As filed with the Securities and Exchange Commission on October 10, 1997
Registration No. 333-32737/-01/-02
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
Amendment No. 1 to
FORM S-3
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
--------------
CHASE MANHATTAN MARINE OWNER TRUST 1997-A
(Issuer of Notes)
CHASE MANHATTAN BANK THE CHASE MANHATTAN BANK
USA, NATIONAL ASSOCIATION
(Depositors of the Trust described herein)
(Exact name as specified in registrants' charter)
United States New York
(States or other jurisdictions of incorporation)
22-2382028 13-4994650
(I.R.S. employer identification numbers)
802 Delaware Avenue 270 Park Avenue
Wilmington, Delaware 19801 New York, New York 10017
(302) 575-5000 (212) 270-6000
(Address, including zip code, and
telephone number, including area code, of
registrant's Principal Executive Office)
ANDREW T. SEMMELMAN ANTHONY J. HORAN
Secretary Secretary
Chase Manhattan Bank USA, National Association The Chase Manhattan Bank
802 Delaware Avenue 270 Park Avenue
Wilmington, Delaware 19801 New York, New York 10017
(302) 575-5033 (212) 270-7122
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
MARTIN R. JOYCE LAURA PALMA WILLIAM A. GRAY
The Chase Manhattan Bank Simpson Thacher & Bartlett Orrick, Herrington & Sutcliffe LLP
270 Park Avenue 425 Lexington Avenue 666 Fifth Avenue
New York, New York 10017 New York, New York 10017 New York, New York 10103
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement. If any of
the securities being registered on this Form are to be offered pursuant to
dividend or interest reinvestment plans, please check the following box. |_|
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |_|
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. |_|
CALCULATION OF REGISTRATION FEE
====================================================================================================================================
Proposed Maximum Proposed Maximum Amount of
Title of Securities to be Amount to be Aggregate Price Aggregate Registration
Registered(1) Registered Per Unit(2) Offering Price(2) Fee(3)
- ------------------------------------------------------------------------------------------------------------------------------------
Asset-Backed Notes $266,262,029.25 100% $266,262,029.25 $80,685.46
====================================================================================================================================
(1) The Notes are also being registered for the purpose of market making.
(2) Estimated solely for the purpose of calculating the registration fee.
(3) Of which $80,381.46 is paid herewith, and $304 has been previously paid.
The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment that specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, or until the Registration Statement shall thereafter
become effective in accordance on such date as the Commission, acting pursuant
to said Section 8(a), may determine.
================================================================================
M
SUBJECT TO COMPLETION, DATED OCTOBER 10, 1997
PROSPECTUS
$266,262,029.25
CHASE MANHATTAN MARINE OWNER TRUST 1997-A
CLASS A ASSET BACKED NOTES
CLASS B ASSET BACKED NOTES
CLASS C ASSET BACKED NOTES
CHASE MANHATTAN BANK USA, NATIONAL ASSOCIATION
THE CHASE MANHATTAN BANK
SELLERS
THE CIT GROUP/SALES FINANCING, INC.
SERVICER
Chase Manhattan Marine Owner Trust 1997-A (the 'TRUST' or the 'ISSUER'), created
pursuant to an Amended and Restated Trust Agreement, to be dated as of October
1, 1997, among Chase Manhattan Bank USA, National Association, a national
banking association ('CHASE USA'), The Chase Manhattan Bank, a New York banking
corporation ('CHASE,' and together with Chase USA, the 'SELLERS'),
(Continued on following page)
THE NOTES REPRESENT OBLIGATIONS OF THE TRUST ONLY AND DO NOT REPRESENT
OBLIGATIONS OF CHASE MANHATTAN BANK USA, NATIONAL ASSOCIATION, THE CHASE
MANHATTAN BANK, THE CIT GROUP/SALES FINANCING, INC. OR ANY OF THEIR RESPECTIVE
AFFILIATES. NONE OF THE NOTES IS A DEPOSIT AND NONE OF THE NOTES IS INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION (THE 'FDIC'). THE RECEIVABLES ARE NOT
INSURED OR GUARANTEED BY THE FDIC OR ANY OTHER GOVERNMENTAL AGENCY.
THESE NOTES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
----------------
PROSPECTIVE INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE INFORMATION SET
FORTH UNDER THE HEADING 'RISK FACTORS' COMMENCING ON PAGE 11 HEREIN.
----------------
AGGREGATE UNDERWRITING
PRINCIPAL INTEREST FINAL SCHEDULED PRICE TO DISCOUNT AND PROCEEDS TO
AMOUNT RATE(1) DISTRIBUTION DATE PUBLIC(2) COMMISSION SELLERS(3)
--------------- -------- ------------------- --------- ------------ -----------
CLASS A-1 NOTES $ 41,800,000.00 % JANUARY 17, 2000 % % %
CLASS A-2 NOTES $ 55,600,000.00 % MARCH 15, 2002 % % %
CLASS A-3 NOTES $ 50,600,000.00 % JANUARY 17, 2005 % % %
CLASS A-4 NOTES $ 37,300,000.00 % APRIL 16, 2007 % % %
CLASS A-5 NOTES $ 29,300,000.00 % OCTOBER 15, 2009 % % %
CLASS A-6 NOTES $ 23,700,000.00 % APRIL 16, 2012 % % %
CLASS B NOTES $ 10,650,000.00 % AUGUST 15, 2013 % % %
CLASS C NOTES $ 17,312,029.25 % OCTOBER 16, 2017 % % %
TOTAL $266,262,029.25 $ $ $
(1) Plus accrued interest, if any, from the Closing Date.
(2) Before deduction of expenses estimated at $573,000.
----------------
This Prospectus may be used by Chase Securities Inc., an affiliate of each of
the Sellers and a subsidiary of The Chase Manhattan Corporation (the
'CORPORATION'), in connection with offers and sales related to market-making
transactions in the Notes. Chase Securities Inc. may act as principal or agent
in such transactions. Such sales will be made at prices related to prevailing
market prices at the time of sale.
The Notes are being offered by the Underwriters, subject to prior sale, when, as
and if issued to and accepted by the Underwriters, subject to approval of
certain legal matters by counsel for the Underwriters. The Underwriters reserve
the right to reject orders in whole or in part. It is expected that the Notes
will be delivered in book-entry form, on or about October , 1997 (the 'CLOSING
DATE') through the facilities of The Depository Trust Company ('DTC'), Cedel
Bank, societe anonyme ('CEDEL') or the Euroclear System ('EUROCLEAR'), against
payment therefor in immediately available funds.
Underwriters of the Class A Notes
CHASE SECURITIES INC.
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
Underwriter of the Class B Notes and the Class C Notes
CHASE SECURITIES INC.
THE DATE OF THIS PROSPECTUS IS OCTOBER , 1997.
(continued from preceding page)
and Wilmington Trust Company, as Owner Trustee (the 'OWNER TRUSTEE'), will issue
eight classes of Asset Backed Notes (collectively, the 'NOTES') in the
respective aggregate principal amounts set forth on the cover page hereof
pursuant to an indenture (as amended and supplemented from time to time, the
'INDENTURE') to be dated as of October 1, 1997, between the Trust and Norwest
Bank Minnesota, National Association, as indenture trustee (the 'INDENTURE
TRUSTEE'). The Trust will also issue Certificates (the 'CERTIFICATES'), which
will not bear interest but will have certain rights to the monies in the Reserve
Account and certain other excess funds (as described in 'Summary of Terms--
Reserve Account') after the payment of all principal and interest then
due on the Notes. The Certificates will represent fractional undivided
beneficial equity interests in the Trust (the 'CERTIFICATE INTEREST'). The
Certificates are not being offered or sold hereby.
The assets of the Trust will consist of a pool of retail installment sales
contracts and purchase money notes and other notes secured by new and used
boats, boat motors and boat trailers, certain monies received or due thereunder
on and after October 1, 1997 (the 'CUTOFF DATE'), security interests in the
boats, boat motors and boat trailers financed thereby, amounts on deposit in the
Collection Account, the Note Distribution Account, the Paid-Ahead Account and
the Reserve Account and proceeds from claims and other rights to payment on
certain insurance policies, all as more fully described herein. The Notes will
be secured by the assets of the Trust pursuant to the Indenture.
Interest on all classes of Notes will accrue at the fixed per annum
interest rates specified above. Interest on the Notes will generally be payable
on the 15th day of each month (each, a 'DISTRIBUTION DATE'), commencing November
17, 1997. Principal of the Notes will be payable on each Distribution Date to
the extent described herein, except that no principal will be paid on any class
of Notes until all of the Notes with preceding class designations have been paid
in full.
Each class of Notes will be payable in full on the Final Scheduled
Distribution Date with respect to such class specified above. Investors should
be aware that payment in full of a class of Notes could occur earlier than such
dates as described herein. In addition, the Class C Notes will be subject to
prepayment in whole, but not in part, on any Distribution Date on which The CIT
Group/Sales Financing, Inc. ('CITSF'), in its capacity as servicer (in such
capacity, the 'SERVICER'), exercises its option to purchase the Receivables. The
Servicer may purchase all the Receivables on any Distribution Date following the
last day of a Collection Period on which the Pool Balance (as defined herein)
shall have declined to 5% or less of the Cutoff Date Pool Balance (as defined
herein).
The Notes initially will be represented by Notes registered in the name of
Cede & Co. ('CEDE'), the nominee of DTC. The interests of beneficial owners of
the Notes will be represented by book entries on the records of DTC and
participating members thereof (the 'PARTICIPANTS'). Definitive Notes (as defined
herein) will be available only under the limited circumstances described herein.
There currently is no secondary market for the Notes and there is no
assurance that one will develop. The Underwriters expect, but are not obligated,
to make a market in the Notes, and there is no assurance that any such market
will develop or continue.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE NOTES, INCLUDING
OVER-ALLOTMENT TRANSACTIONS, STABILIZING TRANSACTIONS, SYNDICATE COVERING
TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
'UNDERWRITING' HEREIN.
Upon receipt of a request by an investor, or his or her representative,
within the period during which there is a prospectus delivery obligation, the
Underwriters will transmit or cause to be transmitted promptly, without charge
and in addition to any such delivery requirements, a paper copy of this
Prospectus or this Prospectus encoded in an electronic format.
ii
AVAILABLE INFORMATION
The Sellers have filed with the Securities and Exchange Commission (the
'COMMISSION') a Registration Statement (together with all amendments and
exhibits thereto, referred to herein as the 'REGISTRATION STATEMENT') under the
Securities Act of 1933, as amended (the 'SECURITIES ACT'), with respect to the
Notes offered pursuant to this Prospectus. For further information, reference is
made to the Registration Statement and any reports and other documents
incorporated herein by reference as described below under 'Incorporation of
Certain Documents by Reference,' which may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549; and at the Commission's regional offices at Northwestern
Atrium Center, 500 West Madison Street, 14th Floor, Chicago, Illinois 60661 and
Seven World Trade Center, New York, New York 10048. Copies of the Registration
Statement may be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Chase
Manhattan Bank, on behalf of the Trust, will agree to file or cause to be filed
with the Commission such periodic reports as are required under the Securities
Exchange Act of 1934, as amended (the 'EXCHANGE ACT'), and the rules and
regulations of the Commission thereunder. In addition, the Commission maintains
a public access site on the Internet through the World Wide Web, at which site
reports, information statements and other information, including all electronic
filings, regarding the Sellers may be viewed. The Internet address of such World
Wide Web site is http://www.sec.gov.
REPORTS TO NOTEHOLDERS
Unless and until Definitive Notes are issued, unaudited monthly reports and
annual reports containing information concerning the Trust and prepared by the
Servicer will be sent on behalf of the Trust only to Cede, as the nominee of DTC
and the registered holder of the Notes. See 'Certain Information Regarding the
Notes--Book-Entry Registration,' '--Definitive Notes' and '--Reports.' Such
reports will not constitute financial statements prepared in accordance with
United States generally accepted accounting principles or that have been
examined and reported upon by, with an opinion expressed by, an independent
public or certified public accountant. None of the Sellers or the Servicer
intends to send any of its financial reports to Noteholders or to the owners of
beneficial interests in the Notes.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed on behalf of the Trust with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, subsequent to the date of
this Prospectus and prior to the termination of the offering of the Notes, shall
be deemed to be incorporated by reference herein and to be part hereof. Any
statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document that also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Servicer will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of any such person,
a copy of any or all of the documents incorporated herein by reference, except
the exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Requests for such copies should be
directed to the Servicer, Attention: Securitization Department. Telephone
requests for such copies should be directed to the Servicer at (201) 740-5408.
iii
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain of the matters discussed under the captions 'The Receivables Pool--
Delinquencies and Net Losses' and 'Weighted Average Life of the Notes--CPR
Tables' may constitute forward-looking statements within the meaning of Section
7A of the Securities Act, and as such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Receivables to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements.
iv
SUMMARY OF TERMS
This Summary of Terms is qualified in its entirety by reference to the
detailed information appearing elsewhere herein. Certain capitalized terms used
in this Summary are defined elsewhere herein on the pages indicated in the
'Index of Terms.'
Issuer................... Chase Manhattan Marine Owner Trust 1997-A (the 'TRUST'
or the 'ISSUER'), a Delaware business trust created
pursuant to an amended and restated trust agreement
(as amended and supplemented, the 'TRUST AGREEMENT'),
to be dated as of October 1, 1997, among the Sellers
and the Owner Trustee.
Sellers.................. Chase USA and Chase (also referred to herein together
as the 'SELLERS' or the 'BANKS'). None of the Sellers
or any of their affiliates has guaranteed, insured or
is otherwise obligated with respect to the Notes. See
'Risk Factors--Limited Assets; Subordination.'
Servicer................. The CIT Group/Sales Financing, Inc., a Delaware
corporation ('CITSF,' or in such capacity, the
'SERVICER'), a wholly-owned subsidiary of The CIT
Group, Inc., a Delaware corporation ('CIT'). The
Servicer will be responsible for managing,
administering, servicing and making collections on the
Receivables and serving as an administrator of the
Trust. Neither CITSF nor any of its affiliates has
guaranteed, insured or is otherwise obligated with
respect to the Notes. CIT is partially owned by the
Corporation, the parent of each of the Sellers. See
'The CIT Group/Sales Financing, Inc., Servicer'
herein.
Chase Marine Finance..... Prior to the Servicing Transfer, Chase and Chase USA,
each a wholly-owned subsidiary of the Corporation,
together with several of their affiliates, were
engaged in the marine product financing and marine
loan servicing business. As used herein, the term
'CHASE MARINE FINANCE' refers to such business of the
Sellers, their respective predecessors and their
affiliates, and such term does not include what was
the marine product financing and marine loan servicing
business of The Chase Manhattan Bank, National
Association ('CHASE N.A.') or any of its affiliates
prior to the Chase/Chemical Merger. Prior to the
Servicing Transfer, the servicing of Marine Loans by
Chase Marine Finance was performed by Chase Financial
Management Corporation ('CFMC'), an Ohio corporation
headquartered in Cleveland, Ohio and a subsidiary of
Chase USA.
On June 3, 1997, the right to service or subservice
the Marine Loans and certain other loans then serviced
by CFMC was sold to CITSF (such transaction, the
'SERVICING TRANSFER'). CITSF began servicing such
Marine Loans and other loans on August 18, 1997. In
connection with the Servicing Transfer, CITSF agreed
to serve as Servicer under the Sale and Servicing
Agreement. Following the Servicing Transfer, none of
the Sellers and their affiliates (other than CIT and
its affiliates) is financing or servicing Marine
Loans. The
1
documents effecting the Servicing Transfer are
referred to herein as the 'SERVICING TRANSFER
AGREEMENTS.'
Indenture Trustee........ Norwest Bank Minnesota, National Association, a
national banking association, as Indenture Trustee
under the Indenture. The Indenture Trustee's Corporate
Trust Office is located at Norwest Center, Sixth
Street and Marquette Avenue, Minneapolis, Minnesota
55479-0070, telephone (612) 667-8058. The Banks, the
Servicer and their respective affiliates may have
normal banking relationships with the Indenture
Trustee and its affiliates.
Owner Trustee............ Wilmington Trust Company, a Delaware banking
corporation, as trustee under the Trust Agreement (the
'OWNER TRUSTEE'). The Owner Trustee's Corporate Trust
Office is located at Rodney Square North, 1100 North
Market Street, Wilmington, Delaware 19890-0001,
telephone (302) 651-1000. The Banks, the Servicer and
their respective affiliates may have normal banking
relationships with the Owner Trustee and its
affiliates.
The Notes................ Class A-1 % Asset Backed Notes in the aggregate
principal amount of $41,800,000.00 (the 'CLASS A-1
NOTES').
Class A-2 % Asset Backed Notes in the aggregate
principal amount of $55,600,000.00 (the 'CLASS A-2
NOTES').
Class A-3 % Asset Backed Notes in the aggregate
principal amount of $50,600,000.00 (the 'CLASS A-3
NOTES').
Class A-4 % Asset Backed Notes in the aggregate
principal amount of $37,300,000.00 (the 'CLASS A-4
NOTES').
Class A-5 % Asset Backed Notes in the aggregate
principal amount of $29,300,000.00 (the 'CLASS A-5
NOTES').
Class A-6 % Asset Backed Notes in the aggregate
principal amount of $23,700,000.00 (the 'CLASS A-6
NOTES' and, together with the Class A-1 Notes, Class
A-2 Notes, Class A-3 Notes, Class A-4 Notes and Class
A-5 Notes, the 'CLASS A NOTES').
Class B % Asset Backed Notes in the aggregate
principal amount of $10,650,000.00 (the 'CLASS B
NOTES').
Class C % Asset Backed Notes in the aggregate
principal amount of $17,312,029.25 (the 'CLASS C
NOTES').
To the extent described herein, the Class A Notes will
be senior in right of payment to the Class B Notes and
the Class C Notes, and the Class B Notes will be
senior in right of payment to the Class C Notes.
The Notes will be issued by the Trust pursuant to an
Indenture to be dated as of October 1, 1997 (the
'INDENTURE'), between the Trust and the Indenture
Trustee. The Notes will be secured by the assets of
the Trust.
2
The Notes will be available for purchase in book-entry
form only in minimum denominations of $1,000 and
integral multiples thereof. The Noteholders will not
be entitled to receive Definitive Notes, except in the
limited circumstances described herein. Noteholders
may elect to hold their Notes through DTC (in the
United States) or Cedel or Euroclear (in Europe). All
references herein to Noteholders shall reflect the
rights of Noteholders, as such rights may be exercised
through DTC and its Participants (including Cedel and
Euroclear), except as otherwise specified herein. See
'Description of the Notes--General' and 'Certain
Information Regarding the Notes--Book-Entry
Registration' herein.
The Certificates......... The Certificates will represent fractional undivided
beneficial equity interests in the Trust, including
residual interests in amounts in the Reserve Account
(after the payment of all outstanding interest and
principal then due on the Notes) in excess of the
Specified Reserve Account Balance, and will be issued
pursuant to the Trust Agreement. The Certificates are
not being offered or sold hereby. Each Seller (each, a
'CERTIFICATEHOLDER') will initially retain the
Certificates. Chase will retain a portion of 49.40% of
the Certificate Interest and Chase USA will retain
50.60% of the Certificate Interest. The Sellers may
subsequently transfer the Certificates, subject to
certain restrictions.
The Trust................ The Trust is a business trust created under the laws
of Delaware pursuant to the Trust Agreement. The
activities of the Trust are limited by the terms of
the Trust Agreement to acquiring, owning and managing
the Receivables, issuing and making payments on the
Notes and other activities related thereto. The assets
of the Trust will include (i) the Receivables,
including (A) with respect to Simple Interest
Receivables, certain monies received thereunder on and
after the Cutoff Date, and (B) with respect to
Precomputed Receivables, certain monies due thereunder
on and after the Cutoff Date, (ii) such amounts as
from time to time may be held in one or more Trust
Accounts established and maintained pursuant to the
Sale and Servicing Agreement, as described herein,
(iii) security interests in the Financed Boats, (iv)
proceeds from the exercise of any Seller's recourse
rights against Dealers, (v) proceeds from claims and
other rights to payment on certain insurance policies
and (vi) any and all proceeds of the foregoing.
The Receivables.......... The Receivables are marine retail installment sales
contracts and purchase money notes and other notes
secured by new and used boats and motors and trailers
for boats (collectively, the 'FINANCED BOATS'). On the
Closing Date, the Sellers will transfer the
Receivables to the Trust in exchange for the Notes and
Certificates pursuant to a Sale and Servicing
Agreement to be dated as of October 1, 1997 (as
amended and supplemented from time to time, the 'SALE
AND SERVICING AGREEMENT'), among the Trust, the
Sellers and the Servicer. Chase will transfer
Receivables to the Trust having an
3
aggregate Principal Balance of $131,543,761.78 as of
the Cutoff Date, and Chase USA will transfer
Receivables to the Trust having an aggregate Principal
Balance of $134,718,267.47 as of the Cutoff Date. See
'Description of the Transfer and Servicing Agreements'
herein.
The Receivables consist of all of the Marine Loans
owned by the Sellers which met the criteria stated
herein as of the Cutoff Date. No Receivable has a
scheduled maturity that, after giving prospective
effect to any permitted extensions or deferrals, would
be later than September 30, 2017 (the 'FINAL SCHEDULED
MATURITY DATE'). As of the Cutoff Date, the weighted
average remaining maturity of the Receivables was
approximately 140.36 months and the weighted average
original maturity of the Receivables was approximately
188.44 months.
The aggregate Principal Balance of the Receivables as
of the Cutoff Date (the 'CUTOFF DATE POOL BALANCE')
was $266,262,029.25, and the aggregate Principal
Balance of the Receivables as of each of their
respective origination dates (the 'ORIGINAL POOL
BALANCE') was $365,982,443.52.
The 'POOL BALANCE' as of any date will equal the
aggregate Principal Balance of the Receivables as of
the close of business on such date.
Terms of the Notes....... The principal terms of the Notes are described below:
Distribution Dates. Payments of interest on and
principal of the Notes will be made on the 15th day of
each month or, if any such day is not a Business Day,
on the next succeeding Business Day, commencing
November 17, 1997. Payments will be made to holders of
record of the Class A Notes (the 'CLASS A
NOTEHOLDERS'), the holders of record of the Class B
Notes (the 'CLASS B NOTEHOLDERS') and the holders of
record of the Class C Notes (the 'CLASS C NOTEHOLDERS'
and, together with the Class A Noteholders and the
Class B Noteholders, the 'NOTEHOLDERS') as of the day
immediately preceding such Distribution Date or, if
Definitive Notes are issued, as of the last day of the
preceding calendar month (each, a 'RECORD DATE'). A
'BUSINESS DAY' is a day on which banks located in New
York, New York; Oklahoma City, Oklahoma; Wilmington,
Delaware; and Minneapolis, Minnesota are open for the
purpose of conducting a commercial banking business.
Interest Rates. Each class of Notes will bear
interest at the fixed rate per annum specified for
such class on the cover page hereof. The interest rate
for each class of Notes is referred to herein as an
'INTEREST RATE.'
Interest. Interest on the outstanding principal
amount of each class of Notes will accrue at the
applicable Interest Rate from and including the
Closing Date (in the case of the first Distribution
Date) or from and including the most recent
4
Distribution Date on which interest has been paid to
but excluding the following Distribution Date (each,
an 'INTEREST ACCRUAL PERIOD'). Interest on the Class B
Notes and Class C Notes will not be paid on any
Distribution Date until interest on the Class A Notes
for such Distribution Date has been paid in full, and
interest on the Class C Notes will not be paid on any
Distribution Date until interest on the Class B Notes
for such Distribution Date has been paid in full. In
addition, if an Event of Default occurs and the Notes
are accelerated, (i) payments of interest on and
principal of the Class B Notes and the Class C Notes
will not be made until the Class A Notes have been
paid in full and (ii) payments of interest on and
principal of the Class C Notes will not be made until
the Class B Notes have been paid in full. Interest on
the the Notes will be calculated on the basis of a
360-day year consisting of twelve 30-day months.
Interest on the Notes of any class for any
Distribution Date due but not paid on such
Distribution Date will be due on the next Distribution
Date in addition to an amount equal to interest on
such amount at the applicable Interest Rate (to the
extent lawful). See 'Description of the Notes--
Payments of Interest' and 'Description of the Transfer
and Servicing Agreements--Distributions' herein.
Principal. Principal of the Notes will be payable on
each Distribution Date in an amount equal to the
Noteholders' Principal Distributable Amount for such
Distribution Date, to the extent of the Available
Amount remaining after the Servicer has been paid the
Servicer Payment and the Noteholders' Interest
Distributable Amount has been deposited into the Note
Distribution Account. The Noteholders' Principal
Distributable Amount for each Distribution Date will
be calculated by the Servicer in the manner described
under 'Description of the Transfer and Servicing
Agreements--Distributions.'
No principal payments will be made on any class of
Class A Notes until all Class A Notes with preceding
class designations have been paid in full. For
example, no principal payments will be made on the
Class A-2 Notes until the Class A-1 Notes have been
paid in full, and no principal payments will be made
on the Class A-3 Notes until the Class A-2 Notes have
been paid in full. Notwithstanding the foregoing, if
an Event of Default occurs and the Notes are
accelerated, each class of Class A Notes will be paid
pro rata on the basis of their respective unpaid
principal amounts.
No principal will be paid on the Class B Notes or the
Class C Notes until the Class A Notes have been paid
in full, and no principal will be paid on the Class C
Notes until the Class B Notes have been paid in full.
The outstanding principal amount of each class of
Notes, to the extent not previously paid, will be
payable on the Distribution Date specified for such
class on the cover page
5
hereof (each, a 'FINAL SCHEDULED DISTRIBUTION DATE')
from funds available therefor as described herein.
Optional Redemption. After the Class A Notes and the
Class B Notes have been paid in full, the Class C
Notes will be redeemed in whole, but not in part, on
any Distribution Date on which the Servicer exercises
its option to purchase the Receivables, which can
occur following the last day of any Collection Period
as of which the Pool Balance declines to 5% or less of
the Cutoff Date Pool Balance, at a redemption price
equal to the unpaid principal amount of the Class C
Notes plus accrued and unpaid interest thereon. See
'Description of the Notes--Optional Redemption'
herein.
Limited Rights. Except as described herein, if an
Event of Default occurs under the Indenture, (i)
neither the Class B Noteholders nor the Class C
Noteholders will have any right to direct or to
consent to any remedies therefor by the Indenture
Trustee, including the sale of Receivables, until the
Class A Notes have been paid in full and (ii) the
Class C Noteholders will not have any right to direct
or to consent to any remedies therefor by the
Indenture Trustee, including the sale of the
Receivables, until the Class B Notes have been paid in
full. If an Event of Servicing Termination occurs, (i)
neither the Class B Noteholders nor the Class C
Noteholders will have any right to direct or consent
to removal of the Servicer or waiver of any Event of
Servicing Termination until the Class A Notes have
been paid in full and (ii) the Class C Noteholders
will not have any right to direct or consent to
removal of the Servicer or waiver of any Event of
Servicing Termination until the Class B Notes have
been paid in full. See 'Risk Factors--Rights of
Noteholders,' 'Description of the Notes--The Indenture
--Events of Default; Rights upon an Event of Default'
and 'Description of the Transfer and Servicing
Agreements--Rights Upon Event of Servicing
Termination' and '--Waiver of Past Defaults' herein.
Reserve Account.......... The Sellers will establish a reserve account (the
'RESERVE ACCOUNT') in the name of the Indenture
Trustee on behalf of the Noteholders to be pledged by
the Trust to the Indenture Trustee as collateral for
the Notes. The Reserve Account will be funded with an
initial deposit by the Sellers of cash or certain
investments having a value of $11,981,791.32 (4.50% of
the Cutoff Date Pool Balance) (the 'RESERVE ACCOUNT
INITIAL DEPOSIT'). In addition, on each Distribution
Date, any remaining Available Amount with respect to
the preceding calendar month (the 'COLLECTION PERIOD'
with respect to such Distribution Date) after payment
of the Servicing Payment to the Servicer and deposits
into the Note Distribution Account have been made will
be deposited into the Reserve Account. On each
Distribution Date, any amounts on deposit in the
Reserve Account in excess of the Specified Reserve
Account Balance will be distributed to the
Certificateholders in accordance with their respective
Certificate Interests.
6
On or prior to each Deposit Date, the Indenture
Trustee will withdraw funds from the Reserve Account,
to the extent of the funds therein, to the extent (x)
the amounts required to be distributed to the Servicer
and the Noteholders on the related Distribution Date
exceed (y) the Available Amount for such Distribution
Date. Amounts so withdrawn will be deposited into the
Collection Account. If the amount in the Reserve
Account is reduced to zero, the Noteholders will bear
the credit and other risks associated with ownership
of the Receivables, including the risk that the Trust
may not have a perfected security interest in the
Financed Boats. See 'Description of the Transfer and
Servicing Agreements-- Subordination of the Class B
Notes and the Class C Notes; Reserve Account' and
'Certain Legal Aspects of the Receivables' herein.
Specified Reserve Account
Balance................ On any Distribution Date, the specified reserve
account balance (the 'SPECIFIED RESERVE ACCOUNT
BALANCE') will equal 4.50% (8.00% under certain
circumstances described herein) of the Pool Balance as
of the related Settlement Date, but in no event will
be less than the lesser of (i) $5,325,240.59 (2.00% of
the Cutoff Date Pool Balance) and (ii) such Pool
Balance. The Specified Reserve Account Balance with
respect to any Distribution Date may be reduced to a
lesser amount as determined by the Certificateholders,
provided that such reduction does not adversely affect
the rating by a Rating Agency of any class of Notes.
Monthly Advances......... With respect to each Receivable as to which there has
been a Payment Shortfall during the related Collection
Period (other than a Payment Shortfall arising from a
Receivable which has been prepaid in full or which has
been subject to a Relief Act Reduction during the
related Collection Period), on each Deposit Date the
Servicer will be obligated to advance funds in the
amount of such Payment Shortfall (each, a 'MONTHLY
ADVANCE'), but only to the extent that the Servicer,
in its good faith judgment, expects to recover such
Monthly Advance from subsequent payments on such
Receivable made by or on behalf of the obligor
thereunder (the 'OBLIGOR') (but only to the extent of
expected interest collections in the case of a Simple
Interest Receivable) or from Net Liquidation Proceeds
or insurance proceeds with respect to such Receivable.
The Servicer shall be reimbursed for any Monthly
Advance from subsequent collections with respect to
such Receivable. If the Servicer determines in its
good faith judgment that an unreimbursed Monthly
Advance will not ultimately be recoverable from
subsequent collections or that the related Receivable
will be sold pursuant to the Sale and Servicing
Agreement, the Servicer shall be reimbursed for such
Monthly Advance from collections on all Receivables in
accordance with the priority of distributions
described herein. In determining whether a Monthly
Advance is or will be nonrecoverable, the Servicer
need not take into account any
7
amounts it might receive in a deficiency judgment
against an Obligor. The Servicer will not make a
Monthly Advance in respect of (i) the principal
component of any scheduled payment on a Simple
Interest Receivable or (ii) a Payment Shortfall
arising from a Receivable which has been prepaid in
full or which has been subject to a Relief Act
Reduction during the related Collection Period. See
'Description of the Transfer and Servicing
Agreements--Monthly Advances' herein.
'PAYMENT SHORTFALL' means (i) with respect to any
Simple Interest Receivable and any Collection Period,
the excess of (A) the product of (1) one-twelfth of
the Contract Rate of such Receivable and (2) the
outstanding principal amount of such Receivable as of
the related Settlement Date (or, in the case of the
first Collection Period, as of the Cutoff Date) over
(B) the amount of interest, if any, collected on such
Receivable during the related Collection Period and
(ii) with respect to any Precomputed Receivable and
any Collection Period, the excess of (A) the scheduled
payment due on such Precomputed Receivable during the
related Collection Period over (B) the amount with
respect to such payment collected on such Receivable
(including any amounts allocated from the Paid-Ahead
Account with respect to such Collection Period).
Collection Account;
Priority of Payments... The Servicer will be required to remit collections
(including Net Liquidation Proceeds) received with
respect to the Receivables during the related
Collection Period and any other amounts constituting
the Available Amount to an account in the name of the
Indenture Trustee (the 'COLLECTION ACCOUNT') on each
Deposit Date, net of any amounts due or distributable
to the Sellers and the Servicer to the extent
described in 'Description of the Transfer and
Servicing Agreement--Net Deposits' herein (except upon
the occurrence of certain conditions described in
'Description of the Transfer and Servicing Agreement--
Collections' herein). Pursuant to the Sale and
Servicing Agreement, the Servicer will have the
revocable power to instruct the Indenture Trustee or
the Paying Agent to withdraw the Available Amount on
deposit in the Collection Account and to apply such
funds on each Distribution Date to the following (in
the priority indicated): (i) the Servicer Payment (if
not deducted from the Servicer's remittance as
described herein), (ii) the Class A Noteholders'
Interest Distributable Amount, (iii) the Class B
Noteholders' Interest Distributable Amount (except as
described below), (iv) the Class C Noteholders'
Interest Distributable Amount (except as described
below) and (v) the Noteholders' Principal
Distributable Amount.
Notwithstanding the foregoing, if an Event of Default
occurs and the maturity of the Notes is accelerated,
(i) payments of interest on and principal of the Class
B Notes and the Class C Notes will not be paid until
the Class A Notes have been paid in full and (ii)
payments of interest on and principal of the
8
Class C Notes will not be paid until the Class B Notes
have been paid in full.
Paid-Ahead Amounts....... Payments by or on behalf of Obligors on Precomputed
Receivables received during any Collection Period
which do not constitute scheduled payments or full
prepayments ('PAID-AHEAD AMOUNTS') will be retained by
the Servicer and deposited into the Paid-Ahead Account
on the related Deposit Date (except upon the
occurrence of certain events described in 'Description
of the Transfer and Servicing Agreement--Collections'
herein). As of the Cutoff Date, there was $594,187.70
of Paid-Ahead Amounts with respect to the Receivables.
See 'Description of the Transfer and Servicing
Agreements--Paid-Ahead Precomputed Receivables'
herein.
Servicer Payment......... The Servicer will be entitled to receive a servicing
fee, payable on each Distribution Date (the 'SERVICING
FEE'), in an amount equal to the sum of (i)
one-twelfth of the product of 0.50% (the 'SERVICING
FEE RATE') and the Pool Balance as of the close of
business on the last day of the second preceding
Collection Period (the 'SETTLEMENT DATE') and (ii) any
Administrative Fees paid by the Obligors during the
related Collection Period. The 'SERVICER PAYMENT' with
respect to any Distribution Date will be equal to the
sum of the reimbursement then due to the Servicer for
outstanding Monthly Advances and the Servicing Fee for
such Distribution Date (including any unpaid Servicing
Fees for past Distribution Dates). See 'Description of
the Transfer and Servicing Agreements--Servicing
Compensation' and '--Net Deposits' herein.
Administration
Agreements............. Each of CITSF and Chase, in its capacity as an
administrator of the Trust (each, an 'ADMINISTRATOR'),
will enter into an agreement (each, an 'ADMINISTRATION
AGREEMENT') with the Trust and the Indenture Trustee.
Pursuant to each Administration Agreement, each
Administrator will agree to provide certain notices
and to perform certain other administrative functions
required of the Trust pursuant to the Transfer and
Servicing Agreements and specified in such
Administration Agreement as being the responsibility
of such Administrator. See 'Description of the
Transfer and Servicing Agreements--Administration
Agreements' herein.
Certain Federal Income
Tax Considerations..... Upon issuance of the Notes, Simpson Thacher &
Bartlett, special United States federal income tax
counsel to the Sellers, will deliver its opinion
generally to the effect that under current law the
Notes will be characterized as debt, and the Trust
will not be characterized as an association (or a
publicly traded partnership) taxable as a corporation.
Each Noteholder, by the acceptance of a Note, will
agree to treat the Notes as indebtedness. See 'Certain
Federal Income Tax Consequences' herein.
9
ERISA Considerations..... Subject to the considerations described herein under
'ERISA Considerations,' the Notes are eligible for
purchase with Plan Assets of any Plan. A fiduciary or
other person contemplating purchasing the Notes on
behalf of or with Plan Assets of any Plan should
carefully review with its legal advisors whether the
purchase or holding of the Notes could give rise to a
transaction prohibited or not otherwise permissible
under ERISA or Section 4975 of the Code.
Ratings of the Notes..... It is a condition to the issuance of the Notes that
(i) the Class A Notes be rated in the highest
long-term rating category, (ii) the Class B Notes be
rated at least in the 'A' category and (iii) the Class
C Notes be rated at least in the investment grade
category, in each case by Moody's Investors Service, a
division of Dun & Bradstreet ('MOODY'S'), Standard &
Poor's Ratings Services, a division of the McGraw-Hill
Companies ('STANDARD & POOR'S') and Duff & Phelps
Credit Rating Company ('DUFF & PHELPS,' and together
with Moody's and Standard & Poor's, the 'RATING
AGENCIES'). There can be no assurance that any rating
will not be lowered or withdrawn by the related Rating
Agency if, in its judgment, circumstances in the
future so warrant. See 'Risk Factors--Ratings of the
Notes' herein.
10
RISK FACTORS
Investors should consider, among other things, the following risk factors
in connection with any purchase of the Notes.
LIMITED LIQUIDITY
There is currently no secondary market for the Notes offered hereby. The
Underwriters currently intend to make a market in the Notes, but are not under
any obligation to do so. There can be no assurance that a secondary market will
develop or, if a secondary market does develop, that it will provide the
Noteholders with liquidity of investment or that it will continue for the life
of the Notes.
TRUST'S RELATIONSHIP TO THE SELLERS AND THE SERVICER
The Notes represent obligations of the Trust only and do not represent
obligations of, or interests in, either Seller, the Servicer or any of their
respective Affiliates. None of the Sellers or the Servicer is generally
obligated to make any payments in respect of the Notes or the Receivables. See
'Description of the Transfer and Servicing Agreements--Sale and Assignment of
Receivables' herein.
SERVICING
In connection with the Servicing Transfer, the right to service or
subservice the Receivables and all other Marine Loans then serviced by CFMC was
sold to CITSF. CITSF began servicing the Receivables on August 18, 1997. The
Sellers and their affiliates (other than CIT and its affiliates) are no longer
financing or servicing Marine Loans. Although steps were taken and will continue
to be taken to ensure an orderly and efficient transfer of the servicing of the
Receivables to CITSF, the Sellers anticipate a temporary increase in the number
of delinquent Receivables during the first few months following such transfer.
CITSF began originating and servicing retail installment sales contracts
for marine products in January 1993. As of June 30, 1997, CITSF serviced for
itself and others approximately 231,500 contracts, representing an outstanding
balance of approximately $5.9 billion. Of this portfolio, approximately 19,900
contracts (representing an outstanding balance of approximately $500 million)
consisted of marine contracts. CITSF's extensive experience in servicing
consumer financing contracts for manufactured housing and other types of
products may not be in all respects directly applicable to the servicing of
marine contracts and the Receivables in particular.
The Sale and Servicing Agreement provides that if, at the end of any
calendar year or, in the case of 1997, the last three months of 1997, Aggregate
Losses on the Receivables exceed 1.20% of the average of the month-end principal
balances of the Receivables for each month in such calendar year or, in the case
of 1997, partial calendar year, the Servicer may be replaced at the direction of
the Sellers as described herein. There can be no assurance that the replacement
of CITSF as Servicer would not adversely affect the performance of the
Receivables or result in delays in payments on the Notes. See 'Description of
the Transfer and Servicing Agreements--Certain Matters Regarding the Servicer'
herein.
The Servicing Transfer Agreements set forth certain requirements and
restrictions with respect to CITSF's activities as Servicer, including a
restriction on CITSF's ability to make any changes to the servicing policies and
procedures applicable to the Receivables that would have a material effect on
the collectibility of the Receivables without CFMC's consent. These requirements
and restrictions could result in the Servicer's servicing the Receivables from
time to time in accordance with policies and procedures which are materially
different than those it follows with respect to its own serviced portfolio of
marine loans at such time. There can be no assurance that such requirements and
restrictions will not adversely affect the performance of the Receivables. See
'Description of the Transfer and Servicing Agreements--Servicing and Insurance
Procedures' herein.
LIMITED ASSETS; SUBORDINATION
The Trust will not have, nor is it permitted or expected to have, any
significant assets or sources of funds other than the Receivables and the
amounts on deposit in the Reserve Account. Noteholders generally must rely for
repayment upon payments on the Receivables and, if and to the extent
11
available on each Distribution Date to cover shortfalls in distributions of
interest and principal on the Notes, amounts on deposit in the Reserve Account.
However, funds deposited in the Reserve Account are limited in amount, and the
amount required to be maintained on deposit therein will be reduced as the Pool
Balance declines. If the amount on deposit in the Reserve Account is exhausted,
to the extent the subordination of amounts payable to Noteholders is
insufficient, the Trust will depend solely on current distributions on the
Receivables to make payments on the Notes. The Notes will not be insured or
guaranteed by the Sellers, the Servicer, the Owner Trustee, the Indenture
Trustee or any affiliate thereof.
Payments of interest on and principal of the Class B Notes and the Class C
Notes will be subordinated in priority of payment to payments of interest on and
principal of the Class A Notes and payments of interest on and principal of the
Class C Notes will be subordinated in priority of payment to payments of
interest on and principal of the Class B Notes. In addition, if an Event of
Default occurs and the Notes are accelerated, (i) payments of interest on and
principal of the Class B Notes will not be made until the Class A Notes have
been paid in full and (ii) payments of interest on and principal of the Class C
Notes will not be made until the Class B Notes have been paid in full.
RATINGS
It is a condition to the issuance of the Notes that (i) the Class A Notes
be rated in the highest long-term rating category, (ii) the Class B Notes be
rated at least in the 'A' category and (iii) the Class C Notes be rated at least
in the investment grade category, in each case by each Rating Agency. A rating
is not a recommendation to purchase, hold or sell the Notes, inasmuch as such
rating does not comment as to market price or suitability for a particular
investor. The ratings of the Notes address the likelihood of the timely payment
of interest on and ultimate payment of principal of the Notes pursuant to their
terms. There can be no assurance that a rating will remain for any given period
of time or that a rating will not be lowered or withdrawn entirely by the
related Rating Agency if in its judgment circumstances in the future so warrant.
CERTAIN LEGAL ASPECTS
Security Interest in Financed Boats. When originated, each Receivable was
secured by a security interest in the Financed Boat financed thereby. Each such
security interest was required to be perfected under applicable state law and,
in the case of certain Financed Boats eligible for federal documentation, under
applicable federal law. In connection with the sale of the Receivables to the
Trust, each Seller will assign its security interest in each Financed Boat to
the Trust. However, due to administrative burden and expense, none of the
Sellers, the Servicer or the Owner Trustee will amend the certificates of title
or file assignments of the UCC-1 financing statements, if any, with respect to
the Financed Boats to identify the Trust or the Indenture Trustee as the new
secured party nor will any of the Sellers or the Owner Trustee file an
assignment of the Preferred Mortgages with respect to any Financed Boats
documented or to be documented under federal law until after the Closing Date.
See 'Certain Legal Aspects of the Receivables--Security Interests in the
Financed Boats' for a description of those Preferred Mortgages that the Sellers
will be obligated to assign to the Trust subsequent to the Closing Date. In
addition, the certificates of title have not and will not be amended and the
UCC-1 financing statements have not and will not be assigned with respect to the
Financed Boats relating to the Receivables not originated by either Seller to
reflect any interim transfers of ownership of the security interests in such
Financed Boats. Furthermore, those Preferred Mortgages that will not be assigned
to the Trust will not have been previously assigned to reflect any interim
transfers of ownership of the security interests in such Financed Boats. In a
majority of states, the assignment of a Receivable together with the related
security interest is, as a matter of state law, an effective conveyance of such
security interest without amendment of any lien noted on the related certificate
of title or any assignment of any UCC-1 financing statements, and the new owner
of the Receivables succeeds to the original secured party's rights in the
related Financed Boat as against creditors of the Obligor. In certain title
states, in the absence of such certificate of title amendment or assignment of
record to reflect the successive assignments of the security interest in such
Financed Boat, the related Seller (if not the secured party of record), the
Trust and/or the Indenture Trustee may not have a
12
perfected security interest in the related Financed Boat. Under the Ship
Mortgage Statutes, in the absence of an assignment of record of a Preferred
Mortgage, the assignment of the related Receivable by itself will not convey the
perfected preferred mortgage lien on the Financed Boat subject to such Preferred
Mortgage, and neither the related Seller (if not the secured party of record)
nor the Trust will have a perfected preferred mortgage lien on such Financed
Boat.
Each Seller will be obligated to repurchase any Receivable sold by it to
the Trust as to which such Seller has represented that the originator of such
Receivable has a first perfected security interest in the Financed Boat securing
such Receivable, if a breach of such representation shall materially adversely
affect the interest of the Trust in such Receivable. In addition, the Sellers
will be obligated to file assignments of the Designated Preferred Mortgages to
reflect the ultimate assignment of record of such Preferred Mortgages to the
Trust within 120 days of the Closing Date, and each Seller will be obligated to
repurchase any Receivable sold by it to the Trust secured by any such Preferred
Mortgage if, after such 120-day period, the Trust does not have a perfected
preferred mortgage lien on the Financed Boat securing such Receivable, such
failure has a material adverse effect on the interest of the Trust in such
Receivable and such failure continues for 30 days after the related Seller
discovers or receives written notice of such failure. If the Trust does not have
a perfected security interest in a Financed Boat, it will not be effective as
against third parties. In such case, if third party liens equal or exceed the
value of the Financed Boat, the only recourse of the Trust would be against the
related Obligor on an unsecured basis or (if the related originator, or in the
case of those Receivables described above, the Trust, did not have a perfected
security interest in such Financed Boat) against the related Seller pursuant to
its repurchase obligation.
To the extent the Trust's security interest in a Financed Boat is
perfected, the Trust will have a prior claim over subsequent purchasers of such
Financed Boat and holders of subsequently perfected security interests in such
Financed Boat. Under the laws of many states, certain possessory liens for
repairs on a boat and storage, as well as certain rights in favor of federal and
state governmental authorities arising from the use of a boat in connection with
illegal activities, may take priority even over a perfected security interest.
Under the Ship Mortgage Statutes, certain preferred maritime liens will have
priority over security interests in Financed Boats perfected under federal law.
Certain federal tax liens may have priority over the lien of a secured party. In
addition, through fraud or negligence, the Trust could lose its security
interest or the priority of its security interest in a Financed Boat. If a
security interest in a Financed Boat is initially perfected (by titling or a UCC
filing) under applicable state law and the Financed Boat subsequently is
federally documented, the Trust could lose the priority of its security interest
in such Financed Boat to a purchaser thereof or to the holder of a subsequently
perfected Preferred Mortgage covering such Financed Boat. See 'Certain Legal
Aspects of the Receivables--Security Interests in Financed Boats' herein for a
description of Chase Marine Finance's policies on federal documentation. None of
the Sellers or the Servicer will have an obligation to repurchase a Receivable
as to which any of the aforementioned occurrences result in the Trust's losing
the priority of its security interest or its security interest in such Financed
Boat after the date such security interest was conveyed to the Trust (other than
through fraud or negligence of a Seller or the Servicer). See 'Certain Legal
Aspects of the Receivables--Security Interests in Financed Boats' herein.
Foreclosure. Applicable state law may impose requirements and restrictions
on foreclosure sales of boats and on obtaining deficiency judgments following
such sales. Even if the Financed Boat securing a Receivable is successfully
repossessed or arrested and sold, the full amount due on the Receivable may not
be realized because of depreciation, loss of or damage to the Financed Boat and
because the resale value of the Financed Boat may vary significantly due to the
limited market for used boats, seasonal factors and other economic and social
factors.
In sum, the Trust may not realize the full amount due on a Receivable in
the event of default by the Obligor because of the failure to make all necessary
amendments to the certificate of title or the UCC-1 financing statement with
respect to the related Financed Boat or the failure make to all necessary
assignments of record of the Preferred Mortgage, if any, covering such Financed
Boat, as the case may be, or the application of requirements and restrictions on
foreclosure and deficiency judgments,
13
or because of depreciation, damage or loss of or to a Financed Boat, the
application of federal and state bankruptcy and insolvency laws, or other
factors. As a result, the Noteholders may be subject to delays in payments and
losses.
Transfer of Receivables to the Trust. Each of the Sellers intends that the
transfer of the Receivables by it to the Trust under the Sale and Servicing
Agreement constitute a sale. In the event that either Seller were to become
insolvent, the Federal Deposit Insurance Act ('FDIA'), as amended by the
Financial Institutions Reform, Recovery and Enforcement Act of 1989 ('FIRREA'),
sets forth certain powers that the FDIC may exercise if it were appointed
receiver of such Seller. To the extent that a Seller has granted a security
interest in the Receivables transferred by it to the Trust and that interest was
validly perfected before such Seller's insolvency and was not taken in
contemplation of insolvency or with the intent to hinder, delay or defraud such
Seller or its creditors, that security interest would not be subject to
avoidance by the FDIC as receiver of such Seller. Positions taken by the FDIC
staff prior to the passage of FIRREA do not suggest that the FDIC, if appointed
receiver of either Seller, would interfere with the timely transfer to the Trust
of payments collected on the Receivables. If, however, the FDIC were to assert a
contrary position, or were to require the Owner Trustee to establish its rights
to those payments by submitting to and completing the administrative claims
procedure established under the FDIA, or the conservator or receiver were to
request a stay of proceedings with respect to such Seller as provided under the
FDIA, delays in payments on the Notes and possible reductions in the amount of
those payments could occur.
Prior to the Closing Date, 6.28% of the Receivables by Cutoff Date Pool
Balance were sold by Chase Financial Acceptance Corporation, an Ohio corporation
headquartered in Cleveland, Ohio and a wholly-owned subsidiary of Chase USA
('CFAC'), and Chase Financial Holdings, Inc., Ohio corporation headquartered in
Cleveland, Ohio and an affiliate of Chase and Chase USA ('CFHI'), to Chase USA
(collectively, the 'CHASE FINANCIAL RECEIVABLES'). Each of CFAC, CFHI and Chase
USA intends that the transfers of the Chase Financial Receivables to Chase USA
constitute true sales, rather than pledges to secure indebtedness. CFAC and CFHI
will take all actions that are required to perfect Chase USA's ownership
interest in such Receivables by filing UCC-1 financing statements with the
appropriate governmental authorities in the State of Ohio. Notwithstanding the
foregoing, if CFAC or CFHI were to become a debtor under the Bankruptcy Code and
CFAC or CFHI or a creditor or trustee-in-bankruptcy of CFAC or CFHI were to take
the position that the sale of those Chase Financial Receivables transferred by
CFAC or CFHI, as the case may be, to Chase USA should be recharacterized as a
pledge of such Receivables to secure a borrowing of such debtor, then delays in
payments of collections of those Chase Financial Receivables to the Trust could
occur or (should the court rule in favor of any such trustee, debtor or
creditor) reductions in the amount of such payments, or a reduction in the
amount of those Chase Financial Receivables securing such a borrowing, could
result.
The U.S. Court of Appeals for the Tenth Circuit issued its opinion in
Octagon Gas Systems, Inc. v. Rimmer (In re Meridian Reserve, Inc.) (decided May
27, 1993) in which it concluded (noting that its position is in contrast to that
taken by another court) that accounts receivable sold by the debtor prior to the
filing for bankruptcy remain property of the debtor's bankruptcy estate.
Although the Chase Financial Receivables are likely to be viewed as 'chattel
paper,' as defined in the UCC, rather than as accounts, the rationale behind the
Octagon ruling is equally applicable to chattel paper. The circumstances under
which the Octagon ruling would apply are not fully known, and the extent to
which the Octagon decision will be followed in other courts or outside the Tenth
Circuit is not certain. If the holding in the Octagon case were applied in a
bankruptcy of CFAC or CFHI, however, even if the transfers of the Chase
Financial Receivables to Chase USA were treated as sales, the Chase Financial
Receivables transferred by CFAC or CFHI, as the case may be, would be part of
the bankruptcy estate of such debtor and would be subject to claims of certain
creditors and delays and reductions in payments to the Trust and holders of the
Notes, or a reduction in the amount of Receivables supporting the Notes, could
result.
14
GEOGRAPHIC CONCENTRATION OF RECEIVABLES
Based on the Cutoff Date Pool Balance, 21.55%, 11.15%, 10.18%, 8.54% and
4.74% of the Receivables had Obligors (in the case of Receivables originated
without the involvement of Dealers) or were originated by Dealers (in the case
of Receivables originated with the involvement of Dealers) with mailing
addresses in New York, Florida, New Jersey, California and Connecticut,
respectively. Because of the relative lack of geographic diversity, losses on
the Receivables may be more sensitive to the economies of such states than would
be the case if there were more geographic diversification. An economic downturn
in New York, Florida, New Jersey, California or Connecticut may have an adverse
effect on the ability of Obligors in any such state to meet their payment
obligations under the Receivables.
MATURITY AND PREPAYMENT CONSIDERATIONS
The weighted average life of the Notes will generally be influenced by the
rate at which the Principal Balances of the Receivables are paid, which payment
may be in the form of scheduled amortization or prepayments. The Receivables are
prepayable by the Obligors at any time. Prepayments may also result from
Receivables becoming Liquidated Receivables. Any reinvestment risks resulting
from a faster or slower incidence of prepayment of the Receivables will be borne
entirely by the Noteholders. See also 'Description of the Transfer and Servicing
Agreements--Termination' regarding the Servicer's option to purchase the
Receivables.
In addition, the Servicer may, on a case-by-case basis, permit extensions
with respect to the Due Dates of payments on Receivables in accordance with the
Servicing Transfer Agreements and the Sale and Servicing Agreement. See
'Description of the Transfer and Servicing Agreements--Servicing and Insurance
Procedures' herein. Any such deferrals or extensions may increase the weighted
average life of the Notes. However, the Servicer will not be permitted to grant
any such deferral or extension if as a result the final scheduled payment on a
Receivable would fall after the Final Scheduled Maturity Date unless the
Servicer purchases the affected Receivable.
RISK OF COMMINGLING
Under the Sale and Servicing Agreement, for so long as CITSF is the
Servicer and CITSF satisfies certain requirements for making deposits less than
daily, the Servicer will not be required to deposit payments on and proceeds of
the Receivables collected during each Collection Period (including Paid-Ahead
Amounts) into the Collection Account (or the Paid-Ahead Account, in the case of
Paid-Ahead Amounts) until the related Deposit Date. Pending deposit into the
Collection Account (or the Paid-Ahead Account, in the case of Paid-Ahead
Amounts) as provided in the Servicing Transfer Agreements, collections will be
transferred by the Servicer to CFMC and held by CFMC until the Business Day
prior to the Deposit Date. The Servicer is required to make deposits into the
Collection Account (or the Paid-Ahead Account, in the case of Paid-Ahead
Amounts) on the related Deposit Date regardless of whether CFMC returns such
funds to the Servicer. If the Servicer were unable to remit such funds (if, for
example, CFMC fails to return such funds to the Servicer prior to such Deposit
Date and the Servicer does not otherwise have funds available), the Noteholders
might incur a loss. The Sellers or the Servicer may, in order to satisfy the
requirements for making deposits less frequently than daily, obtain a letter of
credit or other security for the benefit of the Trust to secure timely
remittances of collections on the Receivables and payment of the aggregate
Repurchase Amount with respect to Receivables repurchased by a Seller or
purchased by the Servicer. See 'Description of the Transfer and Servicing
Agreements--Collections' herein.
INSURANCE
Each Receivable requires the Obligor to obtain fire, theft and collision
insurance or comprehensive and collision insurance with respect to the related
Financed Boat. Since Obligors may choose their own insurers to provide the
required coverage, the specific terms and conditions of their policies vary.
Prior to August 18, 1997, in the event an obligor under a Marine Loan did not
maintain the required insurance coverage with respect to the related financed
boat and the outstanding balance and months remaining to maturity on such Marine
Loan were greater than $5,000 and 15 months,
15
respectively, CFMC purchased a collateral protection insurance policy on behalf
of such obligor. Although insurance will continue to be required pursuant to the
terms of the Receivables, none of the Sellers or CITSF as Servicer will be
obligated to purchase collateral protection insurance on behalf of any Obligor,
verify if any insurance required under a Receivable is being maintained by any
Obligor or be obligated to pursue any remedies under any Receivable or
applicable law as a result of any failure of an Obligor to maintain any such
insurance. See 'Description of Transfer and Servicing Agreements--Servicing and
Insurance Procedures' herein. As a result of this change in policy, the number
of Financed Boats that are not covered by collateral protection insurance may be
greater than that reflected in the historical performance of the Chase Marine
Finance Portfolio. The term 'CHASE MARINE FINANCE PORTFOLIO' refers to the
portfolio of Marine Loans owned and/or serviced by Chase Marine Finance prior to
the Servicing Transfer (including the Marine Loans sold pursuant to prior
securitizations which CFMC continued to service prior to the Servicing
Transfer).
RIGHTS OF NOTEHOLDERS
The Indenture Trustee will have the power to direct the Owner Trustee to
take certain actions in connection with the administration of the Trust property
until the Notes have been paid in full and the lien of the Indenture has been
released. The Indenture will specifically prohibit the Owner Trustee from taking
any action that would impair the Indenture Trustee's security interest in the
Trust property and will require the Owner Trustee to obtain the consent of the
Indenture Trustee or Noteholders representing not less than a majority of the
aggregate principal amount of the Notes then outstanding before modifying,
amending, supplementing, waiving or terminating any provision of the Sale and
Servicing Agreement. Therefore, until the Notes have been paid in full, the
ability to direct the Trust with respect to certain actions permitted to be
taken under the Sale and Servicing Agreement rests with the Indenture Trustee
and the Noteholders.
If an Event of Default under the Indenture occurs and the Notes are
accelerated, the Indenture Trustee will have the right or will be required in
certain circumstances to exercise remedies as a secured party, including selling
the Receivables, to pay the principal of, and accrued interest on, the Notes.
Except as described herein, upon the occurrence of an Event of Default, (i)
neither the Class B Noteholders nor the Class C Noteholders will have any right
to direct or to consent to any actions by the Indenture Trustee until the Class
A Notes have been paid in full and (ii) the Class C Noteholders will not have
any such rights until the Class B Notes have been paid in full. There is no
assurance that the proceeds of any sale of the Receivables would be equal to or
greater than the aggregate outstanding principal amount of the Notes plus
accrued interest thereon. Because following an Event of Default and acceleration
of the Notes neither interest nor principal is paid to the Class B Noteholders
or the Class C Noteholders until the Class A Notes have been paid in full and
neither interest nor principal is paid to Class C Noteholders until the Class B
Notes have been paid in full, the interests of the Class A Noteholders, the
Class B Noteholders and the Class C Noteholders may conflict, and the exercise
by the Indenture Trustee of its right to sell the Receivables or exercise other
remedies may cause the Class B Noteholders and/or the Class C Noteholders to
suffer a loss of all or part of their investment. See 'Description of the
Notes--The Indenture--Events of Default; Rights upon Event of Default' herein.
In the event that an Event of Servicing Termination occurs, the Indenture
Trustee or Noteholders representing not less than a majority of the aggregate
principal amount of the Controlling Notes then outstanding, as described under
'Description of the Transfer and Servicing Agreements--Rights upon an Event of
Servicing Termination' herein, may remove the Servicer without the consent of
any of the other Noteholders or the Owner Trustee. None of the other Noteholders
will have the ability, with certain specified exceptions, to waive defaults by
the Servicer, including defaults that could materially adversely affect such
Noteholders. See 'Description of the Transfer and Servicing Agreements--Waiver
of Past Defaults' herein.
THE TRUST
GENERAL
The Issuer, Chase Manhattan Marine Owner Trust 1997-A, is a business trust
created for the transaction described herein under the laws of the State of
Delaware pursuant to a Certificate of Trust
16
filed with the Secretary of State of the State of Delaware on July 17, 1997 and
the Trust Agreement. The activities of the Trust are limited by the terms of the
Trust Agreement to (i) acquiring, holding and managing the Receivables and the
other assets of the Trust and proceeds thereof, (ii) issuing the Notes and the
Certificates to finance such assets, (iii) making payments on the Notes and the
Certificates issued by it 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 not acquire any contracts or
assets other than the Trust property described below and will not have any need
for additional capital resources. As the Trust does not have any operating
history and will not engage in any activity other than acquiring and holding the
Receivables, issuing the Notes and Certificates and making distributions
thereon, there has not been included herein any historical or pro forma
financial statements or ratio of earnings to fixed charges with respect to the
Trust. Inasmuch as the Trust has no operating history, it is not possible to
predict the operating performance of the Trust while the Notes and Certificates
are outstanding. While management of each of the Sellers believes that the loss
and delinquency experience contained herein for recent periods are
representative of past performance of Marine Loans in the Chase Marine Finance
Portfolio, there is no assurance that such performance is indicative of the
future performance of the Receivables, since future performance may be impacted
by, among other things, general economic conditions and economic conditions in
the geographical areas in which the Obligors reside including, for example,
unemployment rates, the servicing by CITSF of the Receivables and the lack of
force-placed insurance on uninsured Financed Boats.
The Certificates represent the equity in the Trust. The Notes and the
Certificates will be transferred to the Sellers by the Trust in exchange for the
Receivables pursuant to the Sale and Servicing Agreement.
The Trust property will include a pool (the 'RECEIVABLES POOL') comprised
of marine retail installment sales contracts and purchase money notes and other
notes secured by Financed Boats ('MARINE LOANS') and, except as described
herein, (i) with respect to Simple Interest Receivables, all monies received
thereunder on and after the Cutoff Date and (ii) with respect to Precomputed
Receivables, all monies due thereunder on or after the Cutoff Date (including
any outstanding Paid-Ahead Amounts) (collectively, the 'RECEIVABLES'). The Trust
property will also include: (i) such amounts as from time to time may be held in
one or more Trust Accounts established and maintained pursuant to the Sale and
Servicing Agreement, as described herein; (ii) security interests in the
Financed Boats; (iii) proceeds from the exercise of the Sellers' recourse rights
against Dealers (as described herein under 'The Receivables Pools--Origination
of Marine Loans'); and (iv) proceeds from claims and other rights to payment on
theft and physical damage, credit life and credit disability insurance policies
covering the Financed Boats or the Obligors, as the case may be, to the extent
that such insurance policies relate to the Receivables. The Sale and Servicing
Agreement sets forth criteria that must be satisfied by each Receivable. See
'Description of the Transfer and Servicing Agreements--Sale and Assignment of
Receivables' herein. Each Receivable will be identified in one of the schedules
appearing as exhibits to the Sale and Servicing Agreement. The Trust property
will not include any Administrative Fees incurred by the Obligors prior to
August 18, 1997, any forced-placed insurance premiums that are not included in
the Principal Balances of the related Receivables ('EXCLUDED FORCED-PLACED
INSURANCE PREMIUMS') or any scheduled payments due on the Precomputed
Receivables prior to the Cutoff Date ('EXCLUDED PRECOMPUTED AMOUNTS').
If the protection provided to the Noteholders by the subordination of
amounts payable to other Noteholders and the protection provided by the Reserve
Account is insufficient, the Trust will look only to the Obligors on the
Receivables and the proceeds from the repossession and sale of Financed Boats
that secure Liquidated Receivables to make payments on the Notes. In such event,
certain factors, such as the Trust's not having a first priority perfected
security interest in some of the Financed Boats, may affect the Trust's ability
to realize on the collateral securing the Receivables, and thus may reduce the
proceeds to be distributed to Noteholders. See 'Description of the Transfer and
Servicing Agreements--Distributions,' '--Subordination of the Class B Notes and
the Class C Notes; Reserve Account' and 'Certain Legal Aspects of the
Receivables' herein.
The Trust's principal offices are in Delaware at the address listed below
under '--The Owner Trustee.'
17
CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the Trust as of the
Cutoff Date, exclusive of the Certificates, as if the issuance and sale of the
Notes had taken place on such date:
Class A-1 Notes..... $ 41,800,000.00
Class A-2 Notes..... 55,600,000.00
Class A-3 Notes..... 50,600,000.00
Class A-4 Notes..... 37,300,000.00
Class A-5 Notes..... 29,300,000.00
Class A-6 Notes..... 23,700,000.00
Class B Notes....... 10,650,000.00
Class C Notes....... 17,312,029.25
---------------
Total.......... $266,262,029.25
---------------
---------------
THE OWNER TRUSTEE
Wilmington Trust Company is the Owner Trustee under the Trust Agreement.
Wilmington Trust Company is a Delaware banking corporation and its principal
offices are located at Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001. Each Seller, the Servicer and their respective
affiliates may maintain normal commercial banking relations with the Owner
Trustee and its affiliates.
18
THE RECEIVABLES POOL
GENERAL
The Receivables held by the Trust will consist of all of the Marine Loans
owned by the Sellers meeting several criteria as of the Cutoff Date, including
the criteria stated below. Each Receivable:
(i) has a remaining principal balance of not greater than $600,000;
(ii) is not secured by a Financed Boat in repossession status;
(iii) has not been identified on the computer files of the Servicer as
relating to an Obligor who has filed for bankruptcy;
(iv) is not delinquent for 60 or more days; and
(v) was not originated by Chase N.A. or any of its affiliates prior to
the Chase/Chemical Merger.
Approximately 95.49% of the Cutoff Date Pool Balance were Simple Interest
Receivables and approximately 4.51% of the Cutoff Date Pool Balance were
Precomputed Receivables. Approximately 51.17% of the Cutoff Date Pool Balance
related to New Financed Boats, and approximately 48.83% of the Cutoff Date Pool
Balance related to Used Financed Boats. As used herein, a 'NEW FINANCED BOAT'
means a Financed Boat the model year of which was the year of origination of the
related Receivable or a later year, and a 'USED FINANCED BOAT' means a Financed
Boat the model year of which was earlier than the year of origination of the
related Receivable. There can be no assurance that these definitions accurately
identify all Financed Boats which were new or used at the time the related
Receivables were originated.
Approximately 21.55%, 11.15% 10.18%, 8.54% and 4.74% of the Cutoff Date
Pool Balance were Receivables whose Obligors (in the case of Receivables
originated without the involvement of Dealers) or whose Dealers (in the case of
Receivables originated with the involvement of Dealers) had mailing addresses in
the States of New York, Florida, New Jersey, California or Connecticut,
respectively. Approximately 2.70% of the Cutoff Date Pool Balance were
Receivables delinquent between 30 and 59 days as of the Cutoff Date.
All statistical information with respect to the Receivables set forth in
the following tables is given as of the Cutoff Date.
19
COMPOSITION OF THE RECEIVABLES
WEIGHTED
AVERAGE WEIGHTED AVERAGE
CUTOFF AVERAGE AVERAGE REMAINING
WEIGHTED AVERAGE DATE ORIGINAL ORIGINAL TERM TERM
CONTRACT RATE CUTOFF DATE PRINCIPAL ORIGINAL PRINCIPAL NUMBER OF (RANGE IN (RANGE IN
(RANGE) POOL BALANCE BALANCE POOL BALANCE BALANCE RECEIVABLES MONTHS) MONTHS)
- ----------------- --------------- ---------- --------------- ---------- ----------- ------------- -------------
9.49% $266,262,029.25 $28,428.57 $365,982,443.52 $39,075.64 9,366 188.44 months 140.36 months
(0.00% to 16.00%) (21 to 245) (1 to 237)
DISTRIBUTION BY CONTRACT RATE
PERCENTAGE OF AGGREGATE PERCENTAGE OF
NUMBER OF TOTAL NUMBER OF PRINCIPAL CUTOFF DATE
CONTRACT RATE RANGE RECEIVABLES RECEIVABLES BALANCE POOL BALANCE
- ------------------- ----------- --------------- --------------- -------------
0.00 to 6.99%...... 51 0.54% $ 7,140,077.16 2.68%
7.00 to 7.49%...... 42 0.45 3,261,087.31 1.22
7.50 to 7.99%...... 271 2.89 32,611,870.58 12.25
8.00 to 8.49%...... 240 2.56 24,530,688.75 9.21
8.50 to 8.99%...... 814 8.69 66,144,457.62 24.84
9.00 to 9.49%...... 400 4.27 19,688,425.52 7.39
9.50 to 9.99%...... 1,094 11.68 28,970,651.38 10.88
10.00 to 10.49%.... 644 6.88 10,318,503.36 3.88
10.50 to 10.99%.... 1,532 16.36 24,314,065.95 9.13
11.00 to 11.49%.... 1,006 10.74 14,656,348.76 5.50
11.50 to 11.99%.... 1,259 13.44 16,664,668.27 6.26
12.00 to 12.49%.... 646 6.90 6,322,064.72 2.37
12.50 to 12.99%.... 800 8.54 7,609,423.29 2.86
13.00 to 13.49%.... 302 3.22 2,078,285.27 0.78
13.50 to 13.99%.... 208 2.22 1,520,702.37 0.57
14.00 to 16.50%.... 57 0.61 430,708.94 0.16
----------- --------------- --------------- -------------
Total(1)...... 9,366 100.00% $266,262,029.25 100.00%
----------- --------------- --------------- -------------
----------- --------------- --------------- -------------
- ------------------
(1) Dollar amounts and percentages may not add to the total or to 100.00%,
respectively, due to rounding.
20
GEOGRAPHIC DISTRIBUTION(1)
PERCENTAGE OF AGGREGATE PERCENTAGE OF
NUMBER OF TOTAL NUMBER OF PRINCIPAL CUTOFF DATE
STATE RECEIVABLES RECEIVABLES BALANCE POOL BALANCE
- ----------------------- ----------- --------------- --------------- -------------
Alabama................ 79 0.84% $ 3,025,984.21 1.14%
Arizona................ 67 0.72 2,741,652.28 1.03
Arkansas............... 25 0.27 1,304,625.37 0.49
California............. 350 3.74 22,733,521.44 8.54
Colorado............... 21 0.22 636,227.96 0.24
Connecticut............ 628 6.71 12,630,646.16 4.74
Delaware............... 53 0.57 995,586.35 0.37
District of Columbia... 6 0.06 241,132.83 0.09
Florida................ 806 8.61 29,689,360.80 11.15
Georgia................ 269 2.87 9,893,743.64 3.72
Hawaii................. 3 0.03 43,749.99 0.02
Idaho.................. 3 0.03 44,157.04 0.02
Illinois............... 85 0.91 7,557,010.45 2.84
Indiana................ 24 0.26 1,348,054.69 0.51
Iowa................... 6 0.06 481,660.77 0.18
Kansas................. 15 0.16 1,123,784.77 0.42
Kentucky............... 60 0.64 2,165,210.00 0.81
Louisiana.............. 24 0.26 1,062,435.13 0.40
Maine.................. 42 0.45 569,891.20 0.21
Maryland............... 232 2.48 5,629,922.62 2.11
Massachusetts.......... 273 2.91 9,368,765.01 3.52
Michigan............... 15 0.16 347,100.06 0.13
Minnesota.............. 42 0.45 2,635,860.14 0.99
Mississippi............ 38 0.41 1,849,215.76 0.69
Missouri............... 43 0.46 1,626,713.21 0.61
Montana................ 2 0.02 19,294.70 0.01
Nebraska............... 8 0.09 92,309.92 0.03
Nevada................. 32 0.34 1,049,392.35 0.39
New Hampshire.......... 68 0.73 1,882,587.85 0.71
New Jersey............. 1,183 12.63 27,118,106.44 10.18
New Mexico............. 12 0.13 346,583.50 0.13
New York............... 2,790 29.79 57,367,842.52 21.55
North Carolina......... 442 4.72 7,165,536.75 2.69
North Dakota........... 1 0.01 12,602.96 0.00
Ohio................... 57 0.61 3,333,178.97 1.25
Oklahoma............... 28 0.30 1,848,413.46 0.69
Oregon................. 18 0.19 1,861,470.65 0.70
Pennsylvania........... 387 4.13 9,823,132.95 3.69
Puerto Rico............ 1 0.01 7,456.10 0.00
Rhode Island........... 105 1.12 2,502,583.58 0.94
South Carolina......... 104 1.11 2,236,926.80 0.84
South Dakota........... 1 0.01 15,725.41 0.01
Tennessee.............. 179 1.91 8,227,915.10 3.09
Texas.................. 355 3.79 8,141,014.42 3.06
Utah................... 11 0.12 859,631.33 0.32
Vermont................ 24 0.26 294,788.52 0.11
Virginia............... 264 2.82 6,929,782.44 2.60
Washington............. 24 0.26 2,535,299.39 0.95
West Virginia.......... 30 0.32 394,782.53 0.15
Wisconsin.............. 27 0.29 2,379,487.95 0.89
Other.................. 4 0.04 70,170.78 0.03
----------- ------- --------------- -------------
Total(2)........... 9,366 100.00% $266,262,029.25 100.00%
----------- ------- --------------- -------------
----------- ------- --------------- -------------
- ------------------
(1) Based on the mailing address of the related Obligor (in the case of
Receivables originated without involvement of Dealers) or the Dealer who
originated the Receivable (in the case of Receivables originated with
involvement of Dealers).
(2) Dollar amounts and percentages may not add to the total or to 100.00%,
respectively, due to rounding.
21
DISTRIBUTION BY ORIGINAL TERM(1)
PERCENTAGE OF AGGREGATE PERCENTAGE OF
NUMBER OF TOTAL NUMBER OF PRINCIPAL CUTOFF DATE
ORIGINAL TERM RANGE (MONTHS) RECEIVABLES RECEIVABLES BALANCE POOL BALANCE
- ---------------------------- ----------- --------------- --------------- -------------
13 to 24.................. 1 0.01% $ 2,332.74 0.00%
25 to 36.................. 13 0.14 67,587.42 0.03
37 to 48.................. 39 0.42 123,760.45 0.05
49 to 60.................. 209 2.23 1,750,920.17 0.66
61 to 72.................. 90 0.96 522,268.96 0.20
73 to 84.................. 389 4.15 2,804,524.89 1.05
85 to 96.................. 248 2.65 1,830,292.86 0.69
97 to 108.................. 108 1.15 704,910.99 0.26
109 to 120.................. 2,245 23.97 20,531,344.37 7.71
121 to 132.................. 139 1.48 1,119,058.28 0.42
133 to 144.................. 1,567 16.73 19,601,655.60 7.36
145 to 156.................. 129 1.38 1,395,370.55 0.52
157 to 168.................. 90 0.96 1,802,489.36 0.68
169 to 180.................. 3,324 35.49 125,878,264.55 47.28
181 to 192.................. 131 1.40 2,802,663.10 1.05
193 to 204.................. 2 0.02 98,877.75 0.04
205 to 216.................. 3 0.03 175,106.71 0.07
217 to 228.................. 7 0.07 849,225.20 0.32
229 to 240.................. 625 6.67 83,327,134.61 31.30
Over 240.................... 7 0.07 874,240.69 0.33
----------- --------------- --------------- -------------
Total(2)............... 9,366 100.00% $266,262,029.25 100.00%
----------- --------------- --------------- -------------
----------- --------------- --------------- -------------
- ------------------
(1) 'Original Term' with respect to any Receivable is such Receivable's original
term as of its date of origination.
(2) Dollar amounts and percentages may not add to the total or to 100.00%,
respectively, due to rounding.
22
DISTRIBUTION BY REMAINING TERM(1)
PERCENTAGE OF AGGREGATE PERCENTAGE OF
REMAINING TERM RANGE NUMBER OF TOTAL NUMBER OF PRINCIPAL CUTOFF DATE
(MONTHS) RECEIVABLES RECEIVABLES BALANCE POOL BALANCE
- ---------------------------- ----------- --------------- --------------- -------------
1 to 12.................. 909 9.71% $ 1,468,967.72 0.55%
13 to 24.................. 944 10.08 4,043,922.50 1.52
25 to 36.................. 831 8.87 5,697,860.20 2.14
37 to 48.................. 736 7.86 7,801,710.23 2.93
49 to 60.................. 987 10.54 13,358,136.73 5.02
61 to 72.................. 973 10.39 16,429,320.22 6.17
73 to 84.................. 773 8.25 14,751,451.24 5.54
85 to 96.................. 709 7.57 18,569,744.86 6.97
97 to 108.................. 424 4.53 12,819,115.40 4.81
109 to 120.................. 289 3.09 8,931,543.59 3.35
121 to 132.................. 290 3.10 12,537,219.88 4.71
133 to 144.................. 297 3.17 14,937,718.74 5.61
145 to 156.................. 348 3.72 24,918,928.76 9.36
157 to 168.................. 208 2.22 20,649,129.20 7.76
169 to 180.................. 69 0.74 8,095,077.23 3.04
181 to 192.................. 45 0.48 4,321,973.66 1.62
193 to 204.................. 85 0.91 9,447,116.72 3.55
205 to 216.................. 176 1.88 23,172,722.97 8.70
217 to 228.................. 227 2.42 37,228,275.63 13.98
229 to 240.................. 46 0.49 7,082,093.77 2.66
----------- --------------- --------------- -------------
Total(2)............... 9,366 100.00% $266,262,029.25 100.00%
----------- --------------- --------------- -------------
----------- --------------- --------------- -------------
- ------------------
(1) The 'Remaining Term' with respect to any Receivable is such Receivable's
remaining term as of the Cutoff Date.
(2) Dollar amounts and percentages may not add to the total or to 100.00%,
respectively, due to rounding.
23
DISTRIBUTION BY ORIGINAL PRINCIPAL BALANCE(1)
PERCENTAGE OF AGGREGATE PERCENTAGE OF
ORIGINAL RECEIVABLE NUMBER OF TOTAL NUMBER OF PRINCIPAL CUTOFF DATE
PRINCIPAL BALANCE RANGE RECEIVABLES RECEIVABLES BALANCE POOL BALANCE
- --------------------------------- ----------- --------------- --------------- -------------
$ 1 to less than $ 10,000... 447 4.77% $ 1,381,443.51 0.52%
$ 10,000 to less than $ 20,000... 3,480 37.16 23,059,375.44 8.66
$ 20,000 to less than $ 30,000... 2,223 23.73 32,311,388.15 12.14
$ 30,000 to less than $ 40,000... 992 10.59 21,318,257.41 8.01
$ 40,000 to less than $ 50,000... 456 4.87 13,495,935.30 5.07
$ 50,000 to less than $ 60,000... 315 3.36 12,012,640.81 4.51
$ 60,000 to less than $ 70,000... 247 2.64 11,931,533.82 4.48
$ 70,000 to less than $ 80,000... 169 1.80 9,531,598.27 3.58
$ 80,000 to less than $ 90,000... 127 1.36 8,481,733.58 3.19
$ 90,000 to less than $100,000... 110 1.17 8,899,532.31 3.34
$100,000 to less than $120,000... 237 2.53 21,909,827.73 8.23
$120,000 to less than $140,000... 143 1.53 16,097,969.63 6.05
$140,000 to less than $160,000... 128 1.37 17,315,170.07 6.50
$160,000 to less than $180,000... 70 0.75 10,645,147.66 4.00
$180,000 to less than $200,000... 45 0.48 7,712,883.66 2.90
$200,000 to less than $220,000... 40 0.43 7,391,590.84 2.78
$220,000 to less than $240,000... 16 0.17 3,182,166.85 1.20
$240,000 to less than $260,000... 24 0.26 5,555,970.68 2.09
$260,000 to less than $280,000... 15 0.16 3,810,281.15 1.43
$280,000 to less than $300,000... 10 0.11 2,686,465.32 1.01
$300,000 to less than $320,000... 12 0.13 3,458,783.83 1.30
$320,000 to less than $340,000... 4 0.04 1,259,387.52 0.47
$340,000 to less than $360,000... 13 0.14 4,261,803.74 1.60
$360,000 to less than $380,000... 7 0.07 2,423,774.95 0.91
$380,000 to less than $400,000... 5 0.05 1,863,074.59 0.70
$400,000 to less than $450,000... 13 0.14 4,935,018.37 1.85
$450,000 to less than $500,000... 1 0.01 437,626.69 0.16
$500,000 to less than $550,000... 9 0.10 4,490,900.97 1.69
$550,000 to less than $610,000... 8 0.09 4,400,746.40 1.65
----------- --------------- --------------- -------------
Total(2)......................... 9,366 100.00% $266,262,029.25 100.00%
----------- --------------- --------------- -------------
----------- --------------- --------------- -------------
- ------------------
(1) The 'Original Principal Balance' with respect to any Receivable is its
Principal Balance as of its date of origination.
(2) Dollar amounts and percentages may not add to the total or to 100.00%,
respectively, due to rounding.
24
DISTRIBUTION BY CUTOFF DATE PRINCIPAL BALANCE
PERCENTAGE OF AGGREGATE PERCENTAGE OF
CUTOFF DATE NUMBER OF TOTAL NUMBER OF PRINCIPAL CUTOFF DATE
PRINCIPAL BALANCE RANGE RECEIVABLES RECEIVABLES BALANCE POOL BALANCE
- --------------------------------- ----------- --------------- --------------- -------------
$ 1 to less than $ 10,000... 3,681 39.30% $ 17,528,568.19 6.58%
$ 10,000 to less than $ 20,000... 2,576 27.50 37,116,666.23 13.94
$ 20,000 to less than $ 30,000... 1,111 11.86 26,627,289.91 10.00
$ 30,000 to less than $ 40,000... 443 4.73 15,334,107.32 5.76
$ 40,000 to less than $ 50,000... 249 2.66 11,111,416.55 4.17
$ 50,000 to less than $ 60,000... 190 2.03 10,399,964.28 3.91
$ 60,000 to less than $ 70,000... 145 1.55 9,424,670.05 3.54
$ 70,000 to less than $ 80,000... 123 1.31 9,148,406.99 3.44
$ 80,000 to less than $ 90,000... 106 1.13 8,926,028.79 3.35
$ 90,000 to less than $100,000... 132 1.41 12,541,002.07 4.71
$100,000 to less than $120,000... 160 1.71 17,658,566.40 6.63
$120,000 to less than $140,000... 116 1.24 15,103,437.22 5.67
$140,000 to less than $160,000... 96 1.02 14,254,619.09 5.35
$160,000 to less than $180,000... 57 0.61 9,612,738.19 3.61
$180,000 to less than $200,000... 42 0.45 7,964,771.40 2.99
$200,000 to less than $220,000... 18 0.19 3,732,949.37 1.40
$220,000 to less than $240,000... 12 0.13 2,754,062.42 1.03
$240,000 to less than $260,000... 25 0.27 6,197,407.45 2.33
$260,000 to less than $280,000... 13 0.14 3,492,343.27 1.31
$280,000 to less than $300,000... 11 0.12 3,187,861.84 1.20
$300,000 to less than $320,000... 6 0.06 1,867,226.76 0.70
$320,000 to less than $340,000... 10 0.11 3,289,132.21 1.24
$340,000 to less than $360,000... 11 0.12 3,840,621.28 1.44
$360,000 to less than $380,000... 5 0.05 1,858,745.31 0.70
$380,000 to less than $400,000... 7 0.07 2,719,653.89 1.02
$400,000 to less than $450,000... 4 0.04 1,678,125.40 0.63
$450,000 to less than $500,000... 6 0.06 2,926,639.57 1.10
$500,000 to less than $550,000... 8 0.09 4,215,053.82 1.58
$550,000 to less than $590,000... 3 0.03 1,749,953.98 0.66
----------- --------------- --------------- -------------
Total(1).................... 9,366 100.00% $266,262,029.25 100.00%
----------- --------------- --------------- -------------
----------- --------------- --------------- -------------
- ------------------------
(1) Dollar amounts and percentages may not add to the total or to 100.00%,
respectively, due to rounding.
25
DISTRIBUTION BY AGE
PERCENTAGE OF AGGREGATE PERCENTAGE OF
NUMBER OF TOTAL NUMBER OF PRINCIPAL CUTOFF DATE
MONTHS SINCE ORIGINATION RECEIVABLES RECEIVABLES BALANCE POOL BALANCE
- ------------------------ ----------- --------------- --------------- -------------
0 to 12.............. 204 2.18% $ 22,064,239.96 8.29%
13 to 24.............. 626 6.68 65,408,233.82 24.57
25 to 36.............. 820 8.76 48,659,174.95 18.27
37 to 48.............. 953 10.18 29,970,558.92 11.26
49 to 60.............. 908 9.69 20,712,748.61 7.78
61 to 72.............. 695 7.42 11,995,453.08 4.51
73 to 84.............. 738 7.88 12,142,019.80 4.56
85 to 96.............. 1,133 12.10 19,209,962.66 7.21
97 to 108.............. 1,100 11.74 12,515,463.58 4.70
109 to 120.............. 1,276 13.62 12,275,977.83 4.61
121 to 132.............. 621 6.63 8,207,728.71 3.08
133 to 144.............. 202 2.16 2,042,199.64 0.77
145 to 156.............. 54 0.58 818,841.90 0.31
157 to 168.............. 28 0.30 211,981.76 0.08
169 to 180.............. 8 0.09 27,444.03 0.01
----------- --------------- --------------- -------------
Total(1)........... 9,366 100.00% $266,262,029.25 100.00%
----------- --------------- --------------- -------------
----------- --------------- --------------- -------------
- ------------------------
(1) Dollar amounts and percentages may not add to the total or to 100.00%,
respectively, due to rounding.
26
DISTRIBUTION BY YEAR OF ORIGINATION
PERCENTAGE OF AGGREGATE PERCENTAGE OF
NUMBER OF TOTAL NUMBER OF PRINCIPAL CUTOFF DATE
ORIGINATION YEAR RECEIVABLES RECEIVABLES BALANCE POOL BALANCE
- ---------------- ----------- --------------- --------------- -------------
1982............ 2 0.02% $ 5,731.32 0.00%
1983............ 8 0.09 37,437.37 0.01
1984............ 22 0.23 312,976.29 0.12
1985............ 53 0.57 579,893.08 0.22
1986............ 275 2.94 3,210,660.15 1.21
1987............ 690 7.37 8,852,920.77 3.32
1988............ 1283 13.70 12,743,430.25 4.79
1989............ 1079 11.52 12,546,339.95 4.71
1990............ 1069 11.41 18,802,221.82 7.06
1991............ 717 7.66 11,413,360.66 4.29
1992............ 691 7.38 12,273,285.38 4.61
1993............ 955 10.20 22,005,777.94 8.26
1994............ 1070 11.42 40,086,777.79 15.06
1995............ 787 8.40 50,966,609.74 19.14
1996............ 575 6.14 64,970,123.83 24.40
1997............ 90 0.96 7,454,482.91 2.80
----------- --------------- --------------- -------------
Total(1)... 9,366 100.00% $266,262,029.25 100.00%
----------- --------------- --------------- -------------
----------- --------------- --------------- -------------
- ------------------
(1) Dollar amounts and percentages may not add to the total or to 100.00%,
respectively, due to rounding.
DELINQUENCIES AND NET LOSSES
The following tables set forth information with respect to delinquencies,
loan losses and recoveries for the Chase Marine Finance Portfolio as of the
dates indicated and for each of the one-year periods ended December 31, 1996,
1995, 1994 and 1993 and for each of the six-month periods ended June 30, 1997
and June 30, 1996. The data presented in the following tables are for
illustrative purposes only.
Although steps were taken and will continue to be taken to ensure an
orderly and efficient transfer of the servicing of the Receivables to CITSF in
accordance with the Servicing Transfer, the Sellers anticipate a temporary
increase in the number of delinquent Receivables during the first few months
following such transfer.
The delinquency and loan loss data presented in the following tables
include data with respect to Marine Loans serviced by CFMC and for which, if
necessary, force-placed insurance had been obtained. Since CITSF will not be
obtaining force-placed insurance on the Financed Boats, charge-offs on the
Receivables in future periods may be greater than those experienced by the Chase
Marine Finance Portfolio and reflected in the tables below.
There can be no assurance that the loss and delinquency experience of the
Receivables will be comparable to that of the Chase Marine Finance Portfolio,
particularly since the performance of the Receivables will reflect to a large
extent CITSF's loss and delinquency policies which are different from those of
Chase Marine Finance. See 'The CIT Group/Sales Financing, Inc., Servicer--
CITSF's Servicing Procedures.' In addition, under certain circumstances, CITSF
may be replaced as Servicer. See 'The CIT Group/Sales Financing, Inc.,
Servicer.' Accordingly, the information presented in the tables below should not
be considered as a basis for assessing the likelihood, amount or severity of
delinquency or losses on the Receivables in the future, and no assurances can be
given that the delinquency and loss experience presented in the tables below
will be indicative of such experience of the Receivables.
27
DELINQUENCY EXPERIENCE
AS OF JUNE 30,
---------------------------------------------
1997 1996
--------------------- ---------------------
NUMBER NUMBER
OF OF
DOLLARS LOANS DOLLARS LOANS
------------ ------ ------------ ------
Outstanding Principal
Amount(1) $297,397,000 10,922 $364,235,003 14,221
Delinquencies ($)(2)(3)
30-59 Days $ 6,884,655 404 $ 5,924,694 442
60-89 Days 1,805,666 143 1,605,766 134
90 Days or More 2,427,019 152 1,539,917 94
------------ ------ ------------ ------
TOTAL Delinquencies $ 11,117,340 699 $ 9,070,377 670
Repossession Inventory(4) 1,698,905 46 1,917,895 47
------------ ------ ------------ ------
TOTAL Delinquencies and
Repossession Inventory $ 12,816,245 745 $ 10,988,272 717
------------ ------ ------------ ------
------------ ------ ------------ ------
Delinquencies (%)(2)(3)(5)
30-59 Days 2.31% 3.70 % 1.63% 3.11%
60-89 Days 0.61% 1.31 % 0.44% 0.94%
90 Days or More 0.82% 1.39 % 0.42% 0.66%
------------ ------ ------------ ------
TOTAL Delinquencies(6) 3.74% 6.40 % 2.49% 4.71%
Repossession Inventory(4) 0.57% 0.42 % 0.53% 0.33%
------------ ------ ------------ ------
TOTAL Delinquencies and
Repossession Inventory(4)(6) 4.31% 6.82 % 3.02% 5.04%
------------ ------ ------------ ------
------------ ------ ------------ ------
AS OF DECEMBER 31,
--------------------------------------------------------------------------------------------
1996 1995 1994 1993
--------------------- --------------------- --------------------- --------------------
NUMBER NUMBER NUMBER NUMBER
OF OF OF OF
DOLLARS LOANS DOLLARS LOANS DOLLARS LOANS DOLLARS LOANS
------------ ------ ------------ ------ ------------ ------ ------------ ------
Outstanding Principal
Amount(1) $352,222,000 12,826 $371,133,000 16,188 $374,663,000 19,711 $409,788,000 N/A*
Delinquencies ($)(2)(3)
30-59 Days $ 6,947,158 431 $ 7,980,000 541 $ 6,790,000 576 $ 9,246,000 N/A
60-89 Days 2,301,274 149 1,646,000 123 2,474,000 153 2,597,000 N/A
90 Days or More 2,121,179 135 2,627,000 151 3,101,000 168 4,111,000 N/A
------------ ------ ------------ ------ ------------ ------ ------------ ------
TOTAL Delinquencies $ 11,369,611 715 $ 12,253,000 815 $ 12,365,000 897 $ 15,954,000 N/A
Repossession Inventory(4) 2,888,451 61 3,071,166 92 3,759,237 103 N/A N/A
------------ ------ ------------ ------ ------------ ------ ------------ ------
TOTAL Delinquencies and
Repossession Inventory $ 14,258,062 776 $ 15,324,166 907 $ 16,124,237 1,000 $ 15,954,000 N/A
------------ ------ ------------ ------ ------------ ------ ------------ ------
------------ ------ ------------ ------ ------------ ------ ------------ ------
Delinquencies (%)(2)(3)(5)
30-59 Days 1.97% 3.36 % 2.15% 3.34 % 1.81% 2.92 % 2.26% N/A
60-89 Days 0.65% 1.16 % 0.44% 0.76 % 0.66% 0.78 % 0.63% N/A
90 Days or More 0.60% 1.05 % 0.71% 0.93 % 0.83% 0.85 % 1.00% N/A
------------ ------ ------------ ------ ------------ ------ ------------ ------
TOTAL Delinquencies(6) 3.23% 5.57 % 3.30% 5.03 % 3.30% 4.55 % 3.89% N/A
Repossession Inventory(4) 0.82% 0.48 % 0.83% 0.57 % 1.00% 0.52 % N/A N/A
------------ ------ ------------ ------ ------------ ------ ------------ ------
TOTAL Delinquencies and
Repossession Inventory(4)(6) 4.05% 6.05 % 4.13% 5.60 % 4.30% 5.07 % 3.89% N/A
------------ ------ ------------ ------ ------------ ------ ------------ ------
------------ ------ ------------ ------ ------------ ------ ------------ ------
- ------------------
(1) 'Outstanding Principal Amount' is (i) the sum of all amounts scheduled to be
paid under precomputed Marine Loans, less the unearned finance charges on
such Marine Loans, plus (ii) the sum of the unpaid principal balances on
simple interest Marine Loans (in each case, excluding Marine Loans in
repossession).
(2) The period of delinquency is calculated on a 'Fed' basis, which means that
delinquencies are not reported until the end of the month following 30 days
after a payment is contractually due.
(3) Delinquencies include principal amounts only.
(4) Amounts shown in Repossession Inventory represent the principal balances of
Marine Loans whose related financed boats have been repossessed but have not
been sold.
(5) Historically, Delinquencies as a percent of the Outstanding Principal Amount
as of year-end have been higher than those at the end of any prior quarter
during the related year principally due to year-end seasonal factors.
(6) Percentages representing components of TOTAL Delinquencies and Repossession
Inventory may not add to the totals thereof due to rounding.
*N/A: Data is not available.
28
LOAN LOSS EXPERIENCE
SIX MONTHS ENDED YEAR ENDED
-------------------------- ------------------------------------------------------
JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1996 1995 1994 1993
------------ ------------ ------------ ------------ ------------ ------------
Number of Loans Outstanding (1) 10,922 14,221 12,826 16,188 19,711 N/A*
Portfolio Growth Rate(2) (31.13%) (3.72%) (5.10%) (0.94%) (8.57%) N/A
Period End Outstanding Principal Amount (3) $297,397,000 $364,235,003 $352,222,000 $371,133,000 $374,663,000 $409,788,000
Average Outstanding Principal Amount (4) $327,503,833 $364,388,167 $361,542,000 $370,309,250 $381,636,417 $443,055,750
Number of Repossessions 94 173 282 376 426 N/A
Number of Repossessions as a % of Period
End Number of Loans Outstanding (2) 1.72% 2.43% 2.20% 2.32% 2.16% N/A
Gross Charge-Offs (5) $ 2,664,440 $ 2,350,189 $ 5,373,806 $ 5,985,834 $ 6,662,030 $ 9,599,784
Gross Charge-Offs as a % of Period End
Outstanding Principal Amount (2) 1.79% 1.29% 1.53% 1.61% 1.78% 2.34%
Gross Charge-Offs as a % of Average
Outstanding Principal Amount (2) 1.63% 1.29% 1.49% 1.62% 1.75% 2.17%
Recoveries (6) $ (774,011) $ (1,111,434) $ (1,950,305) $ (1,282,130) $ (1,518,020) $ (1,159,394)
Net Charge-Offs $ 1,890,429 $ 1,238,755 $ 3,423,501 $ 4,703,704 $ 5,144,010 $ 8,440,390
Net Charge-Offs as a % of Period End
Outstanding Principal Amount (2) 1.27% 0.68% 0.97% 1.27% 1.37% 2.06%
Net Charge-Offs as a % of Average
Outstanding Principal Amount (2) 1.15% 0.68% 0.95% 1.27% 1.35% 1.91%
- ------------------
(1) Number of loans at period end.
(2) Percentages for the six-month periods ending June 30, 1996 and June 30,
1997 are annualized.
(3) 'Outstanding Principal Amount' is (i) the sum of all amounts scheduled to
be paid under precomputed Marine Loans, less the unearned finance charges
on such Marine Loans, plus (ii) the sum of the unpaid principal balances on
simple interest Marine Loans (in each case, excluding Marine Loans in
repossession).
(4) Averages were computed by taking a simple average of month-end Outstanding
Principal Amounts for each period presented.
(5) Amount charged-off includes amounts charged to losses at the time of
repossession of the related financed boat or when the loan is otherwise
deemed to be uncollectible plus or minus any subsequent loss or gain,
respectively, recognized at the time of disposition of the related financed
boat. Such amounts exclude related repossession and other liquidation
expenses and amounts subsequently recovered from the obligor.
(6) Recoveries represent any deficiency amounts recovered from obligors,
including proceeds realized in connection with accounts previously
charged-off without repossessing the related financed boat.
*N/A: Data is not available.
29
THE FINANCED BOATS
The Financed Boats consist of cruisers, sailboats, houseboats, boat
trailers, outboard boats and runabouts (together with boat motors and boat
trailers). Cruisers are motor boats that typically range from 25 to 50 feet in
length, and include sleeping and galley accommodations. Sailboats are multi-
person, wind-powered craft that typically range from 27 to 50 feet in length.
Houseboats typically range from 40 to 70 feet in length. Outboard boats
typically range from 12 to 27 feet in length and are equipped primarily for
fishing. Runabouts typically range from 14 to 24 feet in length and are family
pleasure or ski boats.
PAYMENTS ON MARINE LOANS
'SIMPLE INTEREST RECEIVABLES' provide for the allocation of payments made
thereunder to principal and interest in accordance with the 'simple interest'
method. As payments are received under a Simple Interest Receivable, the finance
charges accrued to date are paid first, the unpaid amount financed (to the
extent of the remaining monthly scheduled payment) is paid second and the
remaining payment is applied to the unpaid late charges. Accordingly, if an
Obligor pays the fixed monthly installment in advance of the date on which a
payment is due (the 'DUE DATE'), the portion of the payment allocable to finance
charges for the period since the preceding payment will be less than it would be
if the payment were made on the Due Date, and the portion of the payment
allocable to reduce the amount financed will be correspondingly greater.
Conversely, if the Obligor pays the fixed monthly installment after its Due
Date, the portion of the payment allocable to finance charges for the period
since the last payment will be greater than it would be if the payment were made
on the Due Date, and the portion of the payment allocable to reduce the amount
financed will be correspondingly smaller. When necessary, an adjustment is made
at the maturity of the loan to the scheduled final payment to reflect the larger
or smaller, as the case may be, allocations of payments to the amount financed
under a Simple Interest Receivable as a result of early or late payments, as the
case may be. See 'Weighted Average Life of the Notes--Paid-Ahead Simple Interest
Receivables.'
'PRECOMPUTED RECEIVABLES' consist of Actuarial Receivables and Rule of 78's
Receivables. 'ACTUARIAL RECEIVABLES' provide for amortization of the loan over a
series of fixed level payment monthly installments. Each monthly installment,
including the monthly installment representing the final payment on the
Receivable, consists of an amount of interest equal to 1/12th of the related
Contract Rate multiplied by the unpaid principal balance of the Receivable, and
an amount of principal equal to the remainder of the monthly payment. 'RULE OF
78'S RECEIVABLES' provide for the payment by the related Obligor of a specified
total amount of payments, payable in equal monthly installments on each Due
Date, which total represents the principal amount financed and add-on interest
in an amount calculated based on the Contract Rate for the term of the
Receivable. The rate at which such amount of add-on interest is earned and,
correspondingly, the amount of each fixed monthly payment allocated to reduction
of the outstanding principal are calculated in accordance with the 'RULE OF
78'S.' Substantially all of the Precomputed Receivables are Actuarial
Receivables.
If a Simple Interest Receivable is prepaid, rather than receive a rebate,
the Obligor is required to pay interest only to the date of prepayment. If an
Actuarial Receivable is prepaid in full, with minor variations based upon state
law, the Actuarial Receivable requires that the rebate be calculated on the
basis of a constant interest rate. For purposes of making the calculations
required by the Sale and Servicing Agreement, the Servicer will calculate the
amount of interest paid on a Rule of 78's Receivable in the same manner that it
calculates such amounts on Actuarial Receivables.
CHASE MARINE FINANCE
Prior to the Servicing Transfer, Chase and Chase USA, together with several
of their affiliates, were engaged in the marine product financing and marine
loan servicing business. As used herein, the term Chase Marine Finance refers to
such business of the Sellers, their respective predecessors and their
affiliates. Prior to the Servicing Transfer, marine loan servicing by Chase
Marine Finance was performed by CFMC.
30
Marine Loans originated by Chase Marine Finance prior to mid-1990 were
originated by several affiliates of CFAC and subsequently transferred to CFAC.
On April 1, 1995, those Marine Loans owned by CFAC which at the time were
considered 'low quality assets' under Section 23 of the Federal Reserve Act were
transferred to CFHI. Prior to the Closing Date, 6.26% of the Receivables by
Cutoff Date Pool Balance were sold by CFAC to Chase USA and 0.02% of the
Receivables by Cutoff Date Pool Balance were sold by CFHI to Chase USA.
Since mid-1990, most Marine Loans in the form of retail installment sales
contracts purchased from Dealers ('INDIRECT RECEIVABLES') were originated by
Chase. Commencing on November 1, 1990, most Marine Loans in the form of purchase
money loans or other loans made directly to obligors (including transactions
involving a Dealer) ('DIRECT RECEIVABLES') were originated by Chase USA or its
predecessor. CFAC originated all Receivables whose Obligors (in the case of
Receivables originated without the involvement of Dealers) or Dealers (in the
case of Receivables originated with the involvement of Dealers) were located in
California, all Receivables originated under a particular vendor financing
program and all Receivables having an original principal balance of $25,000 or
less.
In July 1996, Chase N.A. and Chemical Bank, both wholly-owned subsidiaries
of the Corporation, merged, with Chemical Bank, a New York banking corporation,
continuing as the surviving entity under the name 'The Chase Manhattan Bank'
(the 'CHASE/CHEMICAL MERGER'). As survivor of the Chase/Chemical Merger, Chase
succeeded to all right, title and interest in the portfolio of Marine Loans
owned by Chemical Bank.
In connection with the Chase/Chemical Merger, Chemical Bank, N.A. changed
its name to Chase Manhattan Bank USA, N.A. and, on December 1, 1996, merged with
Chase USA, with Chase USA continuing as the surviving entity. As survivor of
this merger, Chase USA succeeded to all right, title and interest in the
portfolio of Marine Loans owned by Chemical Bank, N.A.
The term 'ORIGINATOR' refers to the affiliates of CFAC who originated
Marine Loans prior to mid-1990, CFAC, Chase, Chase USA, and their respective
predecessors.
On June 3, 1997, the right to service or subservice the Marine Loans then
serviced by CFMC was sold to CITSF. CITSF began servicing such Marine Loans on
August 18, 1997. CITSF also agreed to service any Marine Loans retained or
repurchased by either of the Sellers and to serve as Servicer under the Sale and
Servicing Agreement. Following the Servicing Transfer, none of the Sellers or
their affiliates (other than CIT and its affiliates) is financing or servicing
Marine Loans. Pursuant to the Servicing Transfer Agreements, CITSF and its
affiliate, The CIT Group/Consumer Finance, Inc. (NY) '(CITCF-NY'), have agreed
to acquire from the Sellers all Marine Loans which did not satisfy the criteria
for inclusion in the Trust described herein under 'The Receivables Pool--
General.'
ORIGINATION OF MARINE LOANS
In accordance with Chase Marine Finance's underwriting criteria, the
Originators purchased marine retail installment sales contracts relating to new
and used boats and motors and trailers for boats from boat dealers who regularly
originated and sold such contracts to the Originators pursuant to the terms of
approved Dealer Agreements and made purchase money loans secured by financed
boats directly to obligors or pursuant to arrangements with Dealers in
accordance with approved Dealer Agreements. The dealers who arranged the Marine
Loans, unless otherwise specified, are collectively referred to herein as
'DEALERS.' The agreements with the Dealers and the assignments of the Marine
Loans by the Dealers are collectively referred to herein as 'DEALER AGREEMENTS.'
Dealer Agreements were entered into with Dealers based upon a financial review
of each Dealer, and in some cases, the reputation and prior experience of Chase
Marine Finance with such Dealer and its key management. The Dealer network was
serviced by several account executives who initiated and managed the Dealer
relationships.
Almost all of the Receivables are Indirect Receivables and Direct
Receivables originated in accordance with Chase Marine Finance's underwriting
criteria.
The Originators made or purchased the Receivables throughout the United
States. Each Dealer made representations and warranties to the Originator with
respect to those Receivables made with the involvement of such Dealer, the
Obligors on such Receivables and the security interests in the
31
Financed Boats relating thereto, which representations and warranties typically
included, among others, that (i) each Obligor was of legal age and competent to
execute a binding contract at the time of such execution; (ii) the documentation
submitted by the Dealer evidenced a bona fide loan contract actually executed by
the Obligor; (iii) the property securing the loan had not been previously titled
if described as new; (iv) the property securing the loan as described in the
security agreement either had been or promptly was delivered to the purchaser;
(v) the amount represented by the Dealer as having been received from the
Obligor as a down payment was actually received in cash or by property received
in trade and valued at no more than its actual cash value; (vi) the Dealer had
not granted an extension of credit for any portion of the down payment; (vii) no
recoupments, counterclaims, or setoffs existed on the part of the Obligor
against the Dealer; (viii) the Dealer had complied with each and every
applicable federal, state and local law and administrative regulation in
connection with the transaction; (ix) the Dealer had fully performed the terms
of any purchase agreement with the Obligor at the time the Originator funded the
loan; and (x) application had been made for a certificate of title or other
ownership documents in the name of the Obligor with the security interest of the
Originator noted as a lien thereon, to the extent applicable.
Upon breach of any representation or warranty with respect to a Receivable
made by a Dealer, the Trust (or its assignee) will have a right of recourse
against such Dealer to require it to purchase or repurchase such Receivable.
Historically, in determining whether to exercise any right of recourse, Chase
Marine Finance considered the prior performance of the Dealer and other business
and commercial factors. The Servicer will be obligated to enforce such rights
under the Dealer Agreements relating to the Receivables in accordance with its
customary practices, and the right to any proceeds received upon such
enforcement will be conveyed to the Trust pursuant to the Sale and Servicing
Agreement. In accordance with its customary practices in determining whether to
exercise any right of recourse, the Servicer considers the prior performance of
the related Dealer and other business and commercial factors, including its own
commercial relationship with such Dealer. The Sellers will make no
representations as to the financial condition of any Dealer to which any Seller
may have recourse, and there can be no assurance as to the ability of any such
Dealer to perform its obligations under a Dealer Agreement.
As described herein, certain of the Receivables were originated without the
involvement of Dealers. Since there were no Dealers involved in the origination
of these Receivables, no Dealer representations and warranties were made with
respect to them.
In substantially all cases, no Direct Receivable was entered into by the
Originator, and no Indirect Receivable was purchased from a Dealer by the
Originator, until a completed customer file, including the credit application of
the customer, was submitted to the Originator and was reviewed and approved by
one of the Originator's marine finance specialists in accordance with Chase
Marine Finance's underwriting procedures.
Until October 1996, certain aspects of Dealer liaison, Dealer sales, credit
underwriting and documentation reviews with respect to the Receivables
originated with the involvement of Dealers took place at several regional
support offices ('REGIONAL CENTERS'). At August 1995, there were eight Regional
Centers. The Regional Centers were consolidated over time until November 1996,
when all of such activities were centralized at the Regional Center in Mission
Viejo, California (except for some underwriting support functions which took
place in the Regional Center in Tampa, Florida). All origination and
underwriting functions with respect to the Receivables originated without the
involvement of Dealers (except for title and lien processing) were performed by
Chase Marine Finance on a centralized basis in Cleveland, Ohio, including the
funding of the Marine Loans, customer service, document file keeping,
computerized account record keeping and title processing. Several third-party
service providers selected by Chase Marine Finance processed titles and liens
with respect to the Marine Loans (including Preferred Mortgages, when
applicable) on behalf of the Obligors.
UNDERWRITING OF MARINE LOANS
Chase Marine Finance's underwriting procedures were intended to assess the
applicant's ability to repay the amounts due on the Receivable and the adequacy
of the financed boat as collateral. The application, which listed the
liabilities, income and credit and employment history of the applicant, was
32
reviewed by Chase Marine Finance for completeness and compliance with Chase
Marine Finance's guidelines. Chase Marine Finance's guidelines were intended to
provide a basis for lending decisions, but were not meant to supersede the
credit judgment of the marine finance specialist overseeing the application. As
a result, certain Receivables may not comply with all of Chase Marine Finance's
stated guidelines. The discretion granted to a marine finance specialist varied
depending on the proposed loan amount and the applicant's credit. Chase Marine
Finance also reviewed a credit report issued by an independent credit reporting
agency and, where deemed necessary, substantiated information regarding the
applicant's employment. The ability of the applicant to repay the amount
financed was evaluated by applying Chase Marine Finance's then current credit
underwriting criteria, which were intended to provide a general indication based
on the information available to Chase Marine Finance of the relative likelihood
of repayment of such amount. Among the criteria considered in evaluating the
individual applications were (i) stability of the obligor with specific regard
to the obligor's length of residence in the area, occupation, length of
employment and whether the obligor rents or owns his or her home; (ii) the
obligor's payment history with respect to present and past debt based on
information known directly by Chase Marine Finance or as provided by various
credit reporting agencies; (iii) a debt service to gross monthly income ratio
test (Chase Marine Finance's general policy was to reject applications for
Marine Loans whose applicants' debt service to gross monthly income ratios
exceeded 45%, although ratios of up to 55% were allowed if approved at senior
levels); (iv) a loan to value ratio test taking into account the age, type and
market value of the financed boat; and (v) a credit bureau score. Each
application was coded with the relevant marine finance specialist's name, and
Chase Marine Finance tracked the historical performance of the Marine Loans
approved by each marine finance specialist.
Prior to 1994 Chase Marine Finance sought to make Marine Loans secured by a
broad spectrum of marine products. Commencing in 1994, Chase Marine Finance
through its pricing policies targeted obligors purchasing higher priced boats.
See '--The Financed Boats' herein.
Each Receivable arose from a credit sale, refinancing or casual sale of a
new or used boat. In most cases, Chase Marine Finance would not finance a Marine
Loan relating to a new boat if the amount financed under the loan exceeded the
sum of (a) 110% of the manufacturer's invoice price of the boat to the Dealer
(or 115% if the Marine Loan was originated under the vendor financing program
with Genmar Industries, Inc. ('GENMAR') and the amount financed was less than
$25,000), (b) the cost to the Dealer of any options and (c) the cost to the
customer of any warranties, taxes, fees and credit life and disability insurance
and title and license fees (other than federal excise tax). In the case of new
boats, Chase Marine Finance generally required an obligor to make a down payment
of at least 15% of the total purchase price if the amount financed was over
$25,000 and 10% if the amount financed was less than $25,000.
With respect to Marine Loans relating to used boats, while Chase Marine
Finance generally reviewed the sale price of a used boat to determine whether it
was within guidelines acceptable to Chase Marine Finance, the prices of used
boats vary significantly based upon the individual circumstances of the sale.
There can be no assurance that a ready resale market exists for any used boat.
Chase Marine Finance used various national publications, including the National
Automotive Dealers Association ('NADA') Marine Appraisal Guide and the BUC
Guidebook, and individual appraisals to assess the value of a used boat and to
determine whether it met Chase Marine Finance's underwriting criteria. Marine
appraisal surveys were required for Marine Loans relating to used boats where
the amount financed was in excess of $50,000. Generally, Chase Marine Finance
would not finance a Marine Loan relating to a used boat unless the amount
financed under the contract was consistent with such national publications or
Chase Marine Finance's appraisal and, in any case, unless such amount was equal
to or less than 80% of the wholesale value indicated in such national
publications or the appraised value (or 85% if the Marine Loan was originated
under the vendor financing program with Genmar). In the case of used boats,
Chase Marine Finance generally financed Marine Loans on which an Obligor made a
down payment of at least 20% of the amount financed (or 15% if the Marine Loan
was originated under the vendor financing program with Genmar).
In addition, whether a financed boat was new or used, Chase Marine Finance
also financed credit life/accident/health insurance and service warranties under
a Marine Loan.
33
INSURANCE PROCEDURES
Each Receivable requires the Obligor to obtain insurance against loss by
fire, theft, comprehensive and collision or full boat damage with respect to the
related Financed Boat. The Dealer Agreements include a representation and
warranty that each Financed Boat had such insurance at the time of origination
of the Receivable. Since Obligors may choose their own insurers to provide the
required coverage, the specific terms and conditions of their policies vary.
Prior to August 18, 1997, in the event an obligor under a Marine Loan did not
maintain the required insurance coverage with respect to the related financed
boat and the outstanding balance and months remaining to maturity on such Marine
Loan were greater than $5,000 and 15 months, respectively, CFMC purchased a
collateral protection insurance policy on behalf of such obligor. The Principal
Balance of a small percentage of the Receivables will include the outstanding
amount of premiums for collateral protection insurance purchased by CFMC on
behalf of the related Obligors prior to the Cutoff Date. In addition, the
Obligors with respect to a small percentage of the Receivables will be obligated
to make premium payments in respect of collateral protection insurance purchased
by CFMC. Such premium payment obligations will not be included in the Principal
Balance of the related Receivables and will not be the property of the Trust.
Although insurance will continue to be required pursuant to the terms of the
Receivables, none of the Sellers or CITSF as Servicer will purchase collateral
protection insurance on behalf of any Obligor, verify if such insurance is being
maintained by any Obligor or be obligated to pursue any remedies under any
Receivable or applicable law as a result of the failure of any Obligor to
maintain insurance. See 'Description of Transfer and Servicing
Agreements--Servicing and Insurance Procedures' herein.
CHASE AND CHASE USA
Chase, a wholly-owned banking subsidiary of the Corporation, is a New York
banking corporation, a member of the Federal Reserve System and is subject to
the primary supervision of the New York State Department of Banking. Chase's
activities are primarily related to retail and commercial banking. The principal
executive office of Chase is located at 270 Park Avenue, New York, New York
10017 (telephone (212) 270-3000).
At June 30, 1997, Chase's total assets were approximately $278.7 billion,
total liabilities were approximately $261.6 billion and total stockholders'
equity was approximately $17.1 billion.
Chase USA, a wholly-owned subsidiary of the Corporation, is a national
banking association, a member of the Federal Reserve System and is subject to
the primary supervision of the Office of the Comptroller of the Currency. Chase
USA's activities are primarily related to general consumer lending. The
principal executive office of Chase USA is located at 802 Delaware Avenue,
Wilmington, Delaware 19801 (telephone (302) 575-5000).
At June 30, 1997, Chase USA's total assets were approximately $26.6
billion, total liabilities were approximately $23.8 billion and total
stockholders' equity was approximately $2.8 billion.
Neither Chase nor Chase USA is currently originating Marine Loans.
THE CIT GROUP/SALES FINANCING, INC., SERVICER
GENERAL
CITSF, a Delaware corporation, 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 marine products, manufactured housing, recreational vehicles and other
consumer goods throughout the United States (except that CITCF-NY purchases the
contracts originated in New York State). CITSF has a centralized asset service
facility (the 'ASSET SERVICE CENTER') in Oklahoma City, Oklahoma. Working
through dealers and manufacturers, CITSF currently offers retail installment
credit. Working through brokers, CITSF makes direct marine loans to obligors.
CITSF began originating and servicing retail installment sales contracts for
marine products in January 1993.
34
As of June 30, 1997, CITSF serviced approximately 231,500 contracts for
itself and others (consisting primarily of recreational vehicle, home equity,
marine and manufactured housing contracts), representing an outstanding
principal balance of approximately $5.9 billion. Of this portfolio,
approximately 19,900 contracts (representing an outstanding balance of
approximately $500 million) consisted of marine contracts. The foregoing
statistics on CITSF's servicing portfolio do not include the Marine Loans and
other loans serviced by CITSF pursuant to the Servicing Transfer Agreements.
CITSF's extensive experience in servicing consumer financing contracts for
manufactured housing and other types of products may not be in all respects
directly applicable to the servicing of marine contracts and the Receivables in
particular.
The Asset Service Center of CITSF services consumer credit transactions in
50 states and the District of Columbia. It provides full servicing for
recreational vehicle, home equity, marine products and manufactured housing
retail installment contracts and direct loans. The Asset Service Center is
supplemented by outside collectors and field remarketers located throughout the
United States.
CIT, a Delaware corporation, is a leading diversified finance organization
offering secured commercial and consumer financing primarily in the United
States to smaller, middle-market and larger businesses and to individuals
through a nationwide distribution network. CIT's predecessor commenced
operations in 1908. CIT has developed a broad array of franchise and strategic
business units that focus on specific industries, asset types and markets
which are balanced by client, industry and geographic diversification.
The Dai-Ichi Kangyo Bank, Limited ('DKB') owns eighty percent (80%) of the
issued and outstanding shares of common stock of CIT. DKB purchased a sixty
percent (60%) common stock interest in CIT from Manufacturers Hanover
Corporation ('MHC') (a predecessor of the Corporation) at year-end 1989 and
acquired an additional twenty percent (20%) common stock interest in CIT on
December 15, 1995 from CBC Holding (Delaware) Inc., a wholly-owned subsidiary of
the Corporation (formerly known as MHC Holdings (Delaware) Inc.) ('CBC
HOLDING'). DKB has an option, expiring December 15, 2000, to purchase the
remaining twenty percent (20%) common stock interest in CIT from CBC Holding.
On September 26, 1997, CIT changed its name to The CIT Group, Inc. and
filed a registration statement with the Commission for an initial public
offering of 20% of its common stock. The proceeds of that offering will be used
to fund CIT's acquisition of DKB's option to purchase CBC Holding's 20% common
stock interest in CIT and the exercise of such option. Following consummation of
such offering, DKB will continue to hold its present investment in CIT.
In accordance with a stockholders agreement among DKB, the Corporation, as
direct successor to CBC and indirect successor to MHC, and CIT, dated as of
December 29, 1989, as amended by an Amendment to Stockholders' Agreement, dated
December 15, 1995 (as amended, the 'STOCKHOLDERS AGREEMENT'), one nominee of the
Board of Directors of CIT is designated by the Corporation. The Stockholders
Agreement also contains restrictions with respect to the transfer of the stock
of CIT to third parties.
ASSET SERVICE CENTER
Through its Asset Service Center, CITSF services marine, recreational
vehicle, manufactured housing, home equity, and other consumer loans. CITSF
services all of the marine loans it and CITCF-NY originates or purchases (except
those sold to third parties on a servicing released basis). CITSF is actively
seeking arrangements pursuant to which it will service marine loans held by
other entities, such as the Receivables. Generally, such servicing
responsibilities are, and would be, also carried out through the Asset Service
Center. Servicing responsibilities include collecting principal and interest
payments, taxes, insurance premiums, where applicable, and other payments from
obligors
35
and remitting principal and interest payments to the holders of such loans to
the extent such holders are entitled thereto. Collections procedures include
repossession and resale of boats securing defaulted loans and, if deemed
advisable by CITSF, entering into workout arrangements with obligors under
certain defaulted loans. Although decisions as to whether to repossess any boat
are made on an individual discretionary basis, CITSF's general policy is to
institute repossession procedures promptly after Asset Service Center personnel
determine that it is unlikely that a defaulted loan will be brought current or
that the related financed boat is at risk, and thereafter to diligently pursue
the resale of such boat if the market is favorable.
CITSF'S SERVICING PROCEDURES
Collection activities with respect to delinquent Receivables will be
performed by the Servicer or its affiliates consistent with the Servicer's
servicing policies and practices in effect from time to time with respect to
marine loans that it services for its own account (except as set forth in the
Servicing Transfer Agreements and described herein). CITSF may change such
policies and practices, provided, that any such change applicable to the
Receivables that would have a material effect on the collectibility of the
Receivables may not be made without CFMC's consent. Collection activities
include prompt investigation and evaluation of the causes of any delinquency. An
obligor is deemed current if an amount equal to no more than $65 of a scheduled
monthly payment remains unpaid.
An automated collection system, together with manual collectors, are
utilized to assist in collection efforts. The automated collection system
provides relevant obligor information (for example, current addresses, phone
numbers and loan information), records of all contacts with obligors and, in
some cases, performs automated dialing. The system also records an obligor's
promise to pay and allows supervisor review of collection personnel activity,
permits supervisors to modify priorities as to which obligors should be
contacted and provides extensive reports concerning marine loan delinquencies.
The Servicer may attempt to collect delinquent payments by sending letters or
making continued phone calls to obligors. In the event that contact by telephone
can not be made within 10 days of the due date of a payment, a manual review of
the marine loan is made to determine the appropriate course of action, which may
be continued phone calls and/or sending of letters. Pursuant to the Servicing
Transfer Agreements, CITSF has agreed to attempt to make such contacts with
Obligors of delinquent Receivables at specified time intervals. See 'Description
of the Transfer and Servicing Agreements--Servicing and Insurance Procedures'
herein. Generally, after a marine loan continues to be delinquent for more than
30 days (regardless of whether contact had been made), such marine loan is
assigned to a specific 'late stage' collector until resolution. A field visit
may be scheduled at this time. The Servicer has agreed to employ the same means
to cure delinquencies on the Receivables as it does for marine loans it services
for itself, including deferments and reschedulings, except as set forth in the
Servicing Transfer Agreements. CITSF may change such means in accordance with
its business judgment; provided, that any such change applicable to the
Receivables that would have a material effect on the collectibility of the
Receivables may not be made without CFMC's consent.
Chase Marine Finance's collection procedures were substantially the same as
those of CITSF, although CITSF's individual collectors have more discretion than
Chase Marine Finance's individual collectors had in determining what actions are
appropriate at different stages of delinquency. In addition, Chase Marine
Finance's collection procedures at the initial stages of delinquency used a
combination of automatic dialing and letters and Chase Marine Finance
customarily assigned a delinquent account to a specific late stage collector at
26 days delinquent (with field visits scheduled if appropriate at 60 days
delinquent).
CITSF implements repossession procedures when it is evident to it that the
obligor can no longer make payment on the marine loan or if the related financed
boat is at risk. Repossessions are generally conducted by third parties who are
engaged in the business of repossessing boats for secured parties. After
repossession, the obligor generally has 10 to 30 days to redeem the boat before
the boat is resold. CITSF uses site auctions, pool auctions, individual bids,
brokers, retail sale outlets, newspaper advertisements and telemarketing for
asset remarketing. Decisions on the remarketing
36
method are made by an internal remarketer based upon recommendations from field
personnel. CITSF will typically send a boat to auction before attempting a
retail sale.
Losses may occur in connection with delinquent marine loans and can arise
in several ways, including the inability to locate the boat or the obligor,
because of a discharge of the obligor in a bankruptcy proceeding, or because of
depreciation of the related financed boat. The Sale and Servicing Agreement will
provide that a Receivable will be deemed to be a Liquidated Receivable upon the
earlier of becoming 120 days past due and the Servicer's determination to
charge-off such Receivable. Charged-off receivables are routed to a recovery
collector who, as appropriate, may assign the loan to a collection agency or an
attorney, and any deficiency remaining will be pursued to the extent deemed
practical and to the extent permitted by law and the Servicing Transfer
Agreements. The loss recognition and collection policies and practices of the
Servicer may change over time in accordance with CITSF's business judgment;
provided, that any such change applicable to the Receivables that would have a
material effect on the collectibility of the Receivables may not be made without
CFMC's consent. Under Chase Marine Finance's loss recognition policies, losses
on Marine Loans were recognized upon repossession of the related financed boat
and all Marine Loans were required to be charged off no later than when 240 days
past due.
CITSF may, on a case-by-case basis, permit extensions with respect to the
Due Dates of payments on Receivables and other modifications of Receivables in
accordance with its normal and customary servicing practices and procedures, as
described more fully in 'Description of the Transfer and Servicing Agreements--
Modification of Receivables' herein. The extension policies of CITSF may be
changed over time in accordance with CITSF's business judgment, provided, that
any such change applicable to the Receivables that would have a material effect
on the collectibility of the Receivables may not be made without CFMC's consent.
USE OF PROCEEDS
As consideration for the transfer of the Receivables to the Trust, the
Trust will issue the Notes and the Certificates to the Sellers, with (i) Chase
receiving 49.40% of the original principal amount of each class of Notes and the
original Certificate Interest and (ii) Chase USA receiving 50.60% of the
original principal amount of each class of Notes and the original Certificate
Interest. After the deposit of the Reserve Account Initial Deposit and the
deduction of estimated expenses, the net proceeds to be received by the Sellers
from the sale of the Notes will be added to their respective general funds.
WEIGHTED AVERAGE LIFE OF THE NOTES
GENERAL
The weighted average life of the Notes will generally be influenced by the
rate at which the principal balances of the Receivables are paid, which payment
may be in the form of scheduled amortization or prepayments. For this purpose,
the term 'PREPAYMENTS' includes prepayments in full, partial prepayments,
liquidations due to default, as well as receipts of proceeds from theft and
physical damage, credit life and credit disability insurance policies covering
the Financed Boats and amounts received in connection with certain other
Receivables repurchased by a Seller or purchased by the Servicer for
administrative reasons. The Receivables are prepayable by the Obligors at any
time.
The rate of prepayments on the Receivables may be influenced by a variety
of economic, social and other factors, including the fact that an Obligor may
not sell or transfer the Financed Boat securing a Receivable without the
Servicer's consent. The rate of prepayment of the Receivables may also be
influenced by programs offered by lenders (including the Sellers, the Servicer
and their respective affiliates) that solicit or make available credit that may
be used by Obligors to prepay the Receivables. Such credit includes but is not
limited to home equity lines of credit, consumer installment credit and credit
cards offered by lenders (including the Sellers, the Servicer and their
respective affiliates). The Sellers, the Servicer and their respective
affiliates may, in the ordinary course of business, offer general or targeted
solicitations for such extensions of credit, and such solicitations may be sent,
to
37
Obligors. In addition, the Sale and Servicing Agreement permits the Servicer to
refinance an existing Receivable for an Obligor, so long as the proceeds of such
refinanced loan would be used to prepay such existing Receivable in full and any
such refinanced loan is evidenced by a new promissory note. Any such loan thus
created by a refinancing would not be the property of the Trust. See
'Description of the Transfer and Servicing Agreements--Termination' herein
regarding the Servicer's option to purchase the Receivables from the Trust. In
addition, each Seller will be obligated to repurchase any Receivable secured by
a Designated Preferred Mortgage transferred by such Seller to the Trust if, by
the 120th day after the Closing Date, the Trust does not have a perfected
preferred mortgage lien on the Financed Boat securing such Receivable, such
failure has a material adverse effect on the interest of the Trust in such
Receivable and such failure continues for 30 days after such Seller discovers or
receives written notice of such failure. See 'Certain Legal Aspects--Security
Interests in Financed Boats.'
In light of the above considerations, there can be no assurance as to the
amount of principal payments to be made on the Notes on each Distribution Date
since such amount will depend, in part, on the amount of principal collected on
the Receivables Pool during the applicable Collection Period. Any reinvestment
risks resulting from a faster or slower incidence of prepayment of Receivables
will be borne entirely by the Noteholders.
No principal payments will be made on any class of Class A Notes until all
Class A Notes with preceding class designations have been paid in full. For
example, no principal payments will be made on the Class A-2 Notes until the
Class A-1 Notes have been paid in full, and no principal payments will be made
on the Class A-3 Notes until the Class A-2 Notes have been paid in full. In
addition, no principal payments will be made on the Class B Notes until the
Class A Notes have been paid in full, and no principal payments will be made on
the Class C Notes until the Class B Notes have been paid in full. See
'Description of the Notes--Payments of Principal' herein. As the rate of payment
of principal of each class of Notes depends primarily on the rate of payment
(including prepayments) of the Principal Balances of the Receivables, final
payment of any class of the Notes could occur significantly earlier than their
respective Final Scheduled Distribution Dates. It is expected that final payment
of the Notes of each class will occur on or prior to the related Final Scheduled
Distribution Date. However, if sufficient funds are not available to pay the
Notes of any class in full on or prior to the related Final Scheduled
Distribution Date, final payment of such Notes could occur later than such date.
Noteholders will bear the risk of being able to reinvest principal payments of
the Notes at yields at least equal to the related Interest Rate.
With respect to the Receivables that are Simple Interest Receivables and,
to the extent that payments of the fixed monthly installments thereunder are
received prior to the scheduled due dates for such installments, the portions of
such installments allocable to interest will be less that they would be if the
payments were received as scheduled. If the Reserve Account is exhausted and
losses on the Receivables occur, the amount of interest distributed to the
Noteholders may be less than described above.
If an Event of Default occurs and the Notes are accelerated, (i) payments
of interest on and principal of the Class B Notes and the Class C Notes will not
be paid until the Class A Notes have been paid in full and (ii) payments of
interest on and principal of the Class C Notes will not be paid until the Class
B Notes have been paid in full.
Subject to the conditions set forth herein under the heading 'Description
of the Transfer and Servicing Agreements--Servicing and Insurance Procedures,'
the Servicer may reschedule the Due Date of any scheduled payment. Any such
deferrals will have the effect of increasing the weighted average life of the
Notes. However, the Servicer will not be permitted to grant any such deferral or
extension if, as a result, the final scheduled payment on a Receivable would
fall after the Final Scheduled Maturity Date, unless the Servicer purchases such
Receivable.
38
PAID-AHEAD RECEIVABLES
If an Obligor with respect to any Simple Interest Receivable, in addition
to making his or her regularly scheduled payment, makes one or more additional
scheduled payments in any Collection Period (for example, because the Obligor
intends to be on vacation the following month), the additional scheduled
payments made in such Collection Period will be treated as a principal
prepayment and applied to reduce the principal balance of the related Receivable
in such Collection Period and, unless otherwise requested by the Obligor, the
Obligor will not be required to make any scheduled payment in respect of such
Receivable (a 'PAID-AHEAD SIMPLE INTEREST RECEIVABLE') 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 such Paid-Ahead Simple Interest Receivable,
as reduced by the application of the additional scheduled payments made in the
Collection Period in which such Receivable was paid-ahead. The Obligor's
Receivable will not be considered delinquent during the Paid-Ahead Period. A
Payment Shortfall with respect to a Paid-Ahead Simple Interest Receivable will
exist during each Collection Period occurring during the Paid-Ahead Period, and
the Servicer may be required to make a Monthly Advance in respect of such
Payment Shortfall, as described under 'Description of the Transfer and Servicing
Agreements--Monthly Advances' herein; provided, that no Monthly Advances will be
made in respect of principal of a Paid-Ahead Simple Interest Receivable.
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 Paid-Ahead Simple Interest Receivable 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 Paid-Ahead Simple Interest Receivable. Depending on
the Principal Balance and the Contract Rate of the related Receivable, and on
the number of payments that were paid-ahead, there may be extended periods of
time during which Receivables that are current are not amortizing.
Paid-Ahead Simple Interest Receivables will affect the weighted average
life of the Notes. The distribution of the paid-ahead amount on the Distribution
Date following the Collection Period in which such amount was received will
generally shorten the weighted average life of the Notes. In addition, to the
extent the Servicer makes Monthly Advances with respect to a Paid-Ahead Simple
Interest Receivable which subsequently goes into default, because liquidation
proceeds with respect to such Receivable will be applied first to reimburse the
Servicer for such Monthly Advances, the loss with respect to such Receivable may
be larger than would have been the case had such Monthly Advances not been made.
As of the Cutoff Date, approximately 28% of the number of Receivables were
Paid-Ahead Simple Interest Receivables with at least one scheduled monthly
payment having been paid-ahead. The Chase Marine Finance Portfolio has
historically included Marine Loans which have been paid-ahead by one or more
scheduled monthly payments. There can be no assurance as to the number of
Receivables which may become Paid-Ahead Simple Interest Receivables or the
number or the principal amount of the scheduled payments which may be
paid-ahead.
If an Obligor with respect to any Precomputed Receivable, in addition to
making his or her regularly scheduled payment, makes one or more additional
scheduled payments in any Collection Period for similar reasons (such Receivable
being a 'PAID-AHEAD PRECOMPUTED RECEIVABLE'), the Paid-Ahead Amounts will be
deposited into an account in the name of the Indenture Trustee (the 'PAID-AHEAD
ACCOUNT') or the Collection Account and applied on subsequent Deposit Dates as
described herein under 'Description of the Transfer and Servicing
Agreements-Paid-Ahead Precomputed Receivables.' Because Paid-Ahead Amounts on
Paid-Ahead Precomputed Receivables are not deposited into the Collection Account
and distributed to Noteholders until the Deposit Date and Distribution Date,
respectively, related to the Collection Period during which any such scheduled
payment was due, no shortfalls of interest or principal will result therefrom.
Chase Marine Finance maintains certain records of the historical prepayment
experience of the Chase Marine Finance Portfolio. The Sellers believe that such
records are not adequate to provide
39
meaningful information with respect to the Receivables. In any event, no
assurance can be given that prepayments on the Receivables would conform to any
historical experience, and no prediction can be made as to the actual prepayment
experience to be expected with respect to the Receivables.
CPR TABLES
Prepayments on Marine Loans can be measured relative to a prepayment
standard or model. The model used in this Prospectus is based on a constant
prepayment rate ('CPR'). CPR is determined by the percentage of principal
outstanding at the beginning of a period that prepays during that period, stated
as an annualized rate. The CPR prepayment model, like any prepayment model, does
not purport to be either an historical description of prepayment experience or a
prediction of the anticipated rate of prepayment.
The tables captioned 'Percent of Initial Note Principal Balance at Various
CPR Percentages' (each, a 'CPR TABLE') have been prepared on the basis of the
characteristics of the Receivables. Each CPR Table assumes that (a) the
Receivables prepay in full at the specified monthly CPR, with no defaults,
losses or repurchases, (b) each scheduled monthly payment on the Receivables is
made on the last day of each month and each month has 30 days, (c) payments on
the Notes are made on each Distribution Date (and each such date is assumed to
be the 15th day of each applicable month), (d) the balance in the Reserve
Account on each Distribution Date is equal to the Specified Reserve Account
Balance, and (e) the Servicer does not exercise its option to purchase the
Receivables. The Receivables Pool has an assumed cutoff date of the Cutoff Date.
The CPR Tables indicate the projected weighted average life of each class of
Notes and set forth the percent of the initial principal amount of each class of
Notes that is projected to be outstanding after each of the Distribution Dates
or each October 15, as indicated, at various CPR percentages.
The tables also assume that the Receivables have been aggregated into five
hypothetical pools with all of the Receivables within each such pool having the
following characteristics:
WEIGHTED
AVERAGE WEIGHTED
AGGREGATE WEIGHTED ORIGINAL AVERAGE
PRINCIPAL AVERAGE TERM IN REMAINING
POOL BALANCE CONTRACT RATE MONTHS TERM IN MONTHS
- ------ --------------- ------------- -------- --------------
1..... $ 63,551,368.84 11.08% 147 57
2..... $ 52,857,623.73 10.13% 167 106
3..... $ 60,505,776.70 8.80% 181 152
4..... $ 45,036,890.58 8.73% 230 200
5..... $ 44,310,369.40 8.18% 240 224
---------------
$266,262,029.25
The information included in the following tables represents forward-looking
statements and involves risks and uncertainties that could cause actual results
to differ materially from those in the forward-looking statements. The actual
characteristics and performance of the Receivables will differ from the
assumptions used in constructing each CPR 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 Receivables will prepay at a constant
level of prepayment until maturity or that all of the Receivables will prepay at
the same level of CPR. Moreover, the diverse terms of the Receivables within
each of the five hypothetical pools could produce slower or faster principal
distributions than indicated in each CPR Table at the various constant
percentages of CPR specified, even if the original and remaining terms to
maturity of the Receivables are as assumed. Any difference between such
assumptions and the actual characteristics and performance of the Receivables,
or actual prepayment experience, will affect the percentages of initial balances
outstanding over time and the weighted average lives of each class of Notes.
40
PERCENT OF INITIAL NOTE PRINCIPAL BALANCE AT VARIOUS CPR PERCENTAGES
CLASS A-1 NOTES
--------------------------------------------------
ASSUMED CPR PERCENTAGE
--------------------------------------------------
0% 12% 18% 21% 24% 30%
----- ----- ----- ----- ----- -----
Closing Date....................... 100 100 100 100 100 100
October 15, 1998................... 53 0 0 0 0 0
October 15, 1999................... 1 0 0 0 0 0
October 15, 2000................... 0 0 0 0 0 0
October 15, 2001................... 0 0 0 0 0 0
October 15, 2002................... 0 0 0 0 0 0
October 15, 2003................... 0 0 0 0 0 0
October 15, 2004................... 0 0 0 0 0 0
October 15, 2005................... 0 0 0 0 0 0
October 15, 2006................... 0 0 0 0 0 0
October 15, 2007................... 0 0 0 0 0 0
October 15, 2008................... 0 0 0 0 0 0
October 15, 2009................... 0 0 0 0 0 0
October 15, 2010................... 0 0 0 0 0 0
October 15, 2011................... 0 0 0 0 0 0
October 15, 2012................... 0 0 0 0 0 0
October 15, 2013................... 0 0 0 0 0 0
October 15, 2014................... 0 0 0 0 0 0
October 15, 2015................... 0 0 0 0 0 0
October 15, 2016................... 0 0 0 0 0 0
Weighted Average Life (years)(1)... 1.06 0.43 0.33 0.29 0.26 0.21
PERCENT OF INITIAL NOTE PRINCIPAL BALANCE AT VARIOUS CPR PERCENTAGES
CLASS A-2 NOTES
--------------------------------------------------
ASSUMED CPR PERCENTAGE
--------------------------------------------------
0% 12% 18% 21% 24% 30%
----- ----- ----- ----- ----- -----
Closing Date....................... 100 100 100 100 100 100
October 15, 1998................... 100 87 60 47 33 7
October 15, 1999................... 100 9 0 0 0 0
October 15, 2000................... 57 0 0 0 0 0
October 15, 2001................... 9 0 0 0 0 0
October 15, 2002................... 0 0 0 0 0 0
October 15, 2003................... 0 0 0 0 0 0
October 15, 2004................... 0 0 0 0 0 0
October 15, 2005................... 0 0 0 0 0 0
October 15, 2006................... 0 0 0 0 0 0
October 15, 2007................... 0 0 0 0 0 0
October 15, 2008................... 0 0 0 0 0 0
October 15, 2009................... 0 0 0 0 0 0
October 15, 2010................... 0 0 0 0 0 0
October 15, 2011................... 0 0 0 0 0 0
October 15, 2012................... 0 0 0 0 0 0
October 15, 2013................... 0 0 0 0 0 0
October 15, 2014................... 0 0 0 0 0 0
October 15, 2015................... 0 0 0 0 0 0
October 15, 2016................... 0 0 0 0 0 0
Weighted Average Life (years)(1)... 3.15 1.49 1.13 1.00 0.89 0.73
- ------------------
(1) The weighted average life of a Note is determined by (i) multiplying the
amount of each principal payment of such Note by the number of years from the
date of the issuance of such Note to the related Distribution Date, (ii) adding
the results and (iii) dividing the sum by the related initial principal amount
of such Note.
THE CPR TABLES HAVE BEEN PREPARED BASED ON THE ASSUMPTIONS DESCRIBED ABOVE
(INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND PERFORMANCE OF THE
RECEIVABLES WHICH WILL DIFFER FROM THE ACTUAL CHARACTERISTICS AND PERFORMANCE
THEREOF) AND SHOULD BE READ IN CONJUNCTION THEREWITH.
41
PERCENT OF INITIAL NOTE PRINCIPAL BALANCE AT VARIOUS CPR PERCENTAGES
CLASS A-3 NOTES
--------------------------------------------------
ASSUMED CPR PERCENTAGE
--------------------------------------------------
0% 12% 18% 21% 24% 30%
----- ----- ----- ----- ----- -----
Closing Date....................... 100 100 100 100 100 100
October 15, 1998................... 100 100 100 100 100 100
October 15, 1999................... 100 100 65 43 23 0
October 15, 2000................... 100 36 0 0 0 0
October 15, 2001................... 100 0 0 0 0 0
October 15, 2002................... 60 0 0 0 0 0
October 15, 2003................... 32 0 0 0 0 0
October 15, 2004................... 1 0 0 0 0 0
October 15, 2005................... 0 0 0 0 0 0
October 15, 2006................... 0 0 0 0 0 0
October 15, 2007................... 0 0 0 0 0 0
October 15, 2008................... 0 0 0 0 0 0
October 15, 2009................... 0 0 0 0 0 0
October 15, 2010................... 0 0 0 0 0 0
October 15, 2011................... 0 0 0 0 0 0
October 15, 2012................... 0 0 0 0 0 0
October 15, 2013................... 0 0 0 0 0 0
October 15, 2014................... 0 0 0 0 0 0
October 15, 2015................... 0 0 0 0 0 0
October 15, 2016................... 0 0 0 0 0 0
Weighted Average Life (years)(1)... 5.46 2.84 2.20 1.96 1.76 1.44
PERCENT OF INITIAL NOTE PRINCIPAL BALANCE AT VARIOUS CPR PERCENTAGES
CLASS A-4 NOTES
--------------------------------------------------
ASSUMED CPR PERCENTAGE
--------------------------------------------------
0% 12% 18% 21% 24% 30%
----- ----- ----- ----- ----- -----
Closing Date....................... 100 100 100 100 100 100
October 15, 1998................... 100 100 100 100 100 100
October 15, 1999................... 100 100 100 100 100 78
October 15, 2000................... 100 100 79 48 19 0
October 15, 2001................... 100 62 0 0 0 0
October 15, 2002................... 100 0 0 0 0 0
October 15, 2003................... 100 0 0 0 0 0
October 15, 2004................... 100 0 0 0 0 0
October 15, 2005................... 55 0 0 0 0 0
October 15, 2006................... 9 0 0 0 0 0
October 15, 2007................... 0 0 0 0 0 0
October 15, 2008................... 0 0 0 0 0 0
October 15, 2009................... 0 0 0 0 0 0
October 15, 2010................... 0 0 0 0 0 0
October 15, 2011................... 0 0 0 0 0 0
October 15, 2012................... 0 0 0 0 0 0
October 15, 2013................... 0 0 0 0 0 0
October 15, 2014................... 0 0 0 0 0 0
October 15, 2015................... 0 0 0 0 0 0
October 15, 2016................... 0 0 0 0 0 0
Weighted Average Life (years)(1)... 8.13 4.18 3.35 3.01 2.72 2.25
- ------------------
(1) The weighted average life of a Note is determined by (i) multiplying the
amount of each principal payment of such Note by the number of years from the
date of the issuance of such Note to the related Distribution Date, (ii) adding
the results and (iii) dividing the sum by the related initial principal amount
of such Note.
THE CPR TABLES HAVE BEEN PREPARED BASED ON THE ASSUMPTIONS DESCRIBED ABOVE
(INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND PERFORMANCE OF THE
RECEIVABLES WHICH WILL DIFFER FROM THE ACTUAL CHARACTERISTICS AND PERFORMANCE
THEREOF) AND SHOULD BE READ IN CONJUNCTION THEREWITH.
42
PERCENT OF INITIAL NOTE PRINCIPAL BALANCE AT VARIOUS CPR PERCENTAGES
CLASS A-5 NOTES
--------------------------------------------------
ASSUMED CPR PERCENTAGE
--------------------------------------------------
0% 12% 18% 21% 24% 30%
----- ----- ----- ----- ----- -----
Closing Date....................... 100 100 100 100 100 100
October 15, 1998................... 100 100 100 100 100 100
October 15, 1999................... 100 100 100 100 100 100
October 15, 2000................... 100 100 100 100 100 58
October 15, 2001................... 100 100 92 55 22 0
October 15, 2002................... 100 91 12 0 0 0
October 15, 2003................... 100 37 0 0 0 0
October 15, 2004................... 100 0 0 0 0 0
October 15, 2005................... 100 0 0 0 0 0
October 15, 2006................... 100 0 0 0 0 0
October 15, 2007................... 74 0 0 0 0 0
October 15, 2008................... 34 0 0 0 0 0
October 15, 2009................... 0 0 0 0 0 0
October 15, 2010................... 0 0 0 0 0 0
October 15, 2011................... 0 0 0 0 0 0
October 15, 2012................... 0 0 0 0 0 0
October 15, 2013................... 0 0 0 0 0 0
October 15, 2014................... 0 0 0 0 0 0
October 15, 2015................... 0 0 0 0 0 0
October 15, 2016................... 0 0 0 0 0 0
Weighted Average Life (years)(1)... 10.61 5.78 4.51 4.09 3.72 3.11
PERCENT OF INITIAL NOTE PRINCIPAL BALANCE AT VARIOUS CPR PERCENTAGES
CLASS A-6 NOTES
--------------------------------------------------
ASSUMED CPR PERCENTAGE
--------------------------------------------------
0% 12% 18% 21% 24% 30%
----- ----- ----- ----- ----- -----
Closing Date....................... 100 100 100 100 100 100
October 15, 1998................... 100 100 100 100 100 100
October 15, 1999................... 100 100 100 100 100 100
October 15, 2000................... 100 100 100 100 100 100
October 15, 2001................... 100 100 100 100 100 58
October 15, 2002................... 100 100 100 75 41 0
October 15, 2003................... 100 100 54 20 0 0
October 15, 2004................... 100 87 7 0 0 0
October 15, 2005................... 100 36 0 0 0 0
October 15, 2006................... 100 0 0 0 0 0
October 15, 2007................... 100 0 0 0 0 0
October 15, 2008................... 100 0 0 0 0 0
October 15, 2009................... 87 0 0 0 0 0
October 15, 2010................... 38 0 0 0 0 0
October 15, 2011................... 9 0 0 0 0 0
October 15, 2012................... 0 0 0 0 0 0
October 15, 2013................... 0 0 0 0 0 0
October 15, 2014................... 0 0 0 0 0 0
October 15, 2015................... 0 0 0 0 0 0
October 15, 2016................... 0 0 0 0 0 0
Weighted Average Life (years)(1)... 12.85 7.76 6.14 5.48 4.94 4.13
- ------------------
(1) The weighted average life of a Note is determined by (i) multiplying the
amount of each principal payment of such Note by the number of years from the
date of the issuance of such Note to the related Distribution Date, (ii) adding
the results and (iii) dividing the sum by the related initial principal amount
of such Note.
THE CPR TABLES HAVE BEEN PREPARED BASED ON THE ASSUMPTIONS DESCRIBED ABOVE
(INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND PERFORMANCE OF THE
RECEIVABLES WHICH WILL DIFFER FROM THE ACTUAL CHARACTERISTICS AND PERFORMANCE
THEREOF) AND SHOULD BE READ IN CONJUNCTION THEREWITH.
43
PERCENT OF INITIAL NOTE PRINCIPAL BALANCE AT VARIOUS CPR PERCENTAGES
CLASS B NOTES
--------------------------------------------------
ASSUMED CPR PERCENTAGE
--------------------------------------------------
0% 12% 18% 21% 24% 30%
----- ----- ----- ----- ----- -----
Closing Date....................... 100 100 100 100 100 100
October 15, 1998................... 100 100 100 100 100 100
October 15, 1999................... 100 100 100 100 100 100
October 15, 2000................... 100 100 100 100 100 100
October 15, 2001................... 100 100 100 100 100 100
October 15, 2002................... 100 100 100 100 100 72
October 15, 2003................... 100 100 100 100 80 0
October 15, 2004................... 100 100 100 51 1 0
October 15, 2005................... 100 100 32 0 0 0
October 15, 2006................... 100 88 0 0 0 0
October 15, 2007................... 100 29 0 0 0 0
October 15, 2008................... 100 0 0 0 0 0
October 15, 2009................... 100 0 0 0 0 0
October 15, 2010................... 100 0 0 0 0 0
October 15, 2011................... 100 0 0 0 0 0
October 15, 2012................... 50 0 0 0 0 0
October 15, 2013................... 0 0 0 0 0 0
October 15, 2014................... 0 0 0 0 0 0
October 15, 2015................... 0 0 0 0 0 0
October 15, 2016................... 0 0 0 0 0 0
Weighted Average Life (years)(1)... 15.01 9.67 7.80 7.06 6.38 5.26
PERCENT OF INITIAL CERTIFICATE PRINCIPAL BALANCE AT VARIOUS CPR PERCENTAGES
CLASS C NOTES
--------------------------------------------------
ASSUMED CPR PERCENTAGE
--------------------------------------------------
0% 12% 18% 21% 24% 30%
----- ----- ----- ----- ----- -----
Closing Date....................... 100 100 100 100 100 100
October 15, 1998................... 100 100 100 100 100 100
October 15, 1999................... 100 100 100 100 100 100
October 15, 2000................... 100 100 100 100 100 100
October 15, 2001................... 100 100 100 100 100 100
October 15, 2002................... 100 100 100 100 100 100
October 15, 2003................... 100 100 100 100 100 91
October 15, 2004................... 100 100 100 100 100 56
October 15, 2005................... 100 100 100 89 65 34
October 15, 2006................... 100 100 82 58 41 20
October 15, 2007................... 100 100 58 40 27 12
October 15, 2008................... 100 87 40 27 17 7
October 15, 2009................... 100 60 26 17 10 4
October 15, 2010................... 100 41 16 10 6 2
October 15, 2011................... 100 29 11 6 4 1
October 15, 2012................... 100 19 7 4 2 1
October 15, 2013................... 83 11 3 2 1 *
October 15, 2014................... 42 5 1 1 * *
October 15, 2015................... 17 2 * * * *
October 15, 2016................... 0 0 0 0 0 0
Weighted Average Life (years)(1)... 16.94 13.06 10.98 10.07 9.24 7.80
- ------------------
(1) The weighted average life of a Note is determined by (i) multiplying the
amount of each principal payment of such Note by the number of years from the
date of the issuance of such Note to the related Distribution Date, (ii) adding
the results and (iii) dividing the sum by the related initial principal amount
of such Note.
(2) An asterisk '*' means a percent of initial Note principal balance of more
than zero and less than 0.5%.
THE CPR TABLES HAVE BEEN PREPARED BASED ON THE ASSUMPTIONS DESCRIBED ABOVE
(INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND PERFORMANCE OF THE
RECEIVABLES WHICH WILL DIFFER FROM THE ACTUAL CHARACTERISTICS AND PERFORMANCE
THEREOF) AND SHOULD BE READ IN CONJUNCTION THEREWITH.
44
NOTE POOL FACTORS AND TRADING INFORMATION
The 'NOTE POOL FACTOR' for each class of Notes will be an eight-digit
decimal that the Servicer will compute prior to each distribution with respect
to such class of Notes expressing the remaining outstanding principal balance of
such class of Notes, as of the applicable Distribution Date (after giving effect
to payments to be made on such Distribution Date), as a fraction of the initial
outstanding principal balance of such class of Notes. Each Note Pool Factor will
be 1.00000000 as of the Cutoff Date and thereafter will decline to reflect
reductions in the outstanding principal balance of the applicable class of
Notes. A Noteholder's portion of the aggregate outstanding principal balance of
the related class of Notes is the product of (i) the original denomination of
such Noteholder's Note and (ii) the applicable Note Pool Factor.
The Paying Agent will send to Noteholders monthly reports concerning
payments received on the Receivables, the Pool Balance, or each Note Pool Factor
and various other items of information specified herein. In addition, the
Indenture Trustee or the Paying Agent will furnish to Noteholders of record
during any calendar year any information for tax reporting purposes as required
by law not later than the latest date permitted by law. See 'Certain Information
Regarding the Notes--Reports to Noteholders' herein.
DESCRIPTION OF THE NOTES
GENERAL
The Notes will consist of eight classes: the Class A-1 Notes, the Class A-2
Notes, the Class A-3 Notes, the Class A-4 Notes, the Class A-5 Notes, the Class
A-6 Notes, the Class B Notes and the Class C Notes. The Notes will be issued
pursuant to the terms of the Indenture substantially in the form of the
Indenture filed as an exhibit to the Registration Statement of which this
Prospectus forms a part. The following, as well as other pertinent information
included elsewhere herein, summarizes the material 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. Norwest Bank Minnesota, National Association, a national
banking corporation with its corporate trust offices located at Norwest Center,
Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479-0070, will be
the Indenture Trustee under the Indenture. In the ordinary course of its
business, the Indenture Trustee and its affiliates have engaged and may in the
future engage in commercial banking or financial advisory transactions with the
Sellers, the Servicer and their respective affiliates.
PAYMENTS OF INTEREST
Interest on the outstanding principal amount of each class of Notes will
accrue at the applicable Interest Rate specified on the cover page hereof and
will be payable to the Noteholders of record monthly on each Distribution Date,
commencing November 17, 1997. Interest on the outstanding principal amount of
each class of Notes will accrue at the applicable Interest Rate for each
Interest Accrual Period and shall be calculated on the basis of a 360-day year
of twelve 30-day months. Interest payments on the Notes will generally be
derived from the Available Amount after payment of the Servicer Payment and from
amounts, if any, on deposit in the Reserve Account. Interest on the Class B
Notes will not be paid on any Distribution Date until all accrued and unpaid
interest on the Class A Notes has been paid in full, and interest on the Class C
Notes will not be paid on any Distribution Date until all accrued and unpaid
interest on the Class B Notes has been paid in full. In addition, if an Event of
Default occurs and the Notes are accelerated, (i) the Class B Noteholders will
not be entitled to receive any payments until the Class A Notes have been paid
in full and (ii) the Class C Noteholders will not be entitled to receive any
payments until the Class B Notes have been paid in full. See 'Description of the
Transfer and Servicing Agreements--Distributions' and '-- Subordination of the
Class B Notes and the Class C Notes; Reserve Account' herein.
Interest payments to all classes of Class A Noteholders will have the same
priority. Under certain circumstances, the amount available for interest
payments on the Class A Notes could be less than the amount of interest payable
on the Class A Notes on any Distribution Date, in which case each class of Class
A Noteholders will receive their ratable share (based upon the aggregate amount
of interest due
45
to such class of Class A Noteholders) of the aggregate amount available to be
distributed in respect of interest on the Class A Notes.
PAYMENTS OF PRINCIPAL
Principal payments will be made to the Noteholders on each Distribution
Date in an amount generally equal to the Noteholders' Principal Distributable
Amount. Principal payments on the Notes will generally be derived from the
remaining Available Amount after payment of the Servicing Payment and the
deposit of the Noteholders' Interest Distributable Amount into the Note
Distribution Account, and from amounts, if any, on deposit in the Reserve
Account.
On each Distribution Date, principal payments on the Notes, to the extent
of the Noteholders' Principal Distributable Amount, will be applied in the
following order of priority: (i) to the principal balance of the Class A-1 Notes
until the principal balance of the Class A-1 Notes is reduced to zero; (ii) to
the principal balance of the Class A-2 Notes until the principal balance of the
Class A-2 Notes is reduced to zero; (iii) to the principal balance of the Class
A-3 Notes until the principal balance of the Class A-3 Notes is reduced to zero;
(iv) to the principal balance of the Class A-4 Notes until the principal balance
of the Class A-4 Notes is reduced to zero; (v) to the principal balance of the
Class A-5 Notes until the principal balance of the Class A-5 Notes is reduced to
zero; (vi) to the principal balance of the Class A-6 Notes until the principal
balance of the Class A-6 Notes is reduced to zero; (vii) to the principal
balance of the Class B Notes until the principal balance of the Class B Notes is
reduced to zero; and (viii) to the principal balance of the Class C Notes until
the principal balance of the Class C Notes is reduced to zero.
Notwithstanding the foregoing, if an Event of Default occurs and the Notes
are accelerated, the Noteholders' Principal Distributable Amount will be applied
to the repayment of principal on each class of Class A Notes pro rata on the
basis of their respective unpaid principal amounts.
The principal balance of each class of Notes, to the extent not previously
paid, will be due on the Final Scheduled Distribution Date with respect to such
class specified on the cover page hereof. The actual date on which the aggregate
outstanding principal amount of any class of Notes is paid may be earlier than
the applicable Final Scheduled Distribution Date based on a variety of factors,
including those described under 'Weighted Average Life of the Notes' herein.
OPTIONAL REDEMPTION
On any Distribution Date after the Class A Notes and the Class B Notes have
been paid in full, the Class C Notes will be redeemed in whole, but not in part,
if the Servicer exercises its option to purchase the Receivables. The Servicer
may purchase the Receivables after the last day of a Collection Period as to
which the Pool Balance shall have declined to 5% or less of the Cutoff Date Pool
Balance, as described herein under 'Description of the Transfer and Servicing
Agreements--Termination.' The redemption price will be equal to the unpaid
principal amount of the Class C Notes plus accrued and unpaid interest thereon.
THE INDENTURE
Modification of Indenture. The Trust and the Indenture Trustee may, with
the consent of the Noteholders representing not less than a majority of the
aggregate principal amount of the Notes then outstanding, execute a supplemental
indenture to add provisions to, change in any manner or eliminate any provisions
of, the Indenture, or modify (except as provided below) in any manner the rights
of the Noteholders.
Without the consent of the holder of each outstanding Note affected
thereby, no supplemental indenture will: (i) change the date of payment of any
installment of principal of or interest on any such 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 such 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 Noteholders of which is required
(a) for any such supplemental indenture or (b) for any waiver of compliance with
certain provisions of the
46
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 such
Notes, the Sellers or an affiliate of any of them; (v) reduce the percentage of
the aggregate outstanding principal amount of such Notes required to direct the
Indenture Trustee to sell or liquidate the Receivables, the consent of the
Noteholders of which is required if the proceeds of such sale or liquidation
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
that specify the applicable percentage of aggregate principal amount of the
Notes necessary to amend the Indenture or certain other related agreements;
(vii) modify any provisions of the Indenture in such a manner as to affect the
calculation of the amount of any payment of interest or principal due on any
Note on any Distribution Date (including the calculation of any of the
individual components of such calculation); or (viii) 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.
The Trust and the Indenture Trustee may also enter into supplemental
indentures, without obtaining the consent of the Noteholders, for the purpose
of, among other things, adding any provisions to or changing in any manner or
eliminating any of the provisions of the Indenture or modifying in any manner
the rights of the Noteholders; provided that such action will not materially
adversely affect the interest of any such Noteholder.
In addition to the foregoing limitations on executing supplemental
indentures, the Trust will covenant in the Sale and Servicing Agreement not to
execute any supplemental indentures without the prior written consent of CITSF,
as Administrator.
Events of Default; Rights Upon Event of Default. With respect to the
Notes, 'EVENTS OF DEFAULT' under the Indenture will consist of: (i) a default in
the payment of any interest on any such Note for a period of 5 days; (ii) a
default in the payment of the principal of or any installment of the principal
of any such Note when the same becomes due and payable; (iii) a default in the
observance or performance of any covenant or agreement of the Trust made in the
Indenture, which default materially adversely affects the rights of the
Noteholders and which default continues for a period of 30 days after written
notice thereof is given to the Trust by the Indenture Trustee or to the Trust
and the Indenture Trustee by the Noteholders representing not less than 25% of
the aggregate principal amount of the Controlling Notes then outstanding (or for
such longer period, not in excess of 90 days, as may be reasonably necessary to
remedy such default; provided that such default is capable of remedy within 90
days or less); or (iv) certain events of bankruptcy, insolvency, receivership or
liquidation of the Trust. However, the amount of principal required to be paid
to Noteholders under the Indenture will generally be limited to the Principal
Distributable Amount (absent acceleration of the Notes). Therefore, the failure
to pay principal on a class of Notes on any Distribution Date generally will not
result in the occurrence of an Event of Default until the Final Scheduled
Distribution Date for such class of Notes.
If an Event of Default occurs and is continuing with respect to the Notes,
the Indenture Trustee or the Noteholders representing not less than a majority
of the aggregate principal amount of the Controlling 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 Noteholders
representing not less than a majority of the aggregate principal amount of such
Controlling Notes then outstanding.
As used herein, 'CONTROLLING NOTES' means (i) all classes of Class A Notes
voting together as a single class until the Class A Notes have been paid in
full, (ii) from and after the payment in full of the Class A Notes, the Class B
Notes and (iii) from and after the payment in full of the Class B Notes, the
Class C Notes.
If the Notes are declared to be due and payable following an Event of
Default with respect thereto, the Indenture Trustee may institute proceedings to
collect amounts due or foreclose on the Trust property, exercise remedies as a
secured party, sell the Receivables or elect to have the Trust
47
maintain possession of the Receivables and continue to apply collections on the
Receivables as if there had been no declaration of acceleration. However, the
Indenture Trustee is prohibited from selling the Receivables following an Event
of Default, unless (i) Noteholders representing 100% of the aggregate principal
amount of the Notes then outstanding consent to such sale, (ii) the proceeds of
such sale are sufficient to pay in full the principal of and the accrued
interest on the outstanding Notes at the date of such sale, or (iii) there has
been an Event of Default arising from a failure to make a required payment of
principal of or interest on any Notes, and the Indenture Trustee determines that
the proceeds of Receivables 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 Noteholders representing not less than 66-2/3% of the
aggregate principal amount of the Controlling Notes then outstanding.
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
Noteholders if the Indenture Trustee reasonably believes it will not be
adequately indemnified against the costs, expenses and liabilities that might be
incurred by it in complying with such request. Subject to the provisions for
indemnification and certain limitations contained in the Indenture, Noteholders
representing not less than a majority of the aggregate principal amount of the
Controlling Notes then outstanding will have the right to direct the time,
method and place of conducting any proceeding or any remedy available to the
Indenture Trustee, and Noteholders representing not less than a majority of the
aggregate principal amount of the Controlling 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 Noteholders representing 100% of the aggregate principal amount of the Notes
then outstanding.
No Noteholders will have the right to institute any proceeding with respect
to the Indenture unless (i) such holder has previously given written notice to
the Indenture Trustee of a continuing Event of Default, (ii) Noteholders
representing not less than 25% of the aggregate principal amount of the
Controlling Notes then outstanding have made written request to the Indenture
Trustee to institute such proceeding in its own name as Indenture Trustee, (iii)
such Noteholder or Noteholders have offered the Indenture Trustee indemnity
reasonably satisfactory to it against the costs, expenses and liabilities to be
incurred in complying with such request, (iv) the Indenture Trustee has for 60
days after receipt of such notice, request and offer of indemnity failed to
institute such proceeding, and (v) no direction inconsistent with such written
request has been given to the Indenture Trustee during such 60-day period by
Noteholders representing not less than a majority of the aggregate principal
amount of the Controlling Notes then outstanding.
In addition, the Indenture Trustee and the Noteholders, by accepting the
Notes, will covenant that they will not at any time institute against the Trust
any bankruptcy, reorganization or other proceeding under any federal or state
bankruptcy or similar law.
With respect to the Trust, neither the Indenture Trustee nor the Owner
Trustee in its individual capacity, nor any Certificateholder, 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 will provide 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 of the United States or the District of Columbia, (ii) such entity
expressly assumes the Trust's obligation to make due and punctual payments of
principal of and interest on 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 no rating then in effect of
the Notes by any Rating Agency would be downgraded or withdrawn as a result of
such merger or consolidation,
48
(v) such action as was 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.
The Trust will not, among other things, (i) except as expressly permitted
by the Indenture or the Sale and Servicing Agreement, sell, transfer, exchange
or otherwise dispose of any of the properties or assets of the Trust, (ii) claim
any credit on or make any deduction from the principal or 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)
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 Notes under the Indenture except as may be
expressly permitted thereby, (iv) permit any lien, charge, excise, claim,
security interest, mortgage or other encumbrance to be created on or extend to
or otherwise arise upon or burden the assets of the Trust or any party thereof,
or any interest therein or the proceeds thereof (other than tax liens,
mechanics' liens and other liens that arise by operation of law, in each case on
a Financed Boat and arising solely as a result of an action or omission of the
related Obligor) or (v) permit any lien of the Indenture not to constitute a
valid first priority security interest in the Trust (other than with respect to
any such tax, mechanics or other lien).
The Trust may not engage in any activity other than as specified herein.
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 Indenture or the Sale and Servicing Agreement.
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 Notes upon the delivery to the Indenture Trustee for
cancellation of all the Notes or, with certain limitations, upon deposit with
the Indenture Trustee of funds sufficient for the payment in full of all the
Notes.
THE INDENTURE TRUSTEE
The Indenture Trustee may resign at any time by notifying the Issuer and
the Noteholders, in which event the Issuer will be obligated to appoint a
successor indenture trustee. The Issuer may 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. Noteholders representing not less
than a majority of the aggregate principal amount of the Notes then outstanding
may also remove the Indenture Trustee by so notifying the Indenture Trustee. In
such circumstances, the Issuer will be obligated to appoint a successor
indenture trustee. Any resignation or removal of the Indenture Trustee and
appointment of a successor indenture trustee will not become effective until
acceptance of the appointment by the successor indenture trustee.
Pursuant to the Trust Indenture Act of 1939, as amended, the Indenture
Trustee will be deemed to have a conflict of interest and be required to resign
as trustee for at least two of the Class A Notes, the Class B Notes and the
Class C Notes (each, a 'CLASS') if an Event of Default occurs under the
Indenture. In these circumstances, the Indenture will require that, within 90
days of ascertaining that an Event of Default has occurred, the Indenture
Trustee will resign as Indenture Trustee for at least two of the Classes of
Notes and provide for indenture trustees to be appointed for such Classes. The
indenture trustee for the Controlling Notes will have the right to exercise
remedies under the Indenture
49
(but the Noteholders of any other Classes will be entitled to their share of any
proceeds of enforcement, subject to the subordination described herein), and
only the Noteholders of the Controlling Notes will have the right to direct or
consent to any action to be taken, including sale of the Receivables. Any
resignation of the original Indenture Trustee as described above with respect to
any Class of Notes will become effective only upon the appointment of a
successor trustee for such Class of Notes and such successor's acceptance of
such appointment.
In addition, the Indenture Trustee will agree that if for any reason it
shall not qualify as an assignee of a Preferred Mortgage under the Ship Mortgage
Statutes, it shall immediately give notice thereof to the Servicer and the
Noteholders and shall cause a successor indenture trustee to be appointed. Any
such successor indenture trustee must qualify as such an assignee under the Ship
Mortgage Statutes.
CERTAIN INFORMATION REGARDING THE NOTES
BOOK-ENTRY REGISTRATION
Noteholders may hold their Notes through DTC (in the United States) or
Cedel or Euroclear (in Europe), which in turn hold through DTC, if they are
participants of such systems, or indirectly through organizations that are
participants in such systems.
The Sellers have been informed by DTC that DTC's nominee will be Cede.
Accordingly, such nominee is expected to be the holder of record of any
Book-Entry Notes. Unless and until Definitive Notes are issued under the limited
circumstances described herein, no Noteholder will be entitled to receive a
physical certificate representing its interest in such Note. All references
herein to actions by Noteholders refer to actions taken by DTC upon instructions
from its Participants and all references herein to distributions, notices,
reports and statements to Noteholders of Book-Entry Notes refer to
distributions, notices, reports and statements to DTC or its nominee, as the
registered holder of the Notes, for distribution to Noteholders in accordance
with DTC's procedures with respect thereto. See '--Definitive Notes' herein.
Cedel and Euroclear will hold omnibus positions on behalf of the Cedel
Participants and the Euroclear Participants, respectively, through customers'
securities accounts in Cedel's and Euroclear's names on the books of their
respective depositaries (collectively, the 'DEPOSITARIES'), which in turn will
hold such positions in customers' securities accounts in the Depositaries' names
on the books of DTC.
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a 'CLEARING
CORPORATION' within the meaning of the New York Uniform Commercial Code and a
'CLEARING AGENCY' registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC was created to hold securities for its Participants and
facilitate the clearance and settlement of securities transactions between
Participants 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 (who may
include any Underwriter), banks, trust companies and clearing corporations and
may include certain other organizations, including Cedel and Euroclear. Indirect
access to the DTC system also is available to Indirect Participants such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly.
Transfers between Participants will occur in accordance with DTC rules.
Transfers between Cedel Participants and Euroclear Participants will occur in
the ordinary way in accordance with their applicable rules and operating
procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC in the United States, on the one hand, and directly or indirectly
through Cedel Participants or Euroclear Participants, on the other, will be
effected in DTC in accordance with DTC rules on behalf of the relevant European
international clearing system by its Depositary; however, such cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in such system in accordance
with its rules and procedures and within its established deadlines (European
time). The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to its
Depositary to take action to effect final settlement on
50
its behalf by delivering or receiving securities in DTC, and making or receiving
payment in accordance with normal procedures for same-day funds settlement
applicable to DTC. Cedel Participants and Euroclear Participants may not deliver
instructions directly to the Depositaries.
Because of time-zone differences, credits or securities in Cedel or
Euroclear as a result of a transaction with a Participant will be made during
the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant Cedel
Participant or Euroclear Participant on such business day. Cash received in
Cedel or Euroclear as a result of sales of securities by or through a Cedel
Participant or Euroclear Participant to a Participant will be received with
value on the DTC settlement date but will be available in the relevant Cedel or
Euroclear cash account only as of the business day following settlement in DTC.
A 'NOTEHOLDER,' as used herein, shall mean a holder of a beneficial
interest in a Book-Entry Note. Noteholders that are not Participants or Indirect
Participants but desire to purchase, sell or otherwise transfer ownership of or
other interest in Notes may do so only through Participants and Indirect
Participants. In addition, Noteholders will receive all distributions of
principal of and interest on Notes from the Indenture Trustee, through the
Participants, who in turn will receive them from DTC. Under a book-entry format,
Noteholders may experience some delay in their receipt of payments, since such
payments will be forwarded by the Indenture Trustee to Cede, as nominee for DTC.
DTC will forward such payments to its Participants which thereafter will forward
them to Indirect Participants or Noteholders. It is anticipated that the only
'CLASS A NOTEHOLDER,' 'CLASS B NOTEHOLDER' and 'CLASS C NOTEHOLDER' will be
Cede, as nominee of DTC. Noteholders will not be recognized by the Indenture
Trustee as Noteholders, as such term is used in the Indenture, as applicable,
and Noteholders will only be permitted to exercise the rights of Noteholders
indirectly through DTC, Cedel or Euroclear and their respective participants or
organizations.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the 'RULES'), DTC is required to make book-entry transfers of
Notes among Participants on whose behalf it acts with respect to the Notes and
to receive and transmit distributions of principal of, and interest on, the
Notes. Participants and Indirect Participants with which Noteholders have
accounts with respect to the Notes similarly are required to make book-entry
transfers and receive and transmit such payments on behalf of their respective
Noteholders. Accordingly, although Noteholders will not physically possess
Notes, the Rules provide a mechanism by which Participants will receive payments
and will be able to transfer their interests.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Noteholder
to pledge Notes to persons or entities that do not participate in the DTC
system, or to otherwise act with respect to such Notes, may be limited due to
the lack of physical certificates for such Notes.
DTC has advised the Sellers that it will take any action permitted to be
taken by a Noteholder under the Indenture only at the direction of one or more
Participants to whose accounts with DTC the applicable Notes 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.
Cedel Bank, societe anonyme ('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 by 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
regulations 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
51
certain other organizations and may include any Underwriter. Indirect access to
Cedel is also available to others, such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a Cedel
Participant, either directly or indirectly.
The Euroclear System ('EUROCLEAR') was created in 1968 to hold securities
for participants of Euroclear ('EUROCLEAR PARTICIPANTS') and to clear and settle
transactions between Euroclear Participants through simultaneous electronic
book-entry delivery against payment, thereby eliminating the need for physical
movement of certificates and any risk from lack of simultaneous transfers of
securities and cash. Transactions may now be settled in any of 27 currencies,
including United States dollars. Euroclear includes various other services,
including securities lending and borrowing and interfaces with domestic markets
in several countries generally similar to the arrangement for cross-market
transfers with DTC described above. Euroclear is operated by Morgan Guaranty
Trust Company of New York, Brussels, Belgium office (the 'EUROCLEAR OPERATOR'),
under contract with Euroclear Clearance System, S.C., a Belgian cooperative
corporation (the 'COOPERATIVE'). All operations are conducted by the Euroclear
Operator, and all Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear Operator, not the Cooperative. The
Cooperative establishes policy for Euroclear on behalf of Euroclear
Participants. Euroclear Participants include banks (including central banks),
securities brokers and dealers and other professional financial intermediaries
and may include any Underwriter. Indirect access to Euroclear is also available
to other firms that clear through or maintain a custodial relationship with a
Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member 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 Euroclear and applicable Belgian law
(collectively, the 'TERMS AND CONDITIONS'). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawal of securities and
cash from Euroclear, and receipts of payments with respect to securities in
Euroclear. All securities in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
Euroclear 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 Depositary. 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 Noteholder under the Indenture or the Trust Agreement, as
applicable, on behalf of a Cedel Participant or a Euroclear Participant only in
accordance with its relevant rules and procedures and subject to its
Depositary's ability to effect such actions on its behalf through DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of Notes among participants of DTC, Cedel and
Euroclear, they are under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time.
Except as required by law, the Indenture Trustee will not have any
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests of the Notes held by DTC, Cedel or Euroclear
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
DEFINITIVE NOTES
The Notes of any class issued in book-entry form will be issued in fully
registered, certificated form ('DEFINITIVE NOTES') to Noteholders or their
respective nominees, rather than to DTC or its nominee, only if (i) the Sellers
advise the Indenture Trustee in writing that DTC is no longer willing or able to
52
discharge properly its responsibilities as depository with respect to the Notes
and the Indenture Trustee is unable to locate a qualified successor depository,
(ii) the Sellers, at their option, elect to terminate the book-entry system
through DTC or (iii) after the occurrence of an Event of Default or an Event of
Servicing Termination, holders representing not less than a majority of the
outstanding principal amount of the Notes of such class advise DTC through
Participants in writing (with instructions to notify the Indenture Trustee in
writing) that the continuation of a book-entry system through DTC (or a
successor thereto) with respect to such Notes is no longer in the best interest
of the holders of such Notes.
Upon the occurrence of any event described in the immediately preceding
paragraph, DTC will be required to notify all applicable Noteholders through
Participants of the availability of Definitive Notes. Upon surrender by DTC of
the definitive certificates representing the corresponding Notes and receipt of
instructions for re-registration, the Indenture Trustee will reissue such Notes
as Definitive Notes to such Noteholders.
Distributions of principal with respect to, and interest on, such
Definitive Notes will thereafter be made in accordance with the procedures set
forth in the Indenture, directly to holders of Definitive Notes in whose names
the Definitive Notes were registered at the close of business 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 Indenture Trustee. The
final payment on any such Definitive Notes (whether a Definitive Note or the
Notes registered in the name of Cede representing the Notes), however, will be
made only upon presentation and surrender of such Definitive Note at the office
or agency specified in the notice of final distribution to the applicable
Noteholders.
Definitive Notes will be transferable and exchangeable at the offices of
the transfer agent and registrar, which shall initially be the corporate trust
department of Chase (in such capacity, the 'TRANSFER AGENT AND REGISTRAR'). No
service charge will be imposed for any registration of transfer or exchange, but
the Indenture Trustee may require payment of a sum sufficient to cover any tax
or other governmental charge imposed in connection therewith.
LIST OF NOTEHOLDERS
Three or more Noteholders (each of whom has owned a Note for at least six
months) may, by written request to the Indenture Trustee, obtain access to the
list of all Noteholders maintained by the Indenture Trustee for the purpose of
communicating with other Noteholders with respect to their rights under the
Indenture or the Notes. The Indenture Trustee may elect not to afford the
requesting Noteholders access to the list of such Noteholders if it agrees to
mail the desired communication or proxy, on behalf and at the expense of the
requesting Noteholders, to all Noteholders of record. Unless Definitive Notes
have been issued, the only Noteholder appearing on the list maintained by the
Indenture Trustee will be Cede, as nominee for DTC. In such circumstances, any
beneficial owner of a Note wishing to communicate with other beneficial owners
of Notes will not be able to identify those beneficial owners through the
Indenture Trustee and instead will have to attempt to identify them through DTC
and its Participants or such other means as such beneficial owner may find
available.
REPORTS
On each Distribution Date, the Paying Agent will include with each
distribution to each Noteholder a statement prepared by the Servicer. Each such
statement to be delivered to Noteholders will include, among other things, the
following information as to the Trust and the Notes with respect to such
Distribution Date or the period since the previous Distribution Date, as
applicable:
(i) the amount of the distribution allocable to interest with respect
to each class of Notes and the derivation of such amounts;
(ii) the amount of the distribution allocable to principal on or with
respect to each class of Notes;
(iii) the amount of the Servicing Fee paid and the amount of Monthly
Advances being reimbursed to the Servicer in respect of the related
Collection Period, and the total Servicer Payment;
53
(iv) the Pool Balance as of the close of business on the last day of
the preceding Collection Period;
(v) the aggregate outstanding principal balance and the Note Pool
Factor for each class of Notes after giving effect to all payments reported
under clause (ii) above on such date;
(vi) the amount of the Aggregate Net Losses, if any, for the preceding
Collection Period and the derivation of such amount, and the amount of
Aggregate Losses on all Liquidated Receivables for the year to date;
(vii) the Class A Noteholders' Interest Carryover Shortfall, the Class
A Noteholders' Principal Carryover Shortfall, the Class B Noteholders'
Interest Carryover Shortfall, the Class B Noteholders' Principal Carryover
Shortfall, the Class C Noteholders' Interest Carryover Shortfall and the
Class C Noteholders' Principal Carryover Shortfall, if any, and the change
in such amounts from the preceding statement;
(viii) the aggregate Repurchase Amounts with respect to the
Receivables, if any, that were repurchased by either Seller or purchased by
the Servicer in such Collection Period;
(ix) the balance of the Reserve Account as of such date, after giving
effect to changes therein on such date, the Specified Reserve Account
Balance on such date and the components of calculating any such required
balance;
(x) the amount of Monthly Advances included in the Available Amount;
and
(xi) the balance of the Paid-Ahead Account as of such date, after
giving effect to any changes therein on such date.
Each amount set forth pursuant to subclauses (i) and (ii) with respect to
each class of Notes will be expressed as a dollar amount per $1,000 of the
initial principal balance of such class of Notes.
The statements for each Collection Period will be delivered to DTC for
further distribution to Noteholders in accordance with DTC procedures. See
'Certain Information Regarding the Notes--Book-Entry Registration' herein.
Chase, as Administrator, will file with the Commission such periodic reports
with respect to the Trust as required under the Exchange Act and the rules and
regulations of the Commission thereunder.
Within the prescribed period of time for tax reporting purposes after the
end of each calendar year during the term of the Trust, the Indenture Trustee or
the Paying Agent will furnish to each person who at any time during such
calendar year has been a Noteholder and received any payment thereon a statement
containing certain information for the purposes of such Noteholder's preparation
of federal income tax returns. See 'Certain Federal Income Tax Consequences'
herein.
DESCRIPTION OF THE CERTIFICATES
On the Closing Date, the Trust will issue the Certificates to the Sellers.
The Certificates will not bear interest but will evidence the right on each
Distribution Date to receive monies in the Reserve Account in excess of the
Specified Reserve Account Balance and, after the payment of all principal and
interest on the Notes, to receive any amounts remaining on deposit in the
Reserve Account. The Certificates will represent fractional undivided beneficial
equity interests in the Trust and will be issued pursuant to the Trust
Agreement. The Certificates are not being offered and sold hereby.
On the Closing Date, Chase will retain 49.40% of the Certificate Interest
and Chase USA will retain 50.60% of the Certificate Interest. The Sellers may
subsequently transfer the Certificates, provided the Owner Trustee and Indenture
Trustee receive an opinion of counsel that such transfer will not cause the
Trust to become a taxable entity and confirmation from each Rating Agency that
such transfer will not adversely affect any rating by such Rating Agency of a
Note.
54
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following, as well as other information included elsewhere herein,
summarizes the material terms of the Sale and Servicing Agreement, the Trust
Agreement and the Administration Agreements (collectively, the 'TRANSFER AND
SERVICING AGREEMENTS'). Each of the Transfer and Servicing Agreements is in
substantially the form of the corresponding agreement filed as an exhibit to the
Registration Statement of which this Prospectus forms a part. The summary does
not purport to be complete and is subject to, and qualified in its entirety by
reference to, all the provisions of the Transfer and Servicing Agreements. The
following summary supplements the description of the general terms and
provisions of the Transfer and Servicing Agreements set forth herein, to which
description reference is hereby made.
SALE AND ASSIGNMENT OF RECEIVABLES
Pursuant to the Sale and Servicing Agreement, on or before the Closing
Date, the Sellers will transfer and assign to the Trust in consideration of the
receipt of the Notes and Certificates, without recourse, their entire interest
in the Receivables, certain related property and the proceeds thereof,
including, among other things, their respective security interests in the
related Financed Boats. Each Receivable will be identified in a schedule
appearing as an exhibit to the Sale and Servicing Agreement (a 'SCHEDULE OF
RECEIVABLES'). The Sellers will sell the Notes to the Underwriters. See
'Underwriting' herein. The Certificates are not being offered or sold hereby and
will initially be retained by the Sellers. See 'Description of the Certificates'
herein.
In the Sale and Servicing Agreement, each Seller will make representations
and warranties with respect to its Receivables and the security interests in the
Financed Boats related thereto, which representations and warranties will
include, among others, the following: (i) each Receivable (A) was originated by
a Dealer and acquired by an Originator from such Dealer in the ordinary course
of business or (B) was originated by an Originator directly; (ii) each
Receivable is secured by a Financed Boat; (iii) each Receivable was originated
in the form of a retail installment sales contract with a Dealer or a purchase
money loan from an Originator through a Dealer located in one of the states of
the United States (or the District of Columbia) or without the involvement of a
Dealer for the financing of a Financed Boat, and in each case was fully and
properly executed by the parties thereto; (iv) (A) in the case of a Receivable
originated with the involvement of a Dealer, if in the form of a retail
installment sales contract, such Receivable was purchased by an Originator from
the originating Dealer and was validly assigned by such Dealer to such
Originator and (B) in the case of a Chase Financial Receivable, such Receivable
was purchased by Chase USA from CFAC or CFHI, and was validly assigned by CFAC
or CFHI, as applicable, to Chase USA; (v) no provision of a Receivable has been
waived, altered or modified in any respect, except by instruments or documents
contained in the related Receivables file; (vi) each Receivable 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); (vii) as of the Cutoff Date, such Seller had no knowledge of
any facts which would give rise to any right of rescission, setoff, counterclaim
or defense or of the same being asserted or threatened with respect to any
Receivable; (viii) the Obligor on each Receivable is required to maintain
physical damage insurance covering the related Financed Boat in accordance with
its terms; (ix) no Receivable was originated in or is subject to the laws of any
jurisdiction whose laws would prohibit (A) the transfer of the Receivable to the
Trust pursuant to the Sale and Servicing Agreement, (B) the ownership of the
Receivable by the Trust or (C) the pledge by the Trust of such Receivable to the
Indenture Trustee; (x) each Receivable complies with all requirements of law in
all material respects; (xi) no Receivable has been satisfied, subordinated in
whole or in part or rescinded, and no Financed Boat has been released from the
security interest of the related Receivable in whole or in part; (xii) each
Receivable creates a valid and enforceable first priority security interest in
favor of the originator of such Receivable in the Financed Boat covered thereby,
such security interest is assignable to the Trust (by such originator to such
Seller, if such originator is not such Seller, and by such Seller to the Trust),
and all necessary action with respect to such Receivable has been taken to
perfect the security interest in the related Financed Boat in favor of such
originator; (xiii) all parties to each Receivable had capacity to execute such
Receivable; (xiv) no Receivable has been sold,
55
assigned or pledged by such Seller to any person other than the Trust and, prior
to the transfer of the Receivables by such Seller to the Trust, such Seller had
good and marketable title to such Receivable, free and clear of any lien,
encumbrance, equity, loan, pledge, charge, claim or security interest, and such
Seller was the sole owner and had full right to transfer such Receivable to the
Trust; (xv) as of the Cutoff Date, such Seller had no knowledge that a default,
breach, violation or event permitting acceleration under any Receivable existed;
such Seller had no knowledge of any 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 Receivable (except for payment
delinquencies permitted as described herein), and such Seller has not waived any
of the foregoing (except for payment delinquencies permitted); (xvi) as of the
Cutoff Date, such Seller had no knowledge of any liens or claims which have been
filed for work, labor or materials affecting a Financed Boat securing a
Receivable, which are or may be liens prior to or equal or coordinate with the
security interest of the Receivable; (xvii) each Receivable is a fully
amortizing loan with interest at a fixed rate (the 'CONTRACT RATE'), provides
for level payments over the term of such Receivable and is either a Simple
Interest Receivable or a Precomputed Receivable; (xviii) each Receivable
contains customary and enforceable provisions such as to render the rights and
remedies of the holder thereof adequate for realization against the related
collateral (except as may be limited by creditors' rights generally); (xix) the
description of each Receivable set forth in the Schedule of Receivables is true
and correct as of its date; (xx) no Obligor is the United States of America or
any state or any agency, department, instrumentality or political subdivision
thereof; (xxi) 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 Receivable 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 has not
made a claim to a Seller or the Servicer that (A) the amount of interest on the
Receivable 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 Receivable should be delayed pursuant to the Military Reservist
Relief Act, in either case unless a court has ordered otherwise upon application
of a Seller (in either case 'RELIEF ACT REDUCTION'); (xxii) there is only one
original executed copy of each Receivable, which, prior to the execution of the
Sale and Servicing Agreement, was transferred to the Servicer on behalf of the
Trust; (xxiii) the Receivable is 'chattel paper' as defined in the New York and
Ohio Uniform Commercial Codes; (xxiv) each Receivable satisfies the other
criteria specified above under 'The Receivables Pool' herein; and (xxv) each
Receivable was originated in the United States of America. The representations
and warranties will be for the benefit of the Trust and, with respect to any
Receivable purchased by the Servicer, the Servicer.
As of the last day of the month following the date (or, if the related
Seller elects, the last day of the month including such date) on which the
related Seller discovers or receives written notice from the Owner Trustee or
the Indenture Trustee that a Receivable did not meet any of the criteria set
forth in the Sale and Servicing Agreement as of the Closing Date or the Cutoff
Date, as applicable, and such failure materially adversely affects the interests
of the Trust in such Receivable (regardless of whether such Seller had actual
knowledge of such failure as of the Cutoff Date), such Seller, unless it has
cured the failed criterion, will repurchase such Receivable from the Trust at a
price equal to the Actual Principal Balance owed by the Obligor thereof plus
accrued and unpaid interest thereon at the respective Contract Rate through such
last day (the 'REPURCHASE AMOUNT').
In addition, the Sellers will be obligated to file assignments of record of
the Designated Preferred Mortgages to reflect the ultimate assignments of such
Preferred Mortgages to the Trust within 120 days of the Closing Date, and each
Seller will be obligated to repurchase any Receivable sold by it to the Trust
secured by any such Preferred Mortgage for an amount equal to the Repurchase
Amount thereof if, after such 120-day period, the Trust does not have a
perfected preferred mortgage lien on the Financed Boat securing such
Receivable, such failure has a material adverse effect on the interest of the
Trust in such Receivable and such failure continues for 30 days after such
Seller discovers or receives written notice of such failure. For
administrative convenience, if Chase is obligated pursuant to the Sale and
Servicing Agreement to repurchase a Receivable from the Trust, Chase USA, at
its option, may satisfy Chase's obligation by repurchasing such Receivable on
the same terms. The repurchase obligation
56
will constitute the sole remedy available to the Owner Trustee, the Noteholders
or the Indenture Trustee for the failure of a Receivable to meet any of the
criteria set forth in the Sale and Servicing Agreement. 'ACTUAL PRINCIPAL
BALANCE' means, as of the close of business on the last day of any month, (a)
with respect to a Precomputed Receivable, the sum of (i) the Principal Balance
thereof as of such day and (ii) the portion of all scheduled payments on such
Receivable due and unpaid on or prior to such day allocable to principal using
the actuarial method and (b) with respect to a Simple Interest Receivable, the
Principal Balance thereof as of such day.
The Owner Trustee will agree that if for any reason it shall not qualify as
an assignee of a Preferred Mortgage under the Ship Mortgage Statutes, it shall
immediately give notice thereof to the Sellers and the Sellers shall cause a
successor owner trustee to be appointed. Any such successor owner trustee must
be such a qualified assignee under the Ship Mortgage Statutes.
CUSTODY OF RECEIVABLES
Pursuant to the Sale and Servicing Agreement, to assure uniform quality in
servicing the Receivables and to reduce administrative costs, the Owner Trustee
on behalf of the Trust and the Indenture Trustee will appoint the Servicer as
initial custodian of the Receivables files. Receivables will not be stamped or
otherwise marked to reflect the transfer of the Receivables to the Trust and
will not be segregated from the other marine loans owned or serviced by the
Servicer, CFMC or any of their respective affiliates. Custody of the Receivables
files may be held by the Servicer or a third party custodian together with files
for marine loans or other loans owned by Chase Marine Finance or CITSF. The
Obligors under the Receivables will not be notified of the transfer of the
Receivables to the Trust, but each Seller's accounting records and computer
systems will be purged of all references to the Receivables to reflect the sale
and assignment of the Receivables to the Trust. See 'Certain Legal Aspects of
the Receivables' herein.
ACCOUNTS
The Sellers will establish the Collection Account, the Reserve Account, the
Paid-Ahead Account and the Note Distribution Account in the name of the
Indenture Trustee on behalf of the Noteholders. The Collection Account, the
Paid-Ahead Account, the Reserve Account and the Note Distribution Account are
collectively referred to herein as the 'TRUST ACCOUNTS.' Each Trust Account
(other than the Reserve Account) will be established initially with the trust
department of Chase, and the Reserve Account will be established initially with
the trust department of Norwest Bank Minnesota, National Association. Chase, in
its capacity as the initial paying agent (the 'PAYING AGENT'), will have the
revocable right, at the direction of the Servicer, to withdraw funds from each
Trust Account (other than the Reserve Account) for the purpose of making
distributions to Noteholders in the manner provided in the Transfer and
Servicing Agreements. See '--Subordination of the Class B Notes and the Class C
Notes; Reserve Account' below.
The Trust Accounts will be maintained as Eligible Deposit Accounts. An
'ELIGIBLE DEPOSIT ACCOUNT' shall be either (a) a separately identifiable deposit
account established in the deposit taking department of a Qualified Institution
or (b) a segregated identifiable trust account established in the trust
department of a Qualified Trust Institution. A 'QUALIFIED INSTITUTION' shall be
a depository institution (including Chase) organized under the laws of the
United States or any state thereof or incorporated under the laws of a foreign
jurisdiction with a branch or agency located in the United States or any state
thereof and subject to supervision and examination by federal or state banking
authorities, having a short-term certificate of deposit rating and a long-term
unsecured debt rating confirmed by each Rating Agency as being consistent with
the ratings of the Notes and, in the case of any such institution (including
Chase) organized under the laws of the United States, the deposits of which are
insured by the FDIC. A 'QUALIFIED TRUST INSTITUTION' shall be an institution
organized under the laws of the United States or any state thereof or
incorporated under the laws of a foreign jurisdiction with a branch or agency
located in the United States and subject to supervision and examination by
federal or state banking authorities with the authority to act under such laws
as a trustee or in any other fiduciary capacity, having not less than $1 billion
in assets under fiduciary management and a long-term deposit rating confirmed by
each Rating Agency as being consistent with the ratings of the Notes.
57
Should Chase, Norwest Bank Minnesota, National Association or any other
depositary of a Trust Account cease to be a Qualified Institution or Qualified
Trust Institution, such Trust Account shall be moved to a Qualified Institution
or Qualified Trust Institution, provided that such Trust Account may remain at
such depositary if the Indenture Trustee receives written confirmation from each
related Rating Agency to the effect that the ratings of the Notes will not be
adversely affected.
Funds in the Trust Accounts will be invested as provided in the Sale and
Servicing Agreement in Permitted Investments. 'PERMITTED INVESTMENTS' are
generally limited to investments confirmed by the related Rating Agencies as
being consistent with the ratings of the Notes. Permitted Investments may
include securities issued by either Seller or its affiliates or trusts
originated by either Seller or its affiliates, and may also include certain
money market mutual funds for which Chase or any of its affiliates serves as an
investment advisor, administrator, shareholder servicing agent and/or custodian
or subcustodian (for which it collects fees and expenses). Permitted Investments
are limited to obligations or securities that mature on or before the Business
Day preceding the next Distribution Date (each such preceding day, a 'DEPOSIT
DATE'). Investment earnings on funds deposited in the Trust Accounts (other than
the Reserve Account), net of losses and investment expenses (collectively,
'INVESTMENT EARNINGS'), shall be paid to the Certificateholders.
PAID-AHEAD PRECOMPUTED RECEIVABLES
So long as CITSF is the Servicer and provided that (i) there exists no
Event of Servicing Termination and (ii) each other condition to holding
Paid-Ahead Amounts as may be required by the Sale and Servicing Agreement is
satisfied, Paid-Ahead Amounts received during any Collection Period will be
retained by the Servicer until the related Deposit Date. As provided in the
Servicing Transfer Agreements, pending deposit into the Paid-Ahead Account,
Paid-Ahead Amounts will be transferred by the Servicer to CFMC and held by CFMC
on behalf of the Servicer until the Business Day prior to such Deposit Date. If
any of the above-described conditions to retaining Paid-Ahead Amounts is not
satisfied, Paid-Ahead Amounts will be deposited into the Paid-Ahead Account
within two business days of receipt thereof and retained therein until such time
as the paid-ahead payment falls due. As of the Cutoff Date, there was
$594,187.70 of Paid-Ahead Amounts with respect to the Receivables. Until such
time as Paid-Ahead Amounts are transferred from the Paid-Ahead Account to the
Collection Account, they will not constitute collected interest or collected
principal and will not be available for distribution to the Noteholders.
SERVICING COMPENSATION
The Servicer will be entitled to receive, out of collections on the
Receivables, a Servicing Fee for each Collection Period, payable on the
following Distribution Date, equal to the sum of (i) one-twelfth of the product
of the Servicing Fee Rate and the Pool Balance as of the related Settlement Date
(or, in the case of the first Distribution Date, the Cutoff Date Pool Balance)
and (ii) any Administrative Fees paid by the Obligors during the related
Collection Period. 'ADMINISTRATIVE FEES' shall mean late payment fees, extension
fees and transfer of equity and assumption fees with respect to the Receivables.
In addition, the Servicing Transfer Agreements provide that CFMC may be
required to pay to CITSF a fee, or, in the alternative, CITSF may be required to
pay CFMC a fee, in each case, based on the performance of the Receivables. If
the ratio (expressed as a percentage) of (x) the Aggregate Losses on the
Receivables for any calendar year or partial calendar year over (y) the average
monthly Pool Balance with respect to such calendar year or partial calendar year
is less than 1.00%, CFMC will be required to pay to CITSF an additional fee of
up to 0.80% per annum of such average monthly Pool Balance (based on the actual
level of Aggregate Losses), and if such ratio exceeds 1.00%, CITSF will be
required to refund to CFMC an amount up to 0.20% per annum of such average
monthly Pool Balance (based on the actual level of Aggregate Losses). Neither
the Trust nor any successor Servicer under the Sale and Servicing Agreement will
be entitled to receive from CFMC or will be required to refund to CFMC any of
the foregoing amounts. 'AGGREGATE LOSSES' means, with respect to any calendar
year or partial calendar year, an amount equal to (x) the sum of the Losses on
Receivables in default for such calendar year or partial calendar year, less (y)
any recoveries (including, but not limited to, sales proceeds and insurance
credits) received during such calendar year or partial
58
calendar year in respect of Receivables in default in, and included in the
calculation of Aggregate Losses with respect to, any prior calendar year or
partial calendar year. A 'LOSS' on a Receivable in default is equal to the sum
of its principal balance, accrued interest thereon, collection and insurance
expenses, repossession and liquidation expenses and forbearance expenses related
to such Receivable, net of any liquidation proceeds, insurance proceeds,
collections, and any recoveries on such Receivable. For purposes of calculating
Aggregate Losses, a Receivable will be deemed to be in default when CITSF has
received all amounts that it expects to recover upon disposition or sale of the
related Financed Boat.
Payments to the Servicer of such amounts will compensate the Servicer for
performing the functions of a third party servicer of Marine Loans as an agent
for the Trust, including collecting and posting all payments, responding to
inquiries of Obligors, investigating delinquencies, reporting federal income tax
information to Obligors, monitoring the Financed Boats in cases of Obligor
default and handling the foreclosure or other liquidation of the Financed Boat
in appropriate instances (subject to reimbursement of its expenses incurred in
connection with such foreclosure, liquidation or other realization on the
Receivables to the extent described herein). The Servicing Fee will also
compensate the Servicer for serving as an Administrator under its related
Administration Agreement. The Servicer will also be responsible for compensating
Chase for serving as an Administrator under its related Administration
Agreement. The Servicer shall be responsible for all of its own expenses and
costs incurred in carrying out its obligations under the Sale and Servicing
Agreement, except that, in accordance with the Servicing Transfer Agreements,
CFMC has agreed to reimburse the Servicer for customary or necessary
repossession and other expenses incurred in connection with the repair, care and
custody of repossessed Financed Boats in an amount up to $1,000 per defaulted
Receivable, legal fees in an amount up to $1,000 per defaulted Receivable, or
such higher amounts as CFMC shall agree to from time to time, and funds advanced
by the Servicer to pay taxes or satisfy tax liens in respect of Financed Boats.
The Servicer is not required to take any action which would cause it to incur
expenses in excess of such amounts nor is CFMC required to reimburse any such
expenses in excess of such amounts. CFMC has also agreed to pay the Servicer
reasonable compensation and reimburse it for its expenses if, at the request of
CFMC, the Servicer takes action beyond its agreed-upon scope in servicing the
Receivables.
The Servicing Fee also will compensate the Servicer for administering the
Receivables, including reimbursing the Servicer for accounting for collections,
furnishing monthly and annual statements to the Owner Trustee and Indenture
Trustee with respect to distributions and providing certain federal income tax
information to the Paying Agent. The Servicing Fee also will compensate the
Servicer for accounting fees, outside auditor fees, data processing costs and
other costs incurred in connection with administering and servicing the
Receivables.
The Servicer Payment is equal on each Distribution Date to the sum of the
reimbursement then due to the Servicer for outstanding Monthly Advances and the
Servicing Fee (including any unpaid Servicing Fees for past Distribution Dates).
SERVICING AND INSURANCE PROCEDURES
The Servicer will make reasonable efforts, consistent with the customary
servicing practices and procedures employed by the Servicer with respect to
marine loans owned by it (except as set forth in the Servicing Transfer
Agreements and described herein), to collect all payments due with respect to
the Receivables and, in a manner consistent with the Transfer and Servicing
Agreements, will continue such normal collection practices and procedures as it
follows with respect to comparable marine loans that it services for itself
(except as set forth in the Servicing Transfer Agreements and described herein).
The Servicer will follow such normal collection practices and procedures as it
deems necessary or advisable to realize upon any Receivable with respect to
which it determines that eventual payment in full is unlikely or to realize upon
any defaulted Receivable. The Servicer may sell the related Financed Boat
securing such Receivable at a public or private sale in accordance with the
Servicing Transfer Agreements, or take any other action permitted by applicable
law. See 'Certain Legal Aspects of the Receivables.' The proceeds of any such
realization will be deposited in the Collection Account. CITSF's customary
servicing practices and procedures with respect to marine
59
loans may be changed in accordance with CITSF's business judgment; provided,
that any such change relating to the Receivables that would have a material
effect on the collectibility of the Receivables may not be made without CFMC's
consent.
In accordance with the Servicing Transfer Agreements, CITSF has agreed to
several limitations on how it services the Receivables. In addition, CFMC has
retained the right to direct CITSF with respect to loss mitigation strategies,
to require CITSF to initiate repossession actions or to direct CITSF to refrain
from repossessing Financed Boats, in each case based upon reasonable criteria
communicated in writing to CITSF from time to time. Such limitations and
instructions may result in the Servicer's taking actions from time to time
different from actions it otherwise would take in accordance with its customary
servicing policies and procedures at such time.
The Servicer has agreed that, with respect to defaulted Receivables having
Principal Balances in excess of $30,000, the Servicer may not enter into a
repossession sale or short sale/settlement which would result in a loss
exceeding 60% of such Principal Balance without the approval of CFMC. Pursuant
to the Servicing Transfer Agreements, the Servicer has agreed to attempt to
contact by telephone Obligors whose Receivables have become more than ten days
delinquent, and in the event contact by telephone is not made on or before the
21st day of delinquency, to perform a manual review of the Receivable to
determine the appropriate course of action, which may be continued phone calls
and/or the sending of letters.
In accordance with the Servicing Transfer Agreements, the Servicer is not
permitted to initiate litigation with respect to any Receivable without CFMC's
consent except for actions to recover possession or to foreclose upon a Financed
Boat, collection suits or actions to recover deficiencies (subject to
limitations on reimbursement of the Servicer's expenses as described under
'--Servicing Compensation' herein). The Servicing Transfer Agreements also
require that the Servicer, before commencing any litigation to collect amounts
owing with respect to a Receivable, review the related files to determine if
there exist facts which might constitute a defense or counterclaim in any such
litigation. If such review indicates the existence of facts which might
constitute a defense or counterclaim, the Servicer is not permitted to initiate
any litigation with respect to such Receivable without the prior written consent
of CFMC.
The Servicer shall, at its own cost and expense, keep in force throughout
the term of the Transfer and Servicing Agreements a fidelity bond. Such fidelity
bond shall protect against losses, including forgery, theft, embezzlement and
fraud and shall have such deductibles, and be in such form and amount as is
generally customary among persons which service a portfolio of marine loans
having an aggregate principal amount of $100 million or more and which are
generally regarded as servicers acceptable to institutional investors, but in no
case shall such fidelity bond be less than $5,000,000.
PURCHASE BY THE SERVICER
Under the Sale and Servicing Agreement, the Servicer will agree not to,
except as expressly provided therein, (i) release the Financed Boat securing
each Receivable from the security interest granted by such Receivable except in
accordance with the terms of such Receivable and applicable law, (ii) impair the
rights of the Trust in the Receivables or take any action inconsistent with the
Trust's ownership of the Receivables, (iii) increase the number of payments
under a Receivable, or increase the principal amount of a Receivable which is
used to finance the purchase price of the related Financed Boat, or extend or
forgive payments on a Receivable, or (iv) fail to file and process claims under
any insurance policy covering a Receivable, if the failure to file and process
such claims would impair the protection or benefit to be afforded by such
insurance policy. A breach of any of the above described covenants that
materially adversely affects the Trust's interest in any Receivable will require
the Servicer to purchase such Receivable from the Trust for the Repurchase
Amount, unless such breach is cured by the last day of the Collection Period
following the Collection Period in which such discovery occurred. The purchase
obligation will constitute the sole remedy available to the Owner Trustee and
the Noteholders or the Indenture Trustee for a breach of any of the above
covenants.
60
MODIFICATION OF RECEIVABLES
Consistent with its customary servicing procedures in effect from time to
time (except as described herein), the Servicer may, in its discretion, arrange
with an Obligor to defer, reschedule, extend or modify the payment schedule on a
Receivable or otherwise to modify the terms of a Receivable, provided that (i)
the maturity of such Receivable would not extend beyond the Final Scheduled
Maturity Date and (ii) if any such modification constitutes a refinancing, the
proceeds of such refinancing are used to pay the related Receivable in full.
CITSF may change such servicing procedures in accordance with its business
judgment, provided, that any such change relating to the Receivables that would
have a material effect on the collectibility of the Receivables may not be made
without CFMC's consent. Notwithstanding the foregoing, in connection with the
settlement by the Servicer of a defaulted Receivable, the Servicer may forgive a
portion of such Receivable, if in its discretion it believes that the acceptance
of the settlement proceeds from the related Obligor would result in the Trust's
receiving a greater amount of collections than the Net Liquidation Proceeds that
would result from repossessing and liquidating the related Financed Boat.
REMOVAL OF RECEIVABLES
Except as otherwise specified herein, none of the Sellers or the Servicer
will have the right to remove any Receivables from the Trust after the Closing
Date. In certain circumstances, a Seller may have the obligation to repurchase,
the Servicer may have the obligation to purchase or the Servicer may have the
option to purchase, a Receivable from the Trust, but all such repurchases or
purchases (except for the Servicer's optional purchase) will be made at the
Repurchase Amount.
COLLECTIONS
The Servicer may deposit all payments on or with respect to the Receivables
during each Collection Period (including Paid-Ahead Amounts) into the Collection
Account (or the Paid-Ahead Account, in the case of Paid-Ahead Amounts) monthly
on the Deposit Date following the last day of such Collection Period, provided
that (i) (A) CITSF or any of its affiliates is the Servicer and (B) the Servicer
or the direct or indirect parent of the Servicer has and maintains a short-term
debt rating of at least A-1 by Standard & Poor's and at least 'D-1' by Duff &
Phelps (if rated by Duff & Phelps) and either a short-term debt rating of P-1 or
a long-term debt rating of at least A2 by Moody's, or (ii) the Sellers or the
Servicer obtain a letter of credit, surety bond or insurance policy as set forth
in the Sale and Servicing Agreement, under which demands for payment may be made
to secure timely remittance of monthly collections to the Collection Account (or
the Paid-Ahead Account, in the case of Paid-Ahead Amounts) and, in the case of
clause (ii), the Indenture Trustee is 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 any of
its then-current ratings of the Notes. As of the date of this Prospectus, CITSF,
as Servicer, will be permitted to remit collections to the Collection Account
(or the Paid-Ahead Account, in the case of Paid-Ahead Amounts) on a monthly
basis by virtue of clause (i) above. In the event that the Servicer is permitted
to make remittances of collections to the Collection Account (or the Paid-Ahead
Account, in the case of Paid-Ahead Amounts) on a monthly basis pursuant to
satisfaction of clause (ii) above, the Sale and Servicing Agreement will be
modified, to the extent necessary, without the consent of any Noteholder.
Pending such a monthly deposit into the Collection Account (or the Paid-Ahead
Account, in the case of Paid-Ahead Amounts), the Servicing Transfer Agreements
require that collections be transferred by the Servicer to CFMC and held by CFMC
until the Business Day prior to the Deposit Date. See 'Risk Factors--Risk of
Commingling.' If the Servicer is not permitted to remit collections to the
Collection Account (or the Paid-Ahead Account, in the case of Paid-Ahead
Amounts) on a monthly basis, the Servicer will be obligated to deposit all
payments on or with respect to the Receivables and all proceeds of Receivables
collected on or with respect to the Receivables during each Collection Period
into the Collection Account (or the Paid-Ahead Account, in the case of
Paid-Ahead Amounts) not later than two Business Days after receipt.
A Seller or the Servicer, as the case may be, will remit the aggregate
Repurchase Amount of any Receivables to be purchased from the Trust into the
Collection Account on or before the next succeeding Deposit Date.
61
The Servicer will not be required to deposit in the Collection Account
amounts relating to the Receivables attributable to the following: (a) amounts
received with respect to each Receivable (or property acquired in respect
thereof) which has been repurchased by a Seller or purchased by the Servicer,
respectively, pursuant to the Sale and Servicing Agreement, (b) Investment
Earnings on funds deposited in the Collection Account or the Paid-Ahead Account,
(c) amounts to be reimbursed to the Servicer in respect of nonrecoverable
Monthly Advances, (d) Net Liquidation Proceeds of any Liquidated Receivable to
the extent such proceeds exceed its Principal Balance, (e) Administrative Fees
incurred by the Obligors prior to August 18, 1997, (f) any Excluded
Forced-Placed Insurance Premiums and (g) any Excluded Precomputed Amounts.
MONTHLY ADVANCES
With respect to each Receivable as to which there has been a Payment
Shortfall during the related Collection Period (other than a Payment Shortfall
arising from a Receivable which has been prepaid in full or which has been
subject to a Relief Act Reduction during the related Collection Period), on each
Deposit Date the Servicer will be obligated to make a Monthly Advance but only
to the extent that the Servicer, in its good faith judgment, expects to recover
such Monthly Advance from subsequent collections on such Receivable made by or
on behalf of the Obligor (but only to the extent of expected interest
collections in the case of a Simple Interest Receivable) or from Net Liquidation
Proceeds or insurance proceeds with respect to such Receivable. The Servicer
shall be reimbursed for any Monthly Advance from subsequent collections with
respect to such Receivable. If the Servicer determines in its good faith
judgment that an unreimbursed Monthly Advance shall not ultimately be
recoverable from subsequent collections or that the related Receivable will be
sold pursuant to the Sale and Servicing Agreement, the Servicer shall be
reimbursed for such Monthly Advance from collections on all Receivables in
accordance with the priority of distributions described herein. In determining
whether a Monthly Advance is or will be nonrecoverable, the Servicer need not
take into account that it might receive any amounts in a deficiency judgment
against an Obligor. The Servicer will not make a Monthly Advance in respect of
(i) the principal component of any scheduled payment on a Simple Interest
Receivable or (ii) a Payment Shortfall arising from a Receivable which has been
prepaid in full or which has been subject to a Relief Act Reduction during the
related Collection Period.
NET DEPOSITS
As an administrative convenience, the Servicer will be permitted to make
deposits of collections, Monthly Advances, and the aggregate Repurchase Amount
of Receivables purchased by the Servicer for, or with respect to, a Collection
Period net of distributions to be made to the Sellers or the Certificateholders
(to the extent of Investment Earnings and amounts received with respect to
Excluded Forced-Placed Insurance Premiums and Excluded Precomputed Amounts) or
to the Servicer (including, without limitation, the Servicer Payment, amounts
received with respect to Administrative Fees incurred by Obligors prior to
August 18, 1997, and amounts to be deducted in the definition of 'Available
Amount' and paid to the Servicer set forth under '--Distributions' below). The
Servicer, however, will account to the Owner Trustee and the Indenture Trustee
and to the Noteholders as if all such deposits and distributions were made on an
aggregate basis for each type of payment or deposit. On each Distribution Date,
the Servicer will pay directly to the Certificateholders any Investment
Earnings on funds deposited in the Collection Account or the Paid-Ahead
Account and any other amounts the Sellers are entitled to (such as
amounts received with respect to Excluded Forced-Placed Insurance
Premiums and Excluded Precomputed Amounts).
DISTRIBUTIONS
Deposits to Collection Account. On or before the third Business Day prior
to a Distribution Date, the Servicer will inform the Indenture Trustee and the
Paying Agent of the following amounts: (i) the Available Amount and the
Principal Distributable Amount for the next succeeding Distribution Date; (ii)
the aggregate Repurchase Amount, if any, of Receivables to be repurchased by the
Sellers or purchased by the Servicer with respect to the preceding Collection
Period; (iii) the amount to be withdrawn from the Reserve Account on the next
succeeding Deposit Date and deposited into the Collection Account; (iv) the
Noteholders' Interest Distributable Amount; (v) the Servicer Payment;
62
(vi) the amount of Paid-Ahead Amounts received during the preceding Collection
Period and any Paid-Ahead Amounts to be deposited into the Collection Account on
the related Deposit Date; (vii) the Monthly Advances to be deposited into the
Collection Account on the related Deposit Date; (viii) the amount to be
deposited in the Reserve Account; and (ix) the amount, if any, to be withdrawn
from the Reserve Account and paid to the Certificateholders on such Distribution
Date.
On or before each Deposit Date, the Servicer will cause all collections and
other amounts constituting the Available Amount for the related Distribution
Date to be deposited into the Collection Account, together with any amounts
withdrawn by the Indenture Trustee from the Reserve Account on such Deposit
Date.
The 'AVAILABLE AMOUNT' on any Distribution Date is equal to the excess of
(A) the sum of (i) all amounts on deposit in the Collection Account attributable
to collections or deposits made in respect of the Receivables in the related
Collection Period (including Net Liquidation Proceeds, any recoveries on
Liquidated Receivables and any applied Paid-Ahead Amounts), (ii) the Repurchase
Amount for any Receivable repurchased by either Seller or purchased by the
Servicer and the price paid by the Servicer, if any, to purchase the assets of
the Trust as described herein under '--Termination' and (iii) any Monthly
Advances made by the Servicer (with respect to (ii) and (iii) above, to the
extent such amounts are paid on or before the Deposit Date immediately preceding
such Distribution Date), over (B) the sum of the following amounts (to the
extent that the Servicer has not already withheld such amounts from collections
on the Receivables): (i) any amounts incorrectly deposited in the Collection
Account, (ii) net investment earnings on the funds in the Collection Account and
the Paid-Ahead Account, (iii) any amounts received with respect to
Administrative Fees incurred by the Obligors prior to August 18, 1997, Excluded
Forced-Placed Insurance Premiums or Excluded Precomputed Amounts and (iv) any
other amounts, if any, permitted to be withdrawn from the Collection Account by
the Servicer (or to be retained by the Servicer from collections on the
Receivables) pursuant to the Sale and Servicing Agreement.
Principal Distributable Amount. The 'PRINCIPAL DISTRIBUTABLE AMOUNT' on
each Distribution Date is equal to the sum of the following amounts with respect
to the related Collection Period, in each case calculated in accordance with the
method specified in each Receivable: (i) (A) all payments of principal
(including all Principal Prepayments applied during the related Collection
Period as described below) made on each Simple Interest Receivable during the
related Collection Period and (B) the portion of the scheduled payment due
during such Collection Period allocable to principal using the actuarial method
with respect to each Precomputed Receivable (or the Principal Balance thereof if
such Precomputed Receivable is prepaid in full during such Collection Period),
(ii) the Principal Balance of each Receivable which, during the related
Collection Period, was repurchased by a Seller or purchased by the Servicer
pursuant to the Sale and Servicing Agreement (a 'REPURCHASED RECEIVABLE') and
(iii) the Principal Balance of each Receivable that became a Liquidated
Receivable during the related Collection Period; provided, however, that (x)
payments of principal (including Principal Prepayments) with respect to a
Repurchased Receivable received after the last day of the Collection Period as
of which the Receivable became a Repurchased Receivable shall not be included in
the Principal Distributable Amount and (y) if a Liquidated Receivable is
purchased by a Seller or the Servicer pursuant to the Sale and Servicing
Agreement on the Deposit Date immediately following the Collection Period in
which it became a Liquidated Receivable, no amount will be included with respect
to such Receivable in the Principal Distributable Amount pursuant to clause
(iii) of the definition thereof.
'PRINCIPAL BALANCE' means, as of the close of business on the last day of a
Collection Period, (a) with respect to a Precomputed Receivable, the amount
originally advanced thereunder minus the sum of (i) that portion of all
scheduled payments due on or prior to such day allocable to principal using the
actuarial method, (ii) any payment of the Repurchase Amount with respect to such
Precomputed Receivable allocable to principal and (iii) any Principal Prepayment
applied to reduce the Principal Balance of such Precomputed Receivable in full
and (b) with respect to a Simple Interest Receivable, the amount originally
advanced thereunder minus the sum of (i) the portion of all payments made by or
on behalf of the related Obligor on or prior to such day and allocable to
principal using the simple interest method and (ii) any payment of the
Repurchase Amount with respect to such Simple
63
Interest Receivable allocable to principal, in each case without giving effect
to any adjustments due to bankruptcy or similar proceedings. A 'LIQUIDATED
RECEIVABLE' is a defaulted Receivable (i) as to which the Servicer (A) has
recovered all amounts that it expects to recover either by sale or disposition
of the related Financed Boat or otherwise or (B) has charged-off such Receivable
in accordance with its customary practices as modified by the Servicing Transfer
Agreements or (ii) which is 120 or more days past due, whichever occurs first.
'PRINCIPAL PREPAYMENT' means a payment or other recovery of principal on a
Receivable (including insurance proceeds and Net Liquidation Proceeds applied to
principal on a Receivable) which is received in advance of its Due Date. 'NET
LIQUIDATION PROCEEDS' means the monies collected by the Servicer (from whatever
source) during a Collection Period on a Liquidated Receivable, net of (i) any
payments required by law to be remitted to the Obligor and (ii) other expenses
customarily deducted from sales proceeds by third parties in connection with
sales or other dispositions of boats.
Deposits to the Distribution Accounts. On each Distribution Date, the
Servicer shall instruct the Indenture Trustee or the Paying Agent to make the
following distributions, to the extent of the sum of the Available Amount and
any amounts withdrawn from the Reserve Account then on deposit in the Collection
Account, in the following order of priority (except under the limited
circumstances provided herein):
(i) to the Servicer, the Servicer Payment with respect to such
Distribution Date and all unpaid Servicing Fees with respect to prior
Distribution Dates, to the extent such amounts are not deducted from the
Servicer's remittance to the Collection Account;
(ii) to the Note Distribution Account, the Class A Noteholders'
Interest Distributable Amount;
(iii) to the Note Distribution Account, the Class B Noteholders'
Interest Distributable Amount (unless the Notes have been accelerated as
described herein);
(iv) to the Note Distribution Account, the Class C Noteholders'
Interest Distributable Amount (unless the Notes have been accelerated as
described herein);
(v) to the Note Distribution Account, the Noteholders' Principal
Distributable Amount; and
(vi) to the Reserve Account, any remaining portion of the Available
Amount.
Notwithstanding the foregoing, if an Event of Default occurs and the Notes
are accelerated, the Class B Noteholders and the Class C Noteholders will not be
entitled to receive any payments until the Class A Notes have been paid in full,
and the Class C Noteholders will not be entitled to receive any payments until
the Class A Notes and the Class B Notes have been paid in full.
For purposes hereof, the following terms shall have the following meanings:
'CLASS A NOTEHOLDERS' INTEREST CARRYOVER SHORTFALL' means, for any
Distribution Date, the excess of (i) the Class A Noteholders' Interest
Distributable Amount for the preceding Distribution Date over (ii) the amount in
respect of interest that was actually deposited in the Note Distribution Account
in respect of the Class A Notes on such preceding Distribution Date, plus
interest on the amount of interest due but not paid to the Class A Noteholders
on the preceding Distribution Date, to the extent permitted by law, at the
respective Interest Rates borne by the Class A Notes for the related Interest
Accrual Period.
'CLASS A NOTEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT' means, for any
Distribution Date, the sum of (x) the Class A Noteholders' Monthly Interest
Distributable Amount for all classes of Class A Notes for such Distribution Date
and (y) the Class A Noteholders' Interest Carryover Shortfall for such
Distribution Date.
'CLASS A NOTEHOLDERS' MONTHLY INTEREST DISTRIBUTABLE AMOUNT' means, for any
Distribution Date for each class of Class A Notes, interest accrued during the
related Interest Accrual Period at the Interest Rate borne by such class of
Class A Notes on the outstanding principal balance of the Class A Notes of such
class on such Distribution Date (or, in the case of the first Distribution Date,
on the Closing Date).
'CLASS B NOTEHOLDERS' INTEREST CARRYOVER SHORTFALL' means, for any
Distribution Date, the excess of (i) the Class B Noteholders' Interest
Distributable Amount for the preceding Distribution Date
64
over (ii) the amount in respect of interest that was actually deposited into the
Note Distribution Account in respect of the Class B Notes on such preceding
Distribution Date, plus interest on the amount of interest due but not paid to
the Class B Noteholders on the preceding Distribution Date, to the extent
permitted by law, at the Interest Rate borne by the Class B Notes for the
related Interest Accrual Period.
'CLASS B NOTEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT' means, for any
Distribution Date, the sum of (x) the Class B Noteholders' Monthly Interest
Distributable Amount for such Distribution Date and (y) the Class B Noteholders'
Interest Carryover Shortfall for such Distribution Date.
'CLASS B NOTEHOLDERS' MONTHLY INTEREST DISTRIBUTABLE AMOUNT' means, for any
Distribution Date, interest accrued during the related Interest Accrual Period
at the Interest Rate borne by the Class B Notes on the outstanding principal
balance of the Class B Notes on such Distribution Date (or, in the case of the
first Distribution Date, on the Closing Date).
'CLASS C NOTEHOLDERS' INTEREST CARRYOVER SHORTFALL' means, for any
Distribution Date, the excess of (i) the Class C Noteholders' Interest
Distributable Amount for the preceding Distribution Date over (ii) the amount in
respect of interest that was actually deposited into the Note Distribution
Account in respect of the Class C Notes on such preceding Distribution Date,
plus interest on the amount of interest due but not paid to the Class C
Noteholders on the preceding Distribution Date, to the extent permitted by law,
at the Interest Rate borne by the Class C Notes for the related Interest Accrual
Period.
'CLASS C NOTEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT' means, for any
Distribution Date, the sum of (x) the Class C Noteholders' Monthly Interest
Distributable Amount for such Distribution Date and (y) the Class C Noteholders'
Interest Carryover Shortfall for such Distribution Date.
'CLASS C NOTEHOLDERS' MONTHLY INTEREST DISTRIBUTABLE AMOUNT' means, for any
Distribution Date, interest accrued during the related Interest Accrual Period
at the Interest Rate borne by the Class C Notes on the outstanding principal
balance of the Class C Notes on such Distribution Date (or, in the case of the
first Distribution Date, on the Closing Date).
'NOTEHOLDERS' DISTRIBUTABLE AMOUNT' means, for any Distribution Date, the
sum of the Noteholders' Principal Distributable Amount and the Noteholders'
Interest Distributable Amount.
'NOTEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT' means, for any Distribution
Date, the sum of (x) the Class A Noteholders' Interest Distributable Amount, (y)
the Class B Noteholders' Interest Distributable Amount and (z) the Class C
Noteholders' Interest Distributable Amount.
'NOTEHOLDERS' PRINCIPAL CARRYOVER SHORTFALL' means, for any Distribution
Date, the excess of (x) the Noteholders' Principal Distributable Amount for the
preceding Distribution Date over (y) the amount in respect of principal that was
actually deposited in the Note Distribution Account on such preceding
Distribution Date.
'NOTEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT' means, for any Distribution
Date, the sum of (i) the Principal Distributable Amount for such Distribution
Date and (ii) the Noteholders' Principal Carryover Shortfall for such
Distribution Date; provided, that the Noteholders' Principal Distributable
Amount shall not exceed the outstanding principal balance of the Notes. In
addition, on the Final Scheduled Distribution Date of each class of Notes, the
principal required to be deposited in the Note Distribution Account will include
the amount necessary (after giving effect to other amounts to be deposited in
the Note Distribution Account on such Distribution Date and allocable to
principal) to reduce the outstanding principal balance of the related class of
Notes to zero.
SUBORDINATION OF THE CLASS B NOTES AND CLASS C NOTES; RESERVE ACCOUNT
In the event of defaults and delinquencies on the Receivables, the Class A
Notes will generally be senior in right to payment of interest and principal to
the Class B Notes and the Class C Notes, and the Class B Notes will generally be
senior in right to payment of interest and principal to the Class C Notes. The
protection afforded to the Class A Noteholders through subordination of the
Class B Notes and the Class C Notes will be effected by the preferential right
of the Class A Noteholders to be paid principal, and following the occurrence of
an Event of Default and acceleration of the Notes, interest and
65
principal. Subject to the rights of the Class A Noteholders, the protection
afforded to the Class B Noteholders through subordination of the Class C Notes
will be effected by the preferential right of the Class B Noteholders (relative
to the Class C Noteholders) to be paid principal, and following the occurrence
of an Event of Default and acceleration of the Notes (after the Class A Notes
have been paid in full) interest and principal.
The Reserve Account will be funded with an initial deposit by the Sellers
of cash or Permitted Investments having a value of at least the Reserve Account
Initial Deposit. In addition, on each Distribution Date, the Reserve Account
will be augmented by the deposit therein of the Available Amount remaining after
the payment of the Servicer Payment and the deposit of the Noteholders'
Distributable Amount in the Note Distribution Account as described above under
'--Distributions.'
Under the Sale and Servicing Agreement, on each Deposit Date, the Indenture
Trustee is required to demand a withdrawal from the amounts on deposit in the
Reserve Account, up to the Available Reserve Account Amount, in an amount equal
to the excess, if any, of the Noteholders' Distributable Amount for the related
Distribution Date over the Available Amount for such Distribution Date remaining
after the payment of the Servicer Payment for such Distribution Date. Amounts so
withdrawn will be deposited in the Collection Account.
On each Distribution Date, the amount available in the Reserve Account (the
'AVAILABLE RESERVE ACCOUNT AMOUNT') will equal the lesser of (i) the amount on
deposit in the Reserve Account and (ii) the Specified Reserve Account Balance.
The aggregate amount withdrawn from the Reserve Account on any Deposit Date may
not exceed the Available Reserve Account Amount for the related Distribution
Date.
The Specified Reserve Account Balance on any Distribution Date will equal
4.50% of the Pool Balance as of the related Settlement Date, but in any event
will not be less than the lesser of (i) $5,325,240.59 (2.00% of the Cutoff Date
Pool Balance) and (ii) such Pool Balance; provided that the Specified Reserve
Account Balance will be calculated using a percentage of 8.00% on any
Distribution Date (beginning with the January 1998 Distribution Date) for which
(x) the Average Net Loss Ratio exceeds 2.75% or (y) the Average Delinquency
Percentage exceeds 3.00%. If the Specified Reserve Account Balance is increased
pursuant the foregoing proviso, it will revert back to the amount as previously
calculated if, for any three consecutive Distribution Dates, clauses (x) or (y)
is not triggered.
'AGGREGATE NET LOSSES' means, for any Distribution Date, the amount equal
to (i) the aggregate Principal Balance of all Receivables that became Liquidated
Receivables during the related Collection Period minus (ii) the Net Liquidation
Proceeds collected during such Collection Period with respect to any Liquidated
Receivables.
'AVERAGE DELINQUENCY PERCENTAGE' means, for any Distribution Date, the
average of the Delinquency Percentages for such Distribution Date and the
preceding two Distribution Dates.
'AVERAGE NET LOSS RATIO' means, for any Distribution Date, the average of
the Net Loss Ratios for such Distribution Date and the preceding two
Distribution Dates.
'DELINQUENCY PERCENTAGE' means, for any Distribution Date, the sum of the
outstanding Principal Balances of all Receivables which are 60 days or more
delinquent (including Receivables, which are not Liquidated Receivables,
relating to Financed Boats that have been repossessed), as of the close of
business on the last day of the Collection Period immediately preceding such
Distribution Date, determined in accordance with the Servicer's normal
practices, such sum expressed as a percentage of the Pool Balance as of the
close of business on the last day of such Collection Period.
'NET LOSS RATIO' means, for any Distribution Date, an amount expressed as a
percentage, equal to (i) the Aggregate Net Losses for such Distribution Date,
divided by (ii) the average of the Pool Balances on each of the related
Settlement Date and the last day of the related Collection Period.
The Specified Reserve Account Balance may be reduced to a lesser amount as
determined by the the Certificateholders; provided that such reduction may not
adversely affect any rating by a Rating Agency of a Note.
66
The availability of funds in the Reserve Account and, in the case of the
Class A Notes, the subordination of the Class B Notes and the Class C Notes,
and, in the case of the Class B Notes, the subordination of the Class C Notes,
are intended to enhance the likelihood of receipt by Noteholders of the full
amount of principal and interest due them, and to decrease the likelihood that
the Noteholders will experience losses. There is no other protection against
losses on the Receivables.
In certain circumstances, the Reserve Account could be depleted. If the
amount required to be withdrawn from the Reserve Account to cover shortfalls in
collections on the Receivables exceeds the amount of available cash in the
Reserve Account, Noteholders could incur losses or a temporary shortfall in the
amounts distributed to the Noteholders could result, which could, in turn,
increase the average life of the Notes. Such shortfalls may result from, among
other things, Aggregate Net Losses on the Receivables or the failure by either
Seller or the Servicer to make any remittance under the Sale and Servicing
Agreement.
On each Distribution Date, if the amount on deposit in the Reserve Account
(after giving effect to all deposits thereto or withdrawals therefrom on the day
preceding such Distribution Date) is greater than the Specified Reserve Account
Balance for such Distribution Date, the Servicer will instruct the Indenture
Trustee to distribute the amount of the excess to the Certificateholders in
accordance with the Sale and Servicing Agreement and the Trust Agreement. Upon
distribution to the Certificateholders of amounts from the Reserve Account, the
Noteholders will not have any rights in, or claims to, such amounts.
ADMINISTRATION AGREEMENTS
Each of CITSF and Chase, as Administrators, will enter into an
Administration Agreement with the Trust and the Indenture Trustee. Pursuant to
each Administration Agreement, the Administrator party thereto will agree on
behalf of the Trust to provide certain notices and to perform certain other
administrative functions required by the Transfer and Servicing Agreements and
the Indenture and specified in such Administration Agreement as being the
responsibility of such Administrator. Compensation for the performance by CITSF
of its obligations under the Administration Agreement to which it is a party
will be included in the Servicing Fee. The Servicer will be responsible for
compensating Chase for the performance of Chase's obligations under the
Administration Agreement to which Chase is a party.
Each Administration Agreement provides that the Administrator party thereto
may act directly or through its agents or attorneys pursuant to agreements
entered into with any of them, and that such Administrator will not be liable
for the conduct or misconduct of such agents or attorneys if such agents or
attorneys shall have been selected by such Administrator with due care.
STATEMENTS TO THE OWNER TRUSTEE AND THE INDENTURE TRUSTEE
Prior to each Distribution Date, the Servicer will provide to the Owner
Trustee and Indenture Trustee a statement setting forth substantially the same
information for such date and the related Collection Period as is required to be
provided in the periodic reports provided to Noteholders described herein under
'Certain Information Regarding the Notes--Reports.'
EVIDENCE AS TO COMPLIANCE
The Sale and Servicing Agreement will provide that a firm of independent
public accountants will annually furnish to the Sellers, the Owner Trustee and
the Indenture Trustee a statement as to compliance by the Servicer during the
preceding twelve months (or, in the case of the first such certificate, from the
Closing Date) with certain standards relating to the servicing of the
Receivables, or as to the effectiveness of its processing and reporting
procedures and certain other matters.
The Sale and Servicing Agreement will also provide for delivery to the
related firm of independent public accountants referred to in the immediately
preceding paragraph, substantially simultaneously with the delivery of such
accountants' statement referred to above, of a certificate signed by an officer
of the Servicer stating that the Servicer has fulfilled its obligations in all
material respects under the Sale and Servicing Agreement throughout the
preceding twelve months (or, in the case of the first such
67
certificate, from the Closing Date) or, if there has been a default in the
fulfillment of any such obligation, describing each such default.
Copies of such statements and certificates may be obtained by Noteholders
by a request in writing addressed to the Servicer.
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 a
determination that the Servicer's performance of such duties is no longer
permissible under applicable law. Such resignation will not become effective
until a successor Servicer has assumed the Servicer's servicing obligations and
duties under the Transfer and Servicing Agreements.
Pursuant to the Sale and Servicing Agreement, the Sellers will have the
right to terminate all rights and obligations of the Servicer thereunder at any
time after a calendar year, or in the case of 1997, the last three calendar
months of 1997, during which Aggregate Losses on the Receivables exceed 1.20% of
the average of the month-end principal balances of the Receivables for each
month in such calendar year, or such three calendar months, so long as Chase,
Chase USA or another party acceptable to the Rating Agencies assumes the
Servicer's servicing obligations and duties under the Transfer and Servicing
Agreements.
The Sale and Servicing Agreement will provide that neither the Servicer nor
any of its shareholders, affiliates, directors, officers, employees and agents
shall be under any liability to the Owner Trustee, the Indenture Trustee, the
Trust, the Certificateholders or the Noteholders for taking any action or for
refraining from taking any action pursuant to the Transfer and Servicing
Agreements or for errors in judgment; provided, however, that neither the
Servicer nor any such person will be protected against any liability which
otherwise would be imposed by reason of willful misfeasance, bad faith or
negligence in the performance of duties or by reason of reckless disregard of
obligations and duties thereunder. In addition, the Transfer and Servicing
Agreements will provide that the Servicer is under no obligation to appear in,
prosecute or defend any legal action which arises under the Transfer and
Servicing Agreements 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 Transfer and Servicing
Agreements and the rights and duties of the parties thereto and the interests of
the Noteholders thereunder. In the event that the Servicer, in its discretion,
undertakes any action which it deems necessary or desirable in connection with
its rights and duties under the Transfer and Servicing Agreements or the
interests of the Noteholders 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 will be entitled to be reimbursed
therefor out of amounts otherwise distributable to the Certificateholders from
the Reserve Account.
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 Transfer and Servicing Agreements.
EVENTS OF SERVICING TERMINATION
'EVENTS OF SERVICING TERMINATION' under the Sale and Servicing Agreement
will consist of (i) any failure by the Servicer to deliver to the Owner Trustee
or the Indenture Trustee the Servicer's certificate for the related Collection
Period or any failure by the Servicer to deliver to the Owner Trustee or the
Indenture Trustee for deposit in any Trust Account any proceeds or payments
required to be delivered under the terms of the Notes or the Sale and Servicing
Agreement (or, in the case of a payment or deposit to be made not later than the
Deposit Date, the failure to make such payment or deposit on such Deposit Date),
which failure continues unremedied for five Business Days after discovery by the
Servicer or for five Business Days after receipt of written notice to the
Servicer by the Owner Trustee or the Indenture Trustee or to the Indenture
Trustee and the Servicer by Noteholders representing not less than 25% of the
aggregate principal amount of the Controlling Notes then
68
outstanding; (ii) any failure by the Servicer to duly observe or perform in any
material respect any other covenant or agreement of the Servicer set forth in
the Sale and Servicing Agreement or Indenture, which failure materially
adversely affects the rights of the Trust or the Noteholders or the
Certificateholders and which continues unremedied for 60 days after receipt of
written notice of such failure to the Servicer by the Owner Trustee or the
Indenture Trustee or to the Indenture Trustee and the Servicer by Noteholders
representing not less than 25% of the aggregate principal amount of the
Controlling Notes; (iii) a court or other governmental authority having
jurisdiction in the premises shall have entered a decree or order for relief in
respect of the Servicer in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of the Servicer, as the case may be, or for any substantial
liquidation of its affairs, and such order remains undischarged and unstayed for
at least 60 days; or (iv) the Servicer shall have commenced a voluntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or shall have consented to the entry of an order for relief
in an involuntary case under any such law, or shall have consented to the
appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian or sequestrator (or other similar official) of the Servicer
or for any substantial part of its property, or shall have made any general
assignment for the benefit of its creditors, or shall have failed to, or
admitted in writing its inability to, pay its debts as they become due, or shall
have taken any corporate action in furtherance of the foregoing.
RIGHTS UPON EVENT OF SERVICING TERMINATION
As long as an Event of Servicing Termination under the Sale and Servicing
Agreement remains unremedied, the Indenture Trustee or Noteholders representing
not less than a majority of the aggregate principal amount of the Controlling
Notes then outstanding may terminate all the rights and obligations of the
Servicer under the Sale and Servicing Agreement, whereupon Chase 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. In the event that Chase is unwilling or unable to so act, the
Sellers may appoint, or petition a court of competent jurisdiction for the
appointment of, a successor Servicer to act as successor to the outgoing
Servicer. The Sellers may make such arrangements for compensation to be paid,
which in no event may be greater than the Servicing Fee paid to the Servicer
under the Sale and Servicing Agreement.
WAIVER OF PAST DEFAULTS
The Noteholders representing not less than a majority of the aggregate
principal amount of the Controlling Notes then outstanding may, on behalf of all
the Noteholders, 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 Servicing Termination in making any required deposits to or payments
from any of the Trust Accounts in accordance with the Sale and Servicing
Agreement. Therefore, the Controlling Noteholders have the ability, as limited
above, to waive defaults by the Servicer that could in certain instances
materially adversely affect the Class B Notes and/or the Class C Notes. No such
waiver will impair such Class B Noteholders' or Class C Noteholders' rights with
respect to subsequent defaults.
AMENDMENT
Each of the Transfer and Servicing Agreements may be amended by the parties
thereto, without prior notice to the Noteholders but with prior consent of the
Owner Trustee and notice to the Rating Agencies (i) to cure any ambiguity, to
correct or supplement any provision therein or in the Notes or the Certificates
that may be inconsistent with any other provision therein, to evidence a
succession to the Servicer or a Seller pursuant to the related Transfer and
Servicing Agreement, or to add any other provisions with respect to matters or
questions arising under such Transfer and Servicing Agreement that are not
inconsistent with the provisions of such Transfer and Servicing Agreement;
provided, however, that such action will not, on the basis of officer's
certificate of the Servicer and the Sellers reasonably acceptable to the Owner
Trustee and the Indenture Trustee, materially adversely affect the interests of
the Trust, any Noteholder or any Certificateholder or (ii) to effect a transfer
or assignment of
69
the Trust's or the Servicer's rights, obligations and duties under such Transfer
and Servicing Agreement. The Transfer and Servicing Agreements may also be
amended by the Sellers, the Servicer, the Owner Trustee and the Indenture
Trustee with the consent of the Noteholders representing not less than a
majority of the aggregate principal amount of the Notes then outstanding and
Certificateholders representing a majority of the Certificate Interest for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of such Transfer and Servicing Agreements or of modifying in
any manner the rights of the Noteholders or the Certificateholders; provided,
however, 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 the
Receivables or distributions that are required to be made for the benefit of the
Noteholders or the Certificateholders; or (ii) reduce the aforesaid percentage
of the Noteholders or the Certificateholders that are required to consent to any
such amendment, without the consent of Noteholders representing 100% of the
aggregate principal amount of the Notes then outstanding or Certificateholders
representing 100% of the Certificate Interest, as applicable. In addition to the
foregoing limitations, the Sellers will covenant in the Sale and Servicing
Agreement that they will not amend the Trust Agreement without the prior written
consent of CITSF, as Administrator.
TERMINATION
The obligations of the Servicer, the Sellers, the Owner Trustee and the
Indenture Trustee pursuant to the Transfer and Servicing Agreements will
terminate upon the earlier of (i) the Distribution Date next succeeding the
month that is six months after the maturity or other liquidation of the last
Receivable and the disposition of any amounts received upon liquidation of any
property remaining in the Trust and (ii) the payment to Noteholders of all
amounts required to be paid to them pursuant to the Transfer and Servicing
Agreements.
In order to avoid excessive administrative expense, the Servicer will be
permitted at its option to purchase from the Trust, as of the last day of any
applicable Collection Period, if the outstanding Pool Balance with respect to
the Receivables held by the Trust is 5% or less of the Cutoff Date Pool Balance
as of such last day, all assets of the Trust (other than the Trust Accounts,
except for the Paid-Ahead Account), including the remaining Receivables, any
related Paid-Ahead Amounts and any rights of the Trust to Liquidated
Receivables, at the price specified in the Sale and Servicing Agreement, which
price shall not be less than the amount necessary to redeem the Class C Notes on
the related Distribution Date after paying the Servicer Payment to the Servicer.
The subsequent payment to the Class C Noteholders of all amounts required to be
distributed to them pursuant to the Indenture will effect early redemption of
the Class C Notes.
The Indenture Trustee will give written notice of termination to each Class
C Noteholder of record, which notice will specify the Distribution Date upon
which such Class C Noteholders may surrender their Class C Notes to the Transfer
Agent and Registrar for final payment. The final distribution to any Class C
Noteholder will be made only upon surrender and cancellation of such holder's
Class C Note (whether a Definitive Note or the Notes registered in the name of
Cede representing the Class C Notes) at the office or agency of the Transfer
Agent and Registrar specified in the notice of termination.
Subject to applicable law and after the Indenture Trustee has taken certain
measures to notify Noteholders, any money held by the Indenture Trustee or the
Paying Agent in trust for payment on the Notes that remain unclaimed for two
years shall, upon request of the Trust, be paid to the Trust. Following any such
payment, the Owner Trustee and the Paying Agent shall no longer be liable to any
Noteholder with respect to such unclaimed amount, and any claim with respect to
such amount shall be an unsecured claim against the Trust. Subject to applicable
law, any funds that then remain shall be paid to the Certificateholders.
70
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
TRANSFER OF RECEIVABLES TO THE TRUST
The Receivables are 'chattel paper' as defined in the Uniform Commercial
Code (the 'UCC') in effect in the State of New York. Pursuant to the UCC, the
sale of chattel paper is treated in a manner similar to a security interest in
chattel paper. In order to protect the Trust's ownership or security interest in
the Receivables, the Sellers will file UCC-1 financing statements with the
appropriate governmental authorities in the States of New York, Delaware and,
with respect to the Chase Financial Receivables, Ohio, to give notice of Chase
USA's, the Trust's and the Indenture Trustee's ownership of and security
interest in the Receivables and their proceeds. Under the Sale and Servicing
Agreement, the Servicer will be obligated to maintain the perfection of the
Trust's and the Indenture Trustee's interest in the Receivables. It should be
noted, however, that a purchaser of chattel paper who gives new value and takes
possession of it in the ordinary course of such purchaser's business has
priority over a security interest, including an ownership interest, in the
chattel paper that is perfected by filing UCC-1 financing statements and not by
possession of such chattel paper by the original secured party, if such
purchaser acts in good faith without knowledge that the related chattel paper is
subject to a security interest, including an ownership interest. Any such
purchaser would not be deemed to have such knowledge merely because there are
UCC filings and would not learn of the sale of or security interest in the
Receivables from a review of the Receivables files since they would not be
marked to show such sale, although Chase Marine Finance's master computer
records will indicate such sale.
Each of the Sellers intends that the transfer of the Receivables by it to
the Trust under the Sale and Servicing Agreement constitute a sale. In the event
that either Seller were to become insolvent, the FDIA, as amended by FIRREA,
sets forth certain powers that the FDIC may exercise if it were appointed
receiver of such Seller. To the extent that a Seller has granted a security
interest in its related Receivables to the Trust and that interest was validly
perfected before such Seller's insolvency and was not taken in contemplation of
insolvency or with the intent to hinder, delay or defraud such Seller or its
creditors, that security interest would not be subject to avoidance by the FDIC
as receiver of such Seller. Positions taken by the FDIC staff prior to the
passage of FIRREA do not suggest that the FDIC, if appointed receiver of either
Seller, would interfere with the timely transfer to the Trust of payments
collected on the Receivables. If, however, the FDIC were to assert a contrary
position, or were to require the Owner Trustee to establish its rights to those
payments by submitting to and completing the administrative claims procedure
established under the FDIA, or the conservator or receiver were to request a
stay of proceedings with respect to such Seller as provided under the FDIA,
delays in payments on the Notes and possible reductions in the amount of those
payments could occur.
Prior to the Closing Date, the Chase Financial Receivables were sold by
CFAC and CFHI to Chase USA. Each of CFAC, CFHI and Chase USA intends that the
transfers of the Chase Financial Receivables to Chase USA constitute true sales,
rather than pledges to secure indebtedness. CFAC and CFHI will take all actions
that are required to perfect Chase USA's ownership interest in such Receivables
by filing UCC-1 financing statements with the appropriate governmental
authorities in the State of Ohio. Notwithstanding the foregoing, if CFAC or CFHI
were to become a debtor under the Bankruptcy Code and CFAC or CFHI or a creditor
or trustee-in-bankruptcy of CFAC or CFHI were to take the position that the sale
of those Chase Financial Receivables transferred by CFAC or CFHI, as the case
may be, to Chase USA should be recharacterized as a pledge of such Receivables
to secure a borrowing of CFAC or CFHI, then delays in payments of collections of
those Chase Financial Receivables to the Trust could occur or (should the court
rule in favor of any such trustee, debtor or creditor) reductions in the amount
of such payments, or a reduction in the amount of those Chase Financial
Receivables securing such a borrowing, could result.
The U.S. Court of Appeals for the Tenth Circuit issued its opinion in
Octagon Gas Systems, Inc. v. Rimmer (In re Meridian Reserve, Inc.) (decided May
27, 1993) in which it concluded (noting that its position is in contrast to that
taken by another court) that accounts receivable sold by the debtor prior
71
to the filing for bankruptcy remain property of the debtor's bankruptcy estate.
Although the Chase Financial Receivables are likely to be viewed as 'chattel
paper,' as defined in the UCC, rather than as accounts, the rationale behind the
Octagon ruling is equally applicable to chattel paper. The circumstances under
which the Octagon ruling would apply are not fully known, and the extent to
which the Octagon decision will be followed in other courts or outside the Tenth
Circuit is not certain. If the holding in the Octagon case were applied in a
bankruptcy of CFAC or CFHI, however, even if the transfers of the Chase
Financial Receivables to Chase USA were treated as sales, the Chase Financial
Receivables transferred by CFAC or CFHI, as the case may be, would be part of
the bankruptcy estate of such debtor and would be subject to claims of certain
creditors and delays and reductions in payments to the Trust and holders of the
Notes, or a reduction in the amount of Receivables supporting the Notes, could
result.
SECURITY INTERESTS IN FINANCED BOATS
The Receivables represent marine retail installment sale contracts,
purchase money notes and other notes that evidence the credit sale or
refinancing of Financed Boats to Obligors. When originated, each Receivable was
secured by a security interest in the Financed Boat financed thereby. Each such
security interest was required to be perfected under applicable state law and,
in the case of certain Financed Boats described below, under applicable federal
law. Generally, security interests in boats may be perfected in one of three
ways: in 'title' states, by notation of the secured party's lien on the
certificate of title issued by an applicable state motor vehicle or wildlife
department or other appropriate state agency; in non-title states, by filing a
UCC-1 financing statement; and in respect of a boat eligible for documentation
under federal law, by filing all documents necessary to create a first preferred
Ship Mortgage (a 'PREFERRED MORTGAGE') under the Ship Mortgage Act of 1920 (1988
Recodification) Section30101 et seq. (the 'SHIP MORTGAGE STATUTES'). Vessels
that meet the federal five net ton standard qualify for documentation under
federal law ('U.S. DOCUMENTABLE BOATS'). However, federal documentation of
vessels used exclusively for recreational purposes is discretionary.
Chase Marine Finance had policies and procedures in place to ensure that
all actions necessary under the laws of the states in which the Financed Boats
were located at the time of origination of the Receivables were taken to perfect
the originators' security interests in the Financed Boats. In addition, it was
Chase Marine Finance's practice to require that all U.S. Documentable Boats of
27 feet or more in length or securing Marine Loans having original principal
balances of $75,000 or more be federally documented and that a Preferred
Mortgage on each such boat be filed. Chase Marine Finance's policy also required
prior perfection of a security interest in any such boat under applicable state
law in order to protect itself prior to completion of federal documentation. If
a security interest in a boat is initially perfected by a UCC-1 filing or
notation on a title under state law and such boat subsequently becomes a
federally documented vessel, the holder of such security interest could lose the
priority of its security interest in such boat under state law to the holder of
a subsequently perfected Preferred Mortgage covering such boat.
In the event that the originator of a Receivable failed to perfect the
security interest in a Financed Boat (for example, by complying with the UCC
rather than the applicable certificate of title statute, or by failing to comply
with applicable state title law, or the Ship Mortgage Statutes or applicable
United States Coast Guard (the 'COAST GUARD') regulations), such originator
would not have a perfected first priority security interest in such Financed
Boat. In this event, if third party liens equal or exceed the value of the
Financed Boat, the only recourse of the Trust would be against the Obligor on an
unsecured basis, if applicable, against a Dealer pursuant to its repurchase
obligation or against the related Seller.
Pursuant to the terms of the Sale and Servicing Agreement, each Seller will
assign its security interest in the Financed Boats to the Trust and the Trust
will pledge its security interest in the Financed Boats to the Indenture
Trustee. However, due to administrative burden and expense, none of the Sellers,
the Servicer or the Trust will amend the certificates of title or file
assignments of the UCC-1 financing statements with respect to the Financed Boats
to identify the Trust or the Indenture Trustee as the new secured party, nor
will any of the Sellers or the Owner Trustee execute or file any transfer
72
instruments with the appropriate governmental authorities. In a majority of
states, the assignment of a Receivable together with the related security
interest is, as a matter of state law, an effective conveyance of such security
interest without amendment of any lien noted on the related certificates of
title or of any UCC-1 financing statements or the filing of any transfer
instruments with the appropriate governmental authorities, and the new owner of
the Receivable succeeds to the original secured party's rights as owner of the
Receivable against creditors of the Obligor. In certain title states, in the
absence of such certificate of title amendment or assignment of record to
reflect the successive assignments of the security interest in the Financed
Boat, the related Seller (if not the secured party of record), the Trust and/or
the Indenture Trustee may not have a perfected security interest in the related
Financed Boat. Under the Ship Mortgage Statutes, in the absence of an assignment
of record of a Preferred Mortgage, the assignment of the related Receivable by
itself will not convey the perfected preferred mortgage lien on the Financed
Boat subject to such Preferred Mortgage and neither the related Seller (if not
the secured party of record) nor the Trust will have a perfected security
interest in such Financed Boat.
Pursuant to the Sale and Servicing Agreement, the Sellers have agreed to
cause filings of the assignments of each Preferred Mortgage (each a 'Designated
Preferred Mortgage') relating to a Receivable having an original Principal
Balance of $50,000 or more showing the chain of ownership of such Preferred
Mortgage from the originator of such Receivable to the Trust within 120 days of
the Closing Date. The Sellers believe that the filing of assignments of
Preferred Mortgages relating to all Receivables having an original Principal
Balance of $50,000 or more should result in the assignment to the Trust of
substantially all of the Preferred Mortgages securing the Receivables. However,
due to the administrative burden and expense of determining which Receivables
having an original Principal Balance of less than $50,000 were secured by U.S.
Documentable Boats, assignments will not be made of all Preferred Mortgages
relating to the Receivables. Under the Ship Mortgage Statutes, in the absence of
an assignment of a Preferred Mortgage, or in the event an assignment of a
Preferred Mortgage is not effective, the Trust will not have a perfected
security interest in the related Financed Boat. In such case, if third party
liens equal or exceed the value of such Financed Boat, the only recourse of the
Trust would be against the related Obligor on an unsecured basis or (in the case
of a Receivable having an original Principal Balance of $50,000 or more) against
the related Seller pursuant to its repurchase obligation.
Except as described above, in the absence of fraud or forgery by a boat
owner or administrative error by state recording officials or the Coast Guard,
the notation of the lien of the originator of each Receivable on the certificate
of title with respect to the related Financed Boat, the filing of a UCC-1
financing statement against the Obligor or the filing of an assignment of the
related Preferred Mortgage, if any, as described above will be sufficient to
protect the Trust against the rights of subsequent purchasers of such Financed
Boat or subsequent lenders who take a security interest in such Financed Boat.
If there are any Financed Boats as to which the originator of the related
Receivable has failed to perfect the security interest assigned to the Trust,
(i) such security interest would be subordinate to, among others, holders of
perfected security interests in such Financed Boats and (ii) subsequent
purchasers of such Financed Boats would take possession free and clear of such
security interest. There is also a risk that, in not identifying the Trust as
the new secured party on the certificates of title or executing and filing of
transfer instruments with the Coast Guard or assignments of UCC-1 financing
statements with state officials, the security interest of the Trust or Indenture
Trustee could be released through fraud or negligence.
A security interest perfected by a Preferred Mortgage has a nationwide
scope and no further action is necessary when an obligor moves or the related
boat is relocated. Actions must be taken to maintain the perfection of security
interests in boats perfected under state law if the boat (in the case of a
'title' state) or the Obligor (in the case of a 'UCC' state) moves to a state
other than the state in which such security interest was originally perfected.
Under the laws of most states, a perfected security interest in a Financed Boat
continues for four months after the Financed Boat is relocated in a new state
(from the state in which a financing statement was properly filed initially to
perfect the security interest or in which the certificate of title was issued)
and thereafter until the owner re-registers
73
such Financed Boat in the new state. Many 'title' states require surrender of a
certificate of title to re-register a Financed Boat. Accordingly, to allow
re-registration the Servicer must surrender possession if it holds the
certificate of title to a Financed Boat or, in the case of a Financed Boat
registered in a state which provides for notation of liens on certificates of
title but not possession of the certificates of title by the lien holder, the
Servicer would typically receive notice of surrender if the security interest in
the Financed Boat is noted on the certificate of title. Accordingly, in such
cases, the Servicer should have the opportunity to re-perfect the security
interest in the Financed Boat in the state of relocation. In states that do not
issue a certificate of title at registration of a Financed Boat, re-registration
in a different state could defeat perfection. In the ordinary course of
servicing its portfolio of marine loans, the Servicer takes steps to effect such
re-perfection upon receipt of notice of re-registration or information from the
Obligor as to relocation. Similarly, when an Obligor sells a titled Financed
Boat showing a lienholder, unless the Servicer surrenders possession of the
certificate of title, it generally will receive notice as a result of its lien
noted thereon and accordingly will have an opportunity to require satisfaction
of the related Receivable before release of the lien. Under the Sale and
Servicing Agreement, the Servicer is obligated to take such steps, at the
Servicer's expense, as are necessary to maintain perfection of security
interests in the Financed Boats.
Under the laws of many states, certain possessory liens for repairs
performed on a Financed Boat and storage, as well as certain rights in favor of
federal and state governmental authorities arising from the use of a boat in
connection with illegal activities, may take priority over a security interest
perfected under state law. Certain U.S. federal tax liens may also have priority
over the lien of a secured party. Under the Ship Mortgage Statutes, a Preferred
Mortgage supersedes a perfected state law security interest, a state created
lien or forfeiture rights (so long as the secured party is innocent of wrong
doing) but is subordinate to preferred maritime liens. Each Seller will
represent in the Sale and Servicing Agreement that, as of the Cutoff Date, it
has no knowledge of any such liens with respect to any Financed Boat related to
a Receivable transferred by such Seller to the Trust. However, such liens could
arise at any time during the term of a Receivable. No notice will be given to
the Owner Trustee or the Indenture Trustee in the event such a lien arises.
ENFORCEMENT OF SECURITY INTERESTS IN FINANCED BOATS
The Servicer on behalf of the Trust and the Indenture Trustee may take
action to enforce the Trust's security interest by repossession and resale of
the Financed Boats securing the Receivables. The actual repossession may be
contracted out to third party contractors. Under the Uniform Commercial Code and
laws applicable in most states, a creditor can repossess a boat securing a loan
by voluntary surrender, 'self-help' repossession that is 'peaceful' (i.e.,
without breach of the peace) and, in the absence of voluntary surrender and the
ability to repossess without breach of the peace, by judicial process. Some
jurisdictions require that the obligor be notified of the default and be given a
time period within which to cure the default prior to repossession. Generally,
this right of cure may be exercised on a limited number of occasions during the
term of the contract. The Uniform Commercial Code and consumer protection laws
in most states place restrictions on repossession sales, including requiring
prior notice to the debtor and commercial reasonableness in effecting such a
sale. In the event of such repossession and resale of a Financed Boat, the Trust
would be entitled to be paid out of the sale proceeds before such proceeds could
be applied to the payment of the claims of unsecured creditors or the holders of
subsequently perfected security interests or, thereafter, to the debtor. Under
federal law, notice to the owner of a Financed Boat subject to a Preferred
Mortgage, any other lienholders who have filed notice with the Coast Guard and
the Coast Guard is required to pass ownership of such Financed Boat in a
non-judicial sale.
Under the Uniform Commercial Code and laws applicable in most states, a
creditor is entitled to obtain a deficiency judgment from a debtor for any
deficiency on repossession and resale of the boat securing such debtor's loan.
However, many states impose prohibitions or limitations on deficiency judgments.
In general, a defaulting Obligor may not have sufficient assets to make the
pursuit of a deficiency worthwhile.
74
Certain other statutory provisions, including federal and state bankruptcy
and insolvency laws, and general equitable principles may limit or delay the
ability of a lender to repossess and resell collateral or enforce a deficiency
judgment. Certain other factors, including the value of a Financed Boat, may
limit the amount realized on the sale of the Financed Boat as collateral to an
amount less than the amount due on the Receivable.
OTHER MATTERS
Numerous federal and state consumer protection laws may impose requirements
applicable to the origination and servicing of the Receivables, including the
Truth in Lending Act, the Fair Credit Reporting Act, the Equal Credit
Opportunity Act, the Magnuson-Moss Warranty Act, the Fair Debt Collection
Practices Act and the Federal Trade Commission Act.
The so-called 'Holder-in-Due-Course' Rule of the Federal Trade Commission
(the 'FTC RULE'), other state statutes or the common law in certain states have
the effect of subjecting a seller (and certain related lenders and their
assignees) in a consumer credit transaction and any assignee of the seller
(which would include the Trust) to all claims and defenses that the obligor in
the transaction could assert against the seller of the goods. Liability of a
subsequent holder under the FTC Rule is limited to the amounts paid by the
obligor under the contract, and a subsequent holder of the contract may also be
unable to collect any balance remaining due thereunder from the obligor. The
Uniform Consumer Credit Code applicable in certain states contains provisions
that generally duplicate this rule.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of the material United States ('U.S.')
federal income tax consequences that may be relevant to the purchase, ownership
and disposition of the Notes by an investor who purchases the Notes pursuant to
their original issuance at their original issue price. This summary is based
upon the Internal Revenue Code of 1986, as amended (the 'CODE'), the Treasury
regulations promulgated thereunder, administrative rulings or pronouncements and
judicial decisions, all as in effect on the date hereof and all of which are
subject to change, possibly retroactively. The following discussion does not
deal with all aspects of U.S. income taxation, nor does it address U.S. federal
income tax consequences that may be relevant to certain types of investors, such
as banks, insurance companies, dealers in securities, tax-exempt organizations
or persons whose functional currency is not the U.S. dollar, who may be subject
to special treatment under the Code. In addition, the following discussion does
not address the alternative minimum tax consequences of an investment in the
Notes or the consequences of such an investment under state and local tax laws
or foreign tax laws. Accordingly, investors should consult their own tax
advisors to determine the federal, state, local, and other tax consequences that
may be relevant to their purchase, ownership and disposition of the Notes based
upon their particular facts and circumstances. Prospective investors should note
that no rulings have been or will be sought from the Internal Revenue Service
('IRS') with respect to any of the U.S. federal income tax consequences
discussed herein and opinions of counsel are not binding on the IRS or the
courts. Thus, no assurance can be given that the IRS will not take positions
contrary to those described below. The opinions of Simpson Thacher & Bartlett,
special U.S. federal income tax counsel to the Sellers ('FEDERAL TAX COUNSEL'),
described herein will be based upon certain representations and assumptions,
including, but not limited to, the assumption that all relevant parties will
comply with the terms of the Trust Agreement and related documents.
This summary is intended as an explanatory discussion of the tax matters
affecting investors generally, but does not purport to furnish information in
the level of detail or with the attention to the investor's specific tax
circumstances that would be provided by an investor's own tax adviser.
Accordingly, each investor is advised to consult its own advisers with regard to
the tax consequences to it of investing in the Notes. An opinion of Federal Tax
Counsel will be filed as an Exhibit to the Registration Statement.
75
For purposes of the following discussion, except as otherwise provided
herein, the term 'NOTEHOLDER' refers to the beneficial owner of a Note. In
addition, the discussion below assumes that Noteholders will hold their Notes as
'capital assets' within the meaning of Section 1221 of the Code.
TRUST TREATED AS PARTNERSHIP
Tax Characterization of the Trust. In the opinion of Federal Tax Counsel,
the Trust will not be classified as an association (or publicly traded
partnership) taxable as a corporation. This opinion is based on, among other
things, certain facts and assumptions contained in such opinion.
TAX CONSEQUENCES
Treatment of the Notes as Indebtedness. The Trust and the Noteholders, by
their purchase of the Notes, agree to treat the Notes as debt for all U.S. tax
purposes. In the opinion of Federal Tax Counsel, the Notes will be characterized
as debt for U.S. federal income tax purposes. The discussion below assumes this
characterization of the Notes is correct.
Interest Income on the Notes. The Notes will not be considered to have
been issued with original issue discount ('OID') in excess of the statutorily
defined de minimis amount (i.e., 1/4% of the principal amount of a Note
multiplied by its weighted average to maturity). Consequently, the stated
interest thereon will be taxable to a Noteholder as ordinary interest income at
the time it is received or accrued in accordance with such Noteholder's method
of tax accounting. Under the applicable Treasury regulations, a holder of a Note
issued with a de minimis amount of OID must include such OID in income, on a pro
rata basis, as principal payments are made on the Note. A purchaser who buys a
Note for more or less than its principal amount generally will be subject,
respectively, to the premium amortization or market discount rules of the Code.
Sale or Other Disposition. If a Noteholder sells or otherwise disposes of
a Note in a taxable transaction, the former Noteholder will recognize gain or
loss in an amount equal to the difference between the amount realized on such
sale or other disposition and the former Noteholder's adjusted tax basis in the
Note. The adjusted tax basis of a Note to a particular Noteholder generally will
equal the holder's cost therefor increased by any market discount previously
included in income by such Noteholder and decreased by the amount of bond
premium (if any) previously amortized and the amount of any payments, other than
payments of stated interest, previously received by such Noteholder with respect
to such Note. Any such gain or loss will be capital gain or loss if the Note was
held as a capital asset, except to the extent such gain represents accrued
interest or accrued market discount not previously included in income. Capital
losses generally may be used only to offset capital gains.
Foreign Noteholders. For purposes of this discussion, the term 'FOREIGN
INVESTOR' means any person other than (i) a citizen or resident of the United
States, (ii) a corporation, partnership or other entity organized in or under
the laws of the United States or any political subdivision thereof, (iii) an
estate, the income of which is includible in gross income for U.S. federal
income tax purposes regardless of its source, or (iv) a trust if the primary
supervision over the administration of such trust can be exercised by a U.S.
court and one or more U.S. fiduciaries have the authority to control all
substantial decisions of such trust.
Under present U.S. federal income tax law, and subject to the discussion
below concerning backup withholding:
(a) no withholding of U.S. federal income tax will be required with
respect to the payment by the Trust of principal or interest on a Note
owned by a Foreign Investor, provided that the beneficial owner of the Note
(i) is not actually or constructively a '10 percent shareholder' of the
Trust (including a holder of 10% or more of such Trust's outstanding
Certificates) or either Seller, (ii) is not a 'controlled foreign
corporation' with respect to which the Trust or either Seller is a 'related
person' within the meaning of the Code and (iii) satisfies the statement
requirement (described generally below) set forth in Section 871(h) and
Section 881(c) of the Code and the regulations thereunder; and
76
(b) no withholding of U.S. federal income tax will be required with
respect to any gain realized by a Foreign Investor upon the sale, exchange
or retirement of a Note provided that, in the case of any gain representing
accrued interest, the conditions described in (a) above are satisfied.
To satisfy the requirement referred to in (a)(iii) above, the beneficial
owner of such Note, or a financial institution holding the Note on behalf of
such owner, must provide, in accordance with specified procedures, the U.S.
entity that would otherwise be required to withhold U.S. taxes with a statement
to the effect that the beneficial owner is not a U.S. person. Pursuant to
current temporary Treasury regulations, these requirements will be met if (i)
the beneficial owner provides his name and address, and certifies, under
penalties of perjury that he, she or it is not a 'U.S. person' (which
certification may be made on an IRS Form W-8 or successor form), or (ii) a
financial institution or securities clearing organization holding the Note on
behalf of such beneficial owner certifies, under penalties of perjury, that such
statement has been received by it and furnishes the U.S. entity otherwise
required to withhold U.S. taxes with a copy thereof.
If a Foreign Investor cannot satisfy the requirements of the 'portfolio
interest' exception described in (a) above, payments of premium, if any, and
interest (including OID) made to a Foreign Investor with respect to a Note will
be subject to a 30% U.S. withholding tax unless the beneficial owner of the Note
provides the U.S. entity otherwise required to withhold U.S. taxes with a
properly executed (i) IRS Form 1001 (or successor form) claiming an exemption
from withholding under the benefit of a tax treaty or (ii) IRS Form 4224 (or
successor form) stating that the interest paid on the Note is not subject to
U.S. withholding tax because such interest income is effectively connected with
the beneficial owner's conduct of a trade or business in the United States.
If a Foreign Investor is engaged in a trade or business in the United
States and premium, if any, or interest on the Note is effectively connected
with the conduct of such trade or business, the Foreign Investor, although
exempt from the U.S. withholding tax discussed above, will be subject to U.S.
federal income tax on such premium, if any, and interest on a net income basis
in the same manner as if it were a U.S. person. In addition, if such Foreign
Investor is a foreign corporation, it may be subject to a branch profits tax
equal to 30% of its effectively connected earnings and profits for the taxable
year, subject to adjustments. For this purpose, such premium, if any, and
interest on the Note will be included in such foreign corporation's effectively
connected earnings and profits.
Any gain realized by a Foreign Investor upon the sale, exchange or
retirement of a Note generally will not be subject to U.S. federal income tax
unless (i) such gain or income is effectively connected with a trade or business
conducted by the Foreign Investor in the United States and (ii) in the case of a
Foreign Investor who is an individual, such individual is present in the United
States for 183 days or more in the taxable year of such sale, exchange or
retirement, and certain other conditions are met.
Information Reporting and Backup Withholding. In general, information
reporting requirements generally will apply to payments of principal, interest
and premium, if any, paid on the Notes and to the proceeds from the sale of a
Note paid to U.S. persons, other than certain exempt recipients (such as
corporations). In addition, a 31% U.S. backup withholding tax will apply to such
payments if the Noteholder (i) is a U.S. person who fails to provide a taxpayer
identification number, (ii) fails to certify such Noteholder's foreign or other
exempt status or (iii) fails to report in full dividend and interest income.
No information reporting or backup withholding will be required with
respect to payments made by the Trust to a Foreign Investor if a statement
described in (a)(iii) above under the caption 'Foreign Noteholders' has been
received by the U.S. entity otherwise required to withhold U.S. taxes and such
entity does not have actual knowledge that the beneficial owner is a U.S.
person.
In addition, backup withholding and information reporting will not apply if
payments of principal, interest and premium (if any) on a Note are paid or
collected by a foreign office of a custodian, nominee or other foreign agent on
behalf of the beneficial owner of such Note, or if a foreign office of a broker
(as defined in applicable Treasury regulations) pays the proceeds from the sale
of a Note to the owner thereof. If, however, such nominee, custodian, agent or
broker is, for U.S. federal income tax purposes, a U.S. person, a controlled
foreign corporation or a foreign person that derives 50% or more of its gross
income for certain periods from the conduct of a trade or business in the United
States,
77
such payments will not be subject to backup withholding but will be subject to
information reporting, unless (i) such custodian, nominee, agent or broker has
documentary evidence in its records that the beneficial owner is not a U.S.
person and certain other conditions are met or (ii) the beneficial owner
otherwise establishes an exemption. Temporary Treasury regulations provide that
the Treasury is considering whether backup withholding will apply with respect
to such payments of principal, interest and premium (if any), or to the proceeds
from a sale that are not subject to backup withholding under the current
regulations. Under proposed Treasury regulations, not currently in effect,
backup withholding will not apply to such payments absent actual knowledge that
the payee is a U.S. person.
Payments of principal, interest and premium (if any) on a Note paid to the
beneficial owner of a Note by a United States office of a custodian, nominee or
agent, or the payment by the United States office of a broker of the proceeds
from the sale of a Note, will be subject to both backup withholding and
information reporting unless the beneficial owner (i) provides the statement
referred to in (a)(iii) above and the payor does not have actual knowledge that
the beneficial owner is a U.S. person or (ii) otherwise establishes an
exemption.
Any amounts withheld under the backup withholding rules will be allowed as
a refund or a credit against such holder's U.S. federal income tax liability,
provided that the required information is furnished to the IRS.
Possible Alternative Classification of the Notes. If, contrary to the
opinion of Federal Tax Counsel, the IRS successfully asserted that one or more
of the Notes did not represent debt for U.S. federal income tax purposes, the
Notes might be treated as equity interests in the Trust. Treatment of the Notes
as equity interests in the Trust could have adverse tax consequences to certain
Noteholders. For example, income to Foreign Investors generally could be subject
to U.S. tax and U.S. tax return filing and withholding requirements and
Noteholders who are individuals might be subject to certain limitations on their
ability to deduct their allocable share of the Trust's expenses.
CERTAIN STATE TAX CONSEQUENCES
The activities to be undertaken by the Servicer in servicing and collecting
the Receivables will take place in Oklahoma. The State of Oklahoma imposes a
state income tax on individuals, nonresident aliens (with respect to Oklahoma
taxable income), corporations, certain foreign corporations, and trusts and
estates with Oklahoma taxable income. No ruling on any of the issues discussed
below will be sought from the Oklahoma Tax Commission.
Because of the variation in each state's or locality's tax laws, it is
impossible to predict the tax consequences to Noteholders or the Trust in all of
the other state and local taxing jurisdictions. Noteholders, particularly
financial institutions, are urged to consult their own tax advisors with respect
to state and local tax consequences arising out of the purchase, ownership and
disposition of the Notes.
TAX CONSEQUENCES WITH RESPECT TO THE NOTES
Crowe & Dunlevy, P.C., Oklahoma tax counsel to the Sellers ('OKLAHOMA TAX
COUNSEL'), will advise the Trust that, assuming the Notes will be treated as
debt for federal income tax purposes, the Notes will be treated as debt for
Oklahoma income tax purposes, and the Noteholders not otherwise subject to
taxation in Oklahoma should not become subject to taxation in Oklahoma solely
because of a holder's ownership of Notes. However, a Noteholder already subject
to Oklahoma's income tax could be required to pay additional Oklahoma tax as a
result of the holder's ownership or disposition of Notes.
78
ERISA CONSIDERATIONS
GENERAL
The Employee Retirement Income Security Act of 1974, as amended ('ERISA'),
and Section 4975 of the Code, impose certain requirements on employee benefit
plans and certain other plans and arrangements, including individual retirement
accounts and annuities, Keogh plans and certain collective investment funds or
insurance company general or separate accounts in which such plans, accounts or
arrangements are invested, that are subject to the fiduciary responsibility
provisions of ERISA and/or Section 4975 of the Code (collectively, 'PLANS'), and
on persons who are fiduciaries with respect to Plans, in connection with the
investment of 'plan assets' of any Plan ('PLAN ASSETS'). ERISA generally imposes
on Plan fiduciaries certain general fiduciary requirements, including those of
investment prudence and diversification and the requirement that a Plan's
investments be made in accordance with the documents governing the Plan.
Generally, any person who has discretionary authority or control respecting the
management or disposition of Plan Assets, and any person who provides investment
advice with respect to such assets for a fee, is a fiduciary with respect to
such Plan Assets.
ERISA and Section 4975 of the Code prohibit a broad range of transactions
involving Plan Assets and persons ('Parties in Interest' under ERISA and
'Disqualified Persons' under the Code) who have certain specified relationships
to a Plan or its Plan Assets, unless a statutory or administrative exemption is
available. Parties in Interest or Disqualified Persons that participate in a
prohibited transaction may be subject to a penalty imposed under ERISA and/or an
excise tax imposed pursuant to Section 4975 of the Code, unless a statutory or
administrative exemption is available. These prohibited transactions generally
are set forth in Section 406 of ERISA and Section 4975 of the Code.
Any fiduciary or other Plan investor considering whether to purchase any
Notes on behalf of or with Plan Assets of any Plan should consult with its
counsel for guidance regarding the ERISA Considerations applicable to the Notes
offered hereby.
Certain employee benefit plans, such as governmental plans (as defined in
Section 3(32) of ERISA) and certain church plans (as defined in Section 3(33) of
ERISA), are not subject to the requirements of ERISA or Section 4975 of the
Code. Accordingly, assets of such plans may be invested in the Notes without
regard to the ERISA considerations described herein, subject to the provisions
of other applicable federal and state law. However, any such plan that is
qualified and exempt from taxation under Sections 401(a) and 501(a) of the Code
is subject to the prohibited transaction rules set forth in Section 503 of the
Code.
Subject to the considerations described below, the Notes are eligible for
purchase with Plan Assets of any Plan.
Any fiduciary or other Plan investor considering whether to purchase the
Notes with Plan Assets of any Plan should determine whether such purchase is
consistent with its fiduciary duties and whether such purchase would constitute
or result in a non-exempt prohibited transaction under ERISA and/or Section 4975
of the Code because any of the Sellers, the Servicer, the Trust (by reason of a
Seller's ownership of Certificates), the Indenture Trustee, the Owner Trustee,
any other Certificateholder or any other parties may be deemed to be benefiting
from the issuance of the Notes and may be Parties in Interest or Disqualified
Persons with respect to the investing Plan. Any fiduciary or other Plan investor
considering whether to purchase the Notes should consult with its counsel
regarding the applicability of the fiduciary responsibility and prohibited
transaction provisions of ERISA and Section 4975 of the Code to such investment,
and of the Seller, the Servicer or the Trust as a Party-in-Interest or
Disqualified Person with respect to the investing Plan, the availability of
exemptive relief under any prohibited transaction exemption. For example, DOL
Prohibited Transaction Exemptions 96-23 (relating to transactions determined by
'in-house asset managers'), 95-60 (relating to transactions involving insurance
company general accounts), 91-38 (relating to transactions involving bank
collective investment funds), 90-1 (relating to transactions involving insurance
company pooled separate accounts) or 84-14 (relating to transactions determined
by independent 'qualified professional asset managers') may be available. A
purchaser of the Notes should be aware, however, that even if the conditions
specified in an exemption are met, the scope of the exemptive relief provided by
the exemption might not cover all acts which might be construed as prohibited
transactions.
79
In addition, under U.S. Department of Labor Regulation Section 2510.3-101
(the 'PLAN ASSET REGULATION'), the purchase with Plan Assets of equity interests
in the Trust could, in certain circumstances, cause the Receivables and other
assets of the Trust to be deemed Plan Assets of the investing Plan which, in
turn, would subject the Trust and its assets to the fiduciary responsibility
provisions of ERISA and the prohibited transaction provisions of ERISA and
Section 4975 of the Code. Nevertheless, because the Notes (a) should be treated
as indebtedness under local law and debt, rather than equity, for tax purposes
(see 'Certain Federal Income Tax Consequences--Tax Consequences to Noteholders--
Treatment of the Notes as Indebtedness' herein), and (b) should not be deemed to
have any 'substantial equity features,' purchases of the Notes with Plan Assets
should not be treated as equity investments and, therefore, the Receivables and
other assets included as assets of the Trust should not be deemed to be Plan
Assets of the investing Plans. Those conclusions are based, in part, upon the
traditional debt features of the Notes, including the reasonable expectation of
purchasers of Notes that the Notes (which are highly rated by the Rating
Agencies) will be repaid when due, as well as the absence of conversion rights,
warrants and other typical equity features. Before purchasing the Notes, a
fiduciary or other Plan investor should itself confirm that the Notes constitute
debt for purposes of the Plan Asset Regulation.
The Notes may not be purchased with Plan Assets of any Plan if any of the
Sellers, the Servicer, the Indenture Trustee, the Owner Trustee or any of their
respective affiliates (a) has investment or administrative discretion with
respect to the Plan Assets used to effect such purchase; (b) has authority or
responsibility to give, or regularly gives, investment advice with respect to
such Plan Assets, for a fee and pursuant to an agreement or understanding that
such advice (1) will serve as a primary basis for investment decisions with
respect to such Plan Assets, and (2) will be based on the particular investment
needs of such Plan; or (c) is an employer maintaining or contributing to such
Plan. Each purchaser will be deemed to have represented and warranted that its
purchase of a Note or any interest therein does not violate the foregoing
limitation.
UNDERWRITING
As consideration for the transfer of the Receivables to the Trust, the
Trust will issue the Notes to the Sellers, with (i) Chase receiving 49.40% of
the original principal amount of each class of Notes and the Certificate
Interest and (ii) Chase USA receiving 50.60% of the original principal amount of
each class of Notes and the Certificate Interest. The Certificates are not being
offered or sold hereby.
Subject to the terms and conditions set forth in the underwriting agreement
with respect to the Class A Notes (the 'CLASS A UNDERWRITING AGREEMENT') and the
underwriting agreement with respect to the Class B Notes and the Class C Notes
(the 'CLASS B AND CLASS C UNDERWRITING AGREEMENT,' and together with the Class A
Underwriting Agreement, the 'UNDERWRITING AGREEMENTS'), the Sellers have agreed
to sell to the underwriters with respect to the Class A Notes (the 'CLASS A
UNDERWRITERS') and Chase Securities Inc., as underwriter with respect to the
Class B Notes and the Class C Notes (the 'CLASS B AND CLASS C UNDERWRITER,' and
together with the Class A Underwriters, the 'UNDERWRITERS'), and each of the
Underwriters has agreed to purchase, the principal amount of each class of Notes
set forth opposite its name below.
MERRILL, LYNCH, PIERCE,
CHASE GOLDMAN, FENNER & SMITH
SECURITIES INC. SACHS & CO. INCORPORATED
--------------- ----------- -----------------------
Class A-1 Notes..... $ $ $
Class A-2 Notes.....
Class A-3 Notes.....
Class A-4 Notes.....
Class A-5 Notes.....
Class A-6 Notes.....
Class B Notes.......
Class C Notes.......
--------------- ----------- -----------
Total.......... $ $ $
--------------- ----------- -----------
--------------- ----------- -----------
80
The Underwriters initially propose to offer all or a part of the Notes
directly to the public at the respective public offering prices set forth on the
cover page of this Prospectus and may offer a portion of the Notes to dealers at
a price which represents a concession not in excess of the amounts set forth
below for the respective classes of Notes. The Underwriters may allow, and such
dealers may allow, a concession not in excess of the amounts set forth below for
the respective classes of the Notes for certain dealers. After the initial
public offering, the public offering prices and such concessions may from time
to time be varied by the Underwriters.
CONCESSION TO REALLOWANCE
DEALERS CONCESSION
------------- -----------
Class A-1 Notes..... % %
Class A-2 Notes.....
Class A-3 Notes.....
Class A-4 Notes.....
Class A-5 Notes.....
Class A-6 Notes.....
Class B Notes.......
Class C Notes.......
The Indenture Trustee and the Owner Trustee (on behalf of the Trust) may,
from time to time, invest the funds in the Collection Account, the Paid-Ahead
Account and the Reserve Account in Permitted Investments acquired from the
Underwriters.
Chase Securities Inc. may engage in over-allotment transactions,
stabilizing transactions, syndicate covering transactions and penalty bids with
respect to the Notes in accordance with Regulation M under the Exchange Act.
Over-allotment transactions involve syndicate sales in excess of the offering
size, which creates a syndicate short position. Stabilizing transactions permit
bids to purchase the Notes so long as the stabilizing bids do not exceed a
specified maximum. Syndicate covering transactions involve purchases of the
Notes in the open market after the distribution has been completed in order to
cover syndicate short positions. Penalty bids permit Chase Securities Inc. to
reclaim a selling concession from a syndicate member when the Notes originally
sold by such syndicate member are purchased in a syndicate covering transaction.
Such over-allotment transactions, stabilizing transactions, syndicate covering
transactions and penalty bids may cause the prices of the Notes to be higher
than they would otherwise be in the absence of such transactions. Neither the
Issuer nor Chase Securities Inc. represent that Chase Securities Inc. will
engage in any such transactions or that such transactions, if commenced, will
not be discontinued without notice.
This Prospectus may be used by Chase Securities Inc., an affiliate of the
Sellers and a subsidiary of the Corporation, in connection with offers and sales
related to market-making transactions in the Notes. Chase Securities Inc. may
act as principal or agent in such transactions. Such sales will be made at
prices related to prevailing market prices at the time of sale. Chase Securities
Inc. has no obligation to make a market in the Notes, and it may discontinue any
such market-making activities at any time without notice, in its sole
discretion.
The Sellers and CITSF will indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act or contribute to
payments the Underwriters may be required to make in respect thereof.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Notes will be passed
upon for the Sellers by Simpson Thacher & Bartlett (a partnership that includes
professional corporations), New York, New York and certain other legal matters
will be passed upon for the Sellers by Robert S. Fisher, Esq. and for the
Underwriters by Orrick, Herrington & Sutcliffe LLP, New York, New York. Certain
Oklahoma state tax matters will be passed upon for the Sellers by Crowe &
Dunlevy, P.C., Oklahoma City, Oklahoma. From time to time Simpson Thacher &
Bartlett and Orrick, Herrington & Sutcliffe LLP provide legal services to the
Sellers and their affiliates.
81
INDEX OF TERMS
TERM PAGE
------------------------------------------------------------- --------
Actual Principal Balance..................................... 57
Actuarial Receivables........................................ 30
Administration Agreement..................................... 9
Administrative Fees.......................................... 58
Administrator................................................ 9
Aggregate Losses............................................. 58
Aggregate Net Losses......................................... 66
Asset Service Center......................................... 34
Available Amount............................................. 63
Available Reserve Account Amount............................. 66
Average Delinquency Percentage............................... 66
Average Net Loss Ratio....................................... 66
Banks........................................................ 1
Business Day................................................. 4
CBC.......................................................... 35
CBC Holding.................................................. 35
Cede......................................................... ii
Cedel........................................................ i, 51
Cedel Participants........................................... 51
Certificate Interest......................................... ii
Certificateholder............................................ 3
Certificates................................................. ii, 3
CFAC......................................................... 14
CFHI......................................................... 14
CFMC......................................................... 1
Chase........................................................ i
Chase Financial Receivables.................................. 14, 31
Chase Marine Finance......................................... 1
Chase Marine Finance Portfolio............................... 16
Chase N.A.................................................... 1
Chase USA.................................................... i
Chase/Chemical Merger........................................ 31
CIT.......................................................... 1
CITCF-NY..................................................... 31
CITSF........................................................ 1
Class........................................................ 49
Class A Noteholders.......................................... 4, 51
Class A Noteholders' Interest Carryover Shortfall............ 64
Class A Noteholders' Interest Distributable Amount........... 64
Class A Noteholders' Monthly Interest Distributable Amount... 64
Class A Notes................................................ 2
Class A-1 Notes.............................................. 2
Class A-2 Notes.............................................. 2
Class A-3 Notes.............................................. 2
82
TERM PAGE
------------------------------------------------------------- --------
Class A-4 Notes.............................................. 2
Class A-5 Notes.............................................. 2
Class A-6 Notes.............................................. 2
Class A Underwriters......................................... 80
Class A Underwriting Agreement............................... 80
Class B and Class C Underwriters............................. 80
Class B and Class C Underwriting Agreement................... 80
Class B Noteholders.......................................... 4, 51
Class B Noteholders' Interest Carryover Shortfall............ 64
Class B Noteholders' Interest Distributable Amount........... 65
Class B Noteholders' Monthly Interest Distributable Amount... 65
Class B Notes................................................ 2
Class C Noteholders.......................................... 4, 51
Class C Noteholders' Interest Carryover Shortfall............ 65
Class C Noteholders' Interest Distributable Amount........... 65
Class C Noteholders' Monthly Interest Distributable Amount... 65
Clearing Agency.............................................. 50
Clearing Corporation......................................... 50
Closing Date................................................. i
Coast Guard.................................................. 72
Code......................................................... 75
Collection Account........................................... 8
Collection Period............................................ 6
Commission................................................... iii
Contract Rate................................................ 56
Controlling Notes............................................ 47
Cooperative.................................................. 52
Corporation.................................................. i, 1
CPR.......................................................... 40
CPR Table.................................................... 40
Cutoff Date.................................................. ii
Cutoff Date Pool Balance..................................... 4
Dealer Agreements............................................ 32
Dealers...................................................... 32
Definitive Notes............................................. 52
Delinquency Percentage....................................... 66
Deposit Date................................................. 58
Depositaries................................................. 50
Designated Preferred Mortgage................................ 77
Direct Receivables........................................... 31
Distribution Date............................................ ii
DKB.......................................................... 35
DTC.......................................................... i
Due Date..................................................... 30
Duff & Phelps................................................ 10
83
TERM PAGE
------------------------------------------------------------- --------
Eligible Deposit Account..................................... 57
ERISA........................................................ 79
Euroclear.................................................... i, 52
Euroclear Operator........................................... 52
Euroclear Participants....................................... 52
Events of Default............................................ 47
Events of Servicing Termination.............................. 68
Exchange Act................................................. iii
Excluded Forced-Placed Insurance Premiums.................... 17
Excluded Precomputed Amounts................................. 17
FDIA......................................................... 14
FDIC......................................................... i
Fed.......................................................... 29
Federal Tax Counsel.......................................... 75
Final Scheduled Distribution Date............................ 6
Final Scheduled Maturity Date................................ 4
Financed Boats............................................... 3
FIRREA....................................................... 14
Foreign Investor............................................. 76
FTC Rule..................................................... 75
Genmar....................................................... 33
Indenture.................................................... ii, 2
Indenture Trustee............................................ ii
Indirect Receivables......................................... 31
Interest Accrual Period...................................... 5
Interest Rate................................................ 5
Investment Earnings.......................................... 58
IRS.......................................................... 75
Issuer....................................................... i, 1
Liquidated Receivable........................................ 64
Loss......................................................... 59
Marine Loans................................................. 17
MHC.......................................................... 35
Military Reservist Relief Act................................ 56
Monthly Advance.............................................. 7, 65
Moody's...................................................... 10
NADA......................................................... 33
Net Liquidation Proceeds..................................... 64
Net Loss Ratio............................................... 66
New Financed Boat............................................ 19
Note Pool Factor............................................. 45
Noteholder................................................... 51, 79
Noteholders.................................................. 4
Noteholders' Distributable Amount............................ 65
Noteholders' Interest Distributable Amount................... 65
84
TERM PAGE
------------------------------------------------------------- --------
Noteholders' Principal Carryover Shortfall................... 65
Noteholders' Principal Distributable Amount.................. 65
Notes........................................................ ii
Obligor...................................................... 7
OID.......................................................... 76
Oklahoma Tax Counsel......................................... 78
Original Pool Balance........................................ 4
Originator................................................... 31
Outstanding Principal Amount................................. 28, 29
Owner Trustee................................................ ii, 2
Paid-Ahead Account........................................... 39
Paid-Ahead Amounts........................................... 9
Paid-Ahead Period............................................ 39
Paid-Ahead Precomputed Receivable............................ 39
Paid-Ahead Simple Interest Receivable........................ 39
Participants................................................. ii
Paying Agent................................................. 57
Payment Shortfall............................................ 8
Permitted Investments........................................ 58
Plan Asset Regulation........................................ 80
Plan Assets.................................................. 79
Plans........................................................ 79
Pool Balance................................................. 4
Precomputed Receivables...................................... 30
Preferred Mortgage........................................... 72
Prepayments.................................................. 37
Principal Balance............................................ 4, 63
Principal Distributable Amount............................... 63
Principal Prepayment......................................... 64
Qualified Institution........................................ 57
Qualified Trust Institution.................................. 57
Rating Agencies.............................................. 10
Receivables.................................................. 17
Receivables Pool............................................. 17
Record Date.................................................. 4
Regional Centers............................................. 32
Registration Statement....................................... iii
Relief Act Reduction......................................... 56
Repurchase Amount............................................ 56
Repurchased Receivable....................................... 63
Reserve Account.............................................. 6
Reserve Account Initial Deposit.............................. 6
Rule of 78's................................................. 30
Rule of 78's Receivables..................................... 30
Rules........................................................ 51
85
TERM PAGE
------------------------------------------------------------- --------
Sale and Servicing Agreement................................. 3, 64
Schedule of Receivables...................................... 55
Securities Act............................................... iii
Sellers...................................................... i, 1
Servicer..................................................... ii, 1
Servicer Payment............................................. 9, 64-65
Servicing Fee................................................ 9
Servicing Fee Rate........................................... 9
Servicing Transfer........................................... 1
Servicing Transfer Agreements................................ 2
Settlement Date.............................................. 9
Ship Mortgage Statutes....................................... 72
Simple Interest Receivables.................................. 30
Soldiers' and Sailors' Civil Relief Act...................... 56
Specified Reserve Account Balance............................ 7
Standard & Poor's............................................ 10
Stockholders Agreement....................................... 35
Terms and Conditions......................................... 52
Transfer Agent and Registrar................................. 53
Transfer and Servicing Agreements............................ 55
Trust........................................................ i, 1
Trust Accounts............................................... 57
Trust Agreement.............................................. 1
UCC.......................................................... 71
Underwriters................................................. 80
Underwriting Agreement....................................... 80
U.S.......................................................... 75
U.S. Documentable Boats...................................... 72
Used Financed Boat........................................... 19
86
ANNEX A
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Chase
Manhattan Marine Owner Trust 1997-A Class A-1 % Asset Backed Notes, Class
A-2 % Asset Backed Notes, Class A-3 % Asset Backed Notes, Class A-4
% Asset Backed Notes, Class A-5 % Asset Backed Notes, Class A-6
% Asset Backed Notes, Class B % Asset Backed Notes and Class C
% Asset Backed Notes (the 'GLOBAL NOTES') to be issued will be available
only in book-entry form. Investors in the Global Notes may hold Global Notes
through any of The Depository Trust Company ('DTC'), Cedel or Euroclear. The
Global Notes will be tradeable as home market instruments in both the European
and U.S. domestic markets. Initial settlement and all secondary trades will
settle in same-day funds.
Secondary market trading between investors holding Global Notes 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 Notes through DTC
will be conducted according to the rules and procedures applicable to U.S.
corporate debt obligations.
Secondary cross-market trading between Cedel or Euroclear and DTC
Participants holding Global Notes will be effected on a delivery-against-payment
basis through the respective Depositaries of Cedel and Euroclear (in such
capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Notes 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 corporation
organizations or their participants.
INITIAL SETTLEMENT
All Global Notes will be held in book-entry form by DTC in the name of Cede
& Co. as nominee of DTC. Investors' interests in the Global Notes will be
represented through financial institutions acting on their behalf as direct and
indirect Participants in DTC. As a result, Cedel and Euroclear will hold
positions on behalf of their participants through their respective Depositaries,
which in turn will hold such positions in accounts as DTC Participants.
Investors electing to hold their Global Notes through DTC will follow the
settlement practice applicable to U.S. corporate debt obligations. Investor
securities custody accounts will be credited with the holdings against payment
in same-day funds on the settlement date.
Investors electing to hold their Global Notes through Cedel or Euroclear
accounts will follow the settlement procedures applicable to conventional
eurobonds, except that there will be no temporary global security and no
'lock-up' or restricted period. Global Notes will be credited to the securities
custody accounts on the settlement date against payment in same-day funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to U.S. corporate
debt obligations in same-day funds.
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
Notes 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 Depositary to receive the Global Notes against
payment. Payment will include interest
A-1
accrued on the Global Notes from and including the last coupon payment date to
and excluding the settlement date. Payment will then be made by the respective
Depositary to the DTC Participant's account against delivery of the Global
Notes. After settlement has been completed, the Global Notes will be credited to
the respective clearing system and by the clearing system, in accordance with
its usual procedures, to the Cedel Participant's or Euroclear Participant's
account. The Global Notes credit will appear the next day (European time) and
the cash debit will be backed-valued to, and the interest on the Global Notes
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 debit 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 Notes
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
Notes would incur overdraft charges for one day, assuming they cleared the
overdraft when the Global Notes were credited to their accounts. However,
interest on the Global Notes would accrue from the value date. Therefore, in
many cases the investment income on the Global Notes earned during the 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 Notes to the
respective Depositary for the benefit of Cedel Participants or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC Participant a cross-market transaction will
settle no differently than a trade between two DTC Participants.
Trading between Cedel or Euroclear seller and DTC purchaser. Due to time
zone differences in their favor, Cedel Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global Notes are
to be transferred by the respective clearing system, through the respective
Depositary, to a DTC Participant. The seller will send instructions to Cedel or
Euroclear through a Cedel Participant or Euroclear Participant at least one
business day prior to settlement. In these cases, Cedel or Euroclear will
instruct the respective Depositary, as appropriate, to deliver the bonds to the
DTC Participant's account against payment. Payment will include interest accrued
on the Global Notes from and including the last coupon payment date to and
excluding the settlement date. The payment will then be reflected in the account
of the Cedel Participant or Euroclear Participant the following day, and receipt
of the cash proceeds in the Cedel Participant's or Euroclear Participant's
account would be back-valued to the value date (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 debit in anticipation of receipt of the sale proceeds in its
account, the back-valuation will extinguish any overdraft charges incurred over
that one-day period. If settlement is not completed on the intended value date
(i.e., the trade fails), receipt of the cash proceeds in the Cedel Participant's
or Euroclear Participant's account would instead be valued as of the actual
settlement date.
Finally, day traders that use Cedel or Euroclear and that purchase Global
Notes 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-2
(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 custom procedures;
(b) borrowing the Global Notes in the U.S. from a DTC Participant no
later than one day prior to settlement, which would give the Global Notes
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 INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Notes holding securities through Cedel or
Euroclear (or through DTC if the holder has an address outside the U.S.) will be
subject to the 30% U.S. withholding tax that generally applies to payments of
interest (including original issue discount) on registered debt issued by U.S.
Persons, unless (i) each clearing system, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or business
in the chain of intermediaries between such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of the
Notes 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 Notes
and who reside 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 of Reduced Rate Certificate). If
the treaty provides only for a reduced rate, withholding tax will be
imposed at that rate unless the filer alternatively files Form W-8. Form
1001 may be filed by such beneficial owner 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 beneficial owner of
a Global Note 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, (iii) an estate the income
of which is includible in gross income for United States tax purposes regardless
of its source or (iv) a trust if a court within the United States is able to
exercise primary supervision over the administration of such trust and one or
more United States fiduciaries have the authority to control all substantial
decisions of such trust. This summary does not deal with all aspects of U.S.
federal income tax withholding that may be relevant to foreign holders of the
Global Notes. Investors are advised to consult their own tax advisors for
specific tax advice concerning their holding and disposing of the Global Notes.
A-3
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE SELLERS, THE SERVICER OR BY THE UNDERWRITERS.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE SELLERS, THE SERVICER OR THE RECEIVABLES SINCE THE DATE HEREOF OR
THEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR A SOLICITATION BY
ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR
TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
- ------------------------------------------------------------
TABLE OF CONTENTS
Summary of Terms.................................................. 1
Risk Factors...................................................... 11
The Trust......................................................... 16
The Receivables Pool.............................................. 19
Chase and Chase USA............................................... 34
The CIT Group/Sales Financing, Inc., Servicer..................... 34
Use of Proceeds................................................... 37
Weighted Average Life of the Notes................................ 37
Note Pool Factors and Trading Information......................... 45
Description of the Notes.......................................... 45
Certain Information Regarding
the Notes....................................................... 50
Description of the Certificates................................... 56
Description of the Transfer and Servicing Agreements.............. 57
Certain Legal Aspects of the Receivables.......................... 71
Certain Federal Income Tax Consequences........................... 75
Certain State Tax Consequences.................................... 78
ERISA Considerations.............................................. 79
Underwriting...................................................... 80
Legal Matters..................................................... 81
Index of Terms.................................................... 82
Annex A........................................................... A-1
Until January , 1998 (90 days after the date of this Prospectus), all dealers
effecting transactions in the Notes, whether or not participating in this
distribution, may be required to deliver this Prospectus. This delivery
requirement is in addition to the obligation of dealers to deliver this
Prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
PROSPECTUS
$266,262,029.25
CHASE MANHATTAN MARINE
OWNER TRUST 1997-A
$238,300,000.00
CLASS A ASSET BACKED NOTES
$10,650,000
CLASS B ASSET BACKED NOTES
$17,312,029.25
CLASS C ASSET BACKED NOTES
CHASE MANHATTAN BANK USA, NATIONAL ASSOCIATION
THE CHASE MANHATTAN BANK
SELLERS
THE CIT GROUP/SALES FINANCING, INC.
SERVICER
UNDERWRITERS OF THE CLASS A NOTES
CHASE SECURITIES INC.
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
UNDERWRITER OF THE CLASS B NOTES AND CLASS C NOTES
CHASE SECURITIES INC.
OCTOBER , 1997
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Estimated expenses in connection with the offering of the Notes being
registered hereunder (other than underwriting discounts and commissions) are
estimated as follow:
Registration Fee............................... $ 80,685.46
Legal Fees and Expenses........................ 175,000.00
Accounting Fees and Expenses................... 25,000.00
Blue Sky Fees and Expenses..................... 5,000.00
Rating Agency Fees............................. 191,444.12
Trustee's Fees and Expenses.................... 20,000.00
Printing ..................................... 75,000.00
Miscellaneous.................................. 870.42
-----------
Total ...................................... $573,000.00
===========
Item 15. Indemnification of Directors and Officers.
In addition to the indemnification provisions set forth below, directors
and officers liability insurance policies presently exist that insure directors
and officers of Chase Manhattan Bank USA, National Association, a national
banking association having its principal executive offices in Wilmington,
Delaware ("Chase USA") and The Chase Manhattan Bank, a New York banking
corporation having its principal executive offices in New York, New York
("Chase"), their parent and certain of their subsidiaries. The policies cover
losses for which Chase USA, Chase, their parent and certain of their
subsidiaries shall be required or permitted by law to indemnify directors and
officers and which result from claims made against such directors or officers
based upon the commission of wrongful acts in the performance of their duties.
The policies also cover losses that the directors or officers must pay as the
result of claims brought against them based upon the commission of wrongful acts
in the performance of their duties and for which they are not indemnified by
Chase USA, Chase, their parent or any of those subsidiaries. The losses covered
by the policies are subject to certain exclusions and do not include fines or
penalties imposed by law or other matters deemed uninsurable under the law. The
policies contain self-insured retention provisions.
Pursuant to the terms of the Underwriting Agreements and an indemnification
agreement among the Sellers, the Underwriters and CITSF, the Underwriters and
CITSF, respectively, will agree to indemnify each controlling person, director
and officer of the Sellers against certain liabilities under the Securities Act,
or contribute to payments such persons may be required to make in respect
thereof.
Chase USA: Article TENTH of the Articles of Association of Chase USA
("Chase USA") provide that any person who was or is made a party or is
threatened to be made a party to or is otherwise involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative (a
"proceeding"), by reason of the fact that he or she is or was a director or
officer of Chase USA or is or was serving at the request of Chase USA as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to an
employee benefit plan (an "indemnitee"), whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee or agent
or in any other capacity while serving as a director, officer, employee or
agent, shall be indemnified and held harmless by Chase USA to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits Chase USA to provide broader indemnification rights
than permitted prior thereto), against all expense, liability and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid in settlement) reasonably incurred or suffered by such
indemnitee in connection therewith and such indemnification shall continue as to
an indemnitee who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the indemnitee's heirs, executors and
administrators; provided, however, that, except as provided in the second
following paragraph with respect to proceedings to enforce rights to
indemnification, Chase USA shall indemnify any such indemnitee in connection
with a proceeding (or part thereof) initiated by such indemnitee only if such
proceeding (or part thereof) was authorized by the board of directors of Chase
USA.
The rights to indemnification described in the immediately preceding
paragraph shall include the right to be paid by Chase USA the expenses incurred
in defending any proceeding for which such right to indemnification is
applicable in advance of its final disposition (hereinafter an "advancement of
expenses"); provided, however, that, if the Delaware General Corporation Law
requires, an advancement of expenses incurred by an indemnitee in his or her
capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such indemnitee, including, without limitation,
service to an employee benefit plan) shall be made only upon delivery to Chase
USA of an undertaking (hereinafter an "undertaking"), by or on behalf of such
indemnitee, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is no further right to
appeal (hereinafter a "final adjudication") that such indemnitee is not entitled
to be indemnified for such expenses under such Article TENTH or otherwise.
The rights to indemnification and to the advancement of expenses described
in the two preceding paragraphs are contract rights. If a claim under either of
such paragraphs is not paid in full by Chase USA within sixty days after a
written claim has been received by Chase USA (except in the case of a claim for
an advancement of expenses, in which case the applicable period shall be twenty
days), the indemnitee may at any time thereafter bring suit against Chase USA to
recover the unpaid amount of the claim. If successful in whole or in part in any
such
II-1
suit, or in a suit brought by Chase USA to recover an advancement of expenses
pursuant to the terms of an undertaking, the indemnitee shall be entitled to be
paid also the expense of prosecuting or defending such suit. In any suit brought
by the indemnitee to enforce a right to indemnification under such Article TENTH
(but not in a suit brought by the indemnitee to enforce a right to an
advancement of expenses) it shall be a defense that, and in any suit by Chase
USA to recover an advancement of expenses pursuant to the terms of an
undertaking, Chase USA shall be entitled to recover such expense upon a final
adjudication that, the indemnitee has not met any applicable standard for
indemnification set forth in the Delaware General Corporation Law. Neither the
failure of Chase USA (including its board of directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such suit that indemnification of the indemnitee is proper in
the circumstances because the indemnitee has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by Chase USA (including its board of directors, independent legal
counsel, or its stockholders) that the indemnitee has not met such applicable
standard of conduct, shall create a presumption that the indemnitee has not met
such applicable standard of conduct or, in the case of such a suit brought by
the indemnitee, be a defense to such suit. In any suit brought by the indemnitee
to enforce a right to indemnification or to an advancement of expenses under
such Article TENTH, or by Chase USA to recover an advancement of expenses
pursuant to the terms of an undertaking, the burden of proving that the
indemnitee is not entitled to be indemnified, or to such advancement of
expenses, under such Article TENTH or otherwise shall be on Chase USA.
Article TENTH of Chase USA's Articles of Association also provides that the
foregoing right of indemnification or reimbursement shall not be exclusive of
other rights to which any person may be entitled under any statute, Articles of
Association, by-law, agreement, or vote of stockholders or disinterested
stockholders or otherwise. Section 145 of the Delaware General Corporation Law
provides that a Delaware corporation must indemnify a director or officer who
has defended successfully, on the merits or otherwise, any proceeding against
him or any claim, matter or issue therein, for reasonable expenses actually
incurred in such defense.
Article 7 of the Business Corporation Law of the State of New York,
Sections 721 through 726, provides, under certain circumstances, for
indemnification of directors and officers of a corporation who are made or
threatened to be made, a party to an action or proceeding (other than one by or
in the right of a corporation to procure a judgment in its favor), whether civil
or criminal, by reason of their service as an officer or director of a
corporation against judgments, fines, amounts paid in settlement and reasonable
expenses, including attorneys' fees actually and necessarily incurred as a
result of such action or proceeding or any appeal therein. Article 7 of the New
York Business Corporation Law also provides that the statutory indemnification
provisions are nonexclusive, but prohibits indemnification if a judgment or
other final adjudication adverse to the director or officer of a corporation
establishes that the officer's or director's acts were committed in bad faith or
were the result of active and deliberate dishonesty and were material to the
cause of action so adjudicated, or that such director or officer personally
gained in fact a financial profit or other advantage to which the officer or
director was not legally entitled, or that would be inconsistent with the laws
of the jurisdiction of incorporation (in the case of corporations formed under
the laws of any jurisdiction other than New York), the corporation's certificate
of incorporation, by-laws, resolutions or other proper corporate action or any
court settlement.
Chase: Article VII of Chase's By-Laws provides that Chase shall, to the
fullest extent permitted by applicable law as then in effect, indemnify any
person (the "indemnitee") who was or is involved in any manner (including,
without limitation, as a party or a witness), or is threatened to be made so
involved, in any threatened pending or completed investigation, claim, action,
suit or proceeding, whether civil, administrative or investigative (including,
without limitation, any action , suit or proceeding by or in the right of Chase
to procure a judgment in its favor) (a "proceeding") by reason of the fact that
he is or was a director, officer, employee or agent of Chase, or is or was
serving at the request of Chase as a director, officer or employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against all expense (including attorney's fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection with
such proceeding. Article VII provides that the foregoing indemnification shall
be a contract right and shall include the right to receive payment in advance of
any expenses incurred by the indemnitee in connection with such proceeding,
consistent with the provisions of applicable law as then in effect.
Article VII further provides that Chase may enter into contracts with any
director, officer, employee or agent of Chase in furtherance of the provisions
thereof and may create a trust fund, grant a security interest or use other
means (including, without limitation a letter of credit) to ensure the payment
of such amounts as may be necessary to effect indemnification under Article VII.
Article VII expressly provides that the right of indemnification and
advancement of expenses thereunder shall not be exclusive of any other rights to
which a person seeking indemnification may otherwise be entitled, under any
statute, by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office.
II-2
Item 16. Exhibits.
(a) Exhibits:
1.1(A) -- Class A Underwriting Agreement (Class A Notes).
1.1(B) -- Class B and Class C Underwriting Agreement (Class B and Class C Notes).
3.1(A) -- Articles of Association of Chase USA.
3.1(B) -- Restated Organization Certificate of Chase.
3.2(A) -- By-laws of Chase USA.
3.2(B) -- By-laws of Chase.
4.1 -- Sale and Servicing Agreement.
4.2 -- Indenture.
4.3(A) -- Certificate of Trust.
4.3(B) -- Amended and Restated Trust Agreement.
4.4(A) -- Chase Administration Agreement.
4.4(B) -- CITSF Administration Agreement.
5.1 -- Opinion of Simpson Thacher & Bartlett with respect to legality.
8.1 -- Opinion of Simpson Thacher & Bartlett with respect to U.S. federal tax matters.
8.2 -- Opinion of Crowe & Dunlevy, P.C. with respect to Oklahoma state tax matters.
10.1 -- Amended and Restated Servicing Agreement.
23.1 -- Consent of Simpson Thacher & Bartlett (included as part of Exhibit 5.1).
23.2 -- Consent of Simpson Thacher & Bartlett (included as part of Exhibit 8.1).
24.1(A) -- Powers of Attorney of directors and officers of Chase USA.*
24.1(B) -- Powers of Attorney of directors and officers of Chase.*
25.1 -- Statement of Eligibility of Trustee on Form T-1.**
* Previously filed.
** Exhibit 7 to Form T-1 filed herewith was filed in paper pursuant to a
continuing hardship exemption.
(b) Financial Statements:
Not applicable.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes that:
(a) That, for purposes of determining any liability under the Act, each
filing of a Registrant's annual report pursuant to Section 13(a) or
15(d) of the Exchange Act (and, where applicable, each filing of a
employee benefit plan's annual report pursuant to Section 15(d) of the
Exchange Act) with respect to any Trust that is incorporated by
reference in the Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(b) To provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in such denominations and
registered in such names as required by the Underwriters to permit
prompt delivery to each purchaser.
(c) That, insofar as indemnification for liabilities arising under the Act
may be permitted to directors, offices and controlling persons of a
Registrant pursuant to the foregoing provisions, or otherwise, the
Registrants have 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 a 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, such Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of
such issue.
(d) (1) That, for purposes of determining any liability under the
Act, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule
430A and contained in the 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 the registration
statement as of the time it was declared effective.
(2) That, for the purpose 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 the time shall be deemed to be the
initial bona fide offering thereof.
II-3
SIGNATURES FOR CHASE USA
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment
No. 1 to Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Wilmington, State of Delaware, on
October 10, 1997.
CHASE MANHATTAN BANK USA, NATIONAL ASSOCIATION
By: /s/ Keith Schuck
-----------------------------------------
Keith Schuck
Controller
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed on October 10, 1997 by the
following persons in the capacities indicated.
Signature Title
- --------- -----
* Chairman of the Board and Director
- ------------------------------ and Chief Executive Officer
Donald L. Boudreau
* President and Director
- ------------------------------
Michael J. Barrett
* Director
- ------------------------------
Luke S. Hayden
* Director
- ------------------------------
John J. Hehir, Jr.
* Director
- ------------------------------
William H. Hoefling
* Director
- ------------------------------
Kevin T. Hurley
* Director
- ------------------------------
Thomas Jacob
* Director
- ------------------------------
John M. Nuzum, Jr.
/s/ Keith Schuck Controller (Principal Accounting
- ------------------------------ Officer and Principal Financial Officer)
Keith Schuck
* Director
- ------------------------------
Michael Urkowitz
* The undersigned, by signing his name hereto, does hereby sign this
Amendment No. 1 to Registration Statement on behalf of the above-indicated
directors and officers of the Registrant pursuant to powers of attorney
signed by such officers and directors.
By: /s/ Keith Schuck
------------------------------
Keith Schuck
Attorney-in-Fact
M
II-4
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment
No. 1 to Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, State of New York, on
October 10, 1997.
THE CHASE MANHATTAN BANK
By: /s/ Deborah L. Duncan
-----------------------------
Deborah L. Duncan
Executive Vice President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed on October 10, 1997 by the
following persons in the capacities indicated.
Signature Title
- --------- -----
* Chairman of the Board and Director
- ------------------------------ and Chief Executive Officer
Walter V. Shipley
* Director
- ------------------------------
Frank A. Bennack Jr.
* Director
- ------------------------------
Susan V. Berresford
* Director
- ------------------------------
M. Anthony Burns
Director
- ------------------------------
H. Laurance Fuller
* Director
- ------------------------------
Melvin R. Goodes
* Director
- ------------------------------
William H. Gray, III
* Director
- ------------------------------
George V. Grune
* Director and Vice Chairman of the Board
- ------------------------------
William B. Harrison Jr.
* Director
- ------------------------------
Harold S. Hook
* Director
- ------------------------------
Helene L. Kaplan
* Director, President and Chief
- ------------------------------ Operating Officer
Thomas G. Labrecque
* Director
- ------------------------------
Henry B. Schacht
* Controller (Principal Accounting
- ------------------------------ Officer)
Joseph L. Sclafani
* The undersigned, by signing his name hereto, does hereby sign this
Amendment No. 1 to Registration Statement on behalf of the above-indicated
directors and officers of the Registrant pursuant to powers of attorney
signed by such officers and directors.
By: /s/ Deborah L. Duncan
------------------------------
Deborah L. Duncan
Attorney-in-Fact
M
II-5
SIGNATURES FOR CHASE
Signature Title
- --------- -----
* Director
- ------------------------------
Andrew C. Sigler
* Director
- ------------------------------
John R. Stafford
* Executive Vice President
- ------------------------------ (Principal Financial Officer)
Peter J. Tobin
* Director
- ------------------------------
Marina v.N. Whitman
* The undersigned, by signing his name hereto, does hereby sign this
Amendment No. 1 to Registration Statement on behalf of the above-indicated
directors and officers of the Registrant pursuant to powers of attorney
signed by such officers and directors.
By: /s/ Deborah L. Duncan
------------------------------
Deborah L. Duncan
Attorney-in-Fact
M
II-6
INDEX TO EXHIBITS
Exhibit Sequentially
Number Exhibit Numbered Page
- ------ ------- -------------
1.1(A) -- Class A Underwriting Agreement (Class A Notes).
1.1(B) -- Class B and Class C Underwriting Agreement (Class B and Class C Notes).
3.1(A) -- Articles of Association of Chase USA.
3.1(B) -- Restated Organization Certificate of Chase.
3.2(A) -- By-laws of Chase USA.
3.2(B) -- By-laws of Chase.
4.1 -- Sale and Servicing Agreement.
4.2 -- Indenture.
4.3(A) -- Certificate of Trust.
4.3(B) -- Amended and Restated Trust Agreement.
4.4(A) -- Chase Administration Agreement.
4.4(B) -- CITSF Administration Agreement.
5.1 -- Opinion of Simpson Thacher & Bartlett with respect to legality.
8.1 -- Opinion of Simpson Thacher & Bartlett with respect to federal tax matters.
8.2 -- Opinion of Crowe & Dunlevy, P.C. with respect to Oklahoma state tax matters.
10.1 -- Amended and Restated Servicing Agreement.
23.1 -- Consent of Simpson Thacher & Bartlett (included as part of Exhibit 5.1).
23.2 -- Consent of Simpson Thacher & Bartlett (included as part of Exhibit 8.1).
24.1(A) -- Powers of Attorney of directors and officers of Chase USA.*
24.1(B) -- Powers of Attorney of directors and officers of Chase.*
25.1 -- Statement of Eligibility of Trustee on Form T-1.**
- ----------
* Previously filed.
** Exhibit 7 to Form T-1 filed herewith was filed in paper pursuant to a
continuing hardship exemption.
M
II-7