 1995, CITSF serviced for itself and others
approximately contracts (consisting primarily of recreational
vehicle and manufactured housing contracts), representing an outstanding balance
of approximately $ billion. Of this portfolio, approximately
contracts (representing approximately $ billion
outstanding balance) consisted of recreational vehicle contracts.
33
<PAGE>
CITSF's general policies with regard to the origination of recreational
vehicle installment sale contracts are described below under "Contract
Origination" and "CITSF's Underwriting Guidelines". See "Servicing" below for a
description of certain of CITSF's servicing policies.
Contract Origination
Although CITSF does, on occasion, purchase recreational vehicle installment
sale contracts in bulk from other lenders, 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 dealers 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.
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.
All credit applications are entered into an automatic 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. Funding of a contract is authorized after verification of the
conditions of approval of the application and satisfactory delivery of the
related recreational vehicle.
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 to be 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.
34
<PAGE>
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. It is expected that the changes in CITSF's
underwriting standards may result in higher delinquency and loan loss experience
than is shown in the tables in this Prospectus since most of the recreational
vehicle contracts included in such tables were originated using CITSF's former
underwriting guidelines. Most of the Initial Contracts were originated and most
Subsequent Contracts, if any, will be originated under these new credit
criteria. Accordingly, the data presented in the tables in this Prospectus
regarding the portfolio of recreational vehicle contracts serviced by CITSF
should not necessarily be considered as a basis for assessing the likelihood
amount or severity of delinquencies or losses on the Contracts.
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
CITSF services, through its Asset Service Center, recreational vehicle,
manufactured housing, home equity, and other consumer loans. CITSF services all
of the recreational vehicle contracts it purchases or originates, 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.
Such contracts would not be 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 contract 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 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. Recently, the Asset Service
Center has developed a nationwide auction network to facilitate resale efforts
on such repossessions.
35
<PAGE>
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 1996
---- ---- ---- ---- ----
(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
RV - Bulk Purchases .......... 5,828 116,545 4,383 84,344 3,331 60,386 3,522 50,882
RV - Servicing Retained (1) .. 0 0 0 0 0 0 4,827 118,267
Total RV ..................... 39,648 845,601 43,309 930,326 46,861 1,021,768 47,803 1,016,291
Total MH ..................... 31,811 509,400 49,640 805,345 47,898 809,670 39,599 878,152
Home Equity .................. 0 0 0 0 3,545 131,322 13,545 570,772
Other ........................ 6,942 101,022 1,126 19,485 1,572 41,944 1,310 74,823
------ ---------- ------ ---------- ------ ---------- ------- ---------- ------- ----------
Total Contracts
Serviced ................... 78,401 $1,456,023 94,075 $1,755,156 99,876 $2,004,704 102,257 $2,540,038 $
====== ========== ====== ========== ====== ========== ======= ========== ======= ==========
</TABLE>
- ----------
RV = Recreational Vehicle
MH = Manufactured Housing
(1) Represents Contracts securitized with servicing retained.
Delinquency, Loan Loss and Liquidation Experience
The following Delinquency Experience and Loan Loss/Liquidation 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, 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>
Year Ended December 31,
--------------------------------------------------------
1991 1992 1993 1994(3) 1995(3)
---- ---- ---- ------- -------
<S> <C> <C> <C> <C> <C>
Number of Contracts ................ 33,820 38,926 43,530 44,281
Principal Balance of
Contracts Serviced ................ $729,056 $845,982 $961,382 $965,409 $
Principal Balance of
Delinquent Contracts (1):
30-59 Days ...................... $ 4,363 $ 4,412 $ 6,478 $ 4,986 $
60-89 Days ...................... 1,304 1,378 2,211 1,959
90 Days or More ................. 3,406 4,140 3,383 2,785
-------- -------- -------- -------- --------
Total Principal Balance
of Delinquent Contracts ........... $ 9,073 $ 9,930 $ 12,072 $ 9,730 $
======== ======== ======== ======== ========
Delinquencies as a
Percent of Principal
Balances (2) ...................... 1.24% 1.17% 1.26% 1.01% %
</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 January 1994 in
connection with another securitization which CITSF is servicing.
(4) Includes Recreational Vehicle contracts sold by CITSF in January 1994, June
1995 and August 1995, respectively, in connection with two other
securitizations which CITSF is servicing.
36
<PAGE>
The following table sets forth the loan loss and repossession experience
for the five years ended December 31, 1995, of the portfolio of recreational
vehicle contracts originated and serviced by CITSF, excluding contracts acquired
by CITSF through portfolio purchases.
Loan Loss/Liquidation Experience
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------
1991 1992 1993 1994(5) 1995(6)
---- ---- ---- ------- -------
<S> <C> <C> <C> <C> <C>
Number of Contracts (1) ............ 33,820 38,926 43,530 44,281
Principal Balance of
Contracts Serviced (1) ........... $729,056 $845,982 $961,382 $965,409
Net Losses:
Dollars(2) ....................... $ 3,942 $ 4,040 $ 3,917 $ 4,887 $
Percentage (3) ................... 0.54% 0.48% 0.41% 0.51% %(4)
</TABLE>
- ----------
(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) This ratio has been annualized, and may not reflect the actual loan loss
experience for the year.
(5) Includes Recreational Vehicle contracts sold by CITSF in January 1994 in
connection with another securitization which CITSF is servicing.
(6) Includes Recreational Vehicle contracts sold by CITSF in January 1994, June
1995 and August 1995, respectively, in connection with two other
securitizations which CITSF is servicing.
The data presented in the foregoing tables is for illustrative purposes
only. CITSF's portfolio of installment sale contracts secured by recreational
vehicles has experienced rapid growth over the past two years. The delinquency
and loss percentages will be affected by the rapid growth, size and relative
lack of seasoning of CITSF's portfolio, as well as general and regional economic
conditions. In addition, 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 CITSF's old
underwriting guidelines. However, in July 1994 CITSF adopted a risk-adjusted
pricing policy and changed its credit criteria and underwriting guidelines as
described under "--CITSF's Underwriting Guidelines" above. 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 July 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 most of the recreational
vehicle contracts included in such tables were originated using CITSF's former
underwriting guidelines. All of the Initial Contracts were originated and all
Subsequent Contracts, if any, will be originated under these new credit criteria
adopted by CITSF in July 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.
37
<PAGE>
THE NOTES
General
The CIT RV Owner Trust 1996-A Class A % Asset Backed Notes (the
"Notes" or the "Class A Notes") will represent obligations of the Trust secured
by the assets of the Trust (other than the Certificate Distribution Account and
the Cash Collateral Account). The Trust will issue $ aggregate principal
amount of Class A Notes pursuant to the terms of an Indenture, to be dated as of
February 1, 1996 (as amended and supplemented from time to time, the
"Indenture") between the Trust and , as trustee (the
"Indenture Trustee"), a form of which will be filed as an exhibit to the
Registration Statement of which this Prospectus 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 offered for purchase in minimum denominations of $1,000
and integral multiples of $1,000 in excess thereof in book-entry form only. The
Class A Notes will initially be represented by a single Note 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"), 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 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 below
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. 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" below.
Payments of interest and principal on the Notes with respect to each Due
Period will be made on the fifteenth day of each month or, if any such day is
not a Business Day, on the next succeeding Business Day (each, a "Distribution
Date"), commencing 15, 1995. With respect to any Distribution Date, the
"Due Period will be the calendar month preceding the month of such Distribution
Date. The first Due Period will commence on and include February 1, 1996 and
will end on and include February 29, 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, Illinois or Oklahoma are authorized or
required by law, regulation or executive order to be closed.
Payments of Interest
The Class A Notes will bear interest at the rate of % per annum (the
"Class A Rate"). 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 on which interest has been paid to but excluding the following
Distribution Date, or in the case of the initial Distribution Date from February
, 1996 to but excluding the initial Distribution Date (each, an "Interest
Accrual Period"). Interest accruing during the related Interest Accrual Period
(computed on the basis of a 360-day year consisting of twelve 30-day months)
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 Class A Rate
and the outstanding principal balance on the 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 from to but
38
<PAGE>
excluding the first Distribution Date, on the outstanding principal balance of
the Notes as of the Closing Date (the "Class A Interest Distribution Amount").
Interest accrued as of any Distribution Date but not paid on such Distribution
Date will be due 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" is equal to
the difference between (i) the sum of (x) the Pool Balance on the last day of
the second preceding Due Period (or, in the case of the first Distribution Date,
the Initial Cut-off Date Pool Principal Balance), and (y) the amount on deposit
in the Pre-Funding Account (exclusive of investment earnings) on the last day of
the second preceding Due Period (or, in the case of the first Distribution Date,
as of the Closing Date), less (ii) the sum of (x) the Pool Balance on the last
day of the preceding Due Period and (y) the amount on deposit in the Pre-Funding
Account (exclusive of investment earnings) on the last day of the preceding Due
Period; provided, however, that the Principal Distribution Amount on the Class A
Final Scheduled Distribution Date will equal the outstanding principal balance
of the Notes as of such date and the Principal Distribution Amount on the
Certificate Final Distribution Date will equal the Certificate Balance on such
date. For the purposes of determining the Principal Distribution Amount, the
unpaid principal balance of a Defaulted Contract or a Repurchased Contract is
deemed to be zero on and after the last day of the Due Period in which such
Contract became a Defaulted Contract or a Repurchased Contract. The Principal
Distribution Amount will not exceed the outstanding principal balance of the
Notes or, after the Cross-Over Date, the Certificate Balance.
No principal will be paid in respect of the Notes until the Servicer has
been reimbursed for any outstanding Monthly Advances and has been paid the
Servicing Fee (including any unpaid Servicing Fee with respect to one or more
prior Due Periods) (collectively, the "Servicer Payment") and until the entire
Class A Interest Distribution Amount has been paid for the related Distribution
Date. The principal balance of the Class A Notes, to the extent not previously
paid, will be due on the Class A Final Scheduled Distribution Date. The actual
date on which the aggregate outstanding principal amount of the Class A Notes is
paid may be earlier than the Class A Final Scheduled Distribution Date based on
a variety of factors.
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 herein under "The Purchase Agreements and The Trust
Documents--Distributions". The unpaid principal balance of the Notes will be
payable on the Class A Final Scheduled Distribution Date.
Redemption
The 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 any portion 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 Notes to be redeemed will be an amount equal to the Pre-Funded
Percentage allocable to the Notes of the amount then on deposit in the
Pre-Funding Account.
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 Class A Rate. An "Optional Purchase" of all the Contracts by CITSF, may
occur at CITSF's option, on any Distribution Date following any Record Date on
which the Pool Balance is 10% or less of the Initial Pool Balance (as
hereinafter defined). An "Auction Sale" may occur, and may result in the sale of
the Contracts remaining in the Trust, within ten days following any Distribution
Date following any Record Date on which the Pool Balance is 5% or less of the
Initial Pool Balance.
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 90 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). Upon the occurrence of such an event, 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 interest thereon at the
Class A Rate.
39
<PAGE>
The Indenture
Modification of Indenture without Noteholder Consent. The Trust and the
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; and (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 herein.
Modification of Indenture with Noteholder Consent. With the consent of the
holders of a majority of the aggregate principal amount of the outstanding
Notes, and with prior notice to the Rating Agencies, the Trust 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 Note affected
thereby, however, no supplemental indenture will: (i) change the due date of any
instalment 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 Trust, any other obligor on the Notes, the Seller or
an affiliate of any of them; (v) reduce the percentage of the aggregate
outstanding amount of the Notes the consent of the holders of which is required
to direct the Indenture Trustee to sell or liquidate the Contracts if the
proceeds of such sale would be insufficient to pay the principal amount and
accrued but unpaid interest on the outstanding Notes; (vi) decrease the
percentage of the aggregate principal amount of the Notes required to amend the
sections of the Indenture which specify the applicable percentage of aggregate
principal amount of the Notes necessary to amend the Indenture or certain other
related agreements; or (vii) permit the creation of any lien ranking prior to or
on a parity with the lien of the Indenture with respect to any of the collateral
for the Notes or, except as otherwise permitted or contemplated in the
Indenture, terminate the lien of the Indenture on any such collateral or deprive
the holder of any Note of the security afforded by the lien of the Indenture.
Events of Default; Rights Upon Event of Default. "Events of Default" under
the Indenture will consist of: (i) any failure to pay interest on the Notes as
and when the same becomes due and payable, which failure continues unremedied
for five days; (ii) any failure (a) to make any required payment of principal on
the Notes which failure continues unremedied for thirty (30) 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 30 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 principal amount of the Notes; (iii) failure to pay the unpaid principal
balance of any Notes on or prior to the Class A Final Scheduled Distribution
Date; and (iv) certain events of insolvency, readjustment of debt, marshalling
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
40
<PAGE>
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 the Notes generally will not
result in the occurrence of an Event of Default until the Class A Final
Scheduled Distribution Date.
If an Event of Default should occur and be continuing with respect to the
Notes, the Indenture Trustee or holders of a majority in principal amount of
such Notes then outstanding 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 a majority of the principal amount of the Notes
then outstanding.
If the Notes are due and payable following an Event of Default with respect
thereto, the Indenture Trustee may institute proceedings to collect amounts due
or foreclose on Trust property, exercise remedies as a secured party, 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. The Indenture Trustee, however, is
prohibited from selling the Contracts following an Event of Default, unless (i)
the holders of all the outstanding 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 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 a
majority of the aggregate outstanding amount of the Notes. 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 and other payments from the Cash Collateral Account).
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 the 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 a majority in principal amount of the outstanding
Notes will have the right to direct the time, method and place of conducting any
proceeding or any remedy available to the Indenture Trustee and the holders of a
majority in principal amount of such Notes then outstanding may, in certain
cases, waive any default with respect thereto, except a default in the payment
of principal or interest or a default in respect of a covenant or provision of
the Indenture that cannot be modified without the waiver or consent of all of
the holders of such outstanding Notes.
No holder of a Note will have the right to institute any proceeding with
respect to the 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 principal amount of the outstanding 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 60
days failed to institute such proceeding and (v) no direction inconsistent with
such written request has been given to the Indenture Trustee during such 60-day
period by the holders of a majority in principal amount of such outstanding
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 90 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, the Indenture Trustee and Noteholders, by accepting the Notes,
will covenant that they will not, for a period of one year after the termination
of the Indenture, institute against the Affiliated Purchaser, the Company or the
Trust any bankruptcy, reorganization or other proceeding under any federal or
state bankruptcy or similar law.
41
<PAGE>
Neither the Indenture Trustee nor the Owner Trustee in its individual
capacity, nor the Cash Collateral Depositor, nor any holder of a Certificate
including, without limitation, the Affiliated Purchaser 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 Notes or for the agreements of the Trust contained in the
Indenture.
Certain Covenants. The Indenture provides that the Trust may not
consolidate with or merge into any other entity, unless (i) the entity formed by
or surviving such consolidation or merger is organized under the laws of the
United States, any state or the District of Columbia, (ii) such entity expressly
assumes the Trust's obligation to make due and punctual 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 would have no material adverse tax consequence to the Trust or to any
Noteholder or Certificateholder.
The Trust 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) for such Trust (collectively, the "Related
Documents"), sell, 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
and interest payable in respect of the 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 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.
The Trust will not incur, assume or guarantee any indebtedness other than
indebtedness incurred pursuant to the Notes and the Indenture or otherwise in
accordance with the Related Documents.
Annual Compliance Statement. The Trust will be required to file annually
with the 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 Noteholders a brief report relating to its eligibility
and qualification to continue as Indenture Trustee under the 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. The Indenture will be discharged
with respect to the collateral securing the related Notes upon the delivery to
the 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 under the Indenture will be
Harris Trust and Savings Bank. 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 does not
become effective until acceptance of the appointment by the successor trustee.
Trust Indenture Act. The Indenture will comply with all applicable
provisions of the Trust Indenture Act of 1939, as amended.
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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 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 Owner Trust 1996-A % Asset Backed Certificates (the
"Certificates" and, together with the Notes, the "Securities") will represent
fractional undivided interests in the Trust. The Trust will issue $
aggregate principal amount of Certificates pursuant to a Trust Agreement, to be
dated as of February 1, 1996, between the Seller and the Owner Trustee (the
"Trust Agreement"), a form of which will be filed as an exhibit to the
Registration Statement of which this Prospectus 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 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 Certificate Balance. The Certificates will
initially be represented by a single Certificate registered in the name of Cede,
the nominee of DTC. 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 below under "Certain Information Regarding The
Securities--Definitive Securities". Unless and until Definitive Certificates are
issued under the limited circumstances described 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" below.
Payments of interest and principal on the Certificates with respect to each
Due Period will be made on each Distribution Date, commencing 15, 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.
Distribution of Interest
The Certificates will bear interest at the rate of % per annum (the
"Pass-Through Rate"). Interest on the Certificate Balance will accrue during the
related Interest Accrual Period at the Pass-Through Rate. Interest accruing
during the related Interest Accrual Period (computed on the basis of a 360-day
year consisting of twelve 30-day months) will be paid to the Certificateholders
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 Pass-Through Rate and the Certificate Balance,
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 from
to but excluding the first Distribution Date, on the Original
Certificate Balance (the "Certificate Interest Distribution Amount"). Interest
accrued as of any Distribution Date but not paid on such Distribution Date will
be due 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 Cash
Collateral Account, to the extent of the Available Cash Collateral Amount, in
the event there are not sufficient funds (after reimbursement to the Servicer
for reimbursable Monthly Advances, and payment of the Servicer Payment to the
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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 and Non-Reimbursable Payments 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 Cash Collateral Amount, in an amount equal to the Principal
Distribution Amount for the related Due Period. Such principal payments will be
funded to the extent of the Available Amount remaining after the Servicer has
been reimbursed for any outstanding Monthly Advances and 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 Cash Collateral Account to the extent of the Available Cash Collateral
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 and to the extent described herein. The
principal balance of the Certificates, to the extent not previously paid, will
be due on the Certificate Final Scheduled Distribution Date. The actual date on
which the aggregate outstanding principal amount of the Certificates is paid may
be earlier than the Certificate Final Scheduled Distribution Date based on a
variety of factors.
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 Cash Collateral 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 reimbursed for any outstanding Monthly Advances and 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 Cash
Collateral Account to the extent of the Available Cash Collateral 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 plus the amounts 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
"--Subordination" below.
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 any portion 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
following any Record Date on which the Pool Balance is 10% or less of the
Initial Pool Balance (as hereinafter defined). An Auction Sale will occur at any
time, and may result in the sale of the Contracts remaining in the Trust, within
ten days following a Distribution Date following the Record Date on which the
Pool Balance is 5% or less of the Initial Pool Balance.
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 proceeds from any such sale, disposition or liquidation of
the Contracts will be treated as collections on the Contracts and deposited in
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the Collection Account. If the proceeds from the liquidation of the Contracts
and any amounts on deposit in the Note Distribution Account and the Certificate
Distribution Account are not sufficient to pay the Notes and Certificates in
full, distributions will be made first, to the payment of interest and principal
on the Notes and second, to the payment of interest and principal on the
Certificates. In such event, 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 Cash Collateral
Amount, made to the Certificateholders from the Cash Collateral Account.
Credit 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 Class A Notes payable on such Distribution Date
has been distributed to the Class A Noteholders, other than payments from the
Cash Collateral Account, and (ii) principal until the Class A Notes have been
paid in full, other than distributions in respect of the Principal Liquidation
Loss Amount.
Cash Collateral Account. The only credit enhancement for the Certificates
is the Cash Collateral Account. With respect to any Distribution Date, the
amount available to be withdrawn from the Cash Collateral Account as payment to
the Certificateholders will not exceed the Available Cash Collateral Amount. The
Available Cash Collateral Amount will be reduced by payments from the Cash
Collateral Account required to be made to the Cash Collateral Depositor (as
hereinafter defined) pursuant to the Cash Collateral Agreement (as hereinafter
defined) and payments previously made therefrom to Certificateholders and
generally will be reduced as the Pool Balance is reduced. See "The Purchase
Agreements and The Trust Documents--Credit Enhancement--Cash Collateral
Account." At any time that the Available Cash Collateral Amount is zero, 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.
CERTAIN INFORMATION REGARDING THE SECURITIES
Book-Entry Registration
Persons acquiring beneficial ownership interests in the Securities may hold
their interests through DTC in the United States or, in the case of the Notes,
Cedel or Euroclear in Europe and persons acquiring beneficial ownership
interests in the Certificates may hold their interests through DTC. 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. For additional information regarding clearance and
settlement procedures see Annex I hereto.
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 (including the Underwriters), banks and 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
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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 may experience some
delay in their receipt of payments, since such payments will be forwarded by the
Trustees 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 Sale and Servicing Agreement, and Security Owners will only be
permitted to exercise the rights of Securityholders indirectly through DTC and
its Participants. 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.
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.
Because of 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 Participants on such business day. Cash received in Cedel or Euroclear as
result of sales of Securities by or through a Cedel Participant or Euroclear
Participant to a DTC Participant will be received with value on the DTC
settlement date but will be available in the relevant Cedel or Euroclear cash
account only as of the business day following settlement in DTC.
Cross-market transfers between persons directly or indirectly holding Notes
through DTC, on the one hand, and directly or indirectly through Cedel
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC Rules on behalf of the relevant European international
clearing system by its Depository; however, such cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterpart 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 to the Depositories.
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.
Because 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.
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.
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The Euroclear System was created in 1968 to hold securities for its
participants ("Euroclear Participants") and to clear and settle transactions
between Euroclear Participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities and
cash. Transactions may be settled in any of 32 currencies, including United
States dollars. The Euroclear System includes various other services, including
securities lending and borrowing and interfaces with domestic markets in several
countries generally similar to the arrangements for cross-market transfers with
DTC described above. The Euroclear System is operated by the Brussels, Belgium
Office of Morgan Guaranty Trust Company of New York (the "Euroclear Operator" or
"Euroclear"), under contract with Euroclear Clearance Systems, S.C., a Belgian
cooperative corporation (the "Cooperative"). All operations are conducted by the
Euroclear Operator, and all Euroclear securities clearance accounts and
Euroclear cash accounts are accounts with the Euroclear Operators, 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 thorough, 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 and the Trustees that, unless and until
Definitive Securities are issued, DTC will take any action permitted to be taken
by a Securityholder under the Sale and Servicing Agreement only at the direction
of one or more Participants to whose DTC accounts the Securities are credited.
DTC may take conflicting actions with respect to other undivided interests to
the extent that such actions are taken on behalf of Participants whose holdings
include such undivided interests.
NEITHER THE TRUST, THE SELLER, THE SERVICER, CIT, THE AFFILIATED PURCHASER,
THE OWNER TRUSTEE, THE INDENTURE TRUSTEE, THE CASH COLLATERAL DEPOSITOR NOR ANY
OF THE UNDERWRITERS WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO ANY
PARTICIPANTS, CEDEL PARTICIPANTS OR EUROCLEAR PARTICIPANTS OR THE PERSONS FOR
WHOM THEY ACT AS NOMINEES 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 BENEFICIAL OWNER IN
RESPECT OF THE PRINCIPAL AMOUNT OF, OR INTEREST ON, THE SECURITIES, (3) THE
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DELIVERY BY ANY PARTICIPANT, CEDEL PARTICIPANT OR EUROCLEAR PARTICIPANT OF ANY
NOTICE TO ANY BENEFICIAL OWNER WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF
THE INDENTURE OR THE TRUST AGREEMENT TO BE GIVEN TO SECURITYHOLDERS OR (4) ANY
OTHER ACTION TAKEN BY DTC AS THE SECURITYHOLDER.
Definitive Securities
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 Trustees
or 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
and Certificate Owners representing in the aggregate not less than a majority of
the outstanding principal balance of the Notes or the Certificate Balance 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 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 and instructions for
re-registration, the Trustee will issue the Notes as Definitive Notes and the
Certificates as Definitive Certificates, and thereafter the Trustee will
recognize the holders of such Definitive Notes and Definitive Certificates as
Noteholders and Certificateholders, respectively, under the Sale and Servicing
Agreement ("Noteholders" and "Certificateholders" respectively, and together
"Securityholders" or "Holders").
Distributions of principal of the Securities and interest on the Securities
will be made by the Trustee directly to Holders in accordance with the
procedures set forth herein and in the Sale and Servicing Agreement.
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 the
Security Registrar. 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.
Definitive Securities will be transferable and exchangeable at the offices
of the 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.
List of Security Holders
If Definitive Certificates have been issued, the Owner Trustee will, upon
written request by three or more Certificateholders or by holders of
Certificates evidencing not less than 25% of the Certificate Balance, within
five (5) Business Days afford such Certificateholders access during business
hours to the current list of Certificateholders for purposes of communicating
with other Certificateholders with respect to their rights under the 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.
If Definitive Notes have been issued, the Indenture Trustee will, upon
written request by three or more Noteholders or by holders of Notes evidencing
not less than 25% of the aggregate principal balance of the Notes, within five
(5) Business Days 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.
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Statements to Securityholders
On each Distribution Date, the Servicer will include with each distribution
to each Securityholder a statement, setting forth the following information for
the related Due Period:
(i) the amount of the distribution allocable to principal of the Notes
and to the Certificate Balance of the Certificates, including any overdue
principal;
(ii) the amount of the distribution allocable to interest on or with
respect to each class of Securities, including any overdue interest;
(iii) the Pool Balance, the Note Pool Factor and the Certificate Pool
Factor as of the end of the related Due Period;
(iv) the Servicing Fee for the related Due Period, including any
overdue Servicing Fee;
(v) the amount of Monthly Advances and Non-Reimbursable Payments on
such date;
(vi) the amount, if any, withdrawn from the Cash Collateral Account
and distributed to the Certificateholders with respect to such Distribution
Date;
(vii) the Available Cash Collateral Amount, after giving effect to any
deposit to or withdrawal from the Cash Collateral Account with respect to
such Distribution Date, and such amount expressed as a percentage of the
Pool Balance;
(viii) the aggregate principal balance of all Contracts which were
delinquent 30, 59 and 89 days or more as of the last day of the related Due
Period;
(ix) during the Funding Period, the amount of funds on deposit in the
Pre-Funding Account;
(x) during the Funding Period, the number and aggregate principal
balance of Subsequent Contracts;
(xi) during the Funding Period, the number and aggregate principal
balance of Subsequent Contracts purchased by the Trust on the related
Distribution Date;
(xii) during the Funding Period, the amount, if any, withdrawn from
the Capitalized Interest Account to make payments of interest on the
Securities;
(xiii) during the Funding Period, the amount remaining on deposit
in the Capitalized Interest Account;
(xiv) 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), the aggregate principal amount and percentage of
each of the Notes and Certificates which are being redeemed;
(xv) the amount, if any, by which the amount due to be distributed to
Noteholders and Certificateholders exceeds the actual amount distributed on
the related Distribution Date to Noteholders and Certificateholders,
respectively;
(xvi) the aggregate principal balance of all Contracts which became
Defaulted Contracts during the related Due Period;
(xvii) the number and aggregate principal amount of Contracts which
were prepaid, in part or in whole, during the related Due Period;
(xviii) the aggregate outstanding principal balance of the Notes as of
such Distribution Date after giving effect to any distributions on such
Distribution Date;
(xix) the Certificate Balance as of such Distribution Date (after
giving effect to any distributions on such Distribution Date); and
(xx) the Required Cash Collateral Amount.
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 furnish to each person who at any time during such
calendar year shall have been a Securityholder 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."
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THE PURCHASE AGREEMENTS AND THE TRUST DOCUMENTS
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 (together, 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. 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.
Sale and Assignment of the Contracts
On or prior to the Closing Date 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 Owner Trustee, without recourse,
all of its right, title and interest in and to such Contracts, including its
security interests in the Financed Vehicles. 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 Sale and Servicing Agreement (the "List of
Contracts") which includes, among other things, the Contract Rate, Initial
Cut-off Date Principal Balance and date of the last scheduled payment for each
Contract. The Owner Trustee or its designated agent (which may be
) will, concurrently with the sale and assignment of
the Initial Contracts to it pursuant to the Sale and Servicing Agreement,
execute, authenticate and deliver the Notes and Certificates to the Company in
exchange for the Initial Contracts. The Company will sell the Notes and the
Certificates to the Underwriters.
CITSF will make certain representations and warranties in the Sale and
Servicing Agreement with respect to each Initial Contract as of the Closing
Date, including 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 30 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 right of rescission, set-off, counterclaim
or defense, including the defense of usury, 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 not so covered, is covered by a blanket
insurance policy maintained by CITSF and the Servicer has not obtained
Force-Placed Insurance (as hereinafter defined) with respect to any Contract;
(vi) each Contract was originated by a Dealer and was purchased by CITSF or
CITCF-NY in the ordinary course of its business; (vii) no Contract was
originated in or is subject to the laws of any jurisdiction whose laws would
make the transfer of the Contract to the Company under the Purchase Agreement,
to the Trust pursuant to the Sale and Servicing Agreement or pursuant to a
transfer of the Notes and Certificates, or the ownership of the Contracts by the
Trust, unlawful; (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 lien 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 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
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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, to the best of CITSF's knowledge, 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 lien 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 Sale and Servicing
Agreement, was in the possession of CITSF; (xxi) the Contract is "chattel paper"
as defined in the New Jersey UCC; and (xxii) the Contract satisfies the
selection criteria discussed above under "The Contract Pool--General".
The Sale and Servicing Agreement will require CITSF to make 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 Transfer 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 under the heading "The
Contract Pool--Pre Funding Account; Capitalized Interest Account." The
Subsequent Financed Vehicles will consist of motor homes, travel trailers and
other types of recreational vehicles.
Under the terms of the Sale and Servicing Agreement and subject to certain
conditions specified in the Sale and Servicing Agreement, CITSF will be
obligated to purchase for the Purchase Price (as defined below) any Contract not
later than 90 days after CITSF becomes aware, or 85 days after CITSF's receipt
of written notice from either Trustee or the Servicer, of a breach of any
representation or warranty of CITSF in the Sale and Servicing Agreement referred
to in the two preceding paragraphs that materially and adversely affects the
Trust's interest in such Contract if such breach has not been cured. CITSF shall
effect such purchase by depositing the Purchase Price for such Contract in the
Collection Account on the date specified in the Sale and Servicing Agreement.
The "Purchase Price" for any Contract will be the remaining principal amount
outstanding on such Contract on the date of purchase, plus 30 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 Class A Rate and the
remaining principal amount outstanding on the Contract and (ii) accrued and
unpaid Servicing Fees thereon at the Servicing Fee Rate to the date of such
purchase. This purchase obligation constitutes the sole remedy available to the
Trust and the Securityholders for a breach of a representation and warranty
under the Sale and Servicing Agreement with respect to the Contracts (but not
with respect to any other breach by CITSF of its obligations under the Sale and
Servicing Agreement).
To reduce administrative costs, the Trust will appoint the Servicer as
initial custodian of the Contracts. 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. CITSF's accounting records and
computer systems will reflect the sale and assignment of the Contracts by CITSF
to the Company and by the Company to the Trust, and UCC financing statements
perfecting such sale and assignment will be filed. The Obligors under the
Contracts will not be notified of the transfer of the Contracts to the Company
or to the Trust. See "Certain Legal Aspects of the Contracts".
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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 will 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 argue 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 payments of amounts due on the
Certificates and, if accepted by the court, may result in delays or reductions
in distributions of principal and interest on such Securities. Because the
Contracts will remain in CITSF's possession and will not be stamped or otherwise
marked to reflect the 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 assignment. See "Certain
Legal Aspects of the Contracts".
Accounts
The Servicer will establish and maintain with the Indenture Trustee one or
more accounts, in the name of the Indenture Trustee on behalf of the Noteholders
and Certificateholders, into which all payments made on or with respect to the
Contracts will be deposited (the "Collection Account") by the Servicer. The
Servicer will establish and maintain with the Indenture Trustee an account in
the name of the Indenture Trustee on behalf of the Noteholders, in which amounts
released from the Collection Account for payment to the Noteholders will be
deposited and from which distributions to the Noteholders will be made (the
"Note Distribution Account"). The Servicer will establish and maintain with the
Owner Trustee (or its designated agent) an account in the name of the Owner
Trustee on behalf of the Certificateholders, in which amounts released from the
Collection Account and the Cash Collateral Account 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 an Eligible Institution (as
defined below), initially the Owner Trustee (or its designated agent), an
account in the name of the Owner Trustee, in which the Initial Cash Collateral
Amount will be deposited and from which payments will be made (i) to the
Certificate Distribution Account for distribution to the Certificateholders,
(ii) to the Cash Collateral Depositor and (iii) to the Affiliated Purchaser, as
set forth in the Sale and Servicing Agreement and the Cash Collateral Agreement.
Amounts held in the Certificate Distribution Account and the Cash Collateral
Account will not be available to make payments of amounts due on the Notes, and
will not be pledged to the Indenture Trustee as collateral security for the
Notes.
An "Eligible Institution" means either (i) the corporate trust department
of the Owner Trustee, the Indenture Trustee or any paying agent satisfying the
criteria under the Trust Agreement or Indenture as applicable or (ii) a
depository institution or trust company 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), which is subject to supervision and
examination by federal or state authorities and (unless the Certificate Account
is a trust account maintained in the corporate trust department of such
depository institution) whose short-term deposits have been rated P-1 by Moody's
or A-1 by Standard & Poor's, or in one of the two highest rating categories by
Moody's and Standard & Poor's in the case of unsecured long-term debt.
All amounts held in each of the accounts established by the Servicer 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 Sale and
Servicing Agreement, 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, Note
Distribution Account, Certificate Distribution Account and Cash Collateral
Account will not be available to make payments on the Securities.
Servicing Procedures
The Servicer will make reasonable efforts to collect all payments due with
respect to the Contracts and, in a manner consistent with the Sale and Servicing
Agreement, will continue such normal collection practices and procedures as it
follows with respect to comparable recreational vehicle installment sale
contracts it services for itself and others. See "Certain Legal Aspects of the
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Contracts." Consistent with its normal procedures, the Servicer may, in its
discretion, arrange with an Obligor to extend or modify the payment schedule on
a Contract provided that (i) the maturity of such Contract would not extend
beyond the 180th day prior to the Class A Final Scheduled Distribution Date and
(ii) the reducing, 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 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. With
respect to any Due Period, a "Defaulted Contract" means any Contract (except for
a Repurchased Contract) in respect of which payments exceeding $25 in the
aggregate were delinquent 120 days or more as of the last day of such Due
Period; provided, however, that a Paid-Ahead Contract and a Contract which is
delinquent due to the Soldiers and Sailors Relief Act of 1940 shall not be
deemed delinquent. 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 net proceeds
of such realization will be deposited in the Collection Account.
Under the Sale and Servicing Agreement, the Servicer will be required to
use its best efforts to require the Obligors to obtain and maintain theft and
physical damage insurance on the Financed Vehicles in accordance with the
policies and procedures employed by the Servicer with respect to comparable new
or used recreational vehicle receivables that it services for itself or others.
The Sale and Servicing Agreement provides that neither the Servicer nor the
Company, nor any director, officer, employee or agent of the Servicer or the
Company, will be under any liability to the Trustees, the Trust or the
Securityholders for any action taken or for restraining from the taking of any
action in good faith pursuant to the Sale and Servicing Agreement, or for errors
in judgment; provided, however, that the Servicer, the Company or any such
person will not be protected against any liability which would otherwise be
imposed by reason of the failure to perform its obligations in compliance with
the standards of care set forth in the Sale and Servicing Agreement. 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 Sale and Servicing Agreement 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.
The Servicer shall keep in force throughout the term of the Agreement (i)
at such time as the long-term debt of its parent is rated less than "A" by
Standard & Poor's or less than "A3" by Moody's, a policy or policies of
insurance covering errors and omissions for failure to maintain insurance as
required by the Sale and Servicing Agreement and (ii) a fidelity bond. Such
policy or policies and such fidelity bond shall 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.
A breach of certain covenants made by CITSF as Servicer in the Sale and
Servicing Agreement 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 Sale and Servicing
Agreement.
Servicing Compensation
The Servicer will be entitled to receive 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 1.00% per annum (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. In addition,
the Servicer will be entitled to collect and retain 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"). Payments to the
Servicer of such amounts will compensate the Servicer for performing the
functions of a third party servicer of recreational vehicle receivables as an
agent for the Trust, including collecting and posting all payments, responding
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to inquiries of Obligors, investigating delinquencies, reporting federal income
tax information to Obligors, paying costs of disposition of defaults, monitoring
the collateral in cases of Obligor default and handling the foreclosure or other
liquidation of the Financed Vehicle in appropriate instances.
The Servicing Fee and Late Fees 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 and Late Fees 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
The Servicer will deposit all payments on or with respect to the Contracts
received from Obligors and all proceeds of Contracts collected during each Due
Period into the Collection Account not later than two Business Days after
receipt. However, at any time that (i) CITSF remains the Servicer under the Sale
and Servicing Agreement and The CIT Group Holdings, Inc. (the parent of the
Servicer) has and maintains a short-term debt rating of "at least A-1 by
Standard & Poor's and either a short-term debt rating of P-1 or a long-term debt
rating of at least A2 by Moody's" (the "Required Servicer Ratings"), or (ii) the
Servicer obtains a letter of credit, surety bond or insurance policy (the
"Servicer Letter of Credit") as provided in the Sale and Servicing Agreement
under which demands for payment will 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, the Servicer will not be required to deposit payments by
Obligors on the Contracts in the Collection Account within two Business Days of
the date of processing. In such an event, the Servicer may make such deposits on
the Business Day immediately preceding the next Distribution Date in an amount
equal to the net amount of such deposits and payments which would have been made
had the conditions of the preceding sentence not applied. 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 the second condition
described above, the Sale and Servicing Agreement will be modified, to the
extent necessary, without the consent of any Securityholder. Pending deposit
into the Collection Account, collections may be invested by the Servicer at its
own risk and for its own benefit and will not be segregated from its own funds.
The Company, 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 Business Day immediately preceding the
related Distribution Date.
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)
that has been purchased by CITSF or the Servicer pursuant to the Sale and
Servicing Agreement and that are not required to be distributed to
Securityholders, (b) net investment earnings on funds deposited in the
Collection Account, the Note Distribution Account, the Certificate Distribution
Account and the Cash Collateral Account, (c) amounts received as Late Fees, (d)
amounts to be reimbursed to the Servicer in respect of unrecoverable Monthly
Advances, (e) 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, (f) amounts received as liquidation
proceeds, to the extent the Servicer is entitled to reimbursement of liquidation
expenses related thereto, and (g) repossession of profits on liquidated
Contracts.
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 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
judgement, 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"), net liquidation proceeds or insurance proceeds with
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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 judgement 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. The Servicer will not advance funds in respect of the principal
component of any scheduled payment.
"Interest Shortfall" means with respect to any Contract and any
Distribution Date, the excess of (x) the sum of (i) the product of one-twelfth
of the weighted average of the Pass-Through Rate and the Class A Rate multiplied
by 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 Trust, as of the Initial Cut-off Date or
the Subsequent Cut-off Date, as the case may be) calculated on the basis of a
360-day year comprised of twelve 30-day months and (ii) the product of (A)
one-twelfth of the Servicing Fee Rate and (B) 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
Trust, as of the Initial Cut-off Date or the Subsequent Cut-off Date, as the
case may be) over (y) the amount of interest, if any, collected on such Contract
in the related Due Period.
The Servicer will remit any Monthly Advance with respect to each Due Period
into the Collection Account not later than the Business Day preceding the next
following Distribution Date.
Non-Reimbursable Payment
When a payment of principal is made on or in respect of a Contract,
interest is paid on the unpaid principal balance of such Contract only to the
date of such payment. 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 Sale and Servicing Agreement 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").
Distributions
On or before the Determination Date preceding a Distribution Date, the
Servicer will make a determination and inform the Indenture Trustee and the
Owner Trustee 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) 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;
(viii) the amounts required to be withdrawn from the Cash Collateral Account for
such Distribution Date (which shall be equal to (I) the amount, if any (subject
to the Available Cash Collateral Amount), by which the Available Amount for such
Distribution Date after reimbursing the Servicer for any previously unreimbursed
Monthly Advances for which it is entitled to be reimbursed and making the
Servicer Payment to the Servicer and paying interest and principal on the Notes,
is less than the amounts set forth in clauses (e), (f) and (g) below with
respect to such Distribution Date, (II) any Cash Collateral Account Surplus (as
hereinafter defined) which is payable to the Cash Collateral Depositor or the
Affiliated Purchaser and (III) any Excess Collections (as hereinafter defined)
payable to the Cash Collateral Depositor); (ix) any amounts to be deposited into
the Cash Collateral Account; and (x) the aggregate amount of unreimbursed
Monthly Advances to be reimbursed to the Servicer, all as described below.
The "Available Amount" on any Distribution Date is equal to all amounts on
deposit in the Collection Account attributable to collections or deposits made
in respect of such Contracts in the related Due Period (together with the
Purchase Price for any Contract repurchased by CITSF resulting from breaches of
certain representations and warranties or repurchased by the Servicer resulting
from breaches of certain covenants, in each case as set forth in the Sale and
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Servicing Agreement, paid on or prior to the Deposit Date immediately preceding
such Distribution Date) less 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 Sale and Servicing Agreement) 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; any amounts
incorrectly deposited in the Collection Account; and net investment earnings on
the funds in the Collection Account due to the Servicer pursuant to the Sale and
Servicing Agreement 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 Sale and Servicing Agreement.
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 aggregate amount of any unreimbursed Monthly Advances made by
the Servicer (and which are then due to be reimbursed to the Servicer) will
be paid to the Servicer;
(b) the Servicing Fee, including any overdue Servicing Fee, will (to
the extent not previously retained by the Servicer) be paid to the
Servicer;
(c) the Class A Interest Distribution Amount, including any overdue
Class A Interest Distribution Amount, will be deposited into the Note
Distribution Account, for payment to the Noteholders;
(d) 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;
(e) 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;
(f) 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;
(g) on and after the Cross-Over Date, the Principal Distribution
Amount, including any overdue Principal Distribution Amount, will be
deposited into the Certificate Distribution Account, for payment to the
Certificateholders;
(h) an amount equal to the sum of (i) the difference between the
Available Cash Collateral Amount and the Required Cash Collateral Amount,
to the extent the Available Cash Collateral Amount is less than the
Required Cash Collateral Amount and (ii) the amount necessary to make
payments of principal and interest on the Loan (as hereinafter defined), to
the extent required by the Sale and Servicing Agreement and the Cash
Collateral Agreement, will be deposited into the Cash Collateral Account;
and
(i) 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 (e), (f) or (g) above on any Distribution
Date, the Owner Trustee will withdraw or cause to be withdrawn from the Cash
Collateral Account, to the extent available, the difference between the
aggregate amounts described in clauses (e), (f) and (g) and the Available Amount
remaining after payment of the amounts described in clauses (a), (b), (c) and
(d). Any amount so withdrawn from the Cash Collateral Account by or on behalf of
the Owner Trustee will be deposited into the Certificate Distribution Account
for distribution to the Certificateholders.
Credit Enhancement
Subordination of Certificates. The rights of the Certificateholders to
receive distributions with respect to the Contracts will be subordinated to the
rights of the Class A Noteholders, to the limited extent described herein. This
subordination is intended to enhance the likelihood of timely receipt by Class A
Noteholders of the full amount of interest and principal required to be paid to
them, and to afford such Class A Noteholders limited protection against losses
in respect of the Contracts.
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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 Class A Notes payable on such Distribution Date has been distributed to
the Class A Noteholders, other than payments from the Cash Collateral Account,
and (ii) principal until the Class A Notes have been paid in full, other than
distributions in respect of the Principal Liquidation Loss Amount.
The protection afforded to the Class A Noteholders by the subordination
feature described above will be effected by the preferential right of the Class
A 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 making payments in respect of the Certificates. There is no
other protection against losses on the Contracts afforded the Class A Notes. The
Cash Collateral Account will not be available to provide a source of funds to
make payments of principal or interest on the Notes.
Cash Collateral Account. On the Closing Date, the Cash Collateral 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 Cash Collateral Account under certain circumstances specified below. The
Cash Collateral Account will be funded on the Closing Date in the amount of
$ (the "Initial Cash Collateral Amount") from the proceeds of a loan
(the "Loan") by the Cash Collateral Depositor pursuant to a Cash Collateral
Agreement among the Cash Collateral Depositor, the Trust and the Servicer (the
"Cash Collateral Agreement"). The Cash Collateral Depositor's only recourse
against the Trust for repayment of the Loan is from the Cash Collateral Account
Surplus (as hereinafter defined), certain investment earnings on funds deposited
in the Cash Collateral Account and payments from the Cash Collateral Account
upon maturity of the Loan, in each case as set forth in the Cash Collateral
Agreement.
The Cash Collateral Account shall be a segregated account maintained with
an Eligible Institution. Funds on deposit in the Cash Collateral Account will be
invested in certain investments which satisfy the criteria established by each
of the Ratings Agencies. It is expected that such funds will be invested in debt
obligations of the Cash Collateral Depositor or its affiliates so long as such
obligations satisfy the criteria established by the Rating Agencies. The Cash
Collateral Account and any amounts therein shall be held by or on behalf of the
Owner Trustee in accordance with the Sale and Servicing Agreement and the Cash
Collateral Agreement for the benefit of the Certificateholders and the Trust,
and as provided in the Sale and Servicing Agreement and the Cash Collateral
Agreement.
The Cash Collateral Account will be terminated following the earlier to
occur of (a) the date on which the Certificates are paid in full and any funds
remaining therein have been paid to the Cash Collateral Depositor or the
Affiliated Purchaser or (b) the Certificate Final Scheduled Distribution Date.
On each Distribution Date, the amount available to be withdrawn from the
Cash Collateral Account for the benefit of the Certificateholders (the
"Available Cash Collateral Amount") will be equal to the lesser of (i) the
Required Cash Collateral Amount and (ii) the amount on deposit in the Cash
Collateral Account, exclusive of interest and earnings thereon and any
investment losses and expenses and before giving effect to any deposit to be
made to the Cash Collateral Account on such Distribution Date.
On each Determination Date, the Servicer will determine the amounts, if
any, required to be withdrawn from the Cash Collateral Account, up to the
Available Cash Collateral 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 Cash Collateral 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
into the Cash Collateral Account in an amount sufficient to increase the amount
on deposit in the Cash Collateral Account to the Required Cash Collateral Amount
and to make payments of principal and interest on the Loan as required by the
Cash Collateral Agreement. Excess Collections, if any, not so required to be
deposited in the Cash Collateral Account will be paid to the Affiliated
Purchaser. On each Distribution Date, the Owner Trustee will withdraw or cause
to be withdrawn from the Cash Collateral Account an amount equal to the amount
by which the Available Cash Collateral Amount (after taking into account any
deposits to and withdrawals from the Cash Collateral Account pursuant to the
Sale and Servicing Agreement on such Distribution Date) exceeds the Required
Cash Collateral Amount for the next Distribution Date (the "Cash Collateral
Account Surplus") and pay such amount, to the extent required to make payments
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of principal and interest on the Loan, to the Cash Collateral Depositor. Any
such amounts paid to the Cash Collateral Depositor will not be available for
distribution to Certificateholders. On each Distribution Date, the Owner Trustee
will withdraw from the Cash Collateral Account and pay to the Affiliated
Purchaser the balance, if any, of the Cash Collateral Account Surplus.
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 Cash
Collateral Account an amount equal to the Certificate Balance, and will
distribute such amount to the Certificateholders in retirement of the
Certificates, to the extent funds are available therefor in the Cash Collateral
Account.
The Required Cash Collateral Amount with respect to any Distribution Date
will equal % of the Pool Balance as of the first day of the related Due
Period, but in no event less than $ . 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 % or (b) the average of the principal balances of all
Contracts which became Defaulted Contracts, less any net liquidation proceeds on
Defaulted Contracts, expressed as an annualized percentage of the average
outstanding Pool Balance of the three preceding Due Periods exceeds %, then
the Required Cash Collateral Amount with respect to such Distribution Date shall
be % of the Pool Balance as of the first day of the related Due Period, but
in no event (i) less than $ or (ii) greater than $ ; provided
further that the Required Cash Collateral Amount 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 rating of the Notes and the Certificates.
"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 are remaining in the Collection Account on such Distribution Date after
taking into account distributions to be made on the Securities and payments and
reimbursements made to the Servicer on such Distribution Date.
Net Deposits
As an administrative convenience, the Servicer will under certain
circumstances be permitted to make deposits of collections, Monthly Advances,
Non-Reimbursable Payments and the aggregate Purchase Price of Contracts
purchased by it for, or with respect to, a Distribution Date net of
distributions to be made to the Servicer with respect to such Distribution Date
(including, without limitation, 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 Indenture Trustee, the Owner Trustee 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
On or before each Determination Date, the Servicer will provide to the
Indenture Trustee, Owner Trustee, any Paying Agent and CITSF 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".
Evidence as to Compliance
The Sale and Servicing Agreement will require the Servicer to deliver to
the Trustees a monthly report prior to each Distribution Date, setting forth
certain information regarding the Contract Pool and the Securities. Each such
report to the Trustees 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
Sale and Servicing Agreement.
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The Sale and Servicing Agreement will require that on or before April 1 of
each year, the Servicer will deliver to the Trustees a report of independent
public accountants stating that such firm has, with respect to the Servicer's
overall servicing operations, examined such operations in accordance with the
requirements of the Uniform Single Audit Program for Mortgage Bankers, and
stating such firm's conclusions relating thereto.
The Servicer, on request of the Trustees, will furnish to the Trustees such
reasonably pertinent underlying data as can be generated by the Servicer's
existing data processing system without undue modification or expense.
Certain Matters Regarding the Servicer
The Sale and Servicing Agreement will provide that the Servicer may not
resign from its obligations and duties as Servicer thereunder, except upon
determination that the Servicer's performance of such duties is no longer
permissible under applicable law. Such resignation will not become effective
until the Indenture Trustee or a successor Servicer has assumed the Servicer's
servicing obligations and duties under the Sale and Servicing Agreement.
The Sale and Servicing Agreement will further provide that neither the
Servicer nor the Company nor any of their directors, officers, employees and
agents shall be under any liability to the Trustees, the Trust or the
Noteholders or Certificateholders for taking any action or for refraining from
taking any action pursuant to the Sale and Servicing Agreement, or for errors in
judgment; provided, however, that neither the Servicer nor any such person will
be protected against any breach of warranties or representations made in the
Sale and Servicing Agreement or failure to perform obligations in accordance
with the standards set forth in the Sale and Servicing Agreement or any
liability which otherwise would be imposed by reason of any breach of the terms
and conditions of the Sale and Servicing Agreement. In addition, the Sale and
Servicing Agreement will provide that the Servicer is under no obligation to
appear in, prosecute or defend any legal action which arises under the Sale and
Servicing Agreement 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 Sale and Servicing Agreement
and the rights and duties of the parties thereto and the interests of the
Noteholders and Certificateholders thereunder.
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 Sale and Servicing Agreement.
Physical Damage Insurance
The Sale and Servicing Agreement will provide that the Servicer, in
accordance with its customary servicing procedures, shall 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 vehicle installment sale contracts that
it services for itself or others. If an Obligor fails to maintain such
insurance, the Servicer shall obtain and advance on the behalf of such Obligor,
as required under the terms of the applicable Contract and the Sale and
Servicing Agreement, the premiums for such insurance, with uninsured physical
damage loan insurance endorsements, 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
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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, require 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 consisting of 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 on the Securities. Unless otherwise designated by the Obligor, the
Servicer will not allocate payments with respect to 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 has failed 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 such Force-Placed Insurance.
Servicing -- Hazard Insurance
The Sale and Servicing Agreement will permit the Servicer or any affiliate
of the Servicer, to the extent permitted by law, to (a) 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 hazard
insurance policy (whether or not such hazard insurance policy is force-placed
pursuant to the provisions of any Contract), or any other insurance policy
whatsoever and (b) 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
An "Event of Termination" under the Sale and Servicing Agreement will
consist of (i) any failure by the Servicer to make any required deposit in any
of the accounts required to be made under the Sale and Servicing Agreement 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 Sale and Servicing Agreement (other than those described in
clause (i)) that materially and adversely affects the rights of the Noteholders
or Certificateholders which continues unremedied for 30 days after the giving of
written notice of such failure or breach; (iii) any assignment or delegation by
the Servicer of its duties or rights under the Sale and Servicing Agreement,
except as specifically permitted under the Sale and Servicing Agreement, or any
attempt to make such an assignment or delegation; (iv) certain events of
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings regarding the Servicer; or (v) the Servicer no longer
qualifies as an Eligible Servicer (as defined in the Sale and Servicing
Agreement). "Notice" as used herein shall mean 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 and by Noteholders holding not less than 25% of the outstanding
principal amount of the Notes.
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Rights Upon Event of Termination
As long as an Event of Termination under the Sale and Servicing Agreement
remains unremedied, the Indenture Trustee may, and at the written direction of
the holders of Notes evidencing not less than a majority in principal amount of
such then outstanding Notes, shall, unless prohibited by applicable law,
terminate all (but no less than all) of the rights and obligations of the
Servicer under the Sale and Servicing Agreement and in and to the Contracts, and
the proceeds thereof, whereupon (subject to applicable law) the Indenture
Trustee or a successor Servicer under the Sale and Servicing Agreement will
succeed to all the responsibilities, duties and liabilities of the Servicer
under the Sale and Servicing Agreement and will be entitled to similar
compensation arrangements; provided, however, that neither the Indenture Trustee
nor any successor servicer will assume any obligation of CITSF to purchase
Contracts for breaches of representations or warranties, and the Indenture
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 Sale and Servicing Agreement. Notwithstanding such termination,
the Servicer shall be entitled to payment of certain amounts payable to it prior
to such termination, for services rendered prior to such termination. No such
termination will affect in any manner CITSF's obligation to purchase certain
Contracts for breaches of representations or warranties under the Sale and
Servicing Agreement. In the event that the Indenture Trustee would be obligated
to succeed the Servicer but is unwilling or unable so to act, it may appoint, or
petition to a court of competent jurisdiction for the appointment of, a
Servicer. Pending such appointment, the Indenture Trustee is obligated to act in
such capacity, unless the Indenture Trustee is prohibited by law from so acting.
The Indenture Trustee and such successor may agree upon the servicing
compensation to be paid, which in no event, without written consent of 100% of
the Securityholders, may be greater than the compensation to CITSF as Servicer
under the Sale and Servicing Agreement.
Waiver of Past Defaults
The holders of Notes evidencing at least a majority in principal amount of
the then outstanding Notes (or the holders of the Certificates evidencing not
less than a majority of the Certificate Balance, 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 Sale
and Servicing Agreement 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 Sale and Servicing Agreement. No such waiver will impair
such Noteholders' or Certificateholders' right with respect to subsequent
defaults.
Amendment
Each of the Sale and Servicing Agreement and the Trust Agreement 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) 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 Notes or Certificates; (iv) to add to the covenants, restrictions or
obligations of the Company, the Servicer, the Owner Trustee or the Indenture
Trustee; (v) evidence and provide for the acceptance of the appointment of a
successor trustee with respect to the property owned by the Trust and add to or
change any provisions as shall be necessary to facilitate the administration of
the trusts under the Trust Agreement by more than one trustee pursuant to
Article VI of the Trust Agreement; 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 Noteholders or the Certificateholders. Each such agreement 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 for
the purpose of adding any provisions to or changing in any manner or eliminating
any provisions of the Sale and Servicing Agreement, or of modifying in any
manner the rights of such Noteholders or Certificateholders, respectively;
except, that no such amendment, may (i) increase or reduce in any manner the
amount of, or accelerate or delay the timing of, collections of payments on
Contracts or distributions that are required to be made on any Note or
Certificate, any Contract Rate, the Pass-Through Rate or the Class A Rate or
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(ii) reduce the aforesaid percentage required of Noteholders and
Certificateholders to consent to any such amendment without the consent of all
of the Noteholders or Certificateholders, as the case may be. Notwithstanding
the foregoing, no amendment affecting the rights of the Cash Collateral
Depositor will be made without the consent of the Cash Collateral Depositor.
Insolvency Event
If any of certain events of insolvency, readjustment of debt, marshalling
of assets and liabilities, or similar proceedings with respect to such person
indicating its insolvency or inability to pay its obligations (each, an
"Insolvency Event") occurs with respect to the Affiliated Purchaser, the
Contracts shall be liquidated and the 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), and (ii) each of the Noteholders 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, notice thereof is required to be given
to the Noteholders 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 or the Cash Collateral
Account) in a commercially reasonable manner and on commercially reasonable
terms. The 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 proceeds from the liquidation of the
Contracts, the Note Distribution Account and the Certificate Distribution
Account are not sufficient to pay the Notes and Certificates in full, the amount
of principal returned to the Certificateholders will be reduced (to the extent
the Available Cash Collateral Amount is not sufficient to prevent such
reduction) and the Certificateholders will incur a loss. See "Risk
Factors--Certain Legal Aspects".
Affiliated Purchaser Liability
Under the Trust Agreement, the Affiliated Purchaser 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 Noteholder
or a Certificateholder in the capacity of an investor and (ii) the Trust under
the Cash Collateral Agreement) 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
The obligations of the Servicer, the Company, the Affiliated Purchaser, the
Owner Trustee and the Indenture Trustee pursuant to the Purchase Agreements and
the Trust Documents will terminate upon the earliest to occur of (i) the
maturity or other liquidation of the last Contract and the disposition of any
amounts received upon liquidation of any property remaining in the Trust, (ii)
the payment to Securityholders of all amounts required to be paid to them
pursuant to the Purchase Agreements and the Trust Agreement, (iii) the
occurrence of either event described below and (iv) as otherwise required by
law, as described in the Trust Agreement.
In order to avoid excessive administrative expenses, CITSF will be
permitted at its option to purchase from the Trust, on any Distribution Date
following a Record Date on which the Pool Balance 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).
Exercise of such right will effect early retirement of the Securities. 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.
Within ten days after a Distribution Date following a Record Date on which
the Pool Balance 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 below, the sale proceeds will be
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distributed to Securityholders on the second Distribution Date succeeding such
Record Date. Any purchaser of the Contracts must agree to the continuation of
CITSF as Servicer on terms substantially similar to those in the Sale and
Servicing Agreement. Any such sale will effect early retirement of the
Securities.
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 Determination Date would result in proceeds
sufficient to distribute the amount of monthly principal and interest for such
Distribution Date and any unpaid principal and interest with respect to one or
more prior Distribution Dates, 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 the fair market value of such
Contracts has been offered. 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.
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.
CERTAIN LEGAL ASPECTS OF THE CONTRACTS
The following discussion contains summaries of certain legal aspects of
recreational vehicle contracts, which are general in nature. Because such legal
aspects are governed by applicable state law (which laws may differ
substantially), the summaries do not purport to be complete nor to reflect the
laws of any particular state, nor to encompass the laws of all states in which
the security for the Contracts is situated. The summaries are qualified in their
entirety by reference to the applicable federal and state laws governing the
Contracts.
General
As a result of the assignment of the Contracts to the Owner Trustee, the
Trust will succeed collectively to the rights (including the right to receive
payment on the Contracts) and will assume the obligations of the obligee under
the 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 Sale and Servicing
Agreement, the Servicer will retain possession of the Contracts as custodian for
the Owner Trustee, and will make an appropriate filing of a UCC financing
statement in New Jersey to perfect the sale of the Contracts by the Company to
the Owner Trustee. The Contracts will not be stamped to reflect their assignment
from CITCF-NY to CITSF, from CITSF to the Company or from the Company to the
Owner Trustee.
Under the Sale and Servicing Agreement, 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 Sale and Servicing Agreement, with respect to each Contract,
that, as of the Closing Date for each Initial Contract, and as of the related
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Subsequent Transfer Date for each Subsequent Contract, the Contract has not been
sold, transferred, assigned or pledged by CITSF to any person other than the
Company, that immediately prior to the transfer and assignment of the Contracts
to the Company, CITSF has good and marketable title thereto, free and clear of
all liens, encumbrances, security interests and rights of others and,
immediately upon the transfer thereof, the Company will have good and marketable
title to the Contract, free and clear of all liens, encumbrances, security
interests and rights of others, 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
Owner Trustee, or the Trust would be to require CITSF to purchase such Contract.
Pursuant to the Sale and Servicing Agreement, the Servicer will have
custody of the Contracts sold to the Trust. The Contracts and related
certificates of title will not be physically marked or segregated to indicate
that such Contracts have been sold to the Trust. If, through inadvertence or
otherwise, another party purchases (including the taking of 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 would acquire an interest in the Contracts superior to the
interest of the Trust.
Security Interests in the Financed Vehicles
General. Installment sale contracts such as the Contracts evidence the
credit sale of recreational vehicles by dealers to obligors; the contracts also
constitute personal property security agreements and include grants of security
interests in the related recreational vehicles under the UCC. In most states
(including California), 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 state motor
vehicle authority, depending on particular state law. In states that do not have
a certificate of title statute or that make no provision for notation of a
security interest on a certificate of title, perfection is usually accomplished
by filing pursuant to the provisions of the UCC. In most states, including
California, 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 Sale
and Servicing Agreement, the Company will sell and assign its interest in the
Contracts, including the security interests in the Financed Vehicles granted
thereunder, to the Owner Trustee. UCC financing statements to perfect the sale
of (i) CITSF's interests in the Contracts and the Financed Vehicles to the
Company and (ii) the Company's interests in the Contracts and the Financed
Vehicles to the Owner Trustee, will be filed.
Perfection of CITSF's Security Interest in the Financed Vehicles. The
certificates of title relating to the Financed Vehicles name CITSF (or CITCF-NY)
as the secured party. In those instances where no certificate of title is
applicable under state law, a UCC-1 financing statement has been filed. CITSF
takes all actions necessary under the laws of the state in which the related
recreational vehicles are located to perfect its security interest in such
recreational vehicles, including, where applicable, having a notation of its
lien recorded on the related certificate of title or delivering the required
documents and fees, and obtaining possession of the certificate of title (if
possible). In the event CITSF (or CITCF-NY) fails, due to clerical errors, to
effect such notation or delivery, or files the security interest under the wrong
law (for example, under the UCC rather than under a motor vehicle title law),
the Securityholders may not have a first priority security interest in the
Financed Vehicle securing a Contract. In the Sale and Servicing Agreement, 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
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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 within 90 days.
Perfection of Trust's Security Interest in Financed Vehicles. In each case,
except where applicable laws require the filing of a UCC- 1 financing statement,
the certificate of title names CITSF (or CITCF-NY) as the secured party. In the
case of Contracts which have CITCF-NY as the secured party, CITSF has not
amended the certificates of title to substitute CITSF as secured party.
Moreover, because of the administrative burden and expense, neither CITSF, the
Company nor the Trust will amend any certificate of title to identify the Trust
as the new secured party on the certificate of title relating to the Financed
Vehicles. However, the Servicer will continue to hold any certificates of title
relating to the Financed Vehicles in its possession as custodian for the Trust
pursuant to the Sale and Servicing Agreement. See "The Purchase Agreements and
the Trust Documents--Sale and Assignment of the Contracts." Accordingly, CITSF
(or CITCF-NY) will continue to be named as the secured party on the certificates
of title relating to the Financed Vehicles.
(i) California. A security interest in a motor vehicle registered in the
State of California (in which the greatest number of Financed Vehicles are
currently registered) may be perfected only by depositing with the Department of
Motor Vehicles a properly endorsed certificate of title for the vehicle showing
the secured party as "legal owner" thereon or if the vehicle has not been
previously registered, an application in usual form for an original registration
together with an application for registration of the secured party as "legal
owner." However, under the California Vehicle Code, a transferee of a security
interest in a motor vehicle is not required to reapply to the Department of
Motor Vehicles for a transfer of registration when the interest of the
transferee arises from the transfer of a security agreement by the "legal
owner." Accordingly, under California law, an assignment such as that under each
of the Purchase Agreement and the Sale and Servicing Agreement 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 Sale and Servicing Agreement 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 Sale and Servicing Agreement 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. Because of the administrative burden and
expense, none of CITSF, the Company or the Trust will amend any certificate of
title to identify the Trust as the new secured party on the certificate of title
relating to the Financed Vehicles. Although re-registration of the recreational
vehicle in such states is not necessary to convey a perfected security interest
in the Financed Vehicles to the Trust, because the Trust will not be listed as
the secured party on the certificates of title to the Financed Vehicles, its
security interest could be defeated through fraud or negligence. 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 or
subsequent creditors who take a security interest in a Financed Vehicle.
However, with respect to Financed Vehicles in states in which the Trust failed
to obtain a first perfected security interest because it is not identified as
the secured party on the certificate of title, its security interest would be
subordinate to, among others, subsequent purchasers of such Financed Vehicles
and holders of first perfected security interests therein.
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 one in which it is initially registered
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
re-register a vehicle. In those states (including California) that require a
secured party to hold possession of the certificate of title to maintain
perfection of the security interest, 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 the notation of a
lien on the certificate of title but not possession by the secured party, the
secured party would receive notice of surrender from the state of
re-registration if the security interest is noted on the certificate of title.
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Thus, the secured party would have the opportunity to re-perfect its security
interest in the vehicles in the state of relocation. 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 list 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 Sale and Servicing Agreement, the Servicer will be obligated
to take appropriate steps, at its own expense, to maintain perfection of a
security interest in the Financed Vehicles.
CITSF, as Servicer, will continue to hold certificates of title relating to
the Financed Vehicles in its possession as custodian for the Trust pursuant to
the Sale and Servicing Agreement. In the Sale and Servicing Agreement, CITSF, as
Servicer, will covenant that it will not release the Financed Vehicle securing
any Contract from the security interest granted therein except as contemplated
by the Sale and Servicing Agreement. CITSF, as Servicer, will also covenant that
it shall not impair the rights of the Trust in the Contacts or take any action
inconsistent with the Trust's ownership of the Contracts, except as permitted by
the Sale and Servicing Agreement. 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 Sale and Servicing Agreement.
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 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 Sale and Servicing Agreement
that, as of the Closing Date, there were, to the best of CITSF's knowledge, 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 Owner
Trustee 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 CITSF's purchase obligation under the Sale and
Servicing Agreement.
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
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.
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Notice of Sale; Redemption Rights
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 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 in some states, by payment of
delinquent installments or the unpaid principal balance of the related
obligation.
Deficiency Judgments 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." Most courts have held that when a sale is not
"commercially reasonable," the secured party loses its right to a deficiency
judgment. 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. However, the deficiency judgment would be a personal
judgment against the obligor for the shortfall, and a defaulting obligor 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 and the Company intend that the transfer of Contracts from 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. ss.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, 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 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.
, an corporation and a wholly owned subsidiary
of CIT (the "Affiliated Purchaser"), will purchase 1% of the principal balance
of the Certificates. 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 with respect to the Affiliated Purchaser occurs, subject to
certain conditions, the Trust will dissolve. Certain steps have been 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 articles 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
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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.
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 would 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 Certificates, could occur.
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 CITSF under the Bankruptcy Code or similar applicable
state laws (collectively, "Insolvency Laws") will 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 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,
without the prior affirmative unanimous vote of its directors including all
independent directors.
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 and state motor vehicle retail installment sales acts, 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 who fail to comply with their provisions. In some
cases, this liability could affect the ability of an assignee such as the Owner
Trustee to enforce consumer finance contracts such as the Contracts.
The so-called "Holder-in-Due-Course Rule" of the Federal Trade Commission
(the "FTC Rule"), has the effect of subjecting any assignee of the seller in a
consumer credit transaction to all claims and defenses which the obligor in the
transaction could assert against the seller of the goods. Liability under the
FTC Rule is limited to the amounts paid by the obligor under the contract, and
the holder of the contract may also be unable to collect any balance remaining
due thereunder from the obligor. The FTC Rule is generally duplicated by the
Uniform Consumer Credit Code, other state statutes or the common law in certain
states. Most of the Contracts will be subject to the requirements of the FTC
Rule. Accordingly, the Owner Trustee, 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 lending pursuant to the
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
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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 their
provisions may affect the enforceability of the related Contract. Neither the
Trust nor the Company has obtained any license required under any federal or
state consumer or mortgage banking 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 rights. 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.
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.
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 Sale and Servicing Agreement
that each Contract complies with all requirements of law in all material
respects. A breach of such representation and warranty which 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 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 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 occasioned by the inability to realize upon the related
Financed Vehicle in a timely fashion.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Set forth below 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. Schulte Roth & Zabel, counsel for the Trust is of
the opinion that the discussion hereunder fully and fairly discloses all
material Federal tax risks associated with the purchase, ownership and
disposition 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.
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. The Trust has been
provided with an opinion of Schulte Roth & Zabel regarding certain of the
Federal income tax matters discussed below. 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.
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 Agreement 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, the Trust might be
taxable as a corporation with the adverse consequences described above (and 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
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the Noteholder's tax basis for purposes of determining gain or loss on the
maturity, redemption, prior sale, or other disposition of the Notes. Thus, the
effect of OID is to increase the amount of taxable income above the actual
interest payments during the life of the Notes.
Sale or Other Disposition. If a Noteholder sells a Note, the holder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale and the holder's adjusted tax basis in the Note. The
adjusted tax basis of a Note to a particular Noteholder will equal the holder's
cost for the Note, increased by any OID, market discount and gain previously
included by such Noteholder in income with respect to the Note and decreased by
the amount of any bond premium previously amortized and by the amount of
principal payments previously received by such Noteholder with respect to such
Note. Subject to the rules of the Code concerning market discount on the Notes,
any such gain or loss will be capital gain or loss if the Note was held as a
capital asset. Capital losses generally may be deducted to the extent the
Noteholder has capital gains for the taxable year, and non-corporate Noteholders
can deduct a limited amount of such losses in excess of available capital gains.
Foreign Holders. If interest paid (or accrued) to a Noteholder who is a
nonresident alien, foreign corporation or other non-United States person (a
"foreign person") is not effectively connected with the conduct of a trade or
business within the United States by the foreign person, the interest generally
will be considered "portfolio interest," and generally will not be subject to
United States Federal income tax and withholding tax, if the foreign person (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 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).
Information Reporting and Backup Withholding. The Trust will be required to
report annually to the IRS, and to each Noteholder of record, the amount of
interest paid on the Notes (and the amount of accrued OID, if any, and interest
withheld for Federal income taxes, if any) for each calendar year, except as to
exempt holders (generally, holders that are corporations, tax-exempt
organizations, qualified pension and profit-sharing trusts, individual
retirement accounts, or nonresident aliens who provide certification as to their
status as nonresidents). Accordingly, each holder (other than exempt holders who
are not subject to the reporting requirements) will be required to provide,
under penalties of perjury, a certificate containing the holder's name, address,
correct Federal taxpayer identification number and a statement that the holder
is not subject to backup withholding. Should a non-exempt Noteholder fail to
provide the required certification, the Trust will be required to withhold 31%
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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.
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" below. 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 Trust's deductions will consist primarily of interest
accruing with respect to the Notes, servicing and other fees and losses or
deductions upon collection or disposition of the Contracts.
The tax items of a partnership are allocable to the partners in accordance
with the Code, Treasury regulations and the partnership agreement (here, the
Trust Agreement and Related Documents). The Trust Agreement will provide that
the Certificateholders will be allocated taxable income of the Trust for each
Interest Period equal to the sum of (i) the amount of interest that accrues on
the Certificates for such Interest Accrual Period based on the Certificate Rate;
(ii) an amount equivalent to interest that accrues during such Interest Accrual
Period on amounts previously due on the Certificates but not yet distributed;
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
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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 ($114,700 for taxable
years beginning in 1995, 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 deduction 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 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.
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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 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.
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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 distributable 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.
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.
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.
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.
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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."
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 Certificateowner 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 Securities 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.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement") among CITSF, the Company and
and (the "Underwriters"), the Company has agreed to sell to
the Underwriters, and the Underwriters have agreed to purchase, the respective
principal amount of the Notes and Certificates offered hereby, as set forth
opposite their respective names below:
Principal Amount Principal Amount
of Notes of Certificates
---------------- ----------------
.................. $ $
............... $ $
----------- -----------
Total ........................ $ $
=========== ===========
The Underwriting Agreement provides that the obligation of the Underwriters
to pay for and accept delivery of the Notes or Certificates 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 Notes
and Certificates if any are taken.
The Underwriters have advised the Company that they propose to offer the
Notes and Certificates 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 amount of the Notes and not in
excess of % of the principal balance of the Certificates. The Underwriters may
allow, and such dealers may reallow, a concession not in excess of % of the
principal amount of the Notes and not in excess of % of the principal balance
of the Certificates 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 in the Trust Accounts 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.
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NOTICE TO CANADIAN RESIDENTS
Resale Restrictions
The distribution of the Notes in Canada is being made only on a private
placement basis exempt from the requirement that the Trust prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of the Notes are effected. Accordingly, any resale of the Notes in Canada
must be made in accordance with applicable securities laws which will vary
depending on the relevant jurisdiction, and which may require resales to be made
in accordance with available statutory exemptions or pursuant to a discretionary
exemption granted by the applicable Canadian securities regulatory authority.
Purchasers are advised to seek legal advice prior to any resale of the Notes.
Representations of Purchasers
Each purchaser of Notes in Canada who receives a purchase confirmation will
be deemed to represent to the Seller, the Trust and the dealer from whom such
purchase confirmation is received that (i) such purchaser is entitled under
applicable provincial securities laws to purchase such Notes without the benefit
of a prospectus qualified under such securities laws, (ii) where required by
law, that such purchaser is purchasing as principal and not as agent, and (iii)
such purchaser has reviewed the text above under "Resale Restrictions".
Rights of Actions and Enforcement
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or rescission or rights of action under
the civil liability provisions of the U.S. federal securities laws.
The Trust, the Seller, the Servicer, the Affiliated Purchaser, the Owner
Trustee and the Indenture Trustee and their respective directors and officers,
if any, as well as the experts named herein, may be located outside of Canada
and, as a result, it may not be possible for Ontario purchasers to effect
service of process within Canada upon the Issuer or such persons. All or a
substantial portion of the assets of the Issuer and such persons may be located
outside of Canada and, as a result, it may not be possible to satisfy a judgment
against the Issuer or such persons in Canada or to enforce a judgment obtained
in Canadian courts against such Issuer or persons outside of Canada.
Notice to British Columbia Residents
A purchaser of the Notes to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any of
the Notes or Certificates acquired by such purchaser pursuant to this offering.
Such report must be in the form attached to British Columbia Securities
Commission Blanket Order BOR #88/5. Only one such report must be filed in
respect of the Notes acquired on the same date and under the same prospectus
exemption.
FINANCIAL INFORMATION
The Company has determined that its financial statements are not material
to the offering made hereby.
The Trust has been formed to own the Contracts and the other Trust assets
and to issue the Notes and Certificates. The Trust had no assets or obligations
prior to the issuance of the Notes and Certificates and will not engage in any
activities other than those described herein. Accordingly, no financial
statements with respect to the Trust are included in this Prospectus.
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RATINGS
It is a condition to the issuance of the Securities that the Class A Notes
be rated in the highest rating category by at least one Rating Agency and the
Certificates be rated in at least the third highest rating category by at least
one Rating Agency. The ratings of the Class A Notes will be based primarily on
the value of the Initial Contracts, 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 Cash Collateral
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 Notes and Certificates 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 Notes and
the Certificates will be passed upon for the Company by Schulte Roth & Zabel.
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ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION
PROCEDURES
Except in certain limited circumstances, the globally offered Notes of CIT
RV Owner Trust 1996-A (the "Global Securities") will be available only in
book-entry form. Investors in the Global Securities may hold such Global
Securities through any of DTC, Cedel or Euroclear. The Global Securities will be
tradable as home market instruments in both the European and U.S. domestic
markets. Initial settlement and all secondary trades will settle in same-day
funds.
Secondary market trading between investors holding Global Securities
through Cedel and Euroclear will be conducted in the ordinary way in accordance
with their normal rules and operating procedures and in accordance with
conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations.
Secondary cross-market trading between Cedel or Euroclear and DTC
Participants holding Notes will be effected on a delivery-against payment basis
through the respective Depositories of Cedel and Euroclear (in such capacity)
and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their Participants.
Initial Settlement
All Global Securities will be held in book-entry form by DTC in the name of
Cede as nominee of DTC. Investors' interests in the Global Securities will be
represented through financial institutions acting on their behalf as direct and
indirect Participants in DTC. As a result, Cedel and Euroclear will hold
positions on behalf of their Participants through their respective Depositories,
which in turn will hold such positions in accounts as DTC Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices specified by the Underwriters. Investor securities
custody accounts will be credited with their holdings against payment in
same-day funds on the settlement date.
Investors electing to hold their Global Securities through Cedel or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global securities
and no "lock-up" or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
Secondary Market Trading
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to insure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled in same-day funds.
Trading between Cedel and/or Euroclear Participants. Secondary market
trading between Cedel Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
Trading between DTC Seller and Cedel or Euroclear Purchaser. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a Cedel Participant or a Euroclear Participant, the purchaser will
send instructions to Cedel or Euroclear through a Cedel Participant or Euroclear
Participant at least one business day prior to settlement. Cedel or Euroclear
will instruct the respective Depository, as the case may be, to receive the
79
<PAGE>
Global Securities against payment. Payment will include interest accrued on the
Global Securities from and including the last coupon payment date to and
excluding the settlement date, on the basis of the actual number of days in such
accrual period and year assumed to consist of 360 days. For transactions
settling on the 31st of the month, payment will include interest accrued to and
excluding the first day of the following month. Payment will then be made by the
respective Depository of the DTC Participant's account against delivery of the
Global Securities. After settlement has been completed, the Global Securities
will be credited to the respective clearing system and by the clearing system,
in accordance with its usual procedures, to the Cedel Participant's or Euroclear
Participant's account. The securities credit will appear the next day (European
time) and the cash debt will be back-valued to, and the interest on the Global
Securities will accrue from, the value date (which would be the preceding day
when settlement occurred in New York). If settlement is not completed on the
intended value date (i.e., the trade fails), the Cedel or Euroclear cash debt
will be valued instead as of the actual settlement date.
Cedel Participants and Euroclear Participants will need to make available
to the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to preposition funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within Cedel or Euroclear. Under this approach,
they may take on credit exposure to Cedel or Euroclear until the Global
Securities are credited to their accounts one day later.
As an alternative, if Cedel or Euroclear has extended a line of credit to
them, Cedel Participants or Euroclear Participants can elect not to preposition
funds and allow that credit line to be drawn upon the finance settlement. Under
this procedure, Cedel Participants or Euroclear Participants purchasing Global
Securities would incur overdraft charges for one day, assuming they cleared the
overdraft when the Global Securities were credited to their accounts. However,
interest on the Global Securities would accrue from the value date. Therefore,
in many cases the investment income on the Global Securities earned during that
one-day period may substantially reduce or offset the amount of such overdraft
charges, although this result will depend on each Cedel Participant's or
Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
the respective European Depository for the benefit of Cedel Participants or
Euroclear Participants. The sale proceeds will be available to the DTC seller on
the settlement date. Thus, to the DTC Participants a cross-market transaction
will settle no differently than a trade between two DTC Participants.
Trading between Cedel or Euroclear Seller and DTC Purchaser. Due to time
zone differences in their favor, Cedel Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing system, through the
respective Depository, to a DTC Participant. The seller will send instructions
to Cedel or Euroclear through a Cedel Participant or Euroclear Participant at
least one business day prior to settlement. In these cases Cedel or Euroclear
will instruct the respective Depository, as appropriate, to deliver the Global
Securities to the DTC Participant's account against payment. Payment will
include interest accrued on the Global Securities from and including the last
payment to and excluding the settlement date on the basis of the actual number
of days in such accrual period and a year assumed to consist of 360 days. For
transactions settling on the 31st of the month, payment will include interest
accrued to and excluding the first day of the following month. The payment will
then be reflected in the account of the Cedel Participant or Euroclear
Participant the following day, and receipt of the cash proceeds in the Cedel
Participant's or Euroclear Participant's account would be back-valued to the
value date (which would be the preceding day, when settlement occurred in New
York). Should the Cedel Participant or Euroclear Participant have a line of
credit with 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.
80
<PAGE>
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:
(a) borrowing through Cedel or Euroclear for one day (until the
purchase side of the day trade is reflected in their Cedel or Euroclear
accounts) in accordance with the clearing system's customary procedures;
(b) borrowing the Global 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
(c) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC Participant is at
least one day prior to the value date for the sale to the Cedel Participant
or Euroclear Participant.
Certain U.S. Federal 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.
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.
81
<PAGE>
INDEX OF PRINCIPAL TERMS
ABS .................................................................. 29
ABS Table ............................................................ 29
Affiliated Purchaser ................................................. 17
Asset Service Center ................................................. 33
Available Amount ..................................................... 55
Available Cash Collateral Amount ..................................... 11
Auction Sale ......................................................... 39
Bankruptcy Code ...................................................... 17
Business Day ......................................................... 6
Capitalized Interest Account ......................................... 6
Cash Collateral Account .............................................. 11
Cash Collateral Account Surplus ...................................... 12
Cash Collateral Agreement ............................................ 11
Cash Collateral Depositor ............................................ 11
Cede ................................................................. 38
Cedel ................................................................ 3
Certificate Balance .................................................. 9
Certificate Distribution Account ..................................... 49
Certificate Final Scheduled Distribution Date ........................ 6
Certificate Interest Distribution Amount ............................. 43
Certificate Owner .................................................... 43
Certificate Pool Factor .............................................. 32
Certificateholders ................................................... 48
Certificates ......................................................... 3
chattel paper ........................................................ 61
CIT .................................................................. 3
CITCF-NY ............................................................. 4
CITSF ................................................................ 3
Class A Final Scheduled Distribution Date ............................ 6
Class A Interest Distribution Amount ................................. 39
Class A Notes ........................................................ 3
Class A Rate ......................................................... 7
Closing Date ......................................................... 5
Code ................................................................. 69
Collection Account ................................................... 52
Commission ........................................................... 38
Company .............................................................. 3
Contract Pool ........................................................ 21
Contract Rate ........................................................ 16
Contracts ............................................................ 4
Cross-Over Date ...................................................... 9
Dealers .............................................................. 4
Defaulted Contracts .................................................. 53
Definitive Certificates .............................................. 48
Definitive Notes ..................................................... 48
Definitive Securities ................................................ 48
Depository ........................................................... 38
Determination Date ................................................... 7
Distribution Date .................................................... 6
DTC .................................................................. 3
DTC Rules ............................................................ 46
Due Period ........................................................... 7
Eligible Institution ................................................. 52
Eligible Investments ................................................. 52
ERISA ................................................................ 15
Euroclear ............................................................ 3
Event of Termination ................................................. 60
82
<PAGE>
Events of Default .................................................... 40
Excess Collections ................................................... 12
Financed Vehicles .................................................... 4
FTC Rule ............................................................. 68
Funding Period ....................................................... 5
Holders .............................................................. 48
Indenture ............................................................ 3
Indenture Trustee .................................................... 3
Indirect Participants ................................................ 45
Initial Cash Collateral Amount ....................................... 11
Initial Contracts .................................................... 4
Initial Cut-off Date ................................................. 4
Initial Cut-off Date Pool Principal Balance .......................... 22
Initial Financed Vehicles ............................................ 4
Initial Pool Balance ................................................. 14
Insolvency Event ..................................................... 61
Insolvency Laws ...................................................... 17
Interest Accrual Period .............................................. 7
Interest Shortfall ................................................... 13
IRS .................................................................. 69
Issuer ............................................................... 3
Late Fees ............................................................ 14
List of Contracts .................................................... 50
Military Reservist Relief Act ........................................ 51
Monthly Advance ...................................................... 13
Moody's .............................................................. 52
Non-Reimbursable Payment ............................................. 13
Note Owner ........................................................... 38
Note Distribution Account ............................................ 52
Note Pool Factor ..................................................... 32
Noteholders .......................................................... 48
Notes ................................................................ 3
Obligor .............................................................. 13
OID .................................................................. 70
Optional Purchase .................................................... 39
Original Certificate Balance ......................................... 4
Owner Trustee ........................................................ 3
Paid-Ahead Contract .................................................. 28
Paid-Ahead Period .................................................... 28
Participants ......................................................... 45
Pass-Through Rate .................................................... 8
Pool Balance ......................................................... 10
Pre-Funded Amount .................................................... 5
Pre-Funded Percentage ................................................ 8
prepayments .......................................................... 27
Principal Distribution Amount ........................................ 39
Principal Liquidation Loss Amount .................................... 9
Purchase Agreement ................................................... 5
Purchase Agreements .................................................. 50
Purchase Price ....................................................... 51
Rating Agencies ...................................................... 14
Record Date .......................................................... 6
Related Documents .................................................... 42
Relief Act Obligor ................................................... 51
Required Cash Collateral Amount ...................................... 12
Required Servicer Ratings ............................................ 54
Sale and Servicing Agreement ......................................... 4
Securities ........................................................... 3
Securityholders ...................................................... 48
83
<PAGE>
Seller ............................................................... 3
Servicer ............................................................. 3
Servicer Letter of Credit ............................................ 54
Servicer Payment ..................................................... 7
Servicing Fee ........................................................ 13
Servicing Fee Rate ................................................... 13
Simple Interest Contract ............................................. 23
Soldiers' and Sailors' Civil Relief Act .............................. 51
Standard & Poor's .................................................... 52
Subsequent Contracts ................................................. 4
Subsequent Cut-off Date .............................................. 5
Subsequent Financed Vehicles ......................................... 4
Subsequent Transfer Agreement ........................................ 5
Subsequent Transfer Date ............................................. 5
Trust ................................................................ 3
Trust Agreement ...................................................... 4
Trust Documents ...................................................... 50
Trustees ............................................................. 3
UCC .................................................................. 16
Underwriters ......................................................... 18
Underwriting Agreement ............................................... 76
84
<PAGE>
No dealer, salesperson or other person has been authorized to give any
information or to make any representation not contained in this Prospectus and,
if given or made, such information or representation must not be relied upon as
having been authorized by the Company or any Underwriter. This Prospectus does
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 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
Page
----
Available Information ................................................. 2
Reports to Securityholders ............................................ 2
Summary ............................................................... 3
Risk Factors .......................................................... 16
Structure of the Transaction .......................................... 20
The Trust Property .................................................... 21
The Contract Pool ..................................................... 22
Maturity and Prepayment Considerations ................................ 27
Yield Considerations .................................................. 32
Pool Factors .......................................................... 32
Use of Proceeds ....................................................... 33
The CIT Group Securitization
Corporation II, Seller .............................................. 33
The CIT Group/Sales Financing, Inc.,
Servicer ............................................................ 33
The Notes ............................................................. 38
The Certificates ...................................................... 43
Certain Information Regarding the
Securities .......................................................... 45
The Purchase Agreements and the
Trust Documents ..................................................... 50
Certain Legal Aspects of the Contracts ................................ 63
Certain Federal Income Tax
Consequences ........................................................ 70
ERISA Considerations .................................................. 75
Underwriting .......................................................... 76
Notice to Canadian Residents .......................................... 77
Financial Information ................................................. 77
Ratings ............................................................... 78
Legal Matters ......................................................... 78
Annex I ............................................................... 79
Index of Principal Terms .............................................. 82
Until , 1996, all dealers effecting transactions in the
registered Securities, whether or not participating in this distribution, may be
required to deliver a Prospectus. This is in addition to the obligation of
dealers to deliver a Prospectus when acting as underwriters and with respect to
their unsold allotments or subscriptions.
<PAGE>
$
CIT RV
Owner Trust 1996-A
$ Class A % Asset
Backed Notes
$ % Asset Backed
Certificates
The CIT Group
Securitization
Corporation II,
Seller
The CIT Group/Sales
Financing, Inc.,
Servicer
Prospectus
Dated , 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following is an itemized list of the estimated expenses to be incurred
in connection with the offering of the securities being offered hereunder other
than underwriting discounts and commissions.
SEC registration fee .................... $ 350
Attorney's fees and expenses ............ *
Accounting fees and expenses ............ *
Blue sky fees and expenses .............. *
Rating agency fees ...................... *
Trustee's fees and expenses ............. *
Printing expenses ....................... *
Miscellaneous fees and expenses ......... *
----------
Total ................................. $ *
==========
----------
* To be completed by amendment.
Item 14. Indemnification of Directors and Officers.
Subsection (a) of Section 145 of the General Corporation Law of Delaware
empowers a corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee, or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against expenses (including attorneys'
fees), judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit, or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation except that no indemnification may be made in
respect of any claim, issue, or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine that despite the adjudication of liability, but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
Section 145 further provides that to the extent a director, officer,
employee, or agent of a corporation has been successful in the defense of any
action, suit, or proceeding referred to in subsections (a) and (b) or in the
defense of any claim, issue, or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith; that indemnification provided for by Section 145 shall not
be deemed exclusive of any other rights to which the indemnified party may be
entitled; and empowers the corporation to purchase and maintain insurance on
behalf of any person acting in any of the capacities set forth in the second
preceding paragraph against any liability asserted against him or incurred by
him in any such capacity or arising out of his status as such whether or not the
corporation would have the power to indemnify him against such liabilities under
Section 145.
II-1
<PAGE>
The Company's By-Laws provide for indemnification of directors and officers
of the Company to the full extent permitted by Delaware law.
In addition, the Registrant maintains directors' and officers'
reimbursement and liability insurance pursuant to standard form policies with
aggregate limits of $65,000,000. The risks covered by such policies do not
exclude liabilities under the Securities Act of 1933.
Pursuant to the form of Underwriting Agreement, the Underwriters will
agree, subject to certain conditions, to indemnify the Registrant, its
directors, certain of its officers and persons who control the Registrant within
the meaning of the Securities Act of 1933 against certain liabilities.
Item 15. Recent Sales of Unregistered Securities.
During June 1994, The CIT Group Securitization Corporation II (the
"Company") issued 200 shares of its Common Stock, no par value per share, to The
CIT Group Holdings, Inc. ("CIT"). No underwriters were involved in connection
with such issuance, which was exempt from registration pursuant to Section 4(2)
of the Securities Act of 1933, as amended (the "Securities Act").
Listed below are all other unregistered securities sold by the Company
since its formation. These Certificates were distributed by the placement agent
listed below and privately placed by such placement agent with institutional
investors in transactions exempt from the registration provisions of the
Securities Act.
Principal Amount Placement
Series Issue Date of Certificates Agent
----- --------- ---------------- ---------
1994-1 July 14, 1994 $42,033,000 (Class A) Goldman, Sachs & Co.
(Approximate)
Item 16. Exhibits and Financial Statement Schedules.
a. Exhibits:
1.1** Form of Underwriting Agreement
3.1 Certificate of Incorporation, as amended,
of The CIT Group Securitization Corporation II
3.2 By-laws of The CIT Group Securitization Corporation II
4.1 Form of Indenture between the Trust and the Indenture Trustee
4.2 Form of Trust Agreement between the Company and the Owner
Trustee
4.3 Form of Sale and Servicing Agreement between the Company,
CITSF and the Trust
5.1* Opinion of Schulte Roth & Zabel with respect to legality
5.2* Opinion of Richards, Layton & Finger with respect to legality
8.1* Opinion of Schulte Roth & Zabel with respect to tax matters
10.1 Form of Purchase Agreement
10.2 Form of Subsequent Purchase Agreement
23.1* Consent of Schulte Roth & Zabel
(included as part of Exhibit 5.1)
24.1 Powers of Attorney of The CIT Group Securitization
Corporation II (included on page II-4)
25.1* Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939 of the Indenture Trustee (bound separately)
- ----------
* To be filed by amendment.
** Filed herewith.
II-2
<PAGE>
b. Financial Statement Schedules:
Not applicable.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes as follows:
(a) To provide to the Underwriters at the closing date specified in
the Underwriting Agreement certificates in such denominations and
registered in such names as required by the Underwriters to provide prompt
delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is therefore
unenforceable. In the event that a claim for indemnification against such
liabilities (other than payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of such Registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(c) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(d) For purposes of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time will be
deemed to be the initial bona fide offering thereof.
(e) The undersigned Registrant hereby undertakes to file an
application for the purpose of determining the eligibility of the trustee
to act under subsection (a) of Section 310 of the Trust Indenture Act in
accordance with the rules and regulations prescribed by the Commission
under Section 305(b)(2) of the Act.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the Town of
Livingston, State of New Jersey, on January 26, 1996.
THE CIT GROUP SECURITIZATION CORPORATION II
By: /s/ JAMES J. EGAN, JR.
-----------------------------------
Name: James J. Egan, Jr.
Title: President
POWER OF ATTORNEY
Each person whose signature to this Amendment No. 1 to the Registration
Statement appears below hereby constitutes and appoints James J. Egan, Jr.,
Richard W. Bauerband and Norman H. Rosen, or any of them (with the full power of
each of them to act alone), as his true and lawful attorney-in-fact and agent,
with full power of substitution, to sign on his behalf individually and in the
capacity stated below and to perform any acts necessary to be done in order to
file all amendments and post-effective amendments to this Amendment No. 1 to the
Registration Statement, and any and all instruments or documents filed as part
of or in connection with this Amendment No. 1 to the Registration Statement or
the amendments thereto, and each of the undersigned does hereby ratify and
confirm all that said attorney-in-fact and agent, or his substitutes, shall do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- -----
<S> <C> <C>
/s/ JAMES J. EGAN, JR. President and Director January 26, 1996
- -------------------------------------
James J. Egan, Jr.
/s/ RICHARD W. BAUERBAND Executive Vice President January 26, 1996
- ------------------------------------- and Director
Richard W. Bauerband
/s/ FRANK GARCIA Vice President, Treasurer and January 26, 1996
- ------------------------------------- Controller (principal financial
Frank Garcia and accounting officer)
</TABLE>
II-4
Exhibit 1.1
CIT RV OWNER TRUST 1996-A
$ CLASS A % ASSET BACKED NOTES
$ % ASSET BACKED CERTIFICATES
THE CIT GROUP SECURITIZATION CORPORATION II
(SELLER)
, 1996
UNDERWRITING AGREEMENT
SALOMON BROTHERS INC
as Representative of
the Several Underwriters (the "Representative"),
Seven World Trade Center
New York, New York 10048
Dear Sirs:
1. Introductory. The CIT Group Securitization Corporation II, a Delaware
corporation (the "Seller") and a wholly-owned limited-purpose finance subsidiary
of The CIT Group Holdings, Inc., a Delaware corporation ("CIT") proposes to
cause CIT RV Owner Trust 1996-A (the "Trust") to issue and sell $ ___________
principal amount of its Class A _____ % Asset Backed Notes (the "Notes") and
$___________ principal amount of its ____ % Asset Backed Certificates (the
"Certificates" and, together with the Notes, the "Securities"). The Securities
are registered under the registration statement referred to in Section 2(a). The
assets of the Trust include, among other things, a pool of retail receivables
generated pursuant to motor vehicle retail installment sale contracts (the
"Initial Contracts") secured by new and used recreational vehicles financed
thereby (the "Initial Financed Vehicles"), and certain monies received
thereunder on or after ____________ , 1996, amounts deposited in the Pre-Funding
Account and Capitalized Interest Account, the right to receive payments under
certain circumstances from funds deposited in the Cash Collateral Account
pursuant to the Cash Collateral Agreement to be dated as of ____________ , 1996
(the "Cash Collateral Agreement") between the Trust, the Owner Trustee, the
Servicer and _______________________________ (the "Cash Collateral Depositor")
and the Sale and Servicing Agreement (as defined below), additional retail
receivables generated pursuant to motor vehicle retail installment sale
contracts (the "Subsequent Contracts"; and together with the Initial Contracts,
<PAGE>
the "Contracts") secured by new and used recreational vehicles financed thereby
(the "Subsequent Financed Vehicles;" and together with the Initial Financed
Vehicles, the "Financed Vehicles") to be conveyed to the Trust subsequent to the
date of issuance of the Securities and certain monies received thereunder on or
after their respective subsequent cutoff dates, and the other property and the
proceeds thereof to be conveyed to the Trust pursuant to the Sale and Servicing
Agreement to be dated as of ____________ , 1996 (the "Sale and Servicing
Agreement") among the Trust, the Seller, and The CIT Group/Sales Financing,
Inc., a wholly-owned subsidiary of CIT, as servicer ("CITSF" or the "Servicer").
The Contracts and other assets of the Trust will be sold by CITSF to the Seller
pursuant to a Purchase Agreement to be dated as of ____________ , 1996 (the
"Purchase Agreement") between CITSF and the Seller, and finally by the Seller to
the Trust pursuant to the Sale and Servicing Agreement. Certain of the Contracts
and other property sold by CITSF to the Seller will first be purchased by CITSF
from The CIT Group/Consumer Finance, Inc. (NY) ("CITCF-NY") pursuant to a
Purchase Agreement to be dated as of ___________ , 1996 (the "CITCF-NY Sale
Agreement") between CITCF-NY and CITSF. The Servicer will service the Contracts
on behalf of the Trust pursuant to the Sale and Servicing Agreement. The Notes
will be issued pursuant to the Indenture to be dated as of ___________ , 1996
(as amended and supplemented from time to time, the "Indenture"), between the
Trust and _________________________ (the "Indenture Trustee"). Pursuant to the
Sale and Servicing Agreement, the Servicer will agree to perform certain
administrative tasks imposed on the Trust under the Indenture. The Certificates,
each representing a fractional undivided interest in the Trust, will be issued
pursuant to a Trust Agreement to be dated as of ___________ , 1996 (the "Trust
Agreement"), between the Seller and __________________________ , as owner
trustee (the "Owner Trustee").
Capitalized terms used herein and not otherwise defined shall have the
meanings given them in the Sale and Servicing Agreement and the Indenture.
The Seller and CITSF hereby agree with the several Underwriters named in
Schedule I hereto (the "Underwriters") as follows:
2. _______ Representations and Warranties of the Seller and CITSF. Each of
the Seller and CITSF, jointly and severally, represents and warrants to, and
agrees with, the Underwriters, as of the date hereof and as of the date of the
purchase and sale of the Securities pursuant to Section 3 hereof (the "Closing
Date") that:
(a) A registration statement on Form S-1 (No. 33-___________) relating
to the Securities, including a form of prospectus, has been filed with the
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Securities and Exchange Commission (the "Commission") and either (i) has
been declared effective under the Securities Act of 1933, as amended (the
"Act"), and is not proposed to be amended or (ii) is proposed to be amended
by amendment or post-effective amendment. If the Seller does not propose to
amend such registration statement and if any post-effective amendment to
such registration statement has been filed with the Commission prior to the
execution and delivery of this Agreement, the most recent such amendment
has been declared effective by the Commission. For purposes of this
Agreement, "Effective Time" means (i) if the Seller has advised the
Representative that it does not propose to amend such registration
statement, the date and time as of which such registration statement, or
the most recent post-effective amendment thereto (if any) filed prior to
the execution and delivery of this Agreement, was declared effective by the
Commission, or (ii) if the Seller has advised the Representative that it
proposes to file an amendment or post-effective amendment to such
registration statement, the date and time as of which such registration
statement, as amended by such amendment or post-effective amendment, as the
case may be, is declared effective by the Commission. "Effective Date"
means the date of the Effective Time. Such registration statement, as
amended at the Effective Time, including all material incorporated by
reference therein and including all information (if any) deemed to be a
part of such registration statement as of the Effective Time pursuant to
Rule 430A(b) under the Act, is hereinafter referred to as the "Registration
Statement," and the form of prospectus relating to the Securities, as first
filed with the Commission pursuant to and in accordance with Rule 424(b)
("Rule 424(b)") under the Act or (if no such filing is required) as
included in the Registration Statement, including all material incorporated
by reference in such prospectus is hereinafter referred to as the
"Prospectus."
(b) If the Effective Time is prior to the execution and delivery of
this Agreement: (i) on the Effective Date, the Registration Statement
conformed in all respects to the requirements of the Act, the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act") and the rules
and regulations of the Commission promulgated under the Act and the Trust
Indenture Act (the "Rules and Regulations") and did not include any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading, and (ii) on the date of this Agreement, the Registration
Statement conforms, and at the time of filing of the Prospectus pursuant to
Rule 424(b), the Registration Statement and the Prospectus will conform, in
all respects to the requirements of the Act, the Trust Indenture Act and
the Rules and Regulations, and neither of such documents includes, or will
include, any untrue statement of a material fact or omits, or will omit, to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading. If the Effective Time is subsequent
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<PAGE>
to the execution and delivery of this Agreement: (i) on the Effective Date,
the Registration Statement and the Prospectus will conform in all material
respects to the requirements of the Act, the Trust Indenture Act and the
Rules and Regulations, (ii) on the Effective Date, the Registration
Statement will not include any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading and (iii) on the
Effective Date, at the time of filing of the Prospectus pursuant to Rule
424(b) and at the Closing Date, the Prospectus will not include any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
The two preceding sentences do not apply to statements in or omissions from
the Registration Statement or Prospectus based upon written information
furnished to the Seller by any Underwriter through the Representative
specifically for use therein. The Seller and CITSF acknowledge that any
information furnished by any of the Underwriters specifically for use in
the Registration Statement, any preliminary prospectus or the Prospectus is
the Underwriters' Information (as defined in Section 7(a)).
(c) Each of the Seller and CITSF have been duly organized and are
validly existing as corporations in good standing under the laws of the
State of Delaware. CITCF-NY has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of New York.
The CIT GP Corporation ("CIT GP") has been duly organized and is validly
existing under the laws of the State of Illinois. Each of the Seller,
CITSF, CITCF-NY and CIT GP have corporate power and authority to own, lease
and operate their respective properties and conduct their respective
businesses as described in the Prospectus and to enter into and perform
their obligations under each of the Basic Documents (as defined below) to
which it is a party; and each of the Seller, CITSF, CITCF-NY and CIT GP is
duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which the character of the business
transacted by it or properties owned or leased by it requires such
qualification and in which the failure so to qualify would have a material
adverse effect on its respective business, properties, assets, or condition
(financial or other) or on its ability to perform its obligations under any
of the Basic Documents to which it is a party. "Basic Documents" means this
Agreement, the Sale and Servicing Agreement, the Trust Agreement, the
Indenture, the Cash Collateral Agreement, the CITCF-NY Sale Agreement, the
Purchase Agreement, the Note Depository Agreement and the Certificate
Depository Agreement.
(d) Neither the Seller nor CIT GP is in violation of its certificate
of incorporation or by-laws or in default in the performance or observance
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<PAGE>
of any material obligation, agreement, covenant or condition contained in
any contract, indenture, mortgage, loan agreement, note, lease or other
instrument to which it is a party or by which it or its properties may be
bound, which default might result in any material adverse change in the
financial condition, earnings, affairs or business of the Seller or CIT GP,
as the case may be, or which might materially and adversely affect the
properties or assets thereof or the ability to perform its obligations
under any of the Basic Documents to which it is a party.
(e) Neither CITSF nor CITCF-NY is in violation of its certificate of
incorporation or by-laws or in default in the performance or observance of
any material obligation, agreement, covenant or condition contained in any
material contract, indenture, mortgage, loan agreement, note, lease or
other instrument to which it is a party or by which it or its respective
properties may be bound, which default might result in any material adverse
change in the financial condition, earnings, affairs or business of either
of CITSF or CITCF-NY or which might materially and adversely affect the
properties or assets thereof or their ability to perform its obligations
under any of the Basic Documents to which it is a party.
(f) The execution and delivery by each of the Seller and CIT GP on the
Closing Date of the Basic Documents to which it is a party and the
performance of its obligations thereunder will be within its corporate
power of the Seller and CIT GP and duly authorized by all necessary
corporate action on the part of the Seller and CIT GP on and as of the
Closing Date; and neither the issuance and sale of the Securities to the
Underwriters, nor the execution and delivery by each of the Seller and CIT
GP of the Basic Documents to which it is a party, nor the consummation by
the Seller or CIT GP of the transactions therein contemplated, nor
compliance by the Seller or CIT GP with the provisions hereof or thereof,
nor the grant of the security interest in the Collateral to the Indenture
Trustee pursuant to the Indenture, will materially conflict with or result
in a material breach of, or constitute a material default under, any of the
provisions of any law, governmental rule, regulation, judgment, decree or
order binding on the Seller or CIT GP or its properties or the certificate
of incorporation or by-laws of the Seller or CIT GP or any of the
provisions of any indenture, mortgage, contract or other instrument to
which the Seller or CIT GP is a party or by which the Seller or CIT GP is
bound or result in the creation or imposition of any lien, charge or
encumbrance upon any of its property pursuant to the terms of any such
indenture, mortgage, contract or other instrument.
(g) The execution and delivery by each of CITSF and CITCF-NY on and as
of the Closing Date of any of the Basic Documents to which it is a party
and the performance of its obligations thereunder, will be within the
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<PAGE>
corporate power of each of CITSF and CITCF-NY and duly authorized by all
necessary corporate action on the part of each of CITSF and CITCF-NY on and
as of the Closing Date; and neither the issuance and sale of the Securities
to the Underwriters, nor the execution and delivery by CITSF and CITCF-NY
of any of the Basic Documents to which it is a party, nor the consummation
by CITSF and CITSF-NY of the transactions therein contemplated, nor
compliance by CITSF and CITCF-NY with the provisions hereof or thereof, nor
the grant of the security interest in the Collateral to the Indenture
Trustee pursuant to the Indenture, will materially conflict with or result
in a material breach of, or constitute a material default under, any of the
provisions of any law, governmental rule, regulation, judgment, decree or
order binding on CITSF or CITCF-NY or their respective properties or the
certificate of incorporation or by-laws of CITSF or CITCF-NY, or any of the
provisions of any material indenture, mortgage, contract or other
instrument to which CITSF or CITCF-NY is a party or by which CITSF or
CITCF-NY is bound or result in the creation or imposition of any lien,
charge or encumbrance upon any of their respective property pursuant to the
terms of any such material indenture, mortgage, contract or other
instrument.
(h) This Agreement has been duly authorized, executed and delivered by
each of the Seller and CITSF, and it constitutes a legal, valid and binding
instrument enforceable against each of the Seller and CITSF in accordance
with its terms, subject (i) to applicable bankruptcy, reorganization,
insolvency, moratorium or other similar laws affecting creditors' rights
generally, (ii) as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or
at law) and (iii) as to enforceability with respect to rights of indemnity
thereunder, to limitations of public policy under applicable securities
laws.
(i) The Sale and Servicing Agreement when executed and delivered on
the Closing Date will be duly authorized, executed and delivered by each of
the Seller and CITSF, and will constitute a legal, valid and binding
instrument enforceable against each of the Seller and CITSF in accordance
with its terms, subject (i) to applicable bankruptcy, reorganization,
insolvency, moratorium or other similar laws affecting creditors' rights
generally and (ii) as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or
at law).
(j) The Trust Agreement when executed and delivered on the Closing
Date will be duly authorized, executed and delivered by each of the Seller
and CIT GP, and will constitute a legal, valid and binding instrument
enforceable against each of the Seller and CIT GP in accordance with its
terms, subject (i) to applicable bankruptcy, reorganization, insolvency,
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<PAGE>
moratorium or other similar laws affecting creditors' rights generally and
(ii) as to enforceability, to general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law).
(k) The Cash Collateral Agreement when executed and delivered on the
Closing Date will be duly authorized, executed and delivered by CITSF and
will constitute a legal, valid and binding instrument enforceable against
CITSF in accordance with its terms, subject (i) to applicable bankruptcy,
reorganization, insolvency, moratorium or other similar laws affecting
creditors' rights generally, and (ii) as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
(l) The Certificates, when duly and validly executed by the Owner
Trustee or an agent thereof on behalf of the Trust, authenticated and
delivered in accordance with the Trust Agreement, and delivered to and paid
for pursuant hereto will be validly issued and outstanding and entitled to
the benefits of the Trust Agreement.
(m) The Notes, when duly and validly executed by the Owner Trustee or
an agent thereof on behalf of the Trust, authenticated and delivered in
accordance with the Indenture, and delivered and paid for pursuant hereto
will be validly issued and outstanding and entitled to the benefits of the
Indenture.
(n) No filing or registration with, notice to or consent, approval,
authorization or order of any court or governmental authority or agency is
required for the consummation by any of the Seller, CITSF and CIT GP of the
transactions contemplated by any of the Basic Documents to which it is a
party, except such as may be required under the Act, the Rules and
Regulations, or state securities or Blue Sky laws.
(o) The Seller, CITSF, CITCF-NY and CIT GP each possess all material
licenses, certificates, authorities or permits issued by the appropriate
state, federal or foreign regulatory agencies or bodies necessary to
conduct the businesses now operated by them and as described in the
Prospectus, other than such licenses, certificates, authorities or permits
the failure of which to possess would not have a material adverse effect on
the interests of the Certificateholders or the Noteholders under the Basic
Documents, and neither the Seller, CITSF, CITCF-NY nor CIT GP have received
any notice of proceedings relating to the revocation or modification of any
such license, certificate, authority or permit which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
would materially and adversely affect the conduct of the business,
operations, financial condition or income of any of the Seller, CITSF,
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<PAGE>
CITCF-NY or CIT GP or their ability to perform their respective obligations
under any of the Basic Documents to which it is a party.
(p) As of the Closing Date, the Initial Contracts and related property
will have been duly and validly assigned to the Owner Trustee in accordance
with the Basic Documents; and when such assignment is effected, a duly and
validly perfected transfer of all such Initial Contracts subject to no
prior lien, mortgage, security interest, pledge, charge or other
encumbrance created by the Seller, CITSF, CITCF-NY or CIT GP will have
occurred. As of the Closing Date, the Trust's grant of a security interest
in the Collateral to the Indenture Trustee pursuant to the Indenture will
vest in the Indenture Trustee, for the benefit of the Noteholders, a first
priority perfected security interest therein, subject to no prior lien,
mortgage, security interest, pledge, charge or other encumbrance created by
the Seller, CITSF, CITCF-NY or CIT GP. As of each Subsequent Transfer Date,
the Subsequent Contracts and related property conveyed to the Trust on such
date will have been duly and validly assigned to the Owner Trustee in
accordance with the Basic Documents; and when such assignment is effected,
the duly and validly perfected transfer of all such Subsequent Contracts
will be subject to no prior lien, mortgage, security interest, pledge,
charge or other encumbrance created by the Seller, CITSF, CITCF-NY or CIT
GP. As of each Subsequent Transfer Date, the Trust's grant of a security
interest in the Collateral sold to the Trust on such Subsequent Transfer
Date pursuant to the Indenture will vest in the Indenture Trustee, for the
benefit of the Noteholders, a first priority perfected security interest
therein, subject to no prior lien, mortgage, security interest, pledge,
charge or other encumbrance created by the Seller, CITSF, CITCF-NY or CIT
GP.
(q) As of the Closing Date, each of the Initial Contracts will meet
the eligibility criteria described in the Prospectus and as of each
Subsequent Transfer Date, each of the Subsequent Contracts being
transferred to the Trust will meet the eligibility criteria described in
the Prospectus.
(r) The chief executive office of each of the Seller, CITSF and
CITCF-NY is listed opposite its name on Schedule II hereto, which office is
the place where it is "located" for the purposes of Section 9-103(3)(d) of
the Uniform Commercial Code as in effect in the State of New York, and the
offices of each of the Seller, CITSF and CITCF-NY where it keeps its
respective records concerning the Contracts are also listed in said
Schedule opposite its name and there have been no other such locations
during the four months preceding the Closing Date.
(s) Neither the Seller, CITSF, CIT GP nor the Trust Fund created by
the Sale and Servicing Agreement will be subject to registration as an
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<PAGE>
"investment company" under the Investment Company Act of 1940, as amended
(the "Investment Company Act").
(t) In connection with the offering of the Securities in the State of
Florida, the Seller hereby certifies that they have complied with all
provisions of Section 5.17.075 of the Florida Securities and Investor
Protection Act.
(u) As of the Closing Date, each of the respective representations and
warranties of the Seller, CITSF, CITCF-NY and CIT GP set forth in the Basic
Documents will be true and correct, and the Underwriters may rely on such
representations and warranties as if they were set forth herein in full.
3. Purchase, Sale and Delivery of Securities. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Seller agrees to cause the Trust to
sell to the Underwriters, and the Underwriters agree, severally and not jointly,
to purchase from the Trust, the principal amount of the Notes set forth opposite
the name of such Underwriter in Schedule I hereto at a purchase price equal to
the Total Price to Seller specified in Schedule III hereto plus accrued interest
at the Class A Rate from , 1996 to (but excluding) the Closing Date,
and the principal balance of the Certificates set forth opposite the name of
such Underwriter in Schedule I hereto at a purchase price equal to the Total
Price to Seller specified in Schedule IV hereto plus accrued interest at the
Pass-Through Rate from , 1996 to (but excluding) the Closing Date.
The Seller will deliver the Securities to the Representative, for the
account of the Underwriters, against payment of the purchase price by wire
transfer of immediately available funds to the Seller, or to such bank as may be
designated by the Seller, at the office of Schulte Roth & Zabel, 900 Third
Avenue, New York, New York 10022 on _____________ , 1996 at 10:00 a.m., New York
City time, or at such other time not later than seven full business days
thereafter as the Representative and the Seller determine, such time being
herein referred to as the "Closing Date." The Securities to be so delivered will
be initially represented by one or more Notes and one or more Certificates
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 DTC and participating members
thereof. One Certificate in definitive form in the principal amount of
$________ will be registered in the name of CIT GP (the "GP Certificate").
Definitive Notes and Definitive Certificates (other than the GP Certificate)
will be available only under the limited circumstances set forth in the
Indenture and Trust Agreement. The notes and certificates evidencing the Notes
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and Certificates will be made available for checking and packaging at the
offices of Schulte Roth & Zabel at least 24 hours prior to the Closing Date.
4. Offering by Underwriters. It is understood that, after the Registration
Statement becomes effective, the Underwriters propose to offer the Securities
for sale to the public (which may include selected dealers), on the terms set
forth in the Prospectus.
5. Covenants of the Seller and CITSF. Each of the Seller and CITSF, jointly
and severally, covenants and agrees with the several Underwriters that:
(a) If the Effective Time is prior to the execution and delivery of
this Agreement, the Seller will file the Prospectus, properly completed,
with the Commission pursuant to and in accordance with subparagraph (1)
(or, if applicable and if consented to by the Representative, subparagraph
(4)) of Rule 424(b) not later than the earlier of (i) the second business
day following the execution and delivery of this Agreement or (ii) the
fifth business day after the Effective Date. The Seller will advise the
Representative promptly of any such filing pursuant to Rule 424(b).
(b) The Seller will advise the Representative promptly of any proposal
to amend or supplement the registration statement as filed or the related
prospectus or the Registration Statement or the Prospectus, and will not
effect any such amendment or supplementation without the Representative's
consent which consent shall not be unreasonably withheld; and the Seller
will also advise the Representative promptly of the effectiveness of the
Registration Statement (if the Effective Time is subsequent to the
execution and delivery of this Agreement) and of any amendment or
supplementation of the Registration Statement or the Prospectus and of the
institution by the Commission of any stop order proceedings in respect of
the Registration Statement and will use its best efforts to prevent the
issuance of any such stop order and to obtain as soon as possible its
lifting, if issued.
(c) The Seller will arrange for the qualification of the Securities
for offering and sale under the securities laws of such jurisdictions in
the United States as the Representative may reasonably designate and will
continue such qualifications in effect so long as necessary under such laws
for the distribution of such Securities, provided that in connection
therewith the Seller shall not be required to qualify as a foreign
corporation to do business nor become subject to service of process
generally, but only to the extent required for such qualification, in any
jurisdiction in which it is not currently so qualified.
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(d) If, at any time when a prospectus relating to the Securities is
required to be delivered by law in connection with sales by any Underwriter
or dealer, either (i) any event shall have occurred as a result of which
the Prospectus as then amended or supplemented would include any untrue
statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or (ii) for any other reason it
shall be necessary to amend or supplement the Prospectus to comply with the
Act, the Seller will promptly notify the Representative and will promptly
prepare and file with the Commission, at their own expense, an amendment or
a supplement to the Prospectus which will correct such statement or
omission or effect such compliance. Neither the consent of the
Representative to, nor the Underwriters' delivery of, any such amendment or
supplement shall constitute a waiver of any of the conditions set forth in
Section 6 hereof.
(e) As soon as practicable, but not later than the Availability Date
(as defined below), the Seller will cause the Trust to make generally
available to Noteholders and Certificateholders an earnings statement of
the Trust covering a period of at least 12 months beginning after the
Effective Date which will satisfy the provisions of Section 11(a) of the
Act and Rule 158 of the applicable Rules and Regulations thereunder. For
the purpose of the preceding sentence, "Availability Date" means the 45th
day after the end of the fourth fiscal quarter following the fiscal quarter
that includes the Effective Date, except that, if such fourth fiscal
quarter is the last quarter of the Trust's fiscal year, "Availability Date"
means the 90th day after the end of such fourth fiscal quarter.
(f) The Seller will furnish to each of the Underwriters copies of the
Registration Statement (two of which will be signed and include all
exhibits), each related preliminary prospectus, the Prospectus and all
amendments and supplements to such documents, in each case as soon as
available and in such quantities as the Representative may from time to
time reasonably request.
(g) So long as any of the Securities are outstanding, the Seller or
CITSF, as the case may be, will furnish to the Representative copies of all
written reports or other written communications (financial or otherwise)
furnished or made available to Noteholders and/or Certificateholders, and
deliver to the Representative during such same period, (i) as soon as they
are available, copies of any reports and financial statements filed by or
on behalf of the Trust by the Seller with the Commission pursuant to the
Exchange Act and (ii) such additional information concerning the Seller or
CITSF (relating to the Contracts, the servicing thereof or the ability of
CITSF to act as Servicer), the Notes, the Certificates or the Trust as the
Representative may reasonably request from time to time.
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(h) Whether or not the transactions contemplated by this Agreement are
consummated, the Seller, CITSF and CIT GP will pay or cause to be paid all
costs and expenses incident to the performance of their respective
obligations hereunder, including (i) the preparation, issuance and delivery
of the Securities, (ii) any fees charged by Moody's Investors Service, Inc.
("Moody's") and Standard & Poor's Structured Ratings Group, a Division of
The McGraw-Hill Companies, Inc. ("S&P" and, together with Moody's, the
"Rating Agencies"), for the rating of the Securities, (iii) the expenses
incurred in printing, reproducing and distributing the registration
statement as filed, the Registration Statement, preliminary prospectuses
and the Prospectus (including any amendments and supplements thereto
required pursuant to Section 5(d) hereof), (iv) the fees and disbursements
of counsel to the Seller, CITSF and CIT GP and the independent public
accountants of the Seller, (v) the fees and disbursements of the Indenture
Trustee and its counsel, (vi) the fees and disbursement of the Owner
Trustee and its counsel, (vii) the fees of DTC in connection with the
book-entry registration of the Securities, (viii) the reasonable expenses
of the Representative including the reasonable fees and disbursements of
its counsel, in connection with the initial qualification of the Securities
for sale in the jurisdictions that the Representative may designate
pursuant to Section 5(c) hereof and in connection with the preparation of
any blue sky survey and legal investment survey and (ix) the printing and
delivery to the Underwriters, in such quantities as the Underwriters may
reasonably request, of copies of the Basic Documents. Subject to Section 8
hereof, the Underwriters shall be responsible for their own costs and
expenses, including the fees and expenses of their counsel (other than the
reasonable expenses of the Representative including the reasonable fees and
disbursements of its counsel, in connection with the initial qualification
of the Securities for sale in the jurisdictions that the Representative may
designate pursuant to Section 5(c) hereof and in connection with the
preparation of any blue sky survey and legal investment survey).
(i) On or before the Closing Date, the Seller, CITSF and CITCF-NY
shall cause each of their respective books and records (including any
computer records) relating to the Initial Contracts to be marked to show
the absolute ownership by the Owner Trustee in accordance with Section
3.01B(d) of the Sale and Servicing Agreement, on behalf of the Trust, of
the Initial Contracts, and from and after the Closing Date neither the
Seller, CITSF, as Servicer, nor CITCF-NY shall take any action inconsistent
with the ownership by the Owner Trustee on behalf of the Trust of the
Initial Contracts, other than as permitted by the Basic Documents.
(j) On or before each Subsequent Transfer Date, the Seller, CITSF and
CITCF-NY shall cause each of their respective books and records (including
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any computer records) relating to the Subsequent Contracts to be sold on
such Subsequent Transfer Date to be marked to show the absolute ownership
by the Owner Trustee in accordance with Section 3.01B(d) of the Sale and
Servicing Agreement, on behalf of the Trust, of such Subsequent Contracts,
and from and after such Subsequent Transfer Date neither the Seller, CITSF,
as Servicer, nor CITCF-NY shall take any action inconsistent with the
ownership by the Owner Trustee on behalf of the Trust of such Subsequent
Contracts, other than as permitted by the Basic Documents.
(k) Until the retirement of the Securities, or until such time as the
Underwriters shall cease to maintain a secondary market in the Securities,
whichever occurs first, the Seller or CITSF will deliver to the
Representative the certified public accountants' annual statements of
compliance furnished to the Indenture Trustee or the Owner Trustee pursuant
to the Indenture and the Sale and Servicing Agreement, as soon as such
statements are furnished to the Indenture Trustee or the Owner Trustee.
(l) To the extent, if any, that either of the ratings provided with
respect to the Securities by either Rating Agency is conditional upon the
furnishing of documents or the taking of any other actions by the Seller,
CITSF, CITCF-NY or CIT GP, the Seller, CITSF, CITCF-NY or CIT GP, as the
case may be, shall furnish such documents and take any such other actions
as may be required to satisfy such conditions. A copy of any such document
shall be provided to the Representative at the time it is delivered to the
Rating Agencies.
6. Conditions of the Obligations of the Underwriters. The obligations of
the several Underwriters to purchase and pay for the Securities will be subject
to the accuracy of the representations and warranties on the part of the Seller
and CITSF, and contained or incorporated herein, to the accuracy of the
statements of officers of the Seller and CITSF made pursuant to the provisions
hereof, to the performance by the Seller and CITSF of its obligations hereunder
and to the following additional conditions precedent:
(a) On the date of this Agreement, the Representative and the Seller
shall have received a letter, dated the date of delivery thereof, of KPMG
Peat Marwick LLP confirming that they are independent public accountants
with respect to the Seller and CITSF within the meaning of the Act and the
Rules and Regulations, substantially in the form of the draft to which the
Representative has previously agreed and otherwise in form and substance
satisfactory to the Representative and counsel for the Underwriters.
(b) If the Effective Time is not prior to the execution and delivery
of this Agreement, the Effective Time shall have occurred not later than
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10:00 p.m., New York City time, on the date of this Agreement or such later
date as shall have been consented to by the Representative. If the
Effective Time is prior to the execution and delivery of this Agreement,
the Prospectus shall have been filed with the Commission in accordance with
the Rules and Regulations and Section 5(a) hereof. On or prior to the
Closing Date, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been instituted or, to the knowledge of the Seller,
shall be contemplated by the Commission.
(c) The Representative shall have received a certificate, dated the
Closing Date, executed by any two of the President, any Vice President, the
principal financial officer or the principal accounting officer of (i) the
Seller representing and warranting that, as of the Closing Date, to the
best of each such officer's knowledge after reasonable investigation, the
representations and warranties of the Seller in this Agreement and the
other Basic Documents to which it is a party are true and correct, that the
Seller has complied with all agreements and satisfied all conditions on its
part to be performed or satisfied hereunder or thereunder at or prior to
the Closing Date, that no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose
have been instituted or, to the best of their knowledge, are contemplated
by the Commission and (ii) CITSF in which such officers shall state that,
to the best of each such officer's knowledge after reasonable
investigation, the representations and warranties of CITSF in this
Agreement and the other Basic Documents to which it is a party are true and
correct and that CITSF has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied hereunder or thereunder
at or prior to the Closing Date.
(d) The Representative shall have received a certificate, dated the
Closing Date, executed by any two of the President, any Vice President, the
principal financial officer or the principal accounting officer of CIT GP
in which such officers shall state that, to the best of each such officer's
knowledge after reasonable investigation, (i) the representations and
warranties of CIT GP in the Trust Agreement are true and correct and (ii)
that CIT GP has complied with all agreements and satisfied all conditions
on its part to be performed or satisfied under the Trust Agreement at or
prior to the Closing Date. Such certificate shall have attached thereto a
true and correct photocopy of the demand note furnished to CIT GP by CIT.
(e) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred (i) any change, or any development involving a
prospective change, in or affecting particularly the business or properties
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of the Trust, the Seller, CITSF, CITCF-NY or CIT GP which, in the judgment
of a majority in interest of the Underwriters (including the
Representative), materially impairs the investment quality of the
Securities or makes it impractical or inadvisable to proceed with
completion of the sale of and payment for the Securities; (ii) any
downgrading in the rating of any debt securities of CIT or CITSF or any of
their direct or indirect subsidiaries by any "nationally recognized
statistical rating organization" (as defined for purposes of Rule 436(g)
under the Act), or any public announcement that any such organization has
under surveillance or review its rating of any such debt securities (other
than an announcement with positive implications of a possible upgrading,
and no implication of a possible downgrading, of such rating); (iii) any
suspension or limitation of trading in securities generally on the New York
Stock Exchange or any setting of minimum prices for trading on such
exchange; (iv) any banking moratorium declared by Federal, New Jersey or
New York authorities; or (v) any outbreak or escalation of major
hostilities in which the United States is involved, any declaration of war
by Congress or any other substantial national or international calamity or
emergency if, in the judgment of a majority in interest of the Underwriters
(including the Representative), the effect of any such outbreak,
escalation, declaration, calamity or emergency makes it impractical or
inadvisable to proceed with completion of the sale of and payment for the
Securities.
(f) The Representative shall have received a written opinion of
in-house General Counsel of the Seller, CITSF and CITCF-NY, or other
counsel satisfactory to the Representative in its reasonable judgment,
dated the Closing Date, in substantially the form set forth below, with
such changes therein as the Representative and counsel for the Underwriters
shall reasonably agree:
(i) The Seller and CITSF have each been duly organized and are
validly existing as corporations in good standing under the laws of
the State of Delaware. CITCF-NY has been duly organized and is validly
existing as a corporation in good standing under the laws of the State
of New York.
(ii) The Seller, CITSF and CITCF-NY each have the corporate power
and corporate authority to carry on their respective businesses as
described in the Prospectus and to own and operate their respective
properties in connection therewith.
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(iii) The Seller, CITSF and CITCF-NY are each corporations duly
organized, validly existing and in good standing under the laws of the
jurisdiction of their organization and each has the corporate power to
own its assets and to transact the business in which it is currently
engaged and to perform their respective obligations under each of the
Basic Documents to which it is a party. The Seller, CITSF and CITCF-NY
are each qualified to do business as a foreign corporation and each is
in good standing in each jurisdiction in which the character of the
business transacted by it or properties owned or leased by it requires
such qualification and in which the failure so to qualify would have a
material adverse effect on the business, properties, assets, or
condition (financial or other) of the Seller, CITSF or CITCF-NY,
respectively or on their ability to perform their respective
obligations under the Basic Documents.
(iv) This Agreement has been duly authorized, executed and
delivered by each of the Seller and CITSF, and is a valid and binding
obligation of each of the Seller and CITSF enforceable against each of
the Seller and CITSF in accordance with its terms, except that (A)
such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally, (B) such enforcement
may be limited by general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law), and (C)
the enforceability as to rights to indemnity thereunder may be limited
under applicable law.
(v) Each of the Basic Documents to which the Seller, CITSF or
CITCF-NY is a party have been duly authorized, executed and delivered
by each of the Seller, CITSF and CITCF-NY, and each constitutes a
valid and binding obligation of, each of the Seller, CITSF and
CITCF-NY, enforceable against each of the Seller, CITSF and CITCF-NY
in accordance with its terms, except that (A) such enforcement may be
subject to bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally and (B) such enforcement may be limited by general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
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(vi) The execution and delivery by each of the Seller, CITSF and
CITCF-NY of each of the Basic Documents to which it is a party, the
performance of their respective obligations thereunder and the signing
of the Registration Statement by the Seller are within the corporate
power of the Seller, CITSF and CITCF-NY, as applicable, and have been
duly authorized by all necessary corporate action on the part of the
Seller, CITSF and CITCF-NY, as applicable; and neither the issue and
sale of the Securities, nor the consummation of the transactions
contemplated by the Basic Documents nor the fulfillment of the terms
thereof, nor the grant of the security interest in the Collateral to
the Indenture Trustee pursuant to the Indenture will, to the best of
such counsel's knowledge, conflict with or constitute a breach of, or
default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or asset of the Seller, CITSF
or CITCF-NY pursuant to, any contract, indenture, mortgage, loan
agreement, note, lease or other instrument, if any, to which the
Seller, CITSF or CITCF-NY is a party or by which either may be bound
or to which the property or assets of the Seller, CITSF or CITCF-NY
are subject (which contracts, indentures, mortgages, loan agreements,
notes, leases and other such instruments, if any, have been identified
by the Seller, CITSF or CITCF-NY to such counsel), nor will such
action result in any violation of the provisions of the certificate of
incorporation or by-laws of the Seller, CITSF or CITCF-NY or, to the
best of such counsel's knowledge, any law, administrative regulation
or administrative or court decree of any state or federal courts,
regulatory bodies, other body, governmental entity or arbitrator
having jurisdiction over the Seller, CITSF or CITCF-NY.
(vii) The Seller has duly authorized, executed and delivered the
written order to the Owner Trustee to execute and deliver the Issuer
Order to the Indenture Trustee.
(viii) The Seller has duly authorized, executed and delivered the
written order to the Owner Trustee to execute and deliver the
Certificates.
(ix) To the best of such counsel's knowledge, no filing or
registration with or notice to or consent, approval, authorization or
order of any New Jersey, New York or federal court or governmental
authority or agency is required for the consummation by the Seller,
CITSF or CITCF-NY of the transactions contemplated by this Agreement,
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except such as may be required under the Act or the Rules and
Regulations, or state securities or Blue Sky laws.
(x) There are no legal or governmental proceedings pending to
which the Seller, CITSF or CITCF-NY is a party or of which any
property of the Seller, CITSF or CITCF-NY is the subject, and no such
proceedings are known by such counsel to be threatened or contemplated
by governmental authorities or threatened by others, (A) that are
required to be disclosed in the Registration Statement or (B)(1)
asserting the invalidity of all or part of any of the Basic Documents,
(2) seeking to prevent the issuance of the Notes or the Certificates,
(3) that could materially and adversely affect the Seller's, CITSF's
or CITCF-NY's obligations under any of the Basic Documents or (4)
seeking to affect adversely the federal or state income tax attributes
of the Securities.
(xi) Such counsel is familiar with CITSF's and CITCF-NY's
standard operating procedures relating to CITSF's and CITCF-NY's
acquisition of a perfected first priority security interest in the
vehicles financed by CITSF and CITCF-NY's pursuant to motor vehicle
retail installment sale contracts and motor vehicle installment loan
contracts in the ordinary course of CITSF's and CITCF-NY's business.
Other than with respect to mechanic's and materialmen's liens,
assuming that CITSF's standard procedures are followed with respect to
the perfection of security interests in the Financed Vehicles (and
such counsel has no reason to believe that either CITSF or CITCF-NY
has not or will not continue to follow its standard procedures in
connection with the perfection of security interests in the Financed
Vehicles), CITSF and CITCF-NY have acquired or will acquire a
perfected first priority security interest in the Financed Vehicles.
(xii) The Contracts are chattel paper, as defined in the UCC in
the State of New Jersey.
(xiii) The form of assignment to be executed and delivered by
CITSF to the Seller pursuant to the Purchase Agreement is sufficient
in form and substance to convey to the Seller all of CITSF's right,
title and interest in and to the Contracts and any security interests
securing the Contracts. When the Purchase Agreement has been duly
executed and delivered by all parties thereto, the assignment
described in the Purchase Agreement has been duly executed and
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delivered to the Seller by CITSF, and the purchase price has been
paid to CITSF by the Seller in the manner specified in the Purchase
Agreement, all of CITSF's right, title and interest in and to the
Contracts and any security interests securing the Contracts will have
been conveyed to the Seller and the Seller will be the holder of a
valid, binding and enforceable security interest in the Contracts.
(xiv) The form of assignment to be executed and delivered by the
Seller to the Owner Trustee pursuant to the Sale and Servicing
Agreement is sufficient in form and substance to convey to the Owner
Trustee all of the Seller's right, title and interest in and to the
Contracts and any security interests securing the Contracts. When the
Basic Documents have each been duly executed and delivered by all
parties thereto, the assignment described in the Sale and Servicing
Agreement has been duly executed and delivered to the Trust by the
Seller, the purchase price therefor has been paid to the Seller by the
Trust in the manner specified in the Sale and Servicing Agreement, and
the Notes and the Certificates have been duly executed and duly
authenticated and delivered by the Owner Trustee or the Indenture
Trustee, as applicable, to or upon the order of the Seller in
accordance with the Sale and Servicing Agreement, the Indenture and
the Trust Agreement, all of the Seller's right, title and interest in
and to the Contracts and any security interests securing the Contracts
will have been conveyed to the Trust and the Trust will be the holder
of a valid and binding security interest in the Contracts.
(g) The Representative shall have received a written opinion of
in-house General Counsel to CIT GP, dated the Closing Date, in
substantially the form set forth below, with such changes therein as
counsel for the Underwriters shall reasonably agree:
(i) CIT GP is duly qualified and licensed and in good standing in
each jurisdiction where its business requires such qualification or
licensing.
(ii) The performance by CIT GP of its obligations under the Trust
Agreement will not, to the best of such counsel's knowledge, conflict
with or constitute a breach of, or default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any
property or asset of CIT GP pursuant to, any material contract,
indenture, mortgage, loan agreement, note, lease or other instrument
to which CIT GP is a party or by which it may be bound or to which the
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property or assets of CIT GP are subject (which material contracts,
indentures, mortgages, loan agreements, notes, leases and other such
instruments have been identified by CIT GP to such counsel), nor will
such action result in any violation of the provisions of the
certificate of incorporation or by-laws of CIT GP or, to the best of
such counsel's knowledge, any law, administrative regulation or
administrative or court decree of any state or federal courts,
regulatory bodies, other body, governmental entity or arbitrator
having jurisdiction over CIT GP.
(iii) To the best of such counsel's knowledge, no filing or
registration with or notice to or consent, approval, authorization or
order of any Illinois or federal court or governmental authority or
agency is required for the consummation by CIT GP of the transactions
contemplated by the Trust Agreement, except such as may be required
under the Act or the Rules and Regulations, or state securities or
Blue Sky laws.
(iv) There are no legal or governmental proceedings pending to
which CIT GP is a party or of which any property of CIT GP is the
subject, and no such proceedings are known by such counsel to be
threatened or contemplated by governmental authorities or threatened
by others, (A) that are required to be disclosed in the Registration
Statement or (B)(1) asserting the invalidity of all or part of the
Trust Agreement, (2) that could materially and adversely affect CIT
GP's obligations under the Trust Agreement or (3) seeking to affect
adversely the federal or state income tax attributes of the
Securities.
Such opinion may contain such assumptions, qualifications and
limitations as are customary in opinions of this type and are reasonably
acceptable to counsel to the Underwriters.
(h) The Representative shall have received a written opinion of
Schwartz, Cooper, Greenberger & Krauss, special Illinois Counsel to CIT GP,
dated the Closing Date, in form and substance satisfactory to the
Representative and counsel for the Underwriters, to the effect that:
(i) CIT GP has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Illinois,
with the corporate power and corporate authority to perform its
obligations under the Trust Agreement.
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(ii) The Trust Agreement has been duly authorized, executed and
delivered by CIT GP.
Such opinion may contain such assumptions, qualifications and
limitations as are customary in opinions of this type and are reasonably
acceptable to counsel to the Underwriters.
(i) The Representative shall have received a written opinion of
Lowenstein, Sandler, Kohl, Fisher and Boylan, special local New Jersey
counsel for the Seller and CITSF, dated the Closing Date, in form and
substance satisfactory to the Representative and counsel for the
Underwriters, to the effect that:
(i)(A) If the transfer of the Contracts is deemed to be the grant
of a security interest, and not a true sale, (1) to the extent that
the Uniform Commercial Code as in effect in the State of New Jersey
(the "New Jersey UCC") applies to the perfection of the Seller's
security interests in the Contracts and the proceeds thereof under
Section 9-103 of the New Jersey UCC, when the financing statements
executed by CITSF as debtor (the "First Step Financing Statements")
have been duly executed and delivered and filed or recorded, as
appropriate, in the office of the Secretary of State of New Jersey,
such security interests will be perfected and (2) to the extent that
the New Jersey UCC applies to the perfection of the Trust's security
interests in the Contracts and the proceeds thereof under Section
9-103 of the New Jersey UCC, when the First Step Financing Statements
and the financing statements executed by the Seller as "debtor"
("Second Step Financing Statements") have been duly executed and
delivered and filed or recorded, as appropriate, in the office of the
Secretary of State of New Jersey, such security interests will be
perfected and (B) based solely on such counsel's review of those
Financing Statements, officer certificates and specified New Jersey
UCC search reports, the security interests of the Trust in the
Contracts are subject to no equal or prior security interest under the
New Jersey UCC; provided, however that (1) for purposes of its
opinions in this paragraph, such counsel may assume that: (a) the
Seller is the holder of valid, binding and enforceable security
interests in the Contracts and the Trust is the holder of valid,
binding and enforceable security interests in the Contracts; (b) the
Contracts constitute "chattel paper," as such term is defined in
Section 9-105 of the New Jersey UCC; (c) the New Jersey UCC governs
the perfection of the security interest in
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the Contracts, the priority of those security interests and the
classification of the Contracts; (d) the chief executive office of
each of the Company and the Seller is, and during the past four months
has been, in the State of New Jersey; (e) neither CITSF, the Seller
nor the Trust has assigned, nor will assign, any Contract to a buyer
who takes possession of it in the ordinary course of its business and
who acts without knowledge that such Contract is subject to a security
interest; (f) the Contracts exist and each of CITSF and the Seller,
respectively, has rights in the Contracts; (g) (i) no lien creditor
has executed on or attached to the Contracts prior to the perfection
of the security interests of the Seller or the Trust in the Contracts
and the proceeds thereof; and (ii) the Contracts are not subject to
the rights of the holder of a perfected "purchase money security
interest" (as such term is defined in Section 9-107 of the New Jersey
UCC); (h) no Contract, or the proceeds thereof, constitutes proceeds
of any property subject to the security interest of a third party; (i)
none of the proceeds of the Contracts which constitute "securities"
under Article 8 of the New Jersey UCC are transferred to a bona fide
purchaser (other than the Indenture Trustee) under Section 8-302 of
the New Jersey UCC; (j) the Seller, the Indenture Trustee and the
Owner Trustee have and will maintain a list describing the Contracts
for inspection during normal business hours by interested parties; (k)
the underlying facts in the officer certificates to be received by
such counsel are correct; (l) all financing statements or other notice
of liens, other than the financing statements, in which CITSF, the
Seller or the Trust is named as debtor were properly filed and
indexed, that the New Jersey UCC search reports have revealed all
recorded liens against CITSF and the Seller and that no filings or
notices covering CITSF or the Seller were made between the dates last
searched and reported on in the New Jersey UCC search reports and the
time of such financing statements, and (m) from and after the date
hereof CITSF, acting in a capacity as servicer and custodian for the
Trustee, will have taken, and will maintain, exclusive possession of
the Contracts; and (2) such counsel need express no opinion: (a)
regarding perfection as to any government or governmental agency
(including without limitation the United States of America or any
State thereof or any agency or department of the United States of
America or any State thereof) of any security interest in any
Contracts with respect to which such government or agency is
obligated; (b) on the perfection of any security interests in the
collateral described in the
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Contracts; (c) as to the priority of any perfected security interests
under the New Jersey UCC of any liens, claims or other interests that
do not require filing or similar action to attach or that arise by
operation of law against any claim or lien in favor of the United
States or any State or any agency or instrumentality of the United
States or any State (including, without limitation, liens arising
under the federal tax laws or the Employment Retirement Income
Security Act of 1974, as amended) or against the rights of a "lien
creditor" (as defined in the New Jersey UCC); and (d) as to the effect
of the laws of any other state that may govern the perfection or
priority of the security interest in the Contracts by possession or
other than by filing a financing statement under the UCC; (3) such
opinions may be subject to the effect of (i) the limitations on the
existence and perfection of security interests in proceeds resulting
from the operation of Section 9-306 of the New Jersey UCC; (ii) the
limitations with respect to documents and instruments imposed by
Section 9-309 of the New Jersey UCC; (iii) bankers' liens, rights of
set-off and other rights of persons in possession of money,
instruments and proceeds constituting certificated or uncertificated
securities; and (iv) Section 552 of the Bankruptcy Code with respect
to any Contracts acquired by the Seller or the Trust subsequent to the
commencement of a case by or against CITSF, the Seller or the Trust
under the Bankruptcy Code; (4) such counsel's opinions may be
inapplicable to any Subsequent Contracts unless, upon the proper
filing of New Jersey UCC financing statements describing the
Subsequent Contracts, (i) the assumptions, qualifications and
limitations in this letter shall be true as to conditions then
existing and as to the Subsequent Contracts, (ii) there are no changes
in law, and (iii) all searches have been updated and reveal no liens
against any of the Subsequent Contracts; and (5) such counsel's
opinion may be further subject to the effect of general principles of
equity, regardless of whether such principles are considered in a
proceeding in equity or at law, as the same may be applied in a
proceeding seeking to enforce any obligation.
(ii) Solely insofar as the present laws of the State of New
Jersey and the Federal law of the United States of America are
concerned, in a properly presented and decided case, a court would
conclude that the transfer of the Contracts and the proceeds thereof
by CITSF to the Seller constitute true sales of such Contracts and,
assuming a court reached that conclusion, in such a case a court would
conclude that the Contracts and the proceeds would not be considered
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property of the estate of CITSF pursuant to Section 541 of the
Bankruptcy Code, and the Contracts and the proceeds thereof would not
be subject to the automatic stay pursuant to Section 362 of the
Bankruptcy Code; provided, however, such counsel need express no
opinion (A) with respect to how long the Seller could be denied
possession of the Contracts before the issues discussed in this
paragraph are finally decided on appeal or other review, (B) with
respect to the availability of a preliminary injunction or temporary
restraining order pursuant to the broad equitable powers granted to a
bankruptcy court and (C) as to the conveyance of any Subsequent
Contracts unless, upon the proper filing of UCC financing statements
describing the Subsequent Contracts, (1) the assumptions,
qualifications and limitations in such opinion shall be true as to
conditions then existing and (2) all searches have been updated and
reveal no liens against any of the Subsequent Contracts.
(iii) Solely insofar as the present laws of the State of New
Jersey and the Federal law of the United States of America are
concerned, in a properly presented and decided case, a court would
conclude that the transfer of the Contracts and the proceeds thereof
by the Seller to the Trust constitute true sales of such Contracts
and, assuming a court reached that conclusion, in such a case a court
would conclude that the Contracts and the proceeds would not be
considered property of the estate of the Seller pursuant to Section
541 of the Bankruptcy Code, and the Contracts and the proceeds thereof
would not be subject to the automatic stay pursuant to Section 362 of
the Bankruptcy Code; provided, however, such counsel need express no
opinion (A) with respect to how long the Trust could be denied
possession of the Contracts before the issues discussed in this
paragraph are finally decided on appeal or other review, (B) with
respect to the availability of a preliminary injunction or temporary
restraining order pursuant to the broad equitable powers granted to a
bankruptcy court and (C) as to the conveyance of any Subsequent
Contracts unless, upon the proper filing of UCC financing statements
describing the Subsequent Contracts, (1) the assumptions,
qualifications and limitations in such opinion shall be true as to
conditions then existing and (2) all searches have been updated and
reveal no liens against any of the Subsequent Contracts.
Such opinion may contain such assumptions, qualifications and
limitations as are customary in opinions of this type and are reasonably
acceptable to
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counsel to the Underwriters. In rendering such opinion, such counsel may
state that they express no opinion as to the laws of any jurisdiction other
than the Federal law of the United States of America and the laws of the
State of New Jersey.
(j) The Representative shall have received a written opinion of
Schulte Roth & Zabel, special counsel to the Seller, CITSF and CITCF-NY,
dated the Closing Date, in substantially the form set forth below, with
such changes therein as the Representative and counsel for the Underwriters
shall reasonably agree:
(i) When the Notes have been duly executed, delivered and
authenticated in accordance with the Indenture and delivered and paid
for pursuant to this Agreement, the Notes will be validly issued,
outstanding and entitled to the benefits of the Indenture, except that
(A) enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (B) enforcement may
be limited by general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
(ii) The Registration Statement became effective under the Act as
of August 23, 1995 and, to the best of such counsel's knowledge, no
stop order suspending the effectiveness of the Registration Statement
or any part thereof or any amendment thereto has been issued under the
Act and no proceeding for that purpose has been instituted or
threatened by the Commission.
(iii) The form of the Indenture has been qualified under the
Trust Indenture Act.
(iv) Neither the Trust Agreement nor the Sale and Servicing
Agreement need to be qualified under the Trust Indenture Act. The
Trust is not, and will not as a result of the offer and sale of the
Securities as contemplated in the Prospectus and in this Agreement
become, required to register as an "investment company" under the
Investment Company Act.
(v) The statements in the Prospectus under the caption "The
Notes," "The Certificates" and "The Purchase Agreements and The Trust
Documents" insofar as such statements purport to summarize certain
terms of the Notes, the Certificates and the Basic Documents, present
a fair summary of such documents.
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(vi) To the best of such counsel's knowledge, there are no
contracts or documents of the Seller which are required to be filed as
exhibits to the Registration Statement pursuant to the Act or the
Rules or Regulations which have not been so filed.
(vii) The statements in the Prospectus under the headings
"Certain Federal Income Tax Consequences" and "ERISA Considerations,"
to the extent that they constitute matters of law or legal conclusions
with respect thereto are correct in all material respects.
(viii) The registration statement on Form S-1 (No. 33-94856)
relating to the Securities as of the Effective Date, the Registration
Statement and the Prospectus as of the date of this Agreement, and any
amendment or supplement thereto, as of its date, complied as to form
in all material respects with the requirements of the Act and the
applicable Rules and Regulations. Such counsel need express no opinion
with respect to the financial statements, the exhibits, annexes and
other financial, statistical, numerical or portfolio data, economic
conditions or financial condition of the portfolio information
included in the registration statement on Form S-1 (No. 33-94856)
relating to the Securities, the Registration Statement, the Prospectus
or any amendment or supplement thereto.
Such counsel shall state that it has participated in conferences with
officers and representatives of the Seller, CITSF, Counsel to CITSF and
officers and representatives of the Underwriters, at which conferences
certain of the contents of the Registration Statement and the Prospectus
were discussed and, although such counsel is not passing upon and does not
assume any responsibility whatsoever for, the factual accuracy,
completeness or fairness of the statements contained in the registration
statement on Form S-1 (No. 33-94856) relating to the Securities, the
Registration Statement or Prospectus (except as stated in Sections 6(j)(v)
and 6(j)(vii) above) and has made no independent check or verification
thereof for the purpose of rendering this opinion, on the basis of the
foregoing (relying as to materiality to a large extent upon the
certificates of officers and other representatives of the Seller, CITSF and
CIT GP), no facts have come to their attention that leads such counsel to
believe that the registration statement on Form S-1 (No. 33-94856) relating
to the Securities, as of the Effective Date, the Registration Statement,
when it became effective, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or that the
Prospectus on its date contained or on the Closing
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<PAGE>
Date contains, any untrue statement of a material fact necessary in order
to make the statements therein, in the light of the circumstances under
which they were made, not misleading, except that such counsel need express
no view with respect to the financial statements, tables, schedules,
exhibits, annexes and other financial, statistical, numerical or portfolio
data, economic conditions or financial condition of the portfolio included
in or incorporated by reference into, the Registration Statement or
Prospectus.
Said counsel may state that they are admitted to practice only in the
State of New York, that they are not admitted to the Bar in any other State
and are not experts in the law of any other State and to the extent that
the foregoing opinions concern the laws of any other State such counsel may
rely upon the opinion of counsel satisfactory to the Underwriters and
admitted to practice in such jurisdiction. Any opinions relied upon by such
counsel as aforesaid shall be addressed to the Underwriters and shall be
delivered together with the opinion of such counsel, which shall state that
such counsel believes that their reliance thereon is justified.
(k) The Representative shall have received, in form and substance
satisfactory to the Representative and counsel for the Underwriters an
opinion of Schulte Roth & Zabel, special counsel to the Trust, dated the
Closing Date, regarding the creation of a security interest in the
Collateral in favor of the Indenture Trustee on behalf of the Noteholders
to the extent that a security interest in such Collateral can be created
under Article 9 of the UCC as currently in effect in the State of New York.
Such opinion may contain such assumptions, qualifications and limitations
as are customary in opinions of this type and as are reasonably acceptable
to counsel to the Underwriters. In rendering such opinion, such counsel may
state that they express no opinion as to the laws of any jurisdiction other
than the Federal law of the United States of America and the laws of the
State of New York.
(l) The Representative shall have received an opinion of Stroock &
Stroock & Lavan, counsel for the Underwriters, dated the Closing Date, with
respect to the validity of the Securities and such other related matters as
the Representative shall require and the Seller shall have furnished or
caused to be furnished to such counsel such documents as they may
reasonably request for the purpose of enabling them to pass upon such
matters.
(m) The Representative shall have received an opinion of counsel to
the Cash Collateral Depositor, dated the Closing Date, in form and
substance satisfactory to the Representative and counsel for the
Underwriters, to the effect that:
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<PAGE>
(i) The Cash Collateral Depositor is licensed to maintain a
branch in the State of New York and has full power and authority to
enter into, and to take all action required of it, under the Cash
Collateral Agreement.
(ii) The Cash Collateral Agreement has been duly authorized,
executed and delivered by the Cash Collateral Depositor.
(iii) The Cash Collateral Agreement constitutes a legal, valid
and binding agreement of the Cash Collateral Depositor, enforceable
against the Cash Collateral Depositor in accordance with its terms,
except as enforceability thereof may be limited by bankruptcy,
insolvency, liquidation, reorganization, moratorium or other similar
laws affecting the enforcement of rights of creditors against the Cash
Collateral Depositor generally, as such laws would apply in the event
of bankruptcy, insolvency, liquidation, receivership, or
reorganization or any moratorium or similar occurrence affecting the
Cash Collateral Depositor, and the application of general principles
of equity (regardless of whether such enforceability is considered in
a proceeding in equity or law).
(n) The Representative shall have received an opinion of ,
counsel to the Indenture Trustee, dated the Closing Date, in form and
substance satisfactory to the Representative and counsel for the
Underwriters, to the effect that:
(i) The Indenture constitutes a legal, valid and binding
agreement of the Indenture Trustee, enforceable against the Indenture
Trustee in accordance with its terms, except as enforceability thereof
may be limited by bankruptcy, insolvency, liquidation, reorganization,
moratorium or other similar laws affecting the enforcement of rights
of creditors against the Indenture Trustee generally, as such laws
would apply in the event of bankruptcy, insolvency, liquidation,
receivership, or reorganization or any moratorium or similar
occurrence affecting the Indenture Trustee, and the application of
general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or law).
(ii) The Notes have been duly authenticated and delivered by the
Indenture Trustee in accordance with the terms of the Indenture.
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<PAGE>
(iii) The Indenture Trustee is a banking corporation validly
existing under the laws of the state of and has full power
and authority to enter into, and to take all action required of it,
under the Indenture.
(iv) The Indenture has been duly authorized, executed and
delivered by the Indenture Trustee.
(o) The Representative shall have received an opinion of , counsel to
the Owner Trustee, dated the Closing Date, in form and substance
satisfactory to the Representative and counsel for the Underwriters, to the
effect that:
(i) The Owner Trustee is a banking corporation duly incorporated
and validly existing under the laws of the State of .
(ii) The Owner Trustee has the full power and authority to accept
the office of owner trustee under the Trust Agreement and to enter
into and perform its obligations under the Trust Agreement and the
transactions contemplated thereby.
(iii) The execution and delivery of the Trust Agreement by the
Owner Trustee and the performance by the Owner Trustee of its
obligations under the Trust Agreement have been duly authorized by all
necessary action of the Owner Trustee and the Trust Agreement has been
duly executed and delivered by the Owner Trustee.
(iv) The Trust Agreement constitutes valid and binding
obligations of the Owner Trustee enforceable against the Owner Trustee
in accordance with its terms, except as the enforceability thereof may
be (a) limited by bankruptcy, insolvency, reorganization, moratorium,
liquidation or other similar laws affecting the rights of creditors
generally, and (b) subject to general principals of equity (regardless
of whether such enforceability is considered in a proceeding in equity
or at law).
(v) The execution and delivery by the Owner Trustee of the Trust
Agreement and the transactions contemplated thereby do not require any
consent, approval or authorization of, or any registration or filing
with, any applicable governmental authority of the State of Delaware
which has not been obtained or done.
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<PAGE>
(vi) Neither the consummation by the Owner Trustee of the
transactions contemplated in the Trust Agreement, nor the fulfillment
of the terms thereof by the Owner Trustee will conflict with, result
in a breach or violation of, or constitute a default under the Article
of Association, By-Laws or other organizational documents of the Owner
Trustee
(p) The Representative shall have received an opinion of Richards,
Layton & Finger, special Delaware counsel for the Trust, dated the Closing
Date, in form and substance satisfactory to the Representative and counsel
for the Underwriters, to the effect that:
(i) The Trust Agreement is the legal, valid and binding agreement
of the Owner Trustee, CIT GP and the Seller, enforceable against the
Owner Trustee, CIT GP and the Seller in accordance with its terms
subject to (i) applicable bankruptcy, insolvency, moratorium,
receivership, reorganization, fraudulent conveyance and similar laws
relating to and affecting the rights and remedies of creditors
generally, (ii) principles of equity (regardless of whether considered
and applied in a proceeding in equity or at law), and (iii) the effect
of applicable public policy on the enforceability of provisions
relating to indemnification or contribution.
(ii) The Certificate of Trust has been duly filed with the
Secretary of State of the State of Delaware. The Trust has been duly
formed and is validly existing as a business trust under the Delaware
Business Trust Act.
(iii) The Trust has the power and authority under the Trust
Agreement and the Delaware Business Trust Act to execute, deliver and
perform its obligations under the Trust Agreement, the Indenture, the
Cash Collateral Agreement, the Sale and Servicing Agreement, the Notes
and the Certificates, and to issue the Notes and the Certificates.
(iv) The Trust has duly authorized and executed the Trust
Agreement, the Indenture, the Cash Collateral Agreement, the Sale and
Servicing Agreement, the Notes and the Certificates.
(v) The Trust has the power under the Trust Agreement and the
Delaware Business Trust Act to pledge the Trust Estate to the
Indenture Trustee as security for the Notes.
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<PAGE>
(vi) The Certificates have been executed, authenticated and
delivered by the Owner Trustee upon the order of the Seller in
accordance with the Trust Agreement and when delivered to and paid for
pursuant to this Agreement, the Certificates will be validly issued
and outstanding, and the holder of record of any such Certificates
will be entitled to the benefits accorded by the Trust Agreement
subject to (i) applicable bankruptcy, insolvency, moratorium,
receivership, reorganization, fraudulent conveyance and similar laws
relating to and affecting the rights and remedies of creditors
generally, (ii) principles of equity (regardless of whether considered
and applied in a proceeding in equity or at law), and (iii) the effect
of applicable public policy on the enforceability of provisions
relating to indemnification or contribution.
(vii) The Notes have been executed, authorized and delivered by
the Owner Trustee upon the order of the Seller in accordance with the
Trust Agreement and the Indenture.
(viii) To the extent that Article 9 of the Uniform Commercial
Code as in effect in the State of Delaware (the "Delaware UCC") is
applicable (without regard to conflicts of laws principles), and
assuming that the security interest created by the Indenture in the
Collateral has been duly created and has attached, upon the filing of
a UCC-1 financing statement with the Secretary of State of the State
of Delaware, the Indenture Trustee will have a perfected security
interest in such Collateral and the proceeds thereof; and such
security interest will be prior to any other security interest granted
by the Trust that is perfected solely by the filing of financing
statements under the Delaware UCC, excluding purchase money security
interests under ss. 9-312 of the Delaware UCC and temporarily
perfected security interests in proceeds under ss. 9-306 of the
Delaware UCC.
(ix) No re-filing or other action is necessary under the Delaware
UCC in the State of Delaware in order to maintain the perfection of
the security interest referenced above except for the filing of
continuation statements at five-year intervals.
(x) Under ss. 3805(b) of the Delaware Business Trust Act, no
creditor of any Certificateholder shall have any right to obtain
possession of, or otherwise exercise legal or equitable remedies with
respect to, the property of the Trust except in accordance with the
terms of the Trust Agreement subject to (i) applicable bankruptcy,
insolvency, moratorium,
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<PAGE>
receivership, reorganization, fraudulent conveyance and similar laws
relating to and affecting the rights and remedies of creditors
generally, (ii) principles of equity (regardless of whether considered
and applied in a proceeding in equity or at law), and (iii) the effect
of applicable public policy on the enforceability of provisions
relating to indemnification or contribution.
(xi) Under ss. 3805(c) of the Delaware Business Trust Act, and
assuming that the Sale and Servicing Agreement conveys good title to
the Contracts to the Trust as a true sale and not as a security
arrangement, the Trust, rather than the Certificateholders, is the
owner of the Contracts subject to (i) applicable bankruptcy,
insolvency, moratorium, receivership, reorganization, fraudulent
conveyance and similar laws relating to and affecting the rights and
remedies of creditors generally, (ii) principles of equity (regardless
of whether considered and applied in a proceeding in equity or at
law), and (iii) the effect of applicable public policy on the
enforceability of provisions relating to indemnification or
contribution.
(xii) The execution and delivery by the Owner Trustee of the
Trust Agreement and, on behalf of the Trust, of the Indenture and the
Sale and Servicing Agreement do not require any consent, approval or
authorization of, or any registration or filing with, any governmental
authority of the State of Delaware, except for the filing of the
Certificate of Trust with the Secretary of State.
(xiii) Neither the consummation by the Owner Trustee of the
transactions contemplated by the Trust Agreement or, on behalf of the
Trust, the transactions contemplated by the Trust Agreement, Indenture
and the Sale and Servicing Agreement nor the fulfillment of the terms
thereof by the Owner Trustee will conflict with or result in a breach
or violation of any law of the State of Delaware.
Such opinion may contain such assumptions, qualifications and
limitations as are customary in opinions of this type and are reasonably
acceptable to counsel to the Underwriters. In rendering such opinion, such
counsel may state that they express no opinion as to the laws of any
jurisdiction other than the Federal law of the United States of America and
the laws of the State of Delaware.
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<PAGE>
(q) The Notes shall have been rated "Aaa" by Moody's and "AAA" by S&P,
and the Certificates shall have been rated at least "A2" by Moody's and "A"
by S&P.
(r) The Representative shall have received copies of each opinion of
counsel delivered to either Rating Agency or the Cash Collateral Depositor,
together with a letter addressed to the Representative, dated the Closing
Date, to the effect that each Underwriter may rely on each such opinion to
the same extent as though such opinion was addressed to each as of its
date.
(s) The Representative shall have received evidence satisfactory to it
and counsel for the Underwriters that, on or before the Closing Date, UCC-1
financing statements shall have been submitted to the Trustee for filing in
the appropriate filing offices reflecting (1) the transfer of the interest
in the Contracts and the proceeds thereof (A) from CITCF-NY to CITSF, to
the extent such Contracts have been transferred to CITSF from CITCF-NY, (B)
from CITSF to the Seller, (C) from the Seller to the Owner Trustee, on
behalf of the Trust, or the Trust, as the case may be, and (2) the grant of
the security interest by the Trust in the Contracts and the proceeds
thereof to the Indenture Trustee.
(t) On the Closing Date, counsel for the Underwriters shall have been
furnished with such documents and opinions as they reasonably may require
for the purpose of enabling them to pass upon the issuance and sale of the
Securities as herein contemplated and related proceedings or in order to
evidence the accuracy and completeness of any of the representations and
warranties, or the fulfillment of any of the conditions, herein contained;
and all proceedings taken by the Seller in connection with the issuance and
sale of the Securities as herein contemplated shall be in form and
substance satisfactory to the Representative and counsel for the
Underwriters.
7. Indemnification and Contribution. (a) CITSF will indemnify and hold each
Underwriter harmless against any losses, claims, damages or liabilities, joint
or several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Registration Statement,
the Prospectus, or any amendment or supplement thereto, or any related
preliminary prospectus or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse each
Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending any such loss, claim,
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<PAGE>
damage, liability or action as such expenses are incurred; provided, however,
that (i) CITSF will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement in or omission or alleged omission from
any of such documents in reliance upon and in conformity with written
information furnished to the Seller or CITSF by any Underwriter through the
Representative specifically for use therein it being understood and agreed that
the only such information furnished by any Underwriter consists of the
Underwriters' Information and (ii) CITSF shall not, in connection with any one
such action or separate but substantially similar or related transactions in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the reasonable fees and expenses of more than one separate firm of
attorneys for all such Underwriters, which firm shall be designated in
accordance with Section 7(c) hereof.
(b) Each Underwriter, severally and not jointly, will indemnify and hold
harmless the Seller and CITSF against any losses, claims, damages or liabilities
to which the Seller or CITSF may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, the
Prospectus or any amendment or supplement thereto, or any related preliminary
prospectus or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Seller or CITSF by such
Underwriter through the Representative specifically for use therein, and will
reimburse any legal or other expenses reasonably incurred by the Seller or CITSF
in connection with investigating or defending any such action or claim as such
expenses are incurred, it being understood and agreed that (i) the only such
information furnished by any Underwriter consists of the following information
contained in the Prospectus: (a) the last paragraph at the bottom of the cover
page concerning the terms of the offering by the Underwriters, (b) the legend
concerning over-allotments and (c) the information contained under the caption
"Underwriting" (the "Underwriters' Information") and (ii) the Underwriters shall
not, in connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys for each of the Seller and
CITSF, which firm shall be designated in accordance with Section 7(c) hereof.
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<PAGE>
(c) Promptly after receipt by an indemnified party under this Section of written
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
subsection (a) or (b) above, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under such subsection. In case any such action is brought against any
indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof and after acceptance by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party unless such settlement includes an unconditional release of such
indemnified party from all liability on any claims that are the subject matter
of such action.
(d) If the indemnification provided for in this Section is unavailable or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in subsection (a) or (b) above in such proportion as is
appropriate to reflect not only the relative benefits received by the Seller and
CITSF on the one hand and the Underwriters on the other from the offering of the
Securities but also the relative fault of the Seller and CITSF on the one hand
and the Underwriters on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities as well as any
other relevant equitable considerations. The relative benefits received by the
Seller and CITSF on the one hand and the Underwriters on the other shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the Securities (before deducting expenses) received by the Seller and CITSF
bear to the total underwriting discounts and commissions received by the
Underwriters. The relative fault shall be determined by
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<PAGE>
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Seller, CITSF or by the Underwriters and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such untrue statement or omission. The amount paid by an
indemnified party as a result of the losses, claims, damages or liabilities
referred to above in this subsection (d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any action or claim which is the subject of this
subsection (d). Notwithstanding the provisions of this subsection (d), no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Securities underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations in
this subsection (d) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(e) The obligations of CITSF under this Section shall be in addition to any
liability which the Seller or CITSF may otherwise have and shall extend, upon
the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section shall be in addition to any liability which the
respective Underwriters may otherwise have and shall extend, upon the same terms
and conditions, to each director of the Seller or CITSF, to each officer of the
Seller or CITSF who has signed the Registration Statement and to each person, if
any, who controls the Seller or CITSF within the meaning of the Act.
8. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Seller and CITSF or their respective officers and of the Underwriters set forth
in or made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation or statement as to the results thereof, made by
or on behalf of any Underwriter, the Seller, CITSF or any of their respective
representatives, officers or directors or any controlling person, and will
survive delivery of and payment for the Securities. If this Agreement is
terminated pursuant to Section 9 or if for any reason the purchase of the
Securities by the Underwriters is not consummated, the Seller, CITSF and
CITCF-NY shall remain responsible for the expenses to be paid or
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<PAGE>
reimbursed by it pursuant to Section 5 hereof and the respective obligations of
the Seller, CITSF and the Underwriters pursuant to Section 7 hereof shall remain
in effect. If the purchase of the Securities by the Underwriters is not
consummated for any reason other than solely because of the termination of this
Agreement pursuant to Section 9 or the occurrence of any event specified in
clauses (iii), (iv) or (v) of Section 6(e) hereof, the Seller and CITSF will
reimburse the Underwriters for all out-of-pocket expenses (including fees and
disbursements of counsel) reasonably incurred by them in connection with the
offering of the Securities.
9. Failure to Purchase the Securities. If any Underwriter or Underwriters
default in their obligations to purchase the principal amount of the Notes
and/or the Certificates opposite such Underwriter's name on Schedule I hereto
and the aggregate principal amount of the Securities that such defaulting
Underwriter or Underwriters agreed but failed to purchase does not exceed 10% of
the total principal amount of the Securities, the Representative may make
arrangements satisfactory to the Seller and CITSF for the purchase of such Notes
or Certificates by other persons, including any of the Underwriters, but if no
such arrangements are made by the Closing Date, the non-defaulting Underwriters
shall be obligated severally, in proportion to their respective commitments
hereunder, to purchase the Notes and/or the Certificates that such defaulting
Underwriters agreed but failed to purchase. If any Underwriter or Underwriters
so default and the aggregate principal amount of the Notes and/or the
Certificates with respect to such default or defaults exceeds 10% of the total
principal amount of the Securities and arrangements satisfactory to the
Representative, the Seller and CITSF for the purchase of such Notes and/or
Certificates by other persons are not made within 36 hours after such default,
this Agreement will terminate without liability on the part of any
non-defaulting Underwriter, the Seller or CITSF, except as provided in Section
8. As used in this Agreement, the term "Underwriter" includes any person
substituted for an Underwriter under this Section. Nothing herein will relieve a
defaulting Underwriter or Underwriters from liability for its default.
10. Notices. All communications hereunder will be in writing and, if sent
to the Representative or the Underwriters, will be mailed, delivered or sent by
facsimile transmission and confirmed to the Representative at Seven World Trade
Center, New York, NY 10048, Attention: Legal Department (facsimile number (212)
783-4009); if sent to the Seller, will be mailed, delivered or sent by facsimile
transmission and confirmed to it at The CIT Group Securitization Corporation II,
650 CIT Drive, Livingston, New Jersey 07039, Attention: James J. Egan, Jr.,
President (facsimile number (201) 740-5410); if sent to CIT, will be mailed,
delivered or sent by facsimile transmission and confirmed to it by The CIT Group
Holdings, Inc., 1211 Avenue of the Americas, New York, New York 10036,
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<PAGE>
Attention: Joseph J. Carrol, Executive Vice President and Chief Financial
Officer (facsimile number (212) 536-1971); and if sent to CITSF, will be mailed,
delivered or sent by facsimile transmission and confirmed to it at The CIT
Group/Sales Financing, Inc., 650 CIT Drive, Livingston, New Jersey 07039,
Attention: James J. Egan, Jr., President (facsimile number (201) 740-5410).
11. No Bankruptcy Petition. Each Underwriter agrees that, prior to the date
which is one year and one day after the payment in full of all securities issued
by the Seller or by a trust for which the Seller was the depositor or by the
Trust, which securities were rated by any nationally recognized statistical
rating organization, it will not institute against, or join any other person in
instituting against, the Seller, the Trust or CIT GP any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings or other
proceedings under any Federal or state bankruptcy or similar law.
12. Successors. This Agreement will inure to the benefit of and be binding
upon the Underwriters, the Seller, CIT and CITSF and their respective successors
and the officers and directors and controlling persons referred to in Section 7,
and no other person will have any right or obligations hereunder.
13. Representation of Underwriters. The Representative will act for the
several Underwriters in connection with the transactions described in this
Agreement, and any action taken by Representative under this Agreement will be
binding upon all the Underwriters.
14. Counterparts. This Agreement may be executed in any number of
counterparts each of which shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same Agreement.
15. Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, without regard to principles
of conflicts of laws.
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<PAGE>
If the foregoing is in accordance with the Representative's understanding
of our agreement, kindly sign and return to us a counterpart hereof, whereupon
it will become a binding agreement among the Seller, CITSF and the several
Underwriters in accordance with its terms.
Very truly yours,
THE CIT GROUP SECURITIZATION CORPORATION II
By:________________________________________
Name:
Title:
THE CIT GROUP/SALES FINANCING, INC.
By:_______________________________________
Name:
Title:
The foregoing Underwriting
Agreement is hereby confirmed and
accepted as of the date first above
written:
SALOMON BROTHERS INC
By:____________________________
Name:
Title:
Acting on behalf of itself and as the
Representative of the several
Underwriters.
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<PAGE>
SCHEDULE I
Initial Principal
Amount of
Underwriter Notes
----------- -----------------
Salomon Brothers Inc . . . . . . . . . . . $
. . . . . . . ------------
Total $
============
Initial Principal
Balance of
Underwriter Certificates
----------- -----------------
Salomon Brothers Inc . . . . . . . . . . . $
. . . . . . . ------------
Total $
============
<PAGE>
SCHEDULE II
Locations of Chief Executive Offices and Principal Places of Business
The CIT Group Securitization
Corporation II 650 CIT Drive
Livingston, NJ 07039-0491
The CIT Group/Sales Financing, Inc. 650 CIT Drive
Livingston, NJ 07039-0491
The CIT Group/Consumer Finance,
Inc. (NY) 650 CIT Drive
Livingston, NJ 07039-0491
Locations of Records
The CIT Group Securitization
Corporation II 715 South Metropolitan Avenue
Suite 150
Oklahoma City, OK 73124-0610
The CIT Group/Sales Financing, Inc. 715 South Metropolitan Avenue
Suite 150
Oklahoma City, OK 73124-0610
The CIT Group/Consumer Finance,
Inc. (NY) 715 South Metropolitan Avenue
Suite 150
Oklahoma City, OK 73124-0610
<PAGE>
SCHEDULE III
Original
Principal Class A
Security Amount $ Price % Price $ Rate%
- -------- --------- ------- ------- -------
Notes
Total Price to Public: $
Total Price to Seller: -------------
Underwriting Discounts
and Commissions: $
<PAGE>
SCHEDULE IV
Original Pass-
Principal Through
Security Balance $ Price % Price $ Rate%
- -------- ---------- ------- ------- --------
Certificates
Total Price to Public: $
Total Price to Seller: -------------
Underwriting Discounts
and Commissions: $
