-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SeV7Zbrt7NKAcOAoy/2n+1XxjdHYTcsrbcMANUDFQjc7p0oseWCxmr17A5h/2Ypy MCbBCOwBWaHTC1E+IwqvNw== 0000912057-00-025804.txt : 20000523 0000912057-00-025804.hdr.sgml : 20000523 ACCESSION NUMBER: 0000912057-00-025804 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 14 FILED AS OF DATE: 20000522 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARLEY DAVIDSON CUSTOMER FUNDING CORP CENTRAL INDEX KEY: 0001114926 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-37550 FILM NUMBER: 641128 BUSINESS ADDRESS: STREET 1: 4150 TECHNOLOGY WAY CITY: CARSON CITY STATE: NV ZIP: 89706 BUSINESS PHONE: 7758863200 MAIL ADDRESS: STREET 1: 4150 TECHNOLOGY WAY CITY: CARSON CITY STATE: NV ZIP: 89706 S-3 1 S-3 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 22, 2000 REGISTRATION NO. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 HARLEY-DAVIDSON MOTORCYCLE TRUSTS (Issuer with respect to the Securities) HARLEY-DAVIDSON CUSTOMER FUNDING CORP. (Sponsor of the Trusts described herein) (Exact name of Registrant as specified in its charter) NEVADA APPLIED FOR (STATE OR OTHER JURISDICTION OF (IRS EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 4150 TECHNOLOGY WAY CARSON CITY, NEVADA 89706 (775) 886-3200 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) DONNA F. ZARCONE PRESIDENT AND CHIEF OPERATING OFFICER HARLEY-DAVIDSON CREDIT CORP. 150 SOUTH WACKER DRIVE SUITE 3100 CHICAGO, ILLINOIS 60606 (775) 886-3200 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) COPIES OF ALL COMMUNICATIONS TO: M. DAVID GALAINENA WINSTON & STRAWN 35 WEST WACKER DRIVE CHICAGO, ILLINOIS 60601 (312) 558-5600 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as practicable after the registration statement becomes effective. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. / / If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. /X/ If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective 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 ================================== ================== ======================== ====================== ======================== TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF REGISTERED REGISTERED(1) PER UNIT(2) PRICE REGISTRATION FEE - ---------------------------------- ------------------ ------------------------ ---------------------- ------------------------ - ---------------------------------- ------------------ ------------------------ ---------------------- ------------------------ Harley-Davidson Motorcycle Contract Backed Notes and Certificates $10,000,000 100% $10,000,000 $2,640.00 ================================== ================== ======================== ====================== ========================
(1) The amount of Securities being registered represents the maximum aggregate principal amount of Securities currently expected to be offered for sale. $190,000,000 aggregate principal amount of the Securities registered by the Registrant under Registration Statement No. 333-62849 referred to below and not previously sold are consolidated in this Registration Statement pursuant to Rule 429. All registration fees in the amount of $354,000 in connection with such unsold amount of Securities have previously been paid under Registration Statement No. 333-62849. The total amount registered under this Registration Statement as so consolidated as of the date of this filing is $200,000,000. (2) Estimated solely for purposes of calculating the registration fee. Pursuant to Rule 429 under the Securities Act of 1933, the prospectus and prospectus supplement filed as part of this Registration Statement also relate to $190,000,000 principal amount of Securities previously registered by the Registrant under its Registration Statement on Form S-3 (File No. 333-62849). THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. INTRODUCTORY NOTE This registration statement contains (i) a prospectus relating to the offering of one or more series of Harley-Davidson Motorcycle Contract Backed Notes and/or Harley-Davidson Motorcycle Contract Backed Certificates by various Harley-Davidson Motorcycle Trusts created from time to time by Harley-Davidson Credit Corp. and (ii) two forms of prospectus supplement relating to the offering by a Harley-Davidson Motorcycle Trust of Harley-Davidson Motorcycle Contract Backed Notes and/or Harley-Davidson Motorcycle Contract Backed Certificates described in the forms of prospectus supplement. The forms of prospectus supplement relate only to the securities described therein and are forms that may be used by the Harley-Davidson Motorcycle Trusts to offer Harley-Davidson Motorcycle Contract Backed Notes and/or Harley-Davidson Motorcycle Contract Backed Certificates under this registration statement. SUBJECT TO COMPLETION, DATED MAY 22, 2000 PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED [______________] THE INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. HARLEY-DAVIDSON MOTORCYCLE TRUST [_____] ISSUER $[ ] [ ]% HARLEY-DAVIDSON MOTORCYCLE CONTRACT BACKED NOTES, CLASS A-1 $[ ] [ ]% HARLEY-DAVIDSON MOTORCYCLE CONTRACT BACKED NOTES, CLASS A-2 $[ ] [ ]% HARLEY-DAVIDSON MOTORCYCLE CONTRACT BACKED NOTES, CLASS B HARLEY-DAVIDSON CUSTOMER FUNDING CORP. DEPOSITOR HARLEY-DAVIDSON CREDIT CORP. SELLER AND SERVICER CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-10 IN THIS PROSPECTUS SUPPLEMENT AND ON PAGE 9 OF THE PROSPECTUS. The notes will represent obligations of the Harley-Davidson Motorcycle Trust [ ] only, and will not represent obligations of or interests in Harley-Davidson Financial Services, Inc., Harley-Davidson Credit Corp., Harley-Davidson Customer Funding Corp., Harley-Davidson, Inc. or any of their respective affiliates. This prospectus supplement may be used to offer and sell the notes only if accompanied by the prospectus. The notes are contract backed notes issued by the trust. The assets underlying the notes are fixed-rate, simple interest, conditional sales contracts relating to the purchase of new or used motorcycles. ------------------------- THE TRUST WILL ISSUE THE FOLLOWING CLASSES OF NOTES:
- ------------------------------------------------------------------------------------------------------------ FINAL UNDERWRITING PRINCIPAL INTEREST FIRST PAYMENT SCHEDULED PRICE TO DISCOUNT PER PROCEEDS TO CLASS AMOUNT RATE DATE PAYMENT DATE PUBLIC NOTE ISSUER - ------------------------------------------------------------------------------------------------------------ A-1 $__________ ___% ___________ _____________ ______ ______ ______ - ------------------------------------------------------------------------------------------------------------ A-2 $__________ ___% ___________ _____________ ______ ______ ______ - ------------------------------------------------------------------------------------------------------------ B $__________ ___% ___________ _____________ ______ ______ ______ - ------------------------------------------------------------------------------------------------------------
The total price to the public is $ ------------------------------------- The total underwriting discount is $ ----------------------------------- The total proceeds to the depositor are $ ------------------------------ Credit Enhancement: - Reserve fund with an initial deposit of $_________. - Subordination of the Class A-2 notes to the Class A-1 notes as described in this prospectus supplement. - Subordination of the Class B notes to the Class A notes as described in this prospectus supplement. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. [UNDERWRITERS] Prospectus Supplement dated [______________] TABLE OF CONTENTS PROSPECTUS SUPPLEMENT
PAGE ---- Prospectus Supplement Summary.....................................................................................S-1 Risk Factors......................................................................................................S-10 The Trust.........................................................................................................S-13 The Seller And The Servicer.......................................................................................S-15 Use Of Proceeds...................................................................................................S-15 The Contracts.....................................................................................................S-15 Yield And Prepayment Considerations...............................................................................S-25 The Depositor.....................................................................................................S-25 Description Of The Notes..........................................................................................S-25 General....................................................................................................S-26 Optional Redemption........................................................................................S-27 Mandatory Redemption Following the Funding Period..........................................................S-27 Certain Information Regarding The Notes...........................................................................S-28 The Accounts...............................................................................................S-28 Determination of Outstanding Principal Balances............................................................S-31 Payments and Distributions on the Notes....................................................................S-32 Material Federal Income Tax Consequences..........................................................................S-34 ERISA Considerations..............................................................................................S-35 Legal Proceedings.................................................................................................S-36 Underwriting......................................................................................................S-36 Ratings Of The Securities.........................................................................................S-38 Legal Matters.....................................................................................................S-38 Experts...........................................................................................................S-38 Reports To Noteholders............................................................................................S-38 Global Clearance, Settlement And Tax Documentation Procedures.....................................................S-40 Glossary Of Terms.................................................................................................S-45
i READING THE PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS We provide information to you about the notes in two separate documents that offer varying levels of detail: * prospectus -- provides general information, some of which may not apply to the notes; and * prospectus supplement -- provides specific information relating to the terms of the notes. To the extent that any statements in this prospectus supplement differ from or modify statements in the prospectus, you should rely on the information in this prospectus supplement. References to "we", "our" and "us" refer to Harley-Davidson Customer Funding Corp. We include cross-references in this prospectus supplement and the accompanying prospectus to captions in these materials where you can find further related discussions. The Table of Contents of this prospectus supplement provides pages on which these captions are located. You can find a glossary of the principal capitalized terms used in this prospectus supplement beginning on page S-45 of this prospectus supplement. If you have received a copy of this prospectus supplement and the accompanying prospectus in an electronic format, and if the legal prospectus delivery period has not expired, you may obtain a paper copy of this prospectus supplement and the accompanying prospectus from Harley-Davidson Credit Corp. or any of the underwriters by asking any of them for it. ii PROSPECTUS SUPPLEMENT SUMMARY This summary highlights selected information from this prospectus supplement and does not contain all the information that you need to consider in making an investment decision. To understand all of the terms of the offering of the notes, you should read this entire prospectus supplement and the accompanying prospectus before making an investment decision. In addition, you may wish to read the documents governing the transfers and servicing of the contracts, the formation of the trusts and the issuance of the securities. Those documents have been filed as exhibits to the registration statement. There are material risks associated with an investment in the securities. See "RISK FACTORS" in this prospectus supplement and in the accompanying prospectus for a discussion of factors you should consider before investing in the securities. The Issuer or the Trust......... Harley-Davidson Motorcycle Trust [ ]. Seller and Servicer............. Harley-Davidson Credit Corp., a 100% owned subsidiary of Harley-Davidson Financial Services, Inc. Depositor....................... Harley-Davidson Customer Funding Corp., a 100% owned subsidiary of Harley-Davidson Credit Corp. Trustee......................... [ ], will be the trustee for the Trust. Indenture Trustee............... [ ]. The indenture trustee will also act as paying agent under the indenture and the trust agreement. Closing Date.................... On or about [ ]. TERMS OF THE NOTES:
AGGREGATE PRINCIPAL CLASS AMOUNT INTEREST RATES Class A-1 notes % Class A-2 notes % Class B notes %
The notes represent indebtedness of the trust secured by the assets of the trust. Payment Dates................... The trust will pay interest and principal on the notes on the [ ] day of each month or if that day is not a business day, the next business day. The first payment date is [ ]. Record Dates.................... The day immediately preceding the payment date. Interest........................ INTEREST PERIODS: S-1 Interest on the notes will accrue in the following manner:
DAY COUNT FROM (INCLUDING) TO (EXCLUDING) CONVENTION ---------------- -------------- ---------- [ ] day of prior [ ] day of current 30/360 month month
The first interest period will begin on and include the closing date and end on and include [ ]. PAYMENT OF INTEREST: On each payment date the trust will pay interest on the notes which will be made from available collections and other amounts. Interest payments on the Class A-1 notes and Class A-2 notes will have the same priority. The trust will make interest payments on the Class B notes after paying interest on the Class A-1 notes and Class A-2 notes. See "CERTAIN INFORMATION REGARDING THE NOTES-- DISTRIBUTIONS ON THE NOTEs" and "DESCRIPTION OF THE NOTES--PAYMENTS OF INTEREST" for a discussion of the determination of the amounts available to pay interest. Principal....................... On each payment date, the trust will pay principal on the notes which will be made from available collections and other amounts. Generally, the trust will pay the principal of the Class A-1 notes until paid in full, and then on the Class A-2 notes until paid in full and then on the Class B notes until paid in full. See "CERTAIN INFORMATION REGARDING THE NOTES-- DISTRIBUTIONS ON THE NOTEs" and "DESCRIPTION OF THE NOTES--PAYMENTS OF PRINCIPAL" for a discussion of the determination of amounts available to pay principal. Final Scheduled Payment Dates................... The final scheduled payment dates of the notes are set forth on the cover of this prospectus supplement. If the notes have not already been paid in full, we will be obligated to pay the outstanding principal amount of the notes in full on their respective final scheduled payment dates. Certain circumstances could cause principal to be paid earlier or later, or in reduced amounts. See "DESCRIPTION OF THE NOTES--OPTIONAL REDEMPTION," S-2 "DESCRIPTION OF THE NOTES--MANDATORY REDEMPTION FOLLOWING THE FUNDING PERIOD" in this prospectus supplement and "DESCRIPTION OF THE NOTES AND THE INDENTURE--THE INDENTURE--EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT" in the prospectus. Optional Redemption............. The seller may cause the depositor to redeem the notes in full if the aggregate outstanding principal balance of the contracts owned by the trust declines to less than 10% of the sum of: - the aggregate outstanding principal balance of the contracts owned by the trust as of the closing date; and - the initial amount on deposit in the pre-funding account. The redemption price will be equal to the unpaid principal amount of the notes plus accrued interest thereon. See "DESCRIPTION OF THE NOTES--OPTIONAL REDEMPTION." Mandatory Special Redemption...................... The notes will be prepaid in part, without premium, on the payment date on or immediately following the last day of the funding period in the event that any amount remains on deposit in the pre-funding account. The aggregate principal amount of notes to be prepaid will be an amount equal to the amount then on deposit in the pre-funding account allocated pro rata. The Contracts and Other Assets of the Trust............. The property of the trust will be a pool of fixed-rate, simple interest conditional sales contracts relating to motorcycles manufactured by Harley-Davidson, Inc. and Buell Motorcycle Company, a wholly-owned subsidiary of Harley-Davidson, Inc. The contracts were originated by the seller indirectly through Harley-Davidson motorcycle dealers. Included in the trust's assets are security interests in the Harley-Davidson and Buell motorcycles securing the contracts and proceeds, if any, from certain insurance policies with respect to such motorcycles. The Contracts................... Our main source of funds for making payments on the notes will be collections on the contracts. The contracts sold to the trust will be selected from contracts in the depositor's portfolio based on the criteria specified in the transfer and sale agreement. The contracts arise and will arise from loans to obligors located in the 50 states of the United States, Canada, the District of Columbia and the U.S. Territories. S-3 On the closing date, pursuant to the sale and servicing agreement, the depositor will be obligated, subject only to the availability thereof, to sell, and the trust will be obligated to purchase, subject to the satisfaction of certain conditions set forth therein, subsequent contracts. Following the transfer of subsequent contracts to the trust, the aggregate characteristics of the entire pool of contracts may vary from those of the initial contracts as to the criteria identified and described above and in "THE CONTRACTS" herein. The last scheduled payment on the initial contract with the latest maturity will occur in [ ]. No contract (including any subsequent contract sold to the trust after the closing date) will have a scheduled maturity later than [ ]. However, an obligor can generally prepay its contract at any time without penalty. COMPOSITION OF THE INITIAL CONTRACTS (AS OF THE INITIAL CUTOFF DATE) Aggregate Principal Balance...................................$_______________ Number of Contracts.....................................................______ Average Principal Balance...........................................$_________ Weighted Average Annual Percentage Rate................................._____% (Range)......................................................___% to ___% Weighted Average Original Term (in months)............................._______ (Range)........................................................___ to ___ Weighted Average Calculated Remaining Term (in months)..................._____ (Range)........................................................___ to ___
GEOGRAPHIC CONCENTRATION
PRINCIPAL BALANCE STATE CONCENTRATION ----- ------------- [ ] ................ % [ ] ................ % [ ] ................ % [ ] ................ % [ ] ................ %
No other state represented more than 5% of the aggregate principal balance of the contracts as of the initial cutoff date. S-4 Reserve Fund.................... On the closing date, the depositor will establish a trust account in the name of the indenture trustee which we refer to as the "RESERVE FUND." The reserve fund provides you with limited protection in the event collections from obligors on the contracts are insufficient to make payment on the notes. We cannot assure you, however, that this protection will be adequate to prevent shortfalls in amounts available to make payments on the notes. The initial balance of the reserve fund will be $________. We will be required to maintain on deposit in the reserve fund on each payment date a specified amount as set forth under the caption "CERTAIN INFORMATION REGARDING THE NOTES--CALCULATION OF RESERVE FUND REQUIRED AMOUNT". If the amount on deposit in the reserve fund on any payment date is less than the required amount, the trust will use the funds available to it after payment of the base servicing fee, reimbursement of servicer advances and payment of interest and principal on the securities to make a deposit into the reserve fund. Amounts on deposit in the reserve fund on any payment date in excess of the required amount will be paid to the depositor. If on any payment date the funds available to the trust to pay principal and interest on the securities are insufficient to make payments on the notes, the trust will use funds in the reserve fund to cover any shortfalls. If on the final scheduled payment date of any class of notes, the principal balance of that class has not been paid in full, the trust will use funds in the reserve fund to pay those notes in full. Pre-Funding Account......................... On the closing date, we will fund an account called the pre-funding account by depositing $[ ] which will secure our obligations to purchase subsequent contracts from the seller and sell those contracts to the trust. The amount in the pre-funding account will be reduced by the amount used to purchase subsequent contracts from the seller. We expect that the pre-funded amount will be reduced to less than $150,000 by the payment date occurring in [ ]. Any pre-funded amount remaining at the end of this funding period will be paid to the noteholders as described above in "SUMMARY OF TERMS--MANDATORY SPECIAL REDEMPTION." S-5 Interest Reserve Account......................... On the closing date, we will fund an account called the interest reserve account by depositing $[ ] which will provide additional funds to account for the fact that the monthly investment earnings on amounts in the pre-funding account (until such amounts have been used to purchase subsequent contracts) are expected to be less than the weighted average of the interest payments on the notes, as well as the amount necessary to pay trustees' fees. In addition to the initial deposit, all investment earnings with respect to the pre-funding account will be deposited into the interest reserve account. The interest reserve account is not designed to provide any protection against losses on the contracts in the trust. After the funding period, money remaining in the interest reserve account will be paid to us. Ratings......................... On the closing date, the notes must have received ratings from Standard & Poor's Ratings Services, A Division of The McGraw-Hill Companies, and/or Moody's Investors Service, Inc. as set forth below:
STANDARD & POOR'S MOODY'S ----------------- ------- Class A-1 Class A-2 Class B
See "RATINGS OF THE NOTES." Advances........................ The servicer is obligated to advance each month an amount equal to accrued and unpaid interest on the contracts which was delinquent with respect to the related due period, but only to the extent that the servicer believes that the amount of such advance will be recoverable from collections on the contracts. The servicer will be entitled to reimbursement of its outstanding advances on any payment date by means of a first priority withdrawal of certain funds then held in the collection account. See "CERTAIN INFORMATION REGARDING THE NOTES--ADVANCES." Mandatory Repurchase by the Depositor................... Under the sale and servicing agreement, we have agreed, in the event of a breach of certain representations and warranties made by us which materially and adversely affects the trust's interest in any contract and which has not been cured, to repurchase such contract S-6 within two business days prior to the first determination date after the servicer, the trustee, the indenture trustee or we become aware of such breach. See "DESCRIPTION OF TRANSFER AND SERVICING AGREEMENTS--REPRESENTATIONS AND WARRANTIES MADE BY THE SELLER AND THE DEPOSITOR" in the prospectus. Servicing Fees.................. The servicer will be entitled to receive a monthly servicing fee equal to 1/12th of 1% of the principal balance of the contracts. The servicer will also be entitled to receive any extension fees or late payment penalty fees paid by obligors. The servicing fees will be paid to the servicer prior to any payments to the noteholders. See "CERTAIN INFORMATION REGARDING THE NOTES--SERVICING COMPENSATION AND REIMBURSEMENT OF SERVICER ADVANCES." Priority of Payments............ PRIOR TO ACCELERATION OF THE NOTES On each payment date prior to the acceleration of the notes, the trust will apply collections on the contracts received during the prior calendar month, servicer advances and funds transferred from the reserve fund to make the following payments in the following order of priority: - to the noteholders, the amount of any mandatory special redemption; - reimbursement of servicer advances; - servicing fee; - trustees' fees; - interest on the Class A notes; - interest on the Class B notes; - principal on the Class A-1 notes until paid in full; - principal on the Class A-2 notes until paid in full; - principal on the Class B notes until paid in full; S-7 - to the reserve fund, the amount, if any, needed to fund the reserve fund to the required amount; - any remaining amounts to the depositor as certificateholder under the trust agreement. AFTER ACCELERATION OF THE NOTES: On each payment date following an event of default under the indenture, all available amounts will be paid sequentially to retire each class of notes in full before principal is paid on the next class beginning with Class A-1. Credit Enhancement.............. The credit enhancement for the securities is as follows: Class A-1 notes: - subordination of the Class A-2 notes and Class B notes - reserve fund Class A-2 notes: - subordination of the Class B notes - reserve fund Class B notes: - reserve fund
Material Federal Income Tax Consequences................ Winston & Strawn, as federal tax counsel to the trust, has delivered its opinion that the notes will be characterized as debt for federal income tax purposes, and the trust will not be characterized as an association (or publicly traded partnership) taxable as a corporation. The purpose of obtaining the opinion of tax counsel is to provide investors with greater assurance regarding the character of the notes for federal income tax purposes and that the issuer of the notes will not be subject to federal income tax at the entity level. However, an opinon of tax counsel is not binding on the Internal Revenue Service and there is no assurance that the Internal Revenue Service will not disagree with the opinion of tax counsel. By purchasing a note, you will agree to treat your note as debt for federal, state and local income tax purposes. As a result, payments received by you will generally be treated as either interest or principal and you will not be considered an owner of an equity interest in the trust. The foregoing is a very general summary of material federal income tax matters. These general statements are subject to the qualifications, clarifications, assumptions and expanded discussion set forth in the accompanying prospectus and in this prospectus S-8 supplement under the heading "MATERIAL FEDERAL INCOME TAX CONSEQUENCES". ERISA Considerations............ The Class A notes are generally eligible for purchase by employee benefit plans and individual retirement accounts and similar arrangements, and by persons investing on behalf of or with plan assets of such plans, accounts and arrangements, subject to those considerations and exceptions discussed under "ERISA CONSIDERATIONS" in the accompanying prospectus and this prospectus supplement. The Class B notes are not eligible for purchase by employee benefit plans, individual retirement accounts or similar arrangements, or by persons investing on behalf of or with plan assets of such plans, accounts and arrangements. You should refer to "ERISA CONSIDERATIONS" in the accompanying prospectus and this prospectus supplement. If you are a benefit plan fiduciary considering a purchase of the notes you should, among other things, consult with your counsel in determining whether all required conditions have been satisfied. Marketing Address and Telephone Numbers of Principal Executive Offices......................... The mailing address of the seller is 150 South Wacker Drive, Chicago, Illinois 60606, telephone (312) 368-9501. The mailing address of the depositor is 4150 Technology Way, Carson City, Nevada 89706, telephone (775) 886-3200. The principal office of the trust is _____________, telephone ___________. S-9 RISK FACTORS The following risk factors and the risk factors in the accompanying prospectus describe the principal risk factors relating to an investment in the notes. You should carefully consider the following risks before you invest in the securities. You should also carefully consider the risk factors beginning on page 9 of the accompanying prospectus. SOME CLASSES OF SECURITIES WILL BE ENTITLED TO INTEREST OR PRINCIPAL PAYMENTS BEFORE OTHER CLASSES The trust will pay interest, principal or both on some classes of notes prior to paying interest, principal or both on other classes of notes. The subordination of some classes to others means that the subordinated classes are more likely to suffer the consequences of delinquent payments and defaults on the contracts than the classes having prior payment rights. See "CERTAIN INFORMATION REGARDING THE NOTES PAYMENTS AND DISTRIBUTIONS ON THE NOTES" in this prospectus supplement. Moreover, the more senior classes of notes could lose the credit enhancement provided by the more subordinate classes and the reserve fund if delinquencies and defaults on contracts increase and the collections on contracts and amounts in the reserve fund are insufficient to pay the more senior classes of notes. ADVERSE EVENTS IN [__________] HIGH CONCENTRATION STATES MAY CAUSE INCREASED DEFAULTS AND DELINQUENCIES If adverse events or economic conditions were particularly severe in a geographic region where there is a substantial concentration of obligors, the amount of delinquent payments and defaults on the contracts may increase. As a result, the overall timing and amount of collections on the contracts may differ from what you expect, and you may experience delays or reductions in payments. The following are the approximate percentages of the initial contract pool principal balance whose obligors are located in the following states: - - [_______%] in [_______], - - [_______%] in [_______], - - [_______%] in [_______], - - [_______%] in [_______], and - - [_______%] in [_______]. The remaining states accounted for [___]% of the initial aggregate principal balance of the contracts, and none of these remaining states accounted for more than 5% of the aggregate S-10 principal balance of the contracts. For a discussion of the breakdown of the contracts by state, see "THE CONTRACTS" in this prospectus supplement. Although we do not know of any matters likely to increase the rate of delinquencies or defaults in these states, adverse events specific to a geographic region would include natural disasters and regional economic downturns. For example, a substantial downturn in the financial services industry, which is highly concentrated in the states of New York and New Jersey, or in the oil and gas industry, which is concentrated in the state of Texas could reduce the income of obligors in those states and ultimately reduce the related obligor's ability to make timely payments on their contracts. In addition, the following economic conditions may affect payments: - unemployment, - interest rates, - inflation rates, and - consumer perceptions of the economy. THE SECURITIES MAY NOT BE SUITABLE INVESTMENTS FOR ALL INVESTORS The securities may not be a suitable investment for any investor that requires a regular or predictable schedule of principal payments. We suggest that only investors who, either alone or with their financial, tax and legal advisors, have the expertise to analyze the prepayment, reinvestment and default risks, the tax consequences of an investment and the interaction of these factors consider purchasing the notes. PREPAYMENTS, POTENTIAL LOSSES AND CHANGE IN ORDER OF PRIORITY OF PAYMENTS MAY OCCUR FOLLOWING ACCELERATION OF THE NOTES If the maturity dates of the notes are accelerated following an event of default resulting from a payment default or the insolvency of the trust, the trust will make no further distributions of interest in respect of the subordinated classes of notes until the more senior classes of notes are paid in full. If the maturity dates of the notes are accelerated following an event of default, the indenture trustee with the consent of the holders of all outstanding notes may sell the trust assets. In such event, the trust may not have sufficient funds to pay all of the securities in full. In addition, if the maturity dates of the notes are accelerated following an event of default and the indenture trustee determines that the trust assets will not be sufficient on an ongoing basis to make all payments on the notes as the payments would have become due if the maturity dates of the notes had not been accelerated, the indenture trustee with the consent of the holders of at least 66-2/3% of the Class A notes outstanding (or, if there are no Class A notes outstanding, the Class B notes) may sell the trust assets for an amount less than the aggregate outstanding principal amount of the notes. In such event, the trust may not have sufficient funds to pay all of the notes in full. S-11 If you receive your principal earlier than expected, you may not be able to reinvest the prepaid amount at a rate of return that is equal to or greater than the rate of return on your securities. If the trust is required to sell its assets in the circumstances described above, the amount received from the sale may not be sufficient to pay all amounts owed to you. BECAUSE THE NOTES ARE IN BOOK-ENTRY FORM, YOUR RIGHTS CAN ONLY BE EXERCISED INDIRECTLY Because the notes will be issued in book-entry form, you will be required to hold your interest in the notes through The Depository Trust Company in the United States, or Clearstream, Luxembourg, or the Euroclear System in Europe. Transfers of interests in the notes must therefore be made in accordance with the usual rules and operating procedures of those systems. So long as the notes are in book-entry form, you will not be entitled to receive a physical note representing your interest. The notes will remain in book-entry form except in the limited circumstances described under the caption "INFORMATION REGARDING THE SECURITIES--BOOK-ENTRY REGISTRATION" in the accompanying prospectus. Unless and until the notes in this prospectus supplement cease to be held in book-entry form, the indenture trustee will not recognize you as a "noteholder," as such term is used in the indenture. As a result, you will only be able to exercise the rights of noteholders indirectly through DTC, if in the United States, and its participating organizations, or Clearstream and Euroclear, in Europe, and their participating organizations. Holding the notes in book-entry form could also limit your ability to pledge your notes to persons or entities that do not participate in DTC, Clearstream or Euroclear and to take other actions that require a physical note representing the notes. Interest and principal on the notes will be paid by the trust to DTC as the holder of record of the notes while they are held in book-entry form. DTC will credit payments received from the trust to the accounts of its participants which, in turn, will credit those amounts to noteholders either directly or indirectly through indirect participants. This process may delay your receipt of principal and interest payments from the trust. S-12 THE TRUST GENERAL The trust is a business trust formed under the laws of the State of Delaware pursuant to the trust agreement between the depositor and the trustee for the transactions described herein. After its formation, the trust will engage in only a limited set of activities. The trust's activities are limited to: - acquiring, holding and managing the contracts and the other assets of the trust and proceeds therefrom; - issuing the notes and a certificate; - making payments on the notes and a certificate; and - engaging in other activities that are necessary, suitable or convenient to accomplish the foregoing purposes or that are incidental to or connected with the foregoing purposes. Under a transfer and sale agreement between the seller and the depositor, the seller will sell all of the contracts and the related property to the depositor. Under a sale and servicing agreement among the trust, the depositor, the servicer, the trustee and the indenture trustee, the depositor will transfer all of the contracts and related property to the trust. The property of the trust will consist of: - the contracts and the right to receive all scheduled payments and prepayments received on the contracts on or after the cut-off date, but excluding any scheduled payments due on or after, but received prior to, the cut-off date; - security interests in the financed motorcycles securing the contracts and any related property; - rights with respect to any repossessed financed motorcycles; - the rights to proceeds from claims on theft, physical damage, credit life and disability insurance policies covering the financed motorcycles or the obligors; - certain rebates of premiums and other amounts relating to insurance policies, extended service contracts or other repair agreements and other items financed under the contracts; - the depositor's rights against the seller under the transfer and sale agreement pursuant to which the seller sold the pool of contracts to the depositor; S-13 - the right to receive payments from the depositor for the repurchase of contracts which do not meet specified representations made by depositor in the sale and servicing agreement; - the trust's rights against the servicer under the sale and servicing agreement; - amounts held in the collection account, the note distribution account and the reserve fund to be established and maintained under the sale and servicing agreement; and - all proceeds of the foregoing. The trust will issue a certificate to the depositor representing the entire beneficial ownership interest in the trust. The trust's principal offices will be in [ ], in care of [ ], as trustee, at the address listed below under "THE TRUSTEE AND THE INDENTURE TRUSTEE." CAPITALIZATION The following table illustrates the capitalization of the trust as of the cut-off date, as if the issuance and sale of the notes had taken place, on such date: Class A-1 notes........................................................................$ Class A-2 notes........................................................................$ Class B notes..........................................................................$_________________ Total.............................................................................$ =======
THE INDENTURE AND THE ADMINISTRATION AGREEMENT Under an indenture between the trust and the indenture trustee, the indenture trustee will pledge the trust assets to secure the payment of the notes. Under an administration agreement among the trust, the indenture trustee and Harley-Davidson Credit Corp., as administrator, the administrator will agree to perform certain of the trust's administrative functions under the indenture. THE TRUSTEE AND THE INDENTURE TRUSTEE [ ] will be the trustee under the trust agreement. The trustee is a [_________] banking association and its principal offices are located at [_____________]. [ ] will be the indenture trustee under the indenture agreement. The indenture trustee is a [_________] and its principal offices are located at [_____________]. The servicer will pay the fees of the trustee and the indenture trustee in connection with their duties under the trust agreement and the indenture. Each of the trustee and the indenture S-14 trustee will also be entitled to indemnification by the servicer for, and will be held harmless against, any loss, liability, fee, disbursement or expense incurred by it not resulting from its own willful misfeasance, bad faith or negligence. The servicer will also indemnify the trustee and the indenture trustee for specified taxes that may be asserted in connection with the transaction. THE SELLER AND THE SERVICER Harley-Davidson Credit Corp. will act as seller and servicer of the contracts and will receive compensation and fees for such services. Information regarding the seller and the servicer is set forth under the captions "THE SELLER AND THE SERVICER" in the accompanying prospectus USE OF PROCEEDS The depositor will use the net proceeds received from the sale of the notes (i) for the purchase of the initial contracts and related assets from the seller and (ii) the remainder for the funding of the pre-funding account. The seller will use the net proceeds from the depositor's purchase of the initial contracts, as well as subsequent contracts, for the repayment of a substantial portion of the outstanding principal of the warehouse lines through which it finances its motorcycle conditional sales contracts. Following each such repayment, it is expected that the warehouse lines will be used to fund a new portfolio of motorcycle conditional sales contracts. THE CONTRACTS The contracts are (or will be, in the case of subsequent contracts) fixed-rate simple interest conditional sales contracts relating to motorcycles manufactured by Harley-Davidson, Inc. or Buell Motorcycle Company, a wholly-owned subsidiary of Harley-Davidson, Inc. The contracts were originated by the seller indirectly through Harley-Davidson motorcycle dealers and acquired by the depositor in the ordinary course of the depositor's business. Each contract has (or will have) a fixed annual percentage rate and provides for, if timely made, payments of principal and interest which fully amortize the loan on a simple interest basis over its term. The contracts have or will have the following characteristics: - the last scheduled payment of each initial contract is due no later than [ ], and with respect to the contracts as a whole (including any subsequent contracts conveyed to the trust after the closing date), the last scheduled payment will be due no later than [ ]; - the first scheduled payment date of contracts representing approximately [ ]% of the aggregate principal balance of the initial contracts as of the initial cutoff date is due no later than [ ]; - the first scheduled payment date of contracts representing approximately [ ]% of the aggregate principal balance of the initial contracts as of the initial cutoff date is due no later than [ ]; - the first scheduled payment date of contracts representing approximately [ ]% of the aggregate principal balance of the subsequent contracts as of the subsequent cutoff date will be due no later than [ ]; S-15 - the first scheduled payment date of contracts representing approximately [ ]% of the aggregate principal balance of the subsequent contracts as of the subsequent cutoff date will be due no later than [ ]; - approximately [ ]% of the principal balance of the initial contracts as of the initial cutoff date is attributable to loans to purchase motorcycles which were new and approximately [ ]% is attributable to loans to purchase motorcycles which were used at the time the related contract was originated. - all initial contracts have a contractual rate of interest of at least [ ]% per annum and not more than [ ]% per annum and the weighted average contractual rate of interest of the initial contracts as of the initial cutoff date is approximately [ ]% per annum (see Table 1 below). - the initial contracts have remaining maturities as of the initial cutoff date of at least [ ] months but not more than [ ] months and original maturities of at least [ ] months but not more than [ ] months. - the initial contracts have a weighted average term to scheduled maturity, as of origination, of approximately [ ] months, and a weighted average term to scheduled maturity as of the initial cutoff date of approximately [ ] months (see Tables 2 and 3 below). - the average principal balance per initial contract as of the initial cutoff date was approximately $[ ] and the principal balances on the initial contracts as of the initial cutoff date ranged from $[ ] to $[ ] (see Table 4 below). - the contracts arise (or will arise) from loans to obligors located in 50 states, the District of Columbia, the U.S. Territories and Canada and with respect to the initial contracts, constitute the following approximate amounts expressed as a percentage of the aggregate principal balance of the initial contracts as of the initial cutoff date:[ ]% in [ ], [ ]% in [ ] and [ ]% in [ ] (see Table 5 below). No other state represented more than 5.00% by aggregate principal balance of the initial contracts. Subsequent contracts will not need to satisfy any criteria except for the criteria described in the preceding paragraph. Therefore, following the transfer of the subsequent contracts to the trust, the aggregate characteristics of the entire pool of the contracts, including the composition of the contracts, the distribution by weighted average annual percentage rate of the contracts, the distribution by calculated remaining term of the contracts, the distribution by original term to maturity of the contracts, the distribution by current balance of the contracts, and the geographic distribution of the contracts, described in the following tables, may vary from those of the initial contracts as of the initial cutoff date. S-16 TABLE 1 DISTRIBUTION BY APR OF THE INITIAL CONTRACTS (AS OF THE INITIAL CUTOFF DATE)
PERCENT OF NUMBER TOTAL OUTSTANDING PERCENT OF POOL RATE NUMBER OF CONTRACTS OF CONTRACTS(1) PRINCIPAL BALANCE BALANCE(1) ---- ------------------- --------------- ----------------- --------------- 8.500- 9.000% 9.001-10.000 10.001-11.000 11.001-12.000 12.001-13.000 13.001-14.000 14.001-15.000 15.001-16.000 16.001-17.000 17.001-18.000 18.001-19.000 19.001-20.000 20.001-21.000 21.001-22.000 22.001-23.000 23.001-23.990 Totals: 100.00% 100.00%
(1) Percentages may not add to 100.00% because of rounding. TABLE 2 DISTRIBUTION BY CALCULATED REMAINING TERM OF THE INITIAL CONTRACTS (AS OF THE INITIAL CUTOFF DATE)
CALCULATED REMAINING PERCENT OF NUMBER TOTAL OUTSTANDING PERCENT OF TERM (MONTHS) NUMBER OF CONTRACTS OF CONTRACTS (1) PRINCIPAL BALANCE POOL BALANCE (1) ------------- ------------------- ---------------- ----------------- ---------------- 6 - 12 13 - 24 25 - 36 37 - 48 49 - 60 61 - 72 73 - 84 TOTALS: 100.00% 100.00%
(1) Percentages may not add to 100.00% because of rounding. S-17 TABLE 3 DISTRIBUTION BY CALCULATED ORIGINAL TERM TO MATURITY OF THE INITIAL CONTRACTS (AS OF THE INITIAL CUTOFF DATE)
ORIGINAL PERCENT OF NUMBER TOTAL OUTSTANDING PERCENT OF POOL TERM (MONTHS) NUMBER OF CONTRACTS OF CONTRACTS (1) PRINCIPAL BALANCE BALANCE (1) ------------- ------------------- ----------------- ----------------- ----------- 0 - 12 13 - 24 25 - 36 37 - 48 49 - 60 61 - 72 73 - 84 TOTALS: 100.00% 100.00%
(1) Percentages may not add to 100.00% because of rounding. S-18 TABLE 4 DISTRIBUTION BY CURRENT BALANCE OF THE INITIAL CONTRACTS (AS OF THE INITIAL CUTOFF DATE)
NUMBER OF PERCENT OF NUMBER TOTAL OUTSTANDING PERCENT OF POOL CURRENT BALANCE CONTRACTS OF CONTRACTS (1) PRINCIPAL BALANCE BALANCE (1) --------------- --------- ---------------- ----------------- ----------- $ 0 - 1,000.00 $ 1,000.01 - 2,000.00 $ 2,000.01 - 3,000.00 $ 3,000.01 - 4,000.00 $ 4,000.01 - 5,000.00 $ 5,000.01 - 6,000.00 $ 6,000.01 - 7,000.00 $ 7,000.01 - 8,000.00 $ 8,000.01 - 9,000.00 $ 9,000.01 - 10,000.00 $ 10,000.01 - 11,000.00 $ 11,000.01 - 12,000.00 $ 12,000.01 - 13,000.00 $ 13,000.01 - 14,000.00 $ 14,000.01 - 15,000.00 $ 15,000.01 - 16,000.00 $ 16,000.01 - 17,000.00 $ 17,000.01 - 18,000.00 $ 18,000.01 - 19,000.00 $ 19,000.01 - 20,000.00 $ 20,000.01 - 21,000.00 $ 21,000.01 - 22,000.00 $ 22,000.01 - 23,000.00 $ 23,000.01 - 24,000.00 $ 24,000.01 - 25,000.00 $ 25,000.01 - 26,000.00 $ 26,000.01 - 27,000.00 $ 27,000.01 - 28,000.00 $ 28,000.01 - 29,000.00 $ 29,000.01 - 30,000.00 $ 30,000.01 - 31,000.00 $ 31,000.01 - 32,000.00 $ 32,000.01 - 33,000.00 $ 33,000.01 - [ ] TOTALS: 100.00% 100.00%
(1) Percentages may not add to 100.00% because of rounding. S-19 TABLE 5 GEOGRAPHIC DISTRIBUTION OF THE INITIAL CONTRACTS (AS OF THE INITIAL CUTOFF DATE)
PERCENT OF NUMBER TOTAL OUTSTANDING PERCENT OF POOL STATE NUMBER OF CONTRACTS OF CONTRACTS (1) PRINCIPAL BALANCE BALANCE (1) ----- ------------------- ---------------- ------------------ ----------- ALABAMA ALASKA ARIZONA ARKANSAS CALIFORNIA COLORADO CONNECTICUT DELAWARE DISTRICT OF COLUMBIA FLORIDA GEORGIA HAWAII IDAHO ILLINOIS INDIANA IOWA KANSAS KENTUCKY LOUISANA MAINE MARYLAND MASSACHUSETTS MICHIGAN MINNESOTA MISSISSIPPI MISSOURI MONTANA NEBRASKA NEVADA NEW HAMPSHIRE NEW JERSEY NEW MEXICO NEW YORK NORTH CAROLINA NORTH DAKOTA OHIO OKLAHOMA OREGON PENNSYLVANIA S-20 TABLE 5 GEOGRAPHIC DISTRIBUTION OF THE INITIAL CONTRACTS (CONTINUED) PERCENT OF NUMBER TOTAL OUTSTANDING PERCENT OF POOL STATE NUMBER OF CONTRACTS OF CONTRACTS (1) PRINCIPAL BALANCE BALANCE (1) ----- ------------------- ---------------- ------------------ ----------- RHODE ISLAND SOUTH CAROLINA SOUTH DAKOTA TENNESSEE TEXAS UTAH VERMONT VIRGINIA WASHINGTON WEST VIRGINIA WISCONSIN WYOMING CANADA OTHER TOTALS: 100.00% 100.00%
(1) Percentages may not add to 100.00% because of rounding. S-21 DELINQUENCY, LOAN LOSS AND REPOSSESSION INFORMATION The following tables set forth the delinquency experience and loan loss and repossession experience of the seller's portfolio of conditional sales contracts for motorcycles. These figures include data in respect of contracts which the seller has previously sold with respect to prior securitizations and for which the seller acts as servicer.
DELINQUENCY EXPERIENCE(1)/ (DOLLARS IN THOUSANDS) AT DECEMBER 31, -------------------------------------------------------------------------------------------------------- 1999 1998 1997 ---- ---- ---- Number Number Number of of of contracts Amount contracts Amount contracts Amount --------- ------ --------- ------ --------- ------ Portfolio ................. 91,556 $ 914,545.5 67,137 $ 651,248.7 45,258 $ 434,890.7 Period of Delinquency(2)/ 30-59 Days ...... 2,868 $ 28,307.9 1,970 $ 17,768.1 1,264 $ 11,454.6 60-89 Days ...... 983 9,424.3 745 6,153.9 559 5,112.1 90 Days or more . 371 3,569.9 304 2,591.0 269 2,196.5 ----- ------------- ----- ------------- ----- ------------- Total Delinquencies ....... 4,222 $ 41,302.1 3,019 $ 26,513.0 2,092 $ 18,763.2 ===== ============= ===== ============= ===== ============= Total Delinquencies as a Percent of Total Portfolio 4.61% 4.52% 4.50% 4.07% 4.62% 4.31% 1996 1995 ---- ---- Number Number of of contracts Amount contracts Amount --------- ------ --------- ------- Portfolio ................. 32,574 $ 303,682.4 20,590 $ 184,054.0 Period of Delinquency(2)/ 30-59 Days ...... 904 $ 8,002.9 477 $ 4,043.3 60-89 Days ...... 374 3,170.7 157 1,298.7 90 Days or more . 213 1,880.6 140 1,120.2 ------ ------------- --- ------------- Total Delinquencies ....... 1,491 $ 13,054.2 774 $ 6,462,2 ====== ============= === ============= Total Delinquencies as a Percent of Total Portfolio. 4.58% 4.30% 3.76% 3.51%
At March 31, --------------------------------------- ------------ 2000 1999 ---- ---- Number Number of of contracts Amount contracts Amount --------- ------ --------- ------ Portfolio.................... 98,306 $981,709.4 72,411 $712,081.0 Period of Delinquency(2)/ 30-59 Days............... 2,343 $22,973.6 1,814 $17,246.9 60-89 Days.............. 587 5,543.9 606 5,403.9 90 Days or more.......... 235 2,363.5 355 3,099.5 --- ------- --- ------- Total Delinquencies.......... 3,165 $30,881.0 2,775 $25,750.3 ===== ========= ===== ========= Total Delinquencies as a Percent of Total Portfolio... 3.22% 3.15% 3.83% 3.62%
------------------ (1) Excludes contracts already in repossession, which contracts the servicer does not consider outstanding. (2) The period of delinquency is based on the number of days payment are contractually past due (assuming 30-day months). Consequently, a contract due on the first day of a month is not 30 days delinquent until the first day of the next month. S-22 LOAN LOSS/REPOSSESSION EXPERIENCE (DOLLARS IN THOUSANDS)
Year Ended December 31, ------------------------------------------------------------------- 1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- Principal Balance of All Contracts Serviced(1)/.................... $918,481.6 $653,836.0 $436,771.0 $304,730.9 $184,548.7 Contract Liquidations(2)/........... 1.59% 1.54% 1.42% 0.74% 0.76% Net Losses: Dollars(3)/..................... $5,875.0 $5,245.3 $3,781.1 $1,639.5 $866.4 Percentage(4)/.................. 0.64% 0.80% 0.87% 0.54% 0.47%
Three Months Ended March 31, --------------------------------------------------------------- 2000 1999 ---- ---- Principal Balance of All Contracts $985,715.0 $714,465.2 Serviced(1)/.................. Contract Liquidations(2)/............ 1.95% 1.67% Net Losses: Dollars(3)/...................... $1,995.5 $1,493.8 Percentage(4)/................... 0.81% 0.84%
------------------ (1) As of period end. Includes contracts already in repossession. (2) As a percentage of the total number of contracts being serviced as of period end, calculated on an annualized basis. (3) The calculation of net loss includes actual charge-offs, deficiency balances remaining after liquidation of repossessed vehicles and expenses of repossession and liquidation, net of recoveries. (4) As a percentage of the principal amount of contracts being serviced as of period end, calculated on an annualized basis. THE DATA PRESENTED IN THE FOREGOING TABLES ARE FOR ILLUSTRATIVE PURPOSES ONLY AND THERE IS NO ASSURANCE THAT THE DELINQUENCY, LOAN LOSS OR REPOSSESSION EXPERIENCE OF THE CONTRACTS WILL BE SIMILAR TO THAT SET FORTH ABOVE. TWELVE MONTHS ENDED DECEMBER 31, 1999 VERSUS TWELVE MONTHS ENDED DECEMBER 31, 1998. The amounts classified as delinquent as a percentage of the portfolio increased from 4.07% to 4.52%. The increase is attributable to a conversion to a new servicing system in December 1999. The number of liquidations as a percentage of the portfolio increased from 1.54% to 1.59%. Net losses as a percentage of the outstanding principal amount of the contracts decreased from 0.80% to 0.64%. The decrease is attributable to more stringent collection procedures implemented by the servicer. The number of contracts in the portfolio increased from 67,137 to 91,556 due to an increase in Harley-Davidson motorcycle production and HDFS's market share penetration of units financed. TWELVE MONTHS ENDED DECEMBER 31, 1998 VERSUS TWELVE MONTHS ENDED DECEMBER 31, 1997. The amounts classified as delinquent as a percentage of the portfolio decreased from 4.31% to 4.07%. The decrease is attributable to the seasoning of the portfolio. The number of liquidations as a percentage of the portfolio increased from 1.42% to 1.54%. The increase is attributable to growth and seasoning of the Delta loan program. Net losses as a percentage of the outstanding principal amount of the contracts decreased from 0.87% to 0.80%. The decrease is S-23 attributable to more stringent collection procedures implemented by the servicer. The number of contracts in the portfolio increased from 45,258 to 67,137 due to an increase in Harley-Davidson motorcycle production and HDFS's market share penetration of units financed. TWELVE MONTHS ENDED DECEMBER 31, 1997 VERSUS TWELVE MONTHS ENDED DECEMBER 31, 1996. The amounts classified as delinquent as a percentage of the portfolio increased from 4.30% to 4.31%. The number of liquidations as a percentage of the portfolio increased from .74% to 1.42%. The increase is attributable to growth and seasoning of the Delta loan program. Net losses as a percentage of the outstanding principal amount of the contracts increased from 0.54% to 0.87%. The increase is attributable to a lower collectors to account ratio due to the launch of HDFS's credit card operation. The number of contracts in the portfolio increased from 32,574 to 45,258 due to an increase in Harley-Davidson motorcycle production and HDFS's market share penetration of units financed. TWELVE MONTHS ENDED DECEMBER 31, 1996 VERSUS TWELVE MONTHS ENDED DECEMBER 31, 1995. The amounts classified as delinquent as a percentage of the portfolio increased from 3.51% to 4.30%. The increase is attributable to overall portfolio growth. The number of liquidations as a percentage of the portfolio decreased from 0.76% to 0.74%. Net losses as a percentage of the outstanding principal amount of the contracts increased from 0.47% to 0.54%. The increase is attributable to overall portfolio growth. The number of contracts in the portfolio increased from 20,590 to 32,574 due to an increase in Harley-Davidson motorcycle production and HDFS's market share penetration of units financed. THREE MONTHS ENDED MARCH 31, 2000 VERSUS THREE MONTHS ENDED MARCH 31, 1999. The amounts classified as delinquent as a percentage of the portfolio decreased from 3.62% to 3.15%. The decrease is attributable to increased collections. The number of liquidations as a percentage of the portfolio increased from 1.67% to 1.95%. The increase is attributable to the growth and seasoning of the Delta loan program. Net losses as a percentage of the outstanding principal amount of the contracts decreased from 0.84% to 0.81%. The decrease is attributable to increased recoveries on defaulted contracts. The number of contracts in the portfolio increased from 72,411 to 98,306 due an increase in Harley-Davidson motorcycle production and HDFS's market share penetration of units financed. We know of no trends that are likely to increase the rate of delinquencies or losses on the contracts. S-24 YIELD AND PREPAYMENT CONSIDERATIONS By their terms, the contracts may be prepaid, in whole or in part, at any time. Each contract also contains a provision which permits the seller to require full prepayment in the event of a sale of the related motorcycle securing a contract. In addition, repurchases of the contracts from the trust by the depositor, and concurrently from the depositor by the seller, could occur in the event of a breach of certain representation and warranties with respect to the contracts. Repurchases of contracts from the trust by the depositor, and concurrently from the depositor by the seller, could also occur if the depositor exercises its limited option to repurchase the contracts from the trust when the aggregate outstanding principal balances of the contracts owned by the trust has declined to less than 10% of the sum of: - the aggregate outstanding principal balance of the contracts owned by the trust as of the closing date; and - the initial amount on deposit in the pre-funding account. Any prepayments and repurchases of contracts will reduce the average life of the notes and the interest received by the noteholders over the life of the notes (for this purpose the term "PREPAYMENT" includes liquidations due to default, as well as receipt of proceeds from credit life, credit disability and casualty insurance policies). In addition, funds remaining in the pre-funding account at the end of the funding period will be used to prepay outstanding principal of the notes and as a result, the interest received by noteholders over the life of the notes will be reduced. THE DEPOSITOR The depositor is a special purpose corporation formed in the State of Nevada. All of the common stock of the depositor is owned by the seller. All of the officers and directors of the depositor are employed by the seller, except that at least two directors of the depositor are required to be independent of the depositor. The depositor's business is limited to purchasing the contracts and related assets (and other similar retail motorcycle installment conditional sales contracts) from the seller, acting as the general partner of the trust and other similar trusts and performing the obligations described in the sale and servicing agreement and the transfer and sale agreement (as well as similar agreements entered into in connection with the formation of similar trusts). DESCRIPTION OF THE NOTES This section supplements the information in the accompanying prospectus under the caption "Description of the Notes and Indenture". However, as these statements are only summaries, you should read the sale and servicing agreement and indenture, forms of which have been filed as exhibits to the registration statement of which the accompanying prospectus forms a part. A copy of the indenture and the sale and servicing agreement are available to you upon request to the depositor and will be filed with the Securities and Exchange Commission following the issuance of the securities. S-25 GENERAL The notes will be issued pursuant to the terms of the indenture between the trust and the indenture trustee. The trust will issue three classes of notes, consisting of two classes of senior notes, designated as the - - Class A-1 notes and - - Class A-2 notes. We refer to these notes as the "CLASS A NOTES." The trust will also issue one class of subordinate notes, designated as the Class B notes. The notes will be delivered in book-entry form only and be issued in minimum denominations of $1,000. INTEREST Each class of notes will bear interest at the fixed rate per annum for that class shown on the cover page of this prospectus supplement. The trust will pay interest on the notes on each payment date with Available Amounts and amounts withdrawn from the reserve fund as set forth under "PAYMENTS AND DISTRIBUTIONS --DISTRIBUTIONS" below. Interest will be payable to you monthly on the [_______] of each month or, if that date is not a business day, on the next succeeding business day and will be calculated on the basis of a 360-day year consisting of twelve 30-day months for the interest period from and including the __th day of the prior month (or from and including the closing date, in the case of the initial payment date) to but excluding the __th day of the next month. After the acceleration of the notes following an event of default resulting from a payment default, the trust will not make interest payments on the Class B Notes until the Class A Notes have been paid in full. Interest payments on the Class A Notes will have the same priority. If on any payment date the trust has insufficient funds to make a full payment of interest on the Class A Notes, the holders of the Class A Notes will receive their pro rata share of the amount available for interest on the Class A Notes. If on any payment date, the trust does not have sufficient funds, to make a full payment of interest on any class of notes, the amount of the shortfall will be carried forward, and together with interest on the shortfall amount at the applicable interest rate for that class, added to the amount of interest the affected class of noteholders will be entitled to receive on the next payment date. S-26 PRINCIPAL On each payment date, principal on the notes will be payable in an amount equal to the amount by which (1) the sum of the aggregate principal balances of the notes as of the close of business on the prior payment date exceeds (2) the aggregate principal balance of the contracts as of the end of the prior calendar month, excluding certain non-collectible or defaulted contracts and contracts to be repurchased by the depositor or purchased by the servicer due to certain breaches. The trust will pay principal on the notes on each payment date with Available Amounts and amounts withdrawn from the reserve fund as set forth under "PAYMENTS AND DISTRIBUTIONS--DISTRIBUTIONS" below. Principal of each class of notes is due and payable on the scheduled final payment date for that class shown on the cover page of this prospectus supplement. OPTIONAL REDEMPTION The notes may be redeemed in full on any payment date if the aggregate outstanding principal balance of the contracts owned by the trust declines to less than 10% of the sum of: - the aggregate outstanding principal balance of the contracts owned by the trust as of the closing date; and - the initial amount on deposit in the pre-funding account. The redemption price will equal the unpaid principal amount of the notes plus accrued interest thereon. MANDATORY REDEMPTION FOLLOWING THE FUNDING PERIOD Noteholders will be prepaid in part, without premium, on the payment date on or immediately following the last day of the funding period if any amount remains on deposit in the pre-funding account after subsequent contracts are transferred to the trust. The aggregate principal amount of notes to be prepaid will be an amount equal to the amount then on deposit in the pre-funding account allocated pro rata. If the amount on deposit in the pre-funding account is less than $150,000, only the Class A-1 noteholders will be prepaid. VOTING RIGHTS This prospectus supplement and the accompanying prospectus specify certain circumstances under which the consent, approval, direction or request of the holders of a specified percentage of the outstanding principal amount of the notes must be obtained, given or made, or under which such holders are permitted to take an action or give a notice. While the Class A notes are outstanding, only the holders of the Class A notes will have those rights, not the holders of all of the notes or the Class B notes. S-27 NOTICES You will be notified in writing by the indenture trustee of any event of default, servicer default or termination of, or appointment of a successor to, the servicer promptly upon a responsible officer obtaining actual knowledge of these events. If notes are issued other than in book-entry form, those notices will be mailed to the addresses of noteholders as they appear in the register maintained by the indenture trustee prior to mailing. Those notices will be deemed to have been given on the date of that publication or mailing. CERTAIN INFORMATION REGARDING THE NOTES THE ACCOUNTS THE COLLECTION ACCOUNT The indenture trustee will establish an account referred to as the collection account in accordance with the sale and servicing agreement. The servicer will cause all collections made on or in respect of the contracts during a due period to be deposited in or credited to the collection account. The servicer is required to deposit, without deposit into any intervening account, into the collection account as promptly as possible, but in any case not later than the second business day following the receipt thereof, all amounts received on or in respect of the contracts. The servicer is required to use its best efforts to cause an obligor to make all payments on the contracts directly to one or more lockbox banks, acting as agent for the trust pursuant to a lockbox agreement. Funds in the collection account will be invested in certain eligible investments. All income or other gain from such investments will be promptly deposited in, and any loss resulting from such investments shall be charged to, the collection account. THE PRE-FUNDING ACCOUNT The indenture trustee will establish a trust account referred to as the pre-funding account in accordance with the sale and servicing agreement. During the funding period, the pre-funding account will be maintained by the indenture trustee for your benefit to secure the depositor's obligations under the sale and servicing agreement to purchase and transfer subsequent contracts to the trust. On the closing date, the depositor will deposit $[ ] into the pre-funding account. During the funding period, amounts on deposit in the pre-funding account will be reduced by the amount thereof that the depositor uses to purchase subsequent contracts from the seller and contemporaneously transfer to the trust. The depositor expects that the pre-funded amount will be reduced to less than $150,000 by the payment date occurring in [ ]. Any pre-funded amount remaining at the end of the funding period will be payable to the noteholders. See "DESCRIPTION OF THE NOTES--MANDATORY SPECIAL REDEMPTION". THE RESERVE FUND The servicer will establish pursuant to the sale and servicing agreement the reserve fund which will be a segregated account in the name of the indenture trustee. The reserve fund will be created with an initial deposit by the depositor on the closing date of an amount equal to S-28 $________, which is less than the amount that is required to be on deposit in the reserve fund. The reserve fund will thereafter be funded as described below under "--DISTRIBUTIONS". Amounts held from time to time in the reserve fund will be held for the benefit of noteholders and may be invested in investments acceptable to the rating agencies rating the notes as being consistent with the ratings of the notes at the direction of the servicer. Investment income on those investments will be paid to the depositor, upon the direction of the servicer, to the extent that funds on deposit in the reserve fund on any payment date exceed the amount that is required to be on deposit in the reserve fund. If the amount on deposit in the reserve fund on any payment date exceeds the amount that is required to be on deposit in the reserve fund on that payment date, the indenture trustee will withdraw that excess and pay it to the depositor. Upon any distribution to the depositor of those excess amounts, the noteholders will not have any rights in, or claims to, those amounts. The servicer may, from time to time after the date of this prospectus supplement, request each rating agency rating the notes to approve a formula for determining the amount that is required to be on deposit in the reserve fund on each payment date that is different from that described below. If each rating agency delivers a letter to the indenture trustee and the trustee to the effect that the use of any new formula will not result in a qualification, reduction or withdrawal of its then-current rating of any class of the notes, then the amount that is required to be on deposit in the reserve fund will be determined in accordance with the new formula. The sale and servicing agreement will accordingly be amended, without the consent of any noteholder, to reflect the new calculation. If Available Amounts for any payment date, after paying the base servicing fee, reimbursing the servicer for servicer advances and paying the trustees' fees, are insufficient to pay principal and interest on the notes, the indenture trustee will withdraw funds from the reserve fund for distribution to the noteholders to cover any shortfalls. If on the final scheduled payment date of any class of notes, the principal amount of that class has not been paid in full, the indenture trustee will withdraw funds from the reserve fund to pay those notes in full. None of the noteholders, the indenture trustee, the trustee or the seller will be required to refund any amounts properly distributed or paid to them, whether or not there are sufficient funds on any subsequent payment date to make full distributions to the noteholders. CALCULATION OF RESERVE FUND REQUIRED AMOUNT On the closing date, the depositor will deposit a total of $[ ] into the reserve fund initial deposit. With respect to any payment date, the reserve fund required amount will equal the greater of (a) [ ]% of the principal balance of the contracts in the trust as of the first day of the immediately preceding due period; PROVIDED, HOWEVER, that if certain trigger events occur, the reserve fund required amount will be equal to [ ]% of the principal balance of the contracts in the trust as of the first day of the immediately preceding due period and (b) [ ]% of the aggregate of the initial note balances; PROVIDED, HOWEVER, in no event shall the reserve fund required amount be greater than the aggregate outstanding principal balance of the notes. As of S-29 any payment date, the amount of funds actually on deposit in the reserve fund initial deposit may, in certain circumstances, be less than the reserve fund required amount. A "RESERVE FUND TRIGGER EVENT" will have been deemed to occur with respect to any payment date if (i) the Average Delinquency Ratio for such payment date is equal to or greater than (a) [ ]% with respect to any payment date which occurs within the period from the closing date to, and inclusive of, the first anniversary of the closing date, (b) [ ]% with respect to any payment date which occurs within the period from the day after the first anniversary of the closing date to, and inclusive of, the second anniversary of the closing date, or (c) [ ]% for any payment date which occurs within the period from the day after the second anniversary of the closing date to, and inclusive of, the third anniversary of the closing date or (d) [ ]% for any payment date following the third anniversary of the closing date; (ii) the Average Loss Ratio for such payment date is equal to or greater than (a) [ ]% with respect to any payment date which occurs within the period from the closing date to, and inclusive of, the eighteen months following the closing date or (b) [ ]% with respect to any payment date which occurs following the eighteen month period following the closing date; or (iii) the Cumulative Loss Ratio for such payment date is equal to or greater than (a) [ ]% with respect to any payment date which occurs within the period from the closing date to, and inclusive of, the first anniversary of the closing date, (b) [ ]% with respect to any payment date which occurs within the period from the day after the first anniversary of the closing date to, and inclusive of, the second anniversary of the closing date, (c) [ ]% for any payment date which occurs within the period from the day after the second anniversary of the closing date to, and inclusive of, the third anniversary of the closing date, or (d) [ ]% following the third anniversary of the closing date. A reserve fund trigger event will be deemed to have terminated with respect to a payment date if no reserve fund trigger event shall exist with respect to [______] consecutive payment dates (inclusive of the respective payment date). INTEREST RESERVE ACCOUNT The depositor will establish, and fund with an initial deposit on the closing date, the interest reserve account, for the purpose of providing additional funds for payment to the trust of carrying charges to pay certain distributions on payment dates occurring during (and on the first payment date following the end of) the funding period. In addition to the initial deposit, all investment earnings with respect to the pre-funded account are to be deposited into the interest reserve account and, pursuant to the sale and servicing agreement, the depositor is obligated to pay to the trust, on each payment date described above, amounts in respect of carrying charges from such account. The interest reserve account will be established to account for the fact that a portion of the proceeds obtained from the sale of the notes will be initially deposited in the pre-funding account rather than invested in contracts, and the monthly investment earnings on amounts in the pre-funding account (until such amounts have been used to purchase subsequent contracts) are expected to be less than the weighted average of the interest rates of the respective classes of notes with respect to the corresponding portion of the principal balances of respective classes of notes, as well as the amount necessary to pay the trustees' fees. The interest reserve account is S-30 not designed to provide any protection against losses on the contracts in the trust. After the funding period, money in the interest reserve account will be released to the depositor. THE DISTRIBUTION ACCOUNT The indenture trustee will establish and maintain with itself the distribution account, in the name of the indenture trustee on behalf of the noteholders, in which amounts released from the collection account for distribution to noteholders will be deposited and from which all distributions to noteholders will be made. DETERMINATION OF OUTSTANDING PRINCIPAL BALANCES Prior to each payment date, the servicer will calculate a seven-digit decimal factor which represents: - the unpaid principal amount of the Class A-1 notes, after giving effect to payments to be made on such payment date, as a fraction of the initial outstanding principal amount of the Class A-1 notes. - the unpaid principal amount of the Class A-2 notes, after giving effect to payments to be made on such payment date, as a fraction of the initial outstanding principal amount of the Class A-2 notes. - the unpaid principal amount of the Class B notes, after giving effect to payments to be made on such payment date, as a fraction of the initial outstanding principal amount of the Class B notes. If the servicer were to perform such calculations on the closing date, the resulting decimal factor for each of the notes would be 1.000000. Thereafter, these decimal factors will decline in correspondence with reductions in the outstanding principal amount of the notes. Your portion of the aggregate outstanding principal amount of notes will be the product of: - the original denomination of the class of notes you own; and - the decimal factor relating to the class of notes at the time of determination (calculated as described above). You will receive reports on or about each payment date concerning payments received on the contracts, the aggregate outstanding principal balance of the contracts owned by the trust, the decimal factors described above and various other items of information. In addition, noteholders of record during any calendar year will be furnished information for tax reporting purposes not later than the latest date permitted by law. See "DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS--STATEMENTS TO SECURITYHOLDERS" in the accompanying prospectus. S-31 PAYMENTS AND DISTRIBUTIONS ON THE NOTES AVAILABLE AMOUNTS The trust will pay principal and interest in respect of the notes on each payment date from Available Amounts for the payment date, as well as amounts permitted to be withdrawn from the reserve fund. See "CERTAIN INFORMATION REGARDING THE NOTES--THE ACCOUNTS--RESERVE FUND". "Available Amounts" for any payment date are generally the sum of: - - the following amounts on deposit in the collection account which the trust received during the prior calendar month; (1) all amounts allocable to scheduled principal or interest payments on the contracts; (2) prepayments of contracts; and (3) proceeds of repossessed financed motorcycles and other proceeds of defaulted contracts; - - the purchase price paid by the depositor in repurchasing contracts from the trust on that payment date as a result of a breach of the representations and warranties with respect to those contracts in the sale and servicing agreement; - - servicer advances made by the servicer on that payment date in respect of delinquent interest payments for the prior calendar month; and - - the amount paid by the depositor to purchase the contracts when the aggregate outstanding principal balance of the contracts is reduced to less than 10% of the sum of (i) aggregate principal balance of the contracts owned by the trust as of the closing date and (ii) the initial mount on deposit in the pre-funding account. The precise calculation of the funds available to the trust on each payment date to make payments on the securities is set forth in the definition of "Available Amounts" and the definitions of the defined terms contained in that definition set forth in the Glossary. We refer you to those definitions. SERVICING COMPENSATION AND REIMBURSEMENT OF SERVICER ADVANCES On each payment date, the servicer will be entitled to receive: - the base servicing fee in an amount equal to the product of one twelfth of one percent (1%) and the aggregate principal balance of the contracts as of the last day of the second calendar month preceding the month in which that payment date falls; and - any investment income earned on amounts on deposit in the collection account during the prior calendar month. S-32 The servicer will also be entitled to retain any late payment fees, prepayment charges, if any, and other similar fees and charges received during the prior calendar month. The servicer will reimburse itself for servicer advances out of: - amounts received by the servicer from the obligors on account of the related delinquent contract payments; - the proceeds, net of expenses incurred by the servicer, of the sale of the repossessed financed vehicles securing the related delinquent contracts; and - payments on other contracts when the servicer has determined that an advance will not be recoverable from payments by the related obligor. DISTRIBUTIONS On each payment date prior to the acceleration of the notes, the servicer will direct the indenture trustee to apply the Available Amounts, together with amounts withdrawn from the reserve fund, to the following payments and distributions in the following order of priority: (1) reimbursement of servicer advances; (2) payment of the base servicing fee; (3) payment of the trustee's and the indenture trustee's fees; (4) all accrued and unpaid interest on the Class A Notes, including any accrued and unpaid interest on the Class A Notes payable on prior payment dates plus interest on that accrued and unpaid interest; (5) all accrued and unpaid interest on the Class B Notes, including any accrued and unpaid interest on the Class B Notes payable on prior payment dates plus interest on that accrued and unpaid interest; (6) principal on the notes in the amounts and priority described below under "PRINCIPAL"; (7) to the reserve fund, any amount necessary to increase the amount on deposit in the reserve fund to the required amount; and (8) any remaining amounts to the depositor as certificateholder under the trust agreement. On each payment date after the acceleration of the notes following an event of default resulting from a payment default, the trust will apply Available Amounts, together with amounts withdrawn from the reserve fund, in the same order as described above except that the trust will not pay interest on the Class B Notes until the Class A Notes are paid in full. S-33 The trust is to make payments first from the Available Amounts, and second, but only as to amounts described in clauses (4), (5) and (6) above, from amounts permitted to be withdrawn from the reserve fund as described under "RESERVE FUND" above. PRINCIPAL PRINCIPAL DISTRIBUTIONS BEFORE ACCELERATION OF NOTES This chart summarizes how the trust will pay principal on the notes before the acceleration of the maturity dates of the notes. The precise calculation of the amount of principal payable on the notes on each payment date is set forth in the definition of "TOTAL PRINCIPAL PAYMENT AMOUNT" and the definitions of the defined terms used in that definition set forth in the Glossary.
- ---------------------------- ----------------------------------------------------------------------------------------- CLASS PRINCIPAL PAYMENTS - ---------------------------- ----------------------------------------------------------------------------------------- Class A-1 Notes - Begins receiving principal on first payment date - Receives 100% of Total Principal Payment Amount until paid in full - ---------------------------- ----------------------------------------------------------------------------------------- Class A-2 Notes - Begins receiving principal on payment date on which Class A-1 Notes are paid in full - Receives 100% of Total Principal Payment Amount until paid in full - ---------------------------- ----------------------------------------------------------------------------------------- Class B Notes - Begins receiving principal on the payment date on which Class A-2 Notes are paid in full - Receives 100% of Total Principal Payment Amount until paid in full - ---------------------------- -----------------------------------------------------------------------------------------
PRINCIPAL DISTRIBUTIONS AFTER ACCELERATION OF NOTES After acceleration of the maturity dates of the notes, the trust will pay principal on the notes as follows:
- ---------------------------- ----------------------------------------------------------------------------------------- CLASS PRINCIPAL PAYMENTS - ---------------------------- ----------------------------------------------------------------------------------------- Class A-1 Notes, 100% of the Total Principal Payment Amount applied on Class A-2 Notes a pro rata basis to each class until paid in full - ---------------------------- ----------------------------------------------------------------------------------------- Class B Notes 100% of the Total Principal Payment Amount until paid in full - ---------------------------- -----------------------------------------------------------------------------------------
MATERIAL FEDERAL INCOME TAX CONSEQUENCES TREATMENT OF TRUST S-34 Winston & Strawn, as federal tax counsel to the trust, will deliver its opinion that the trust will not be an association (or a publicly traded partnership) taxable as a corporation for federal income tax purposes. This opinion will be based on the assumptions and qualifications described in the accompanying prospectus under the caption "MATERIAL FEDERAL INCOME TAX CONSEQUENCES--OWNER TRUST". If certificates issued by the trust are at all times required to be owned by a single person, such as the depositor, then, for federal income tax purposes, the trust may be disregarded as a separate entity from the owner of its certificates. On the other hand, if the trust issues certificates to multiple owners, the trust would be characterized as a partnership for federal income tax purposes. TREATMENT OF INVESTORS IN NOTES Each purchaser of the notes agrees to treat the notes as debt for federal income tax purposes. An investor will be taxed on the amount of payments of interest on a note as ordinary interest income at the time it accrues or is received in accordance with the investor's regular method of accounting. An investor who disposes of a note will recognize taxable gain or loss equal to the difference between the amount realized and the investor's adjusted tax basis in the note. Any gain or loss will be a capital gain or loss assuming the notes constitute capital assets in the hands of the owner. Special rules apply to investors who purchase notes at a discount or a premium. The foregoing general description of the treatment of investors in notes is subject to the further explanation, assumptions and qualifications set forth in the accompanying prospectus. ERISA CONSIDERATIONS The Class A notes may be purchased by an employee benefit plan, an individual retirement account or a similar arrangement (a "Plan") subject to ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"). A fiduciary of a Plan must determine that the purchase of a Class A note is consistent with its fiduciary duties under ERISA and does not result in a nonexempt prohibited transaction as defined in Section 406 of ERISA or Section 4975 of the Code. For additional information regarding treatment of the notes under ERISA, see "ERISA CONSIDERATIONS" in the accompanying prospectus. The Class A notes may not be purchased with the assets of a Plan if the depositor, the servicer, the indenture trustee, the trustee or any of their affiliates: 1. is a "fiduciary" as defined in Section 3(21) of ERISA or Section 4975(e)(3) of the Code with respect to those Plan assets; or 2. is an employer maintaining or contributing to the Plan. Because it is not certain whether the Class B notes will be treated as debt instruments without substantial equity features, the Class B notes may not be purchased by any Plan, or by a person investing on behalf of or with plan assets of a Plan. Each purchaser and transferee of a Class B note, by its acceptance of the Class B note, will be deemed to represent that it is not a Plan, and is not purchasing the note on behalf of or with plan assets of a Plan. S-35 LEGAL PROCEEDINGS None of the depositor, the servicer, the seller, or the trust are parties to any legal proceeding which could have a material adverse impact on your interest in the securities or in the trust's assets. UNDERWRITING Subject to the terms and conditions set forth in the underwriting agreement among the depositor, the seller and the underwriters, the depositor has agreed to sell to each of the underwriters named below and each of those underwriters has severally agreed to purchase the following respective initial principal amounts of notes at the respective public offering prices less the respective underwriting discounts shown on the cover page of this prospectus supplement:
INITIAL PRINCIPAL INITIAL PRINCIPAL INITIAL PRINCIPAL AMOUNT OF AMOUNT OF AMOUNT OF UNDERWRITER CLASS A-1 NOTES CLASS A-2 NOTES CLASS B NOTES - ----------- --------------- --------------- -------------
In the underwriting agreement, the underwriters have agreed, subject to the terms and conditions set forth therein, to purchase all of the notes being offered, if any of the notes are purchased. The underwriters have advised the depositor that they propose initially to offer the notes to the public at the respective public offering prices shown on the cover page of this prospectus supplement, and to certain dealers at that price, less a concession not in excess of the amount noted in the table below. The underwriters may allow and the dealers may reallow to other dealers a discount not in excess of the amount noted in the table below.
SELLING CONCESSION REALLOWANCE CLASS NOT TO EXCEED NOT TO EXCEED - ----- ------------- ------------- A-1 A-2 B
After the initial public offering of the securities, the offering prices and other selling terms may be varied by the underwriters. In connection with the offering of the notes, [_______________], on behalf of the underwriters, may engage in overallotment, stabilizing transactions or syndicate covering transactions in accordance with Regulation M under the Securities Exchange Act of 1934. Overallotment transactions involve syndicate sales in excess of the offering size creating a short position. Stabilizing transactions permit bids to purchase the securities so long as the stabilizing bids do not exceed a specified maximum. Syndicate covering transactions involve purchases of S-36 securities in the open market after the distribution has been completed in order to cover short positions. Such over-allotment transactions, stabilizing and syndicate covering transactions may cause the price of the securities to be higher than they would otherwise be in the absence of those transactions. The underwriters do not represent that the underwriters will engage in those transactions nor that such transactions, once commenced, will not be discontinued without notice. Until the distribution of the notes is completed, rules of the SEC may limit the ability of the underwriters and certain selling group members to bid for and purchase the notes. As an exception to these rules, the underwriters are permitted to engage in certain transactions that stabilize the price of the notes. Such transactions consist of bids or purchases for the purpose of pegging, fixing or maintaining the price of the notes. There is currently no secondary market for the notes and you should not assume that one will develop. The underwriters currently expect, but are not obligated to make a market in the notes. You should not assume that any such market will develop, or if one does develop, that it will continue or provide sufficient liquidity. Neither the seller nor the underwriters make any representations or prediction as to the direction or magnitude of any effect that the transactions described above, if engaged in, may have on the prices of the notes. In addition, neither the seller nor the underwriters make any representation that the underwriters will engage in such transactions or that such transactions, once commenced, will not be discontinued without notice. The underwriters have represented and agreed that: (i) they have not offered or sold and, prior to the expiration of the period of six months from the closing date, will not offer or sell any notes to persons in the United Kingdom, except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of notes Regulation 1995; (ii) they have complied and will comply with all applicable provisions of the Financial Services Act 1986 with respect to anything done by it in relation to the notes in, from or otherwise involving the United Kingdom; and (iii) they have only issued or passed on and will only issue or pass on in the United Kingdom any document received by it in connection with the issue of the notes to a person who is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1995, or is a person to whom such document may otherwise lawfully be issued or passed on. The underwriting agreement provides that the seller and the depositor will indemnify the underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended, or contribute to payments the underwriters may be required to make in respect thereof. S-37 In the ordinary course of their respective businesses, the underwriters and their respective affiliates have engaged and may in the future engage in investment banking or commercial banking transactions with Harley-Davidson, Inc., Harley-Davidson Credit Corp., Harley-Davidson Financial Services, Inc. or any of their respective affiliates. RATINGS OF THE SECURITIES It is a condition of issuance that each of the Class A-1 notes and Class A-2 notes be rated "____" by Standard & Poor's Rating Services and "____" by Moody's Investors Services, Inc. and the Class B notes be rated at least "____" by Standard & Poor's Rating Services and "_____" by Moody's Investors Services, Inc. There is no assurance that any such rating will continue for any period of time or that it will not be revised or withdrawn entirely by the assigning rating agency if, in its judgment, circumstances so warrant. A revision or withdrawal of such rating may have an adverse effect on the market price of the notes. A security rating is not a recommendation to buy, sell or hold the notes. LEGAL MATTERS Certain legal matters with respect to the notes, including certain federal income tax matters, will be passed upon for the seller, servicer, depositor and the trust by Winston & Strawn, Chicago, Illinois. Certain legal matters for the underwriters will be passed upon by [___________]. EXPERTS Ernst & Young LLP, independent auditors, have audited the balance sheet of Harley-Davidson Motorcycle Trust [____] at [__________] as set forth in their report. The depositor included this balance sheet in this prospectus supplement in reliance on Ernst & Young LLP's report, given on their authority as experts in accounting and auditing. REPORTS TO NOTEHOLDERS Unless and until the notes are issued in physical form, monthly and annual unaudited reports containing information concerning the contracts will be prepared by the servicer, and sent on behalf of the trust only to Cede & Co., as nominee of DTC and registered holder of the notes. No financial reports will be sent to you. See "CERTAIN INFORMATION REGARDING THE NOTES--BOOK-ENTRY REGISTRATIOn" and "--STATEMENTS TO NOTEHOLDERS" in this prospectus supplement. Such reports will not constitute financial statements prepared in accordance with generally accepted accounting principles. The servicer will file with the Securities and Exchange Commission such periodic reports with respect to the trust as are required under the Securities Exchange Act of 1934, as amended and the rules and regulations of the SEC thereunder. We filed a registration statement relating to the notes with the SEC. This prospectus is part of the registration statement, but the registration statement includes additional information. S-38 The servicer will file with the SEC all required reports and other information about the trust. You may read and copy any reports, statements or other information we file at the SEC's reference room in Washington, D.C. You can request copies of these documents, upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at (800) SEC-0330 for further information on the operation of the public reference rooms. Our filings with the SEC are also available to the public on the SEC Internet site (http://www.sec.gov). The SEC allows us to "incorporate by reference" information we file with it, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of this prospectus supplement. Information that we file later with the SEC will automatically update the information in this prospectus supplement. In all cases, you should rely on the later information over different information included in this prospectus supplement or the accompanying prospectus. We incorporate by reference any future annual, monthly and special SEC reports and proxy materials filed by or on behalf of the trust until we terminate our offering of the notes. As a recipient of this prospectus, you may request a copy of any document we incorporate by reference, except exhibits to the documents (unless the exhibits are specifically incorporated by reference), at no cost, by writing or calling us at: Harley-Davidson Financial Services, Inc. 150 South Wacker, Suite 3100 Chicago, Illinois 60606 Attention: Treasurer (telephone (312) 368-9501; facsimile (312) 368-4372). S-39 ANNEX I GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES Except in certain limited circumstances, the globally offered Securities (the "GLOBAL SECURITIES") will be available only in book-entry form. Investors in the Global Securities may hold such Global Securities through DTC and, in the case of the Notes, Euroclear or Clearstream. The Global Securities 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 Securities through Euroclear and Clearstream will be conducted in the ordinary way in accordance with their normal rules and operating procedures and in accordance with conventional eurobond practice (I.E. seven calendar day settlement). Secondary market trading between investors holding Global Securities through DTC will be conducted according to the rules and procedures applicable to U.S. corporate debt obligations. Secondary cross-market trading between Euroclear or Clearstream and DTC participants holding Global Securities will be effected on a delivery-against-payment basis through the respective depositaries of Euroclear and Clearstream (in such capacity) and as DTC participants. Non-U.S. holders (as described below) of Global Securities will be subject to U.S. withholding taxes unless such holders meet certain requirements and deliver appropriate U.S. tax documents to the securities clearing organizations or their participants. INITIAL SETTLEMENT All Global Securities will be held in book-entry form by DTC in the name of Cede & Co. as nominee of DTC. Investors' interests in the Global Securities will be represented through financial institutions acting on their behalf as direct and indirect participants in DTC. As a result, Euroclear and Clearstream will hold positions on behalf of their participants through their respective depositaries, which in turn will hold such positions in accounts as DTC participants. Investors electing to hold their Global Securities through DTC will follow the settlement practices applicable to similar issues on pass-through certificates. Investors' securities custody accounts will be credited with their holdings against payment in same-day funds on the settlement date. Investors electing to hold their Global Securities through Euroclear or Clearstream accounts will follow the settlement procedures applicable to conventional eurobonds, except that there will be no temporary global security and no "LOCK-UP" or restricted period. Global Securities will be credited to the securities custody accounts on the settlement date against payments in same-day funds. SECONDARY MARKET TRADING S-40 Since the purchaser determines the place of delivery, it is important to establish 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 similar issues of pass-through certificates in same-day funds. TRADING BETWEEN EUROCLEAR AND/OR CLEARSTREAM PARTICIPANTS. Secondary market trading between Euroclear participants or Clearstream participants will be settled using the procedures applicable to conventional eurobonds in same-day funds. TRADING BETWEEN DTC SELLER AND EUROCLEAR OR CLEARSTREAM PURCHASER. When Global Securities are to be transferred from the account of a DTC participant to the account of a Euroclear participant or a Clearstream participant, the purchaser will send instructions to Euroclear or Clearstream through a Euroclear participant or Clearstream participant at least one business day prior to settlement. Euroclear or Clearstream will instruct the respective depositary, as the case may be, to receive the Global Securities against payment. Payment will include interest accrued on the Global Securities from and including the last coupon payment date to and excluding the settlement date. Payment will then be made by the respective depositary to the DTC participant's account against delivery of the Global Securities. After settlement has been completed, the Global Securities will be credited to the respective clearing system and by the clearing system, in accordance with its usual procedures, to the Euroclear participant's or Clearstream participant's account. The Global Securities credit will appear the next day (European time) and the cash debit will be back-valued to, and the interest on the Global Securities will accrue from, the value date; (which would be the preceding day when settlement occurred in New York). If settlement is not completed on the intended value date (I.E., the trade fails), the Euroclear or Clearstream cash debit will be valued instead as of the actual settlement date. Euroclear participants and Clearstream participants will need to make available to the respective clearing systems the funds necessary to process same-day funds settlement. The most direct means of doing so is to pre-positions funds for settlement, either from cash on hand or existing lines of credit, as they would for any settlement occurring within Euroclear or Clearstream. Under this approach, they may take on credit exposure to Euroclear or Clearstream until the Global Securities are credited to their accounts one day later. As an alternative, if Euroclear or Clearstream has extended a line of credit to them, Euroclear participants or Clearstream participants can elect to pre-position funds and allow that credit line to be drawn upon the finance settlement. Under this procedure, Euroclear participants or Clearstream participants purchasing Global Securities would incur overdraft charges for one day, assuming they cleared the overdraft when the Global Securities were credited to their accounts. However, interest on the Global Securities would accrue from the value date. Therefore, in many cases the investment income on the Global Securities earned during that one-day period may substantially reduce or offset the amount of such overdraft charges, although this S-41 result will depend on each Euroclear participant's or Clearstream participant's particular cost of funds. Since the settlement is taking place during New York business hours, DTC participants can employ their usual procedures for sending Global Securities to the respective Depositary for the benefit of Euroclear participants or Clearstream 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 EUROCLEAR OR CLEARSTREAM SELLER AND DTC PURCHASER. Due to time zone differences in their favor, Euroclear participants and Clearstream participants may employ their customary procedures for transactions in which Global Securities are to be transferred by the respective clearing system, through the respective Depositary, to a DTC participant. The seller will send instructions to Euroclear or Clearstream through a Euroclear participant or Clearstream participant at least one business day prior to settlement. In these cases, Euroclear or Clearstream 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 Securities 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 Euroclear participant or Clearstream participant the following day, and receipt of the cash proceeds in the Euroclear participant's or Clearstream 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 Euroclear participant or Clearstream participant have a line of credit with its respective clearing system and elect to be in debit in anticipation or 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 Euroclear participant's or Clearstream participant's account would instead be valued as of the actual settlement date. Finally, day traders that use, Euroclear or Clearstream and that purchase Global Securities from DTC participants for delivery to Euroclear participants or Clearstream participants should note that these trades would automatically fail on the sale side unless affirmative action were taken. At least three techniques should be readily available to eliminate this potential problem: (a) borrowing through Euroclear or Clearstream for one day (until the purchase side of the day trade is reflected in their Euroclear or Clearstream accounts) in accordance with the clearing system's customary procedures; (b) borrowing the Global Securities in the U.S. from a DTC participant no later than one day prior to settlement, which would give the Global Securities sufficient time to be reflected in their Euroclear or Clearstream account in order to settle the sale side of the trade; or S-42 (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 Euroclear participant or Clearstream participant. CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENT A beneficial owner of Global Securities holding securities through Euroclear or Clearstream (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 issued 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 OR FORM W-8BEN). Beneficial owners of Securities that are non-U.S. Persons can obtain a complete exemption from the withholding tax by filing a signed Form W-8 (Certificate of Foreign Status) or Form W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding). If the information shown on Form W-8 changes, a new Form W-8 or Form W-8BEN must be filed within 30 days of such change. After December 31, 2000, only Form W-8BEN will be acceptable EXEMPTION FOR NON-U.S. PERSONS WILL EFFECTIVELY CONNECTED INCOME (FORM 4224 OR FORM W-8ECI). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S. branch, for which the interest income is effectively connected with its conduct of a trade or business in the United States, can obtain an exemption from the withholding tax by filing Form 4224 (Exemption from Withholding of Tax on Income Effectively Connected with the Conduct of a Trade or Business in the United States) or Form W-8ECI (Certificate of Foreign Person's Claim for Exemption from Withholding on Income Effectively Connected with the Conduct of a Trade or Business in the United States). EXEMPTION OR REDUCED RATE FOR NON-U.S. PERSONS RESIDENT IN TREATY COUNTRIES (FORM 1001 OR FORM W-8BEN). Non-U.S. Persons that are Securityholders residing in a country that has a tax treaty with the United States can obtain an exemption or reduced tax rate (depending on the treaty terms) by filing Form 1001 (Ownership, Exemption or Reduced Rate Certificate). If the treaty provides only for a reduced rate, withholding tax will be imposed at that rate unless the filer alternatively files Form W-8 or Form W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding). Form 1001 may be filed by the Securityholder or his agent. After December 31, 2000, only Form W-8BEN will be acceptable. S-43 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 PROCEDURES. The holder of a Global Security or in the case of a Form 1001 or a Form 4224 filer, his agent, files by submitting the appropriate form to the person through whom it holds (the clearing agency, in the case of persons holding directly on the books of the clearing agency). Form W-8, Form 1001 and Form 4224 are effective until December 31, 2000. Form W-8BEN and Form W-8ECI are effective until the third succeeding calendar year from the date the form is signed. 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, any state thereof or the District of Columbia, (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 the trust and one or more United States persons have the authority to control all substantial decisions of the trust. Notwithstanding the preceding sentence, to the extent provided in Treasury regulations, certain trusts in existence on August 20, 1996, and treated as United States persons under the United States Internal Revenue Code of 1986, as amended (the "Code") and applicable Treasury regulations thereunder prior to such date, that elect to continue to be treated as United States persons under the Code or applicable Treasury regulations thereunder also will be a U.S. Person. This summary does not deal with all aspects of U.S. Federal income tax withholding that may be relevant to foreign holders of the Global Securities. Investors are advised to consult their own tax advisors for specific tax advice concerning their holding and disposing of the Global Securities. S-44 GLOSSARY OF TERMS AVAILABLE AMOUNTS means, with respect to any payment date, the sum of the Available Interest and the Available Principal for such payment date. AVAILABLE INTEREST means, with respect to any payment date, the total, without duplication, of the following amounts received by the servicer on or in respect of the contracts during the prior calendar month: * all amounts allocable to scheduled interest payments on the contracts; * the interest component of all prepayments of contracts; * the interest component of all proceeds of repossessed financed motorcycles and other proceeds of defaulted contracts; * the interest component of the purchase price paid by the depositor in repurchasing contracts from the trust on that payment date as a result of a breach of the representations and warranties with respect to those contracts in the sale and servicing agreement; * all amounts received in respect of carrying charges transferred from the interest reserve account; * all amounts received in respect of interest, dividends, gains, income and earnings on investment of funds in the trust accounts; * servicer advances made by the servicer on that payment date in respect of delinquent interest payments for the prior calendar month; and * the interest component of the amount paid by the seller to purchase the contracts when the aggregate principal balance of the contracts is reduced to less than 10% of the sum of (i) the aggregate outstanding principal balance of the contracts as of the closing date and (ii) the initial mount on deposit in the pre-funding account. AVAILABLE PRINCIPAL means, with respect to any payment date, the total, without duplication, of the following amounts received by the servicer on or in respect of the contracts during the prior calendar month: * all amounts allocable to scheduled principal payments on the contracts; * the principal component of all prepayments of contracts; * the principal component of all proceeds of repossessed motorcycles and other proceeds of defaulted contracts; S-45 * the principal component of the purchase price paid by the depositor in repurchasing contracts from the trust on that payment date as a result of a breach of the representations and warranties with respect to those contracts in the sale and servicing agreement; and * the principal component of the amount paid by the seller to purchase the contracts when the aggregate principal balance of the contracts is reduced to less than 10% of the sum of (i) the aggregate outstanding principal balance of the contracts as of the closing date and (ii) the initial amount on deposit in the pre-funding account. AVERAGE DELINQUENCY RATIO with respect to any payment date, is equal to the arithmetic average of the Delinquency Ratios for the payment date and the two immediately preceding payment dates. AVERAGE LOSS RATIO for any payment date is equal to the arithmetic average of the Loss Ratios for such payment date and the two immediately preceding payment dates. The "LOSS RATIO" for any payment date is equal to the fraction (expressed as a percentage) derived by dividing (x) the Net Liquidation Losses for all contracts that became Liquidated Contracts during the immediately preceding month multiplied by 12 by (y) the outstanding Principal Balances of all contracts as of the beginning of the related month. CUMULATIVE LOSS RATIO for any payment date means the fraction (expressed as a percentage) computed by the servicer by dividing (a) the aggregate Net Liquidation Losses for all contracts since the cutoff date through the end of the related month by (b) the sum of (i) the principal balance of the contracts as of the cutoff date plus (b) the principal balance of any subsequent contracts as of the related subsequent cutoff date. DELINQUENCY AMOUNT as of any payment date means the principal balance of all contracts that were delinquent 60 days or more as of the end of the related month (including contracts in respect of which the related motorcycles have been repossessed and are still inventory). DELINQUENCY RATIO for any payment date is equal to the fraction (expressed as a percentage) derived by dividing (a) the Delinquency Amount during the immediately preceding month by (b) the Principal Balance of the contracts as of the beginning of the related month. A LIQUIDATED CONTRACT means any defaulted contract as to which the servicer has determined that all amounts which it expects to recover from or on account of such contract have been recovered; PROVIDED that any defaulted contract in respect of which the related motorcycle has been realized upon and disposed of and the proceeds of such disposition have been realized shall be deemed to be a Liquidated Contract; and PROVIDED FURTHER, a contract which has been repossessed and has not been sold by the servicer for a period in excess of [___] days from such date of repossession or a contract which has been delinquent more than [___] days shall be deemed to be a Liquidated Contract with a zero balance. NET LIQUIDATION LOSSES means, with respect to a Liquidated Contract, the amount, if any, by which (a) the outstanding Principal Balance of such Liquidated Contract plus accrued S-46 and unpaid interest thereon at the annual interest rate stated in such Liquidated Contract to the date on which such Liquidated Contract became a Liquidated Contract exceeds (b) the Net Liquidation Proceeds for such Liquidated Contract. NET LIQUIDATION PROCEEDS means, as to any Liquidated Contract, the proceeds realized on the sale or other disposition of the related motorcycle, including proceeds realized on the repurchase of such motorcycle by the originating dealer for breach of warranties, and the proceeds of any insurance relating to such motorcycle, after payment of all expenses incurred thereby, together, in all instances, with the expected or actual proceeds of any recourse rights relating to such contract as well as any post disposition proceeds received by the servicer. PRINCIPAL BALANCE means, (a) with respect to any contract as of any date, an amount equal to the unpaid principal balance of such contract as of the opening of business on the cut-off date, reduced by all payments and other amounts received by the servicer as of such date allocable to principal; provided, however, that (i) if (x) a contract is repurchased by the depositor because of a breach of a representation or warranty, or if (y) the depositor gives notice of its intent to purchase the contracts in connection with an optional termination of the trust, in each case the Principal Balance of such contract or contracts shall be deemed to be zero for the prior calendar month in which such event occurs and for each calendar month thereafter and (ii) from and after the prior calendar month in which a contract becomes a defaulted contract, the Principal Balance of such contract shall be deemed to be zero; and (b) where the context requires, the aggregate Principal Balances described in clause (a) for all such contracts. The TOTAL PRINCIPAL PAYMENT AMOUNT for any payment date is the excess of (x) the sum of the aggregate principal balance of the notes as of the close of business on the prior payment date over (y) the principal balance of the contracts as of the last day of the calendar month immediately preceding the payment date. UNITED STATES PERSONS means: * A citizen or resident of the United States; * A corporation or partnership organized in or under the laws of the United States, any state thereof or the District of Columbia; * An estate the income of which is includible in gross income for United States federal income tax purposes, regardless of its source; or A trust, (a) with respect to which a court within the United States is able to exercise primary supervision over its administration, and one or more United States fiduciaries have the authority to control all of its substantial decisions, or (b) otherwise, the income of which is subject to U.S. federal income tax regardless of its source. S-47 HARLEY-DAVIDSON MOTORCYCLE TRUST [ ] BALANCE SHEET AS OF [__________], [_____] Assets -- Cash.................................................... $ Beneficial Equity................................................. $ Liabilities....................................................... $ NOTES TO THE BALANCE SHEET Harley-Davidson Motorcycle Trust [ ] is a limited purpose business trust established under the laws of the State of Delaware. It was formed on [ ] under a trust agreement dated as of [ ] between the depositor and the trustee. The activities of the trust are limited by the terms of the trust agreement to acquiring, owning and managing loan contracts and related assets, issuing and making payments on notes and certificates and other related activities. Prior to and including [ ], the trust did not conduct any activities. The depositor will pay all fees and expenses related to the organization and operations of the trust, other than withholding taxes, imposed by the United States or any other domestic taxing authority. The depositor has also agreed to indemnify the indenture trustee and trustee and certain other persons involved in the sale of notes. S-48 UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL DEALERS EFFECTING TRANSACTIONS IN THE SECURITIES OFFERED BY THIS PROSPECTUS SUPPLEMENT, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. $ HARLEY-DAVIDSON MOTORCYCLE TRUST [ ] $[ ] [ ]% HARLEY-DAVIDSON MOTORCYCLE CONTRACT BACKED NOTES, CLASS A-1 $[ ] [ ]% HARLEY-DAVIDSON MOTORCYCLE CONTRACT BACKED NOTES, CLASS A-2 $[ ] [ ]% HARLEY DAVIDSON MOTORCYCLE CONTRACT BACKED, CLASS B HARLEY-DAVIDSON CREDIT CORP. SELLER AND SERVICER HARLEY-DAVIDSON CUSTOMER FUNDING CORP. DEPOSITOR --------------------- PROSPECTUS SUPPLEMENT --------------------- [UNDERWRITERS] SUBJECT TO COMPLETION, DATED MAY 22, 2000 PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED [______________] THE INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. HARLEY-DAVIDSON MOTORCYCLE TRUST ISSUER $[ ] [ ]% HARLEY-DAVIDSON MOTORCYCLE CONTRACT BACKED CERTIFICATES, CLASS A $[ ] [ ]% HARLEY-DAVIDSON MOTORCYCLE CONTRACT BACKED CERTIFICATES, CLASS B HARLEY-DAVIDSON CUSTOMER FUNDING CORP. DEPOSITOR HARLEY-DAVIDSON CREDIT CORP. SELLER AND SERVICER CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-10 IN THIS PROSPECTUS SUPPLEMENT AND ON PAGE 9 OF THE PROSPECTUS. The certificates will represent obligations of the Harley-Davidson Motorcycle Trust [ ] only, and will not represent obligations of or interests in Harley-Davidson Financial Services, Inc., Harley-Davidson Credit Corp., Harley-Davidson Customer Funding Corp., Harley-Davidson, Inc. or any of their respective affiliates. This prospectus supplement may be used to offer and sell the certificates only if accompanied by the prospectus. The certificates are contract backed securities issued by the trust. The assets underlying the certificates are fixed-rate, simple interest, conditional sales contracts relating to the purchase of new or used motorcycles. THE GRANTOR TRUST WILL ISSUE THE FOLLOWING CLASSES OF CERTIFICATES--
- ------------------------------------------------------------------------------------------------ PASS- FIRST FINAL PRINCIPAL THROUGH PAYMENT SCHEDULED PRICE TO UNDERWRITING PROCEEDS TO CLASS AMOUNT RATE DATE PAYMENT DATE PUBLIC DISCOUNT DEPOSITOR - ------------------------------------------------------------------------------------------------ A $__________ ___% ___________ _____________ ______ ______ ______ - ------------------------------------------------------------------------------------------------ B $__________ ___% ___________ _____________ ______ ______ ______ - ------------------------------------------------------------------------------------------------
THE TOTAL PRICE TO THE PUBLIC IS $ -------------------- THE TOTAL UNDERWRITING DISCOUNT IS $ ------------------ THE TOTAL PROCEEDS TO THE DEPOSITOR ARE $ ------------- CREDIT ENHANCEMENT: - RESERVE FUND WITH AN INITIAL DEPOSIT OF $_________. - SUBORDINATION OF THE CLASS B CERTIFICATES TO THE CLASS A CERTIFICATES AS DESCRIBED IN THIS PROSPECTUS SUPPLEMENT. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. [UNDERWRITERS] Prospectus Supplement dated [______________] TABLE OF CONTENTS PROSPECTUS SUPPLEMENT
Important Notice About Information Presented in this Prospectus Supplement and the Accompanying Prospectus. . . . . . . . . . . . . . . . . . . . . . . . . . ii Prospectus Supplement Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . .S-1 Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-10 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-12 The Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-12 The Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-13 The Seller and the Servicer. . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-14 The Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-14 Yield and Prepayment Considerations. . . . . . . . . . . . . . . . . . . . . . . . .S-22 Pool Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-23 Description of the Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . .S-23 Payments on the Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-28 Ratings of the Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-30 Material Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . . . . .S-31 ERISA Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-32 Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-35 Underwriting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-35 Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-37 Global Clearance, Settlement and Tax Documentation Procedures. . . . . . . . . . . .S-38 Glossary of Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-43
i READING THE PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS We provide information to you about the certificates in two separate documents that offer varying levels of detail: - prospectus provides general information, some of which may not apply to the certificates; and - prospectus supplement provides specific information relating to the terms of the certificates. To the extent that any statements in this prospectus supplement differ from or modify statements in the prospectus, you should rely on the information in this prospectus supplement. References to "we", "our" and "us" refer to Harley-Davidson Customer Funding Corp. We include cross-references in this prospectus supplement and the accompanying prospectus to captions in these materials where you can find further related discussions. The Table of Contents of this prospectus supplement provides pages on which these captions are located. You can find a glossary of the principal capitalized terms used in this prospectus supplement beginning on page S-42 of this prospectus supplement. If you have received a copy of this prospectus supplement and the accompanying prospectus in an electronic format, and if the legal prospectus delivery period has not expired, you may obtain a paper copy of this prospectus supplement and the accompanying prospectus from Harley-Davidson Credit Corp. or any of the underwriters by asking any of them for it. ii PROSPECTUS SUPPLEMENT SUMMARY The following is only a summary of selected information from this prospectus supplement and provides a general overview of relevant terms of the certificates. It does not contain all the information that may be important to you. You should read carefully this entire prospectus supplement and the accompanying prospectus to understand all of the terms of the offering. In addition, you may wish to read the documents governing the transfers and servicing of the contracts, the formation of the trust and the issuance of the certificates. Those documents have been filed as exhibits to the registration statement. There are material risks associated with an investment in the securities. See "Risk Factors" in this prospectus supplement and in the accompanying prospectus for a discussion of factors you should consider before investing in the certificates. Trust............................. Harley-Davidson Motorcycle Trust [ ]. The depositor will establish the trust pursuant to a pooling and servicing agreement. Depositor......................... Harley-Davidson Customer Funding Corp., a 100% owned subsidiary of Harley-Davidson Financial Services, Inc.. See "THE DEPOSITOR" in this prospectus supplement. Trustee........................... The trustee will be [ ], acting not in its individual capacity but solely as trustee under the pooling and servicing agreement. The trustee's address and phone number is [ ]. See "THE TRUST" in this prospectus supplement. Cut-off Date...................... [ ]. Closing Date...................... On or about [ ]. Terms of the Certificates: A. Payment Dates.................. The trust will distribute interest and principal in respect of the certificates on the [ ] day of each month or if that day is not a business day, the next business day. The first payment date is [----]. B. Record Dates.................. The day immediately preceding the payment date. C. Interest...................... PASS-THROUGH RATE: The trust will distribute interest in respect of the certificates at the pass-through rates shown on the cover of this prospectus supplement. S-1 INTEREST PERIODS: Interest on the certificates will accrue in the following manner: Interest Period
From To (excluding) Day Count ---- -------------- --------- (including) Convention ----------- ----------- ___ of prior ___ of 30/360 month current month
DISTRIBUTION OF INTEREST: On each payment date after payment of the base servicing fee and reimbursement of servicer advances, the trust will distribute interest in respect of the certificates from the funds available to it to pay interest and expenses on each payment date. The funds available to the trustee to distribute interest in respect of the certificates on each payment date will generally consist of interest collections on the contracts received by the servicer during the prior calendar month, less the base servicing fee payable to the servicer and amounts applied to reimburse servicer advances relating to delinquent interest payments, and amounts withdrawn form the reserve fund. If the funds available to the trustee to distribute interest in respect of the Class A Certificates are insufficient on any payment date, funds available to the trustee on that payment date to distribute principal in respect of the Class B Certificates will be applied to distribute interest in respect of the Class A Certificates. No distributions of interest in respect of the Class B Certificates will be made on any payment date until interest in respect of the Class A Certificates has been distributed. See "DISTRIBUTIONS ON THE CERTIFICATES" in this prospectus supplement. S-2 E. Principal..................... On each payment date, the trust will distribute principal of the certificates. The funds available to the trustee to distribute principal in respect of the certificates on each payment date will generally consist of collections on the contracts received by the servicer during the prior calendar month, less the base servicing fee payable to the servicer, amounts applied to reimburse servicer advances and amounts distributed in respect of interest on the certificates, and amounts withdrawn from the reserve fund. The amount of principal distributable will be based on the amount by which: - the aggregate principal balance of the contracts as of the first day of the calendar month prior to the month in which that payment date occurs, exceeds - the aggregate principal balance of the contracts as of the first day of the calendar month in which that payment date occurs. The holders of the Class A Certificates and the Class B Certificates will be entitled to receive a PRO RATA share of the amounts to be distributed in respect of principal. However, no distributions of principal in respect of the Class B Certificates will be made on any payment date until interest and principal in respect of the Class A Certificates has been distributed. See "DESCRIPTION OF THE CERTIFICATES-- PRINCIPAL" and "DISTRIBUTIONS ON THE CERTIFICATES--DISTRIBUTIONS" in this prospectus supplement. E. Final Scheduled Payment Date... The trust will reduce the outstanding principal balance of the certificates to zero no later than the date shown on the cover of this prospectus supplement. F. Mandatory Prepayment........... The seller, at its option, may repurchase the contracts on any payment date on which the aggregate of the Class A certificate balance and the Class B certificate balance is less than 10% of the S-3 initial aggregate Class A certificate balance and the Class B certificate balance. If the seller purchases the contracts the trust will prepay the certificates in full on the payment date. See "DESCRIPTION OF THE CERTIFICATES--MANDATORY PREPAYMENT" in this prospectus supplement. THE TRUST'S ASSETS The Contracts..................... Our main source of funds for making payments on the certificates will be collections on the contracts. The contracts sold to the trust will be selected from contracts in the depositor's portfolio based on the criteria specified in the transfer and sale agreement. The contracts arise and will arise from loans to obligors located in the 50 states of the United States, Canada, the District of Columbia and the U.S. Territories. Following the closing date, pursuant to the sale and servicing agreement, the depositor will be obligated, subject only to the availability thereof, to sell, and the trust will be obligated to purchase, subject to the satisfaction of certain conditions set forth therein, subsequent contracts from time to time. Following the transfer of subsequent contracts to the trust, the aggregate characteristics of the entire pool of contracts may vary from those of the initial contracts as to the criteria identified and described above and in "The Contracts" herein. The last scheduled payment on the initial contract with the latest maturity will occur in [ ]. No contract (including any subsequent contract sole to the trust after the closing date) will have a scheduled maturity later than [ ]. However, an obligor can generally prepay its contract at any time without penalty. COMPOSITION OF THE INITIAL CONTRACTS (AS OF THE INITIAL CUTOFF DATE) S-4 Aggregate Principal Balance..$____________ Number of Contracts.................______ Average Principal Balance.......$_________ Weighted Average Annual Percentage Rate ("APR")............................._____% (Range)..................___% to ___% Weighted Average Original Term (in months) ------- (Range)....................___ to ___ Weighted Average Calculated Remaining Term (in months).........................._____ (Range)....................___ to ___ GEOGRAPHIC CONCENTRATION State Principal Balance Concentration [ ] ........... % [ ] ........... % [ ] ........... % [ ] ........... % [ ] ........... % No other state represented more than 5% of the aggregate principal balance of the contracts as of the initial cutoff date. Reserve Fund...................... On the closing date, the depositor will establish a reserve fund in the name of __________, as collateral agent. The reserve fund provides you with limited protection in the event collections from obligors on the contracts are insufficient to make payment on the certificates. We cannot assure you, however, that this protection will be adequate to prevent shortfalls in amounts available to make distributions on the certificates. The initial balance of the reserve fund will be $________. We will be required to maintain on deposit in the reserve fund on each payment date a specified amount as set forth under the caption "DESCRIPTION OF THE CERTIFICATES--CALCULATION OF S-5 RESERVE FUND REQUIRED AMOUNT". If the amount on deposit in the reserve fund on any payment date is less than the required amount, the trustee will use the funds available on that payment date after payment of the base servicing fee, reimbursement of servicer advances and distributions of interest and principal in respect of the certificates to make a deposit into the reserve fund. Amounts on deposit in the reserve fund on any payment date in excess of the required amount will be paid to the depositor. If on any payment date the funds available to the trustee to distribute principal and interest in respect of the certificates are insufficient, the trust will use funds in the reserve fund to make distributions to the certificateholders to cover any shortfalls. If on the final scheduled payment date of the certificates, the certificate balances of the certificates has not been reduced to zero, the trustee will use funds in the reserve fund to reduce the certificates balances to zero. Pre-Funding Account............... On the closing date, we will fund an account called the pre-funding account by depositing $[ ] which will secure our obligation to purchase and transfer subsequent contracts to the trust. The amount in the pre-funding account will be reduced by the amount used to purchase subsequent contracts from the seller. We expect that the pre-funded amount will be reduced to less than $150,000 by the payment date occurring in [ ]. Any pre-funded amount remaining at the end of the funding period will be paid to the certificateholders as described below in "SUMMARY OF TERMS -- MANDATORY SPECIAL REDEMPTION." Mandatory Special Redemption...... The certificates will be prepaid in part, without premium, on the payment date on or immediately following the last day of the funding period in the event that any amount remains on deposit in the pre- funding account. The aggregate principal amount of certificates to be prepaid will generally be an amount equal to the amount then on deposit S-6 in the pre-funding account allocated pro rata. Interest Reserve Account.......... On the closing date, we will fund an account called the interest reserve account by depositing $[ ] which will provide additional funds to account for the fact that the monthly investment earnings on amounts in the pre- funding account (until such amounts have been used to purchase subsequent contracts) are expected to be less than the weighted average of the interest payments on the notes, as well as the amount necessary to pay trustees' fees. In addition to the initial deposit, all investment earnings with respect to the pre-funding account will be deposited into the interest reserve account. The interest reserve account is not designed to provide any protection against losses on the contracts in the trust. After the funding period, money remaining in the interest reserve account will be released to us. Mandatory Repurchases by the Seller............................ Under the transfer and sale agreement, the seller has agreed, in the event of a breach of certain representations and warranties made by the seller and contained therein which materially and adversely affects the trust's interest in any contract, to repurchase such contract within two business days prior to the first determination date after the servicer, the trustee or we become aware of such breach. See "DESCRIPTION OF TRANSFER AND SALE AGREEMENT--REPRESENTATIONS AND WARRANTIES MADE BY THE SELLER AND THE DEPOSITOR" in the prospectus. Servicing; Servicing Fee.......... Harley-Davidson Credit Corp., as the servicer, will be responsible for servicing, managing and administering the contracts and related interests, and enforcing and making collections on the contracts. Advances: The servicer will make advances for delinquent interest payments on contracts to the extent it determines that a contract as to which it has made advances is a defaulted contract. Servicer advances will be reimbursed from the S-7 delinquent payments when made by the obligors and from collections on other contracts when the servicer determines that the servicer advances will not be recoverable from payments by the obligors. Servicing Fee: The servicer's base monthly fee payable on each payment date will equal the product of: - one twelfth (1/12th) of one percent (1%) and - the aggregate principal balance of the contracts as of the last day of the second calendar month preceding the month in which that payment date falls. The trust will pay the base servicing fee to the servicer with the funds available to it to pay interest and expenses on each payment date after the reimbursement of servicer advances. The servicer will also be entitled to retain any late payment fees, prepayment charges, if any, and other similar fees and charges. See "DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENT-SERVICING" in the accompanying prospectus. Credit Enhancement................ Losses and other shortfalls of cash flow will be covered by payments on other contracts, withdrawals from the reserve fund and allocations of available funds to the Class A Certificates. The credit enhancement for the certificates is as follows: Class A Certificates - subordination of the Class B Certificates - reserve fund Class B Certificates - reserve fund Ratings........................... On the closing date, each class of certificates will have the following ratings by Standard & Poor's Rating Services and Moody's Investors Service, S-8 Inc.: Class S&P Moody's ----- --- ------- A B See "RATINGS OF THE CERTIFICATES" in this prospectus supplement and "RATINGS OF THE SECURITIES" in the accompanying prospectus. Material Federal Income Tax Consequences...................... Winston & Strawn, as federal tax counsel to the trust, will deliver an opinion that: - the trust will be treated as a grantor trust for federal income tax purposes and not as an association (or publicly traded partnership) taxable as a corporation; and - each certificateholder will be treated as the owner of a pro rata undivided interest in the income and assets of the trust. ERISA Considerations.............. Subject to the considerations and conditions discussed under "ERISA CONSIDERATIONS" in this prospectus supplement, the Class A Certificates may be purchased by an employee benefit plan that is subject to ERISA or Section 4975 of the Code. Employee benefit plans and other retirement arrangements that are subject to ERISA or Section 4975 of the Code are not permitted to acquire or hold Class B Certificates except through an "insurance company general account" in the manner discussed under "ERISA CONSIDERATIONS" in this prospectus supplement and the accompanying prospectus. You should refer to "ERISA CONSIDERATIONS" in the accompanying prospectus for more detailed information regarding the ERISA eligibility of any class of certificates. Mailing Address and Telephone Number of Principal Executive Offices........................... The mailing address of the seller is 150 South Wacker Drive, Chicago, Illinois 60606, telephone (312) 368-9501. The mailing address of the depositor is 4150 Technology Way, Carson City, Nevada 89706, telephone (775) 886-3200. S-9 RISK FACTORS The following risk factors and the risk factors in the accompanying prospectus describe the principal risk factors relating to an investment in the certificates. You should carefully consider the following risk factors before you invest in the certificates. You should also carefully consider the risk factors beginning on page 9 of the accompanying prospectus. THE CLASS A CERTIFICATES WILL BE ENTITLED TO INTEREST OR PRINCIPAL DISTRIBUTIONS BEFORE THE CLASS B CERTIFICATES The holders of the Class B Certificates will not receive any distribution of interest until the full amount of interest is distributed to the holders of the Class A Certificates on each payment date. The holders of the Class B Certificates will not receive any distribution of principal until the full amount of principal and interest is distributed to the holders of the Class A Certificates on each payment date. The subordination of the Class B Certificates to the Class A Certificates means that the Class B Certificates are more likely to suffer the consequences of delinquent payments and defaults on the contracts than the Class A Certificates having prior distribution rights. See "DISTRIBUTIONS ON THE CERTIFICATES --DISTRIBUTIONS" in this prospectus supplement. Moreover, the Class A Certificates could lose the credit enhancement provided by the Class B Certificates and the reserve fund if delinquencies and defaults on contracts increase and the collections on contracts and amounts in the reserve fund are insufficient to make distributions in respect of even the Class A Certificates. ADVERSE EVENTS IN [_____] HIGH CONCENTRATION STATES MAY CAUSE INCREASED DEFAULTS AND DELINQUENCIES If adverse events or economic conditions were particularly severe in a geographic region where there is a substantial concentration of obligors, the amount of delinquent payments and defaults on the contracts may increase. As a result, the overall timing and amount of collections on the contracts may differ from what you expect, and you may experience delays or reductions in distributions. The following are the approximate percentages of the initial contract pool principal balance whose obligors are located in the following states: - [_______%] in [_______], - [_______%] in [_______], - [_______%] in [_______], - [_______%] in [_______], and - [_______%] in [_______]. S-10 The remaining states accounted for [___]% of the _______ aggregate principal balance of the contracts, and none of these remaining states accounted for more than 5% of the initial aggregate principal balance of the contracts. For a discussion of the breakdown of the contracts by state, see "THE CONTRACTS" in this prospectus supplement. Although we do not know of any matters likely to increase the rate of delinquencies or defaults in these states, an example of an adverse event specific to a geographic region would include natural disasters and regional economic downturns. For example, a substantial downturn in the financial services industry, which is highly concentrated in the states of New York and New Jersey, or in the oil and gas industry, which is concentrated in the state of Texas could reduce the income of obligors in those states and ultimately reduce the related obligor's ability to make timely payments on their contracts. In addition, the following economic conditions may affect payments: - unemployment, - interest rates, - inflation rates, and - consumer perceptions of the economy. THE CERTIFICATES MAY NOT BE SUITABLE INVESTMENTS FOR ALL INVESTORS The certificates may not be a suitable investment for any investor that requires a regular or predictable schedule of principal payments. We suggest that only investors who, either alone or with their financial, tax and legal advisors, have the expertise to analyze the prepayment, reinvestment and default risks, the tax consequences of an investment and the interaction of these factors consider purchasing the certificates. BECAUSE THE CERTIFICATES ARE IN BOOK-ENTRY FORM, YOUR RIGHTS CAN ONLY BE EXERCISED INDIRECTLY Because the certificates will be issued in book-entry form, you will be required to hold your interest in the certificates through The Depository Trust Company in the United States, or Clearstream, Luxembourg, (formerly Cedelbank) or the Euroclear System in Europe. Transfers of interests in the certificates within DTC, Clearstream or Euroclear must be made in accordance with the usual rules and operating procedures of those systems. So long as the certificates are in book-entry form, you will not be entitled to receive a physical note representing your interest. The certificates will remain in book-entry form except in the limited circumstances described under the caption "INFORMATION REGARDING THE CERTIFICATES--BOOK-ENTRY REGISTRATION" in the accompanying prospectus. Unless and until the certificates in this prospectus supplement cease to be held in book-entry form, the trustee will not recognize you as a "certificateholder," as such term is used in the trust agreement. As a result, you will only be able to exercise the rights of securityholders indirectly through DTC, if in the United States, and its participating organizations, or Clearstream and Euroclear, in Europe, and their participating organizations. Holding the certificates in book-entry form could also limit your ability to pledge your S-11 certificates to persons or entities that do not participate in DTC, Clearstream or Euroclear and to take other actions that require a physical note representing the certificates. Interest and principal on the certificates will be paid by the trust to DTC as the record holder of the certificates while they are held in book-entry form. DTC will credit payments received from the trust to the accounts of its participants which, in turn, will credit those amounts to securityholders either directly or indirectly through indirect participants. This process may delay your receipt of principal and interest payments from the trust. HOLDERS OF CLASS B CERTIFICATES MAY HAVE TO PAY TAXES ON AMOUNTS NOT ACTUALLY RECEIVED. For federal income tax purposes, amounts otherwise payable to the holders of the Class A Certificates will be deemed to have been received by the holders of the Class B Certificates and then paid by them to the holders of the Class A Certificates pursuant to a guaranty. Accordingly, the holders of the Class A Certificates could be liable for taxes on amounts not actually received. See "MATERIAL FEDERAL INCOME TAX CONSEQUENCES" in the accompanying prospectus. USE OF PROCEEDS The depositor will use the net proceeds received from the sale of the certificates (i) for the purchase of the initial contracts and related assets from the seller and (ii) the remainder for the funding of the pre-funding account. The seller will use the net proceeds from the depositor's purchase of the initial contracts, as well as subsequent contracts, for the repayment of a substantial portion of the outstanding principal of the warehouse lines through which it finances its motorcycle conditional sales contracts. Following each such repayment, it is expected that the warehouse lines will be used to fund a new portfolio of motorcycle conditional sales contracts. THE TRUST GENERAL The depositor will create the trust pursuant to a pooling and servicing agreement among the depositor, the servicer and the trustee. Under a transfer and sale agreement, the seller and the depositor will sell all of the contracts and the related property to the depositor. Pursuant to the pooling and servicing agreement, the depositor will transfer all of the contracts and related property to the trust in exchange for the certificates. The property of the trust will consist of: - the contracts and the right to receive all scheduled payments and prepayments received on the contracts on or after the cut-off date, but excluding any scheduled payments due on or after, but received prior to, the cut-off date; - security interests in the financed vehicles securing the contracts and any related property; S-12 - rights with respect to any repossessed financed vehicles; - the rights to proceeds from claims on theft, physical damage, credit life and disability insurance policies covering the financed vehicles or the obligors; - certain rebates of premiums and other amounts relating to insurance policies, extended service contracts or other repair agreements and other items financed under the contracts; - the depositor's rights against the seller under the purchase agreement pursuant to which the seller sold the pool of contracts to the depositor and against the performance guarantor under the performance guarantee pursuant to which the performance guarantor guaranteed the seller's obligations under the purchase agreement; - the right to receive payments from the depositor obligated to repurchase contracts which do not meet specified representations made by depositor in the pooling and servicing agreement; - the trust's rights against the servicer under the pooling and servicing agreements; - amounts held in the collection account and the paid-ahead account to be established and maintained under the pooling and servicing agreement; and - all proceeds of the foregoing. The reserve fund, the pre-funding account and the interest reserve account will be maintained in the name of ________, as collateral agent for the benefit of the certificateholders, but will not be part of the trust. The certificates represent fractional undivided interests in the trusts. See "DESCRIPTION OF THE CERTIFICATES" in this prospectus supplement. THE TRUSTEE [ ] will be the trustee under the pooling and servicing agreement. The trustee is a [_________] banking association and its principal offices are located at [_____________]. The trustee may resign at any time, in which event the servicer will be obligated to appoint a successor trustee. The servicer may also remove the trustee if the trustee ceases to be eligible to continue as such under the pooling and servicing agreement or if the trustee becomes insolvent. In such circumstances, the servicer will also be obligated to appoint a successor trustee. Any resignation or removal of the trustee and appointment of a successor trustee will not become effective until acceptance of the appointment by the successor trustee. The servicer will pay the fees of the trustee in connection with its duties under the pooling and servicing agreement. The trustee will also be entitled to indemnification by the servicer for, and will be held harmless against, any loss, liability, fee, disbursement or expense S-13 incurred by the trustee not resulting from its own willful misfeasance, bad faith or negligence. The servicer will also indemnify the trustee for specified taxes that may be asserted in connection with the transaction. THE SELLER AND THE SERVICER Harley-Davidson Credit Corp. will act as seller and servicer of the contracts and will receive compensation and fees for such services. Information regarding the seller and the servicer is set forth under the captions "THE SELLER AND THE SERVICER" in the accompanying prospectus. THE CONTRACTS DESCRIPTION OF THE CONTRACTS The contracts are (or will be, in the case of subsequent contracts) fixed-rate simple interest conditional sales contracts relating to motorcycles manufactured by Harley-Davidson, Inc. or Buell Motorcycle Company, a wholly-owned subsidiary of Harley-Davidson, Inc. The contracts were originated by the seller indirectly through Harley-Davidson motorcycle dealers and acquired by the depositor in the ordinary course of the depositor's business. Each contract has (or will have) a fixed annual percentage rate and provides for, if timely made, payments of principal and interest which fully amortize the loan on a simple interest basis over its term. The contracts have or will have the following characteristics: - the last scheduled payment of each initial contract is due no later than [ ], and with respect to the contracts as a whole (including any subsequent contracts conveyed to the trust after the closing date), the last scheduled payment will be due no later than []; - the first scheduled payment date of contracts representing approximately [ ]% of the aggregate principal balance of the initial contracts as of the initial cutoff date is due no later than []; - the first scheduled payment date of contracts representing approximately [ ]% of the aggregate principal balance of the initial contracts as of the initial cutoff date is due no later than []; - the first scheduled payment date of contracts representing approximately [ ]% of the aggregate principal balance of the subsequent contracts as of the subsequent cutoff date will be due no later than [ ]; - the first scheduled payment date of contracts representing approximately [ ]% of the aggregate principal balance of the subsequent contracts as of the subsequent cutoff date will be due no later than [ ]; - approximately [ ]% of the principal balance of the initial contracts as of the initial cutoff date is attributable to loans to purchase motorcycles which were new and approximately [ ]% is attributable to loans to purchase motorcycles which were used at the time the related contract was originated. - all initial contracts have a contractual rate of interest of at least [ ]% per annum and not more than [ ]% per annum and the weighted average contractual rate of interest S-14 of the initial contracts as of the initial cutoff date is approximately [ ]% per annum (see Table 1 below). - the initial contracts have remaining maturities as of the initial cutoff date of at least [ ] months but not more than [ ] months and original maturities of at least [ ] months but not more than [ ] months. - the initial contracts have a weighted average term to scheduled maturity, as of origination, of approximately [ ] months, and a weighted average term to scheduled maturity as of the initial cutoff date of approximately [ ] months (see Tables 2 and 3 below). - the average principal balance per initial contract as of the initial cutoff date was approximately $[ ] and the principal balances on the initial contracts as of the initial cutoff date ranged from $[ ] to $[] (see Table 4 below). - the contracts arise (or will arise) from loans to obligors located in 50 states, the District of Columbia, the U.S. Territories and Canada and with respect to the initial contracts, constitute the following approximate amounts expressed as a percentage of the aggregate principal balance of the initial contracts as of the initial cutoff date:[ ]% in [ ], [ ]% in [ ] and []% in [ ] (see Table 5 below). No other state represented more than 5.00% by aggregate principal balance of the initial contracts. Subsequent contracts will not need to satisfy any criteria except for the criteria described in the preceding paragraph. Therefore, following the transfer of the subsequent contracts to the trust, the aggregate characteristics of the entire pool of the contracts, including the composition of the contracts, the distribution by weighted average annual percentage rate of the contracts, the distribution by calculated remaining term of the contracts, the distribution by original term to maturity of the contracts, the distribution by current balance of the contracts, and the geographic distribution of the contracts, described in the following tables, may vary from those of the initial contracts as of the initial cutoff date. TABLE 1 DISTRIBUTION BY APR OF THE INITIAL CONTRACTS (AS OF THE INITIAL CUTOFF DATE)
PERCENT OF PERCENT OF NUMBER OF NUMBER OF TOTAL OUTSTANDING POOL RATE CONTRACTS CONTRACTS(1) PRINCIPAL BALANCE BALANCE(1) ---- --------- ------------ ----------------- ---------- 8.500- 9.000% 9.001-10.000 10.001-11.000 11.001-12.000 12.001-13.000 13.001-14.000 14.001-15.000 15.001-16.000 16.001-17.000 17.001-18.000 18.001-19.000 S-15 19.001-20.000 20.001-21.000 21.001-22.000 22.001-23.000 23.001-23.990 TOTALS: 100.00% 100.00%
(1) PERCENTAGES MAY NOT ADD TO 100.00% BECAUSE OF ROUNDING. TABLE 2 DISTRIBUTION BY CALCULATED REMAINING TERM OF THE INITIAL CONTRACTS (AS OF THE INITIAL CUTOFF DATE)
CALCULATED PERCENT OF REMAINING NUMBER OF NUMBER OF TOTAL OUTSTANDING PERCENT OF TERM (MONTHS) CONTRACTS CONTRACTS (1) PRINCIPAL BALANCE POOL BALANCE (1) ------------- --------- ------------- ----------------- --------------- 6 - 12 13 - 24 25 - 36 37 - 48 49 - 60 61 - 72 73 - 84 TOTALS: 100.00% 100.00%
(1) Percentages may not add to 100.00% because of rounding. TABLE 3 DISTRIBUTION BY CALCULATED ORIGINAL TERM TO MATURITY OF THE INITIAL CONTRACTS (AS OF THE INITIAL CUTOFF DATE)
PERCENT OF ORIGINAL NUMBER OF NUMBER OF TOTAL OUTSTANDING PERCENT OF POOL TERM (MONTHS) CONTRACTS CONTRACTS (1) PRINCIPAL BALANCE BALANCE (1) ------------- --------- ------------- ----------------- ----------- 0 - 12 13 - 24 25 - 36 37 - 48 49 - 60 61 - 72 73 - 84 TOTALS: 100.00% 100.00%
(1) Percentages may not add to 100.00% because of rounding. S-16 TABLE 4 DISTRIBUTION BY CURRENT BALANCE OF THE INITIAL CONTRACTS (AS OF THE INITIAL CUTOFF DATE)
PERCENT OF NUMBER OF NUMBER OF TOTAL OUTSTANDING PERCENT OF POOL CURRENT BALANCE CONTRACTS CONTRACTS (1) PRINCIPAL BALANCE BALANCE (1) --------------- --------- ------------- ----------------- ----------- $ 0 - 1,000.00 $ 1,000.01 - 2,000.00 $ 2,000.01 - 3,000.00 $ 3,000.01 - 4,000.00 $ 4,000.01 - 5,000.00 $ 5,000.01 - 6,000.00 $ 6,000.01 - 7,000.00 $ 7,000.01 - 8,000.00 $ 8,000.01 - 9,000.00 $ 9,000.01 - 10,000.00 $ 10,000.01 - 11,000.00 $ 11,000.01 - 12,000.00 $ 12,000.01 - 13,000.00 $ 13,000.01 - 14,000.00 $ 14,000.01 - 15,000.00 $ 15,000.01 - 16,000.00 $ 16,000.01 - 17,000.00 $ 17,000.01 - 18,000.00 $ 18,000.01 - 19,000.00 $ 19,000.01 - 20,000.00 $ 20,000.01 - 21,000.00 $ 21,000.01 - 22,000.00 $ 22,000.01 - 23,000.00 $ 23,000.01 - 24,000.00 $ 24,000.01 - 25,000.00 $ 25,000.01 - 26,000.00 $ 26,000.01 - 27,000.00 $ 27,000.01 - 28,000.00 $ 28,000.01 - 29,000.00 $ 29,000.01 - 30,000.00 $ 30,000.01 - 31,000.00 $ 31,000.01 - 32,000.00 $ 32,000.01 - 33,000.00 $ 33,000.01 - 33,764.16 TOTALS: 100.00% 100.00%
(1) Percentages may not add to 100.00% because of rounding. S-17 TABLE 5 GEOGRAPHIC DISTRIBUTION OF THE INITIAL CONTRACTS (AS OF THE INITIAL CUTOFF DATE)
PERCENT OF NUMBER OF NUMBER OF TOTAL OUTSTANDING PERCENT OF POOL STATE CONTRACTS CONTRACTS (1) PRINCIPAL BALANCE BALANCE (1) ----- --------- ------------ ----------------- ----------- ALABAMA ALASKA ARIZONA ARKANSAS CALIFORNIA COLORADO CONNECTICUT DELAWARE DISTRICT OF COLUMBIA FLORIDA GEORGIA HAWAII IDAHO ILLINOIS INDIANA IOWA KANSAS KENTUCKY LOUISANA MAINE MARYLAND MASSACHUSETTS MICHIGAN MINNESOTA MISSISSIPPI MISSOURI MONTANA NEBRASKA NEVADA NEW HAMPSHIRE NEW JERSEY NEW MEXICO NEW YORK NORTH CAROLINA NORTH DAKOTA OHIO OKLAHOMA OREGON PENNSYLVANIA S-18 TABLE 5 GEOGRAPHIC DISTRIBUTION OF THE INITIAL CONTRACTS (CONTINUED) PERCENT OF NUMBER OF NUMBER OF TOTAL OUTSTANDING PERCENT OF POOL STATE CONTRACTS CONTRACTS (1) PRINCIPAL BALANCE BALANCE (1) ----- --------- ------------ ----------------- ----------- RHODE ISLAND SOUTH CAROLINA SOUTH DAKOTA TENNESSEE TEXAS UTAH VERMONT VIRGINIA WASHINGTON WEST VIRGINIA WISCONSIN WYOMING CANADA OTHER TOTALS: 100.00% 100.00%
(1) Percentages may not add to 100.00% because of rounding. S-19 DELINQUENCY, LOAN LOSS AND REPOSSESSION INFORMATION The following tables set forth the delinquency experience and loan loss and repossession experience of the seller's portfolio of conditional sales contracts for motorcycles. These figures include data in respect of contracts which the seller has previously sold with respect to prior securitizations and for which the seller acts as servicer. DELINQUENCY EXPERIENCE(1)/ (DOLLARS IN THOUSANDS) AT DECEMBER 31,
----------------------------------------------------------------------------------------------------- 1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- Number Number Number Number Number of of of of of contracts Amount contracts Amount contracts Amount contracts Amount contracts Amount ----------------------------------------------------------------------------------------------------- Portfolio..................... 91,556 $914,545.5 67,137 $651,248.7 45,258 $434,890.7 32,574 $303,682.4 20,590 $184,054.0 Period of Delinquency(2)/ 30-59 Days.................... 2,868 $28,307.9 1,970 $17,768.1 1,264 $11,454.6 904 $8,002.9 477 $4,043.3 60-89 Days.................... 983 9,424.3 745 6,153.9 559 5,112.1 374 3,170.7 157 1,298.7 90 Days or more............... 371 3,569.9 304 2,591.0 269 2,196.5 213 1,880.6 140 1,120.2 --- ------- --- ------- --- ------- --- ------- --- ------- Total Delinquencies........... 4,222 $41,302.1 3,019 $26,513.0 2,092 $18,763.2 1,491 $13,054.2 774 $6,462,2 Total Delinquencies as a ===== ========= ===== ========= ===== ========= ===== ========= === ======== Percent of Total Portfolio.... 4.61% 4.52% 4.50% 4.07% 4.62% 4.31% 4.58% 4.30% 3.76% 3.51%
At March 31, --------------------------------------------- 2000 1999 ---- ---- Number Number of of contracts Amount contracts Amount --------------------------------------------- Portfolio..................... 98,306 $981,709.4 72,411 $712,081.0 Period of Delinquency(2)/ 30-59 Days.................... 2,343 $22,973.6 1,814 $17,246.9 60-89 Days.................... 587 5,543.9 606 5,403.9 90 Days or more............... 235 2,363.5 355 3,099.5 --- ------- --- ------- Total Delinquencies........... 3,165 $30,881.0 2,775 $25,750.3 ===== ========= ===== ========= Total Delinquencies as a Percent of Total Portfolio.... 3.22% 3.15% 3.83% 3.62%
------------------ (1) Excludes contracts already in repossession, which contracts the servicer does not consider outstanding. (2) The period of delinquency is based on the number of days payment are contractually past due (assuming 30-day months). Consequently, a contract due on the first day of a month is not 30 days delinquent until the first day of the next month. S-20 Loan Loss/Repossession Experience (Dollars in Thousands)
Year Ended December 31, ------------------------------------------------------------ 1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- Principal Balance of All Contracts Serviced(1)/..................... $918,481.6 $653,836.0 $436,771.0 $304,730.9 $184,548.7 Contract Liquidations(2)/.......... 1.59% 1.54% 1.42% 0.74% 0.76% Net Losses: Dollars(3)/...................... $5,875.0 $5,245.3 $3,781.1 $1,639.5 $866.4 Percentage(4)/................... 0.64% 0.80% 0.87% 0.54% 0.47%
Three Months Ended March 31, ---------------------------------------------- 2000 1999 ---- ---- Principal Balance of All Contracts Serviced(1)/........................ $985,715.0 $714,465.2 Contract Liquidations(2)/........... 1.95% 1.68% Net Losses: Dollars(3)/...................... $1,995.5 $1,493.8 Percentage(4)/................... 0.81% 0.84%
------------------ (1) As of period end. Includes contracts already in repossession. (2) As a percentage of the total number of contracts being serviced as of period end, calculated on an annualized basis. (3) The calculation of net loss includes actual charge-offs, deficiency balances remaining after liquidation of repossessed vehicles and expenses of repossession and liquidation, net of recoveries. (4) As a percentage of the principal amount of contracts being serviced as of period end, calculated on an annualized basis. The data presented in the foregoing tables are for illustrative purposes only and there is no assurance that the delinquency, loan loss or repossession experience of the contracts will be similar to that set forth above. TWELVE MONTHS ENDED DECEMBER 31, 1999 VERSUS TWELVE MONTHS ENDED DECEMBER 31, 1998. The amounts classified as delinquent as a percentage of the portfolio increased from 4.07% to 4.52%. The increase is attributable to a conversion to a new servicing system in December 1999. The number of liquidations as a percentage of the portfolio increased from 1.54% to 1.59%. Net losses as a percentage of the outstanding principal amount of the contracts decreased from 0.80% to 0.64%. The decrease is attributable to more stringent collection procedures implemented by the servicer. The number of contracts in the portfolio increased from 67,137 to 91,556 due to an increase in Harley-Davidson motorcycle production and HOFS's market share penetration of units financed. TWELVE MONTHS ENDED DECEMBER 31, 1998 VERSUS TWELVE MONTHS ENDED DECEMBER 31, 1997. The amounts classified as delinquent as a percentage of the portfolio decreased from 4.31% to 4.07%. The decrease is attributable to the seasoning of the portfolio. The number of liquidations as a percentage of the portfolio increased from 1.42% to 1.54%. The increase is attributable to growth and seasoning of the Delta loan program. Net losses as a percentage of the outstanding principal amount of the contracts decreased from 0.87% to 0.80%. The decrease is attributable to more stringent collection procedures implemented by the servicer. The number of S-21 contracts in the portfolio increased from 45,258 to 67,137 due to an increase in Harley-Davidson motorcycle production and HDFS's market share penetration of units financed. TWELVE MONTHS ENDED DECEMBER 31, 1997 VERSUS TWELVE MONTHS ENDED DECEMBER 31, 1996. The amounts classified as delinquent as a percentage of the portfolio increased from 4.30% to 4.31%. The number of liquidations as a percentage of the portfolio increased from 0.74% to 1.42%. The increase is attributable to growth and seasoning of the Delta loan program. Net losses as a percentage of the outstanding principal amount of the contracts increased from 0.54% to 0.87%. The increase is attributable to a lower collectors to account ratio due to the launch of HDFS's credit card operation. The number of contracts in the portfolio increased from 32,574 to 45,258 due to an increase in Harley-Davidson motorcycle production and HDFS's market share penetration of units financed. TWELVE MONTHS ENDED DECEMBER 31, 1996 VERSUS TWELVE MONTHS ENDED DECEMBER 31, 1995. The amounts classified as delinquent as a percentage of the portfolio increased from 3.51% to 4.30%. The increase is attributable to overall portfolio growth. The number of repossessions as a percentage of the portfolio decreased from 0.76% to 0.74%. Net losses as a percentage of the outstanding principal amount of the contracts increased from 0.47% to 0.54%. The increase is attributable to overall portfolio growth. The number of contracts in the portfolio increased from 20,590 to 32,574 due to an increase in Harley-Davidson motorcycle production and HDFS's market share penetration of units financed. THREE MONTHS ENDED MARCH 31, 2000 VERSUS THREE MONTHS ENDED MARCH 31, 1999. The amounts classified as delinquent as a percentage of the portfolio decreased from 3.62% to 3.15%. The decrease is attributable to increased collections. The number of liquidations as a percentage of the portfolio increased from 1.67% to 1.95%. The increase is attributable to the growth and seasoning of the Delta loan program. Net losses as a percentage of the outstanding principal amount of the contracts decreased from 0.84% to 0.81%. The decrease is attributable to increased recoveries on defaulted contracts. The number of contracts in the portfolio increased from 72,411 to 98,306 due to an increase in Harley-Davidson motorcycle production and HDFS's market share penetration of units financed. We know of no trends that are likely to increase the rate of delinquencies or losses on the contracts. YIELD AND PREPAYMENT CONSIDERATIONS By their terms, the contracts may be prepaid, in whole or in part, at any time. Each contract also contains a provision which permits the seller to require full prepayment in the event of a sale of the related motorcycle securing a contract. In addition, repurchases of the contracts from the trust by the depositor, and concurrently from the depositor by the seller, could occur in the event of a breach of certain representation and warranties with respect to the contracts. Repurchases of contracts from the trust by the depositor, and concurrently from the depositor by the seller, could also occur if the depositor exercises its limited option to repurchase the contracts from the trust when the aggregate outstanding principal balances of the contracts owned by the trust has declined to less than 10% of the sum of: - the aggregate outstanding principal balance of the contracts owned by the trust as of the closing date; and S-22 - the initial amount on deposit in the pre-funding account. Any prepayments and repurchases of contracts will reduce the average life of the certificates and the interest received by the certificateholders over the life of the certificate (for this purpose the term "PREPAYMENT" includes liquidations due to default, as well as receipt of proceeds from credit life, credit disability and casualty insurance policies). In addition, funds remaining in the pre-funding account at the end of the funding period will be used to prepay outstanding principal of the certificates and as a result, the interest received by certificateholders over the life of the certificates will be reduced. The last scheduled payment on the initial contract with the latest maturity will occur in [ ]. The last scheduled payment on the contract with the latest maturity among the contracts as a whole, including any subsequent contracts, will not occur later than [ ]. POOL FACTORS The "CLASS A CERTIFICATE POOL FACTOR" will be a seven-digit decimal indicating the certificate balance of the Class A Certificates on the payment date as a fraction of the aggregate certificate balances of the contracts as of the closing date. The "CLASS B CERTIFICATE POOL FACTOR" will be a seven-digit decimal indicating the certificate balance of the Class B Certificates on the payment date as a fraction of the aggregate certificate balances of the contracts as of the closing date. The servicer will compute the pool factors each month. Initially, each factor will be 1.0000000 and thereafter will decline to reflect reductions in the certificate balances. The portion of the certificate balance for any class of certificates for a given month allocable to a certificateholder can be determined by multiplying the original denomination of the holder's certificate by the related pool factor, as the case may be, for that month. You will receive monthly reports concerning the distributions received on the contracts, the aggregate principal balance for the contracts, the related certificate factors and various other items of information pertaining to the trust. Furthermore, the trustee will furnish you with information for tax reporting purposes not later than the latest date permitted by law. See "DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS--SERVICING--STATEMENTS TO SECURITYHOLDERS" in the accompanying prospectus. DESCRIPTION OF THE CERTIFICATES This section supplements the information in the accompanying prospectus under the caption "DESCRIPTION OF THE Certificates". However, as these statements are only summaries, you should read the pooling and servicing agreement, a form of which has been filed as an exhibit to the registration statement of which the accompanying prospectus forms a part. A copy of the pooling and servicing agreement is available to you upon request to the depositor and will be filed with the Securities Exchange Commission following the issuance of the certificates. GENERAL The certificates will be issued pursuant to the terms of the pooling and servicing agreement among the trustee, the depositor and the servicer. S-23 Two classes of certificates evidencing undivided ownership interests in the trust, designated as the: - Class A Certificates, and - Class B Certificates will be issued. The Class A Certificates will evidence in the aggregate an undivided ownership interest of approximately ___% of the trust and the Class B Certificates will evidence in the aggregate an undivided ownership interest of approximately ____% of the trust. The certificates will be delivered in book-entry form only and be issued in minimum denominations of $1,000. INTEREST Interest will be distributable in respect of the certificates at the fixed pass-through rates for each class of certificates shown on the cover page of this prospectus supplement. The trust will distribute interest in respect of the certificates on each payment date from Available Interest and amounts withdrawn from the reserve fund as set forth under "DISTRIBUTIONS ON THE CERTIFICATES--DISTRIBUTIONS" below. Interest will be distributable to you monthly on the [_______] of each month or, if that date is not a business day, on the next succeeding business day and will be calculated for the interest period from and including the ____th day of the prior month(or from and including the closing date, in the case of the initial payment date) to but excluding the ____th day of the next month on the basis of a 360-day year consisting of twelve 30-day months. If on any payment date, the trust does not have sufficient funds to make a full distribution of interest on any class the certificates, the amount of the shortfall will be carried forward, and together with interest on the shortfall amount at the applicable pass-through rate for that class, added to the amount of interest distributable in respect of that class of certificates on the next payment date. PRINCIPAL On each payment date, principal in respect of the certificates will be distributable in an amount equal to the monthly principal for that payment date. The holders of the Class A Certificates and the Class B Certificates will be entitled to receive a PRO RATA share of the amounts to be distributed in respect of principal. However, no distributions of principal in respect of the Class B Certificates will be made on any payment date until interest and principal in respect of the Class A Certificates has been distributed. Principal in respect of the certificates will be distributed as set forth under "DISTRIBUTIONS ON THE CERTIFICATES--DISTRIBUTIONS" below. OPTIONAL PREPAYMENT S-24 The seller, at its option, may repurchase all of the contracts owned by a trust on any payment date following the date on which the aggregate principal balance of the contracts is less than 10% of the aggregate principal balance of the contracts as of the cut-off date. The purchase price to be paid in connection with the purchase will be at least equal to the sum of: - the unpaid certificate balance of the certificates as of that payment date, together with all interest distributable in respect of the certificates as of that payment date; - unreimbursed servicer advances; - accrued but unpaid servicer fees; - any other amounts payable at the time from Available Amounts; minus - amounts on deposit in the reserve fund. If the seller does purchase the contracts, the certificates will be paid in full on the payment date on which the purchase occurs. VOTING RIGHTS If a servicer default occurs, the trustee or holders of certificates evidencing more than 50% of the aggregate principal balance of the contracts may remove the servicer without the consent of any other holder of certificates. If a servicer default occurs, holders of certificates evidencing more than 50% of the aggregate principal balance of the contracts may waive any servicer default other than a default in making any required deposits into the collection account. NOTICES Certificateholders will be notified in writing by the trustee of any servicer default or termination of, or appointment of a successor to, the servicer promptly upon a responsible officer obtaining actual knowledge of these events. Except for the monthly and annual reports to certificateholders described this prospectus supplement, the trustee is not obligated under the pooling and servicing agreement to forward any other notices to the certificateholders. There are no provisions in the pooling and servicing agreement for the regular or special meetings of certificateholders. THE ACCOUNTS THE COLLECTION ACCOUNT The trustee will establish an account referred to as the collection account. The servicer will cause all collections made on or in respect of the contracts during a due period to be deposited in or credited to the collection account. The servicer is required to deposit, without deposit into any intervening account, into the collection account as promptly as possible, but in any case not later than the second business day following the receipt thereof, all amounts received on or in respect of the contracts. The servicer is required to use its best efforts to cause an obligor to make all payments on the contracts directly to one or more lockbox banks, acting as S-25 agent for the trust pursuant to a lockbox agreement. Funds in the collection account will be invested in certain eligible investments. All income or other gain from such investments will be promptly deposited in, and any loss resulting from such investments shall be charged to, the collection account. THE PRE-FUNDING ACCOUNT The trustee will establish a trust account referred to as the pre-funding account in accordance with the sale and servicing agreement. During the funding period, the pre-funding account will be maintained by the trustee for your benefit to secure the depositor's obligations under the pooling and servicing agreement to purchase and transfer subsequent contracts to the trust. On the closing date, the depositor will deposit $[ ] into the pre-funding account. During the funding period, amounts on deposit in the pre-funding account will be reduced by the amount thereof that the depositor uses to purchase subsequent contracts from the seller and contemporaneously transfer to the trust. The depositor expects that the pre-funded amount will be reduced to less than $150,000 by the payment date occurring in [ ]. Any pre-funded amount remaining at the end of the funding period will be payable to the certificateholders. See "DESCRIPTION OF THE CERTIFICATES -- MANDATORY SPECIAL REDEMPTION". THE RESERVE FUND The reserve fund will be a segregated account in the name of [____________], as collateral agent. The reserve fund will be created with an initial deposit by the depositor on the closing date of an amount equal to $________ which is less than the amount that is required to be on deposit in the reserve fund. The reserve fund will thereafter be funded as described above under "DISTRIBUTIONS ON THE CERTIFICATES--DISTRIBUTIONS". Amounts held from time to time in the reserve fund will be held for the benefit of certificateholders and may be invested in investments acceptable to the rating agencies rating certificates as being consistent with the ratings of the certificates at the direction of the servicer. Investment income on those investments will be paid to the depositor, upon the direction of the servicer, to the extent that funds on deposit in the reserve fund on any payment date exceed the amount that is required to be on deposit in the reserve fund. If the amount on deposit in the reserve fund on any payment date exceeds the amount that is required to be on deposit in the reserve fund on that payment date, the collateral agent will withdraw that excess and pay it to the depositor. Upon any distribution to the depositor of those excess amounts, neither the holders of the Class A Certificates nor the holders of the Class B Certificates will have any rights in, or claims to, those amounts. The amount that is required to be on deposit in the reserve fund on each payment date will initially be $[ ]. However, on any payment date, the amount that is required to be on deposit in the reserve fund will be an amount equal to $[ ]. The servicer may, from time to time after the date of this prospectus supplement, request each rating agency rating the certificates to approve a formula for determining the amount that is required to be on deposit in the reserve fund on each payment date that is different from that described above. If each rating agency delivers a letter to the trustee to the effect that the use of S-26 any new formula will not result in a qualification, reduction or withdrawal of its then-current rating of any class of certificates, then the amount that is required to be on deposit in the reserve fund on each payment date will be determined in accordance with the new formula. The pooling and servicing agreement will accordingly be amended, without the consent of any certificateholder, to reflect the new calculation. If the amounts of Available Interest and/or Available Principal available to the trust for any payment date are insufficient to make distributions of principal and interest on the certificates, the collateral agent will withdraw funds from the reserve fund for distribution to the certificateholders to cover any shortfalls. If on the final scheduled payment date, the certificate balance of each class has not been reduced to zero, the collateral agent will withdraw funds from the reserve fund to pay those certificates in full. CALCULATION OF RESERVE FUND REQUIRED AMOUNT On the closing date, the depositor will deposit a total of $[ ] into the reserve fund initial deposit. With respect to any payment date, the reserve fund required amount will equal the greater of (a) [ ]% of the principal balance of the contracts in the trust as of the first day of the immediately preceding due period; PROVIDED, HOWEVER, that if certain trigger events occur, the reserve fund required amount will be equal to [ ]% of the principal balance of the contracts in the trust as of the first day of the immediately preceding due period and (b) [ ]% of the aggregate of the initial certificate balances; PROVIDED, HOWEVER, in no event shall the reserve fund required amount be greater than the aggregate outstanding principal balance of the securities. As of any payment date, the amount of funds actually on deposit in the reserve fund initial deposit may, in certain circumstances, be less than the reserve fund required amount. A "RESERVE FUND TRIGGER EVENT" will have been deemed to occur with respect to any payment date if (i) the Average Delinquency Ratio for such payment date is equal to or greater than (a) [ ]% with respect to any payment date which occurs within the period from the closing date to, and inclusive of, the first anniversary of the closing date, (b) [ ]% with respect to any payment date which occurs within the period from the day after the first anniversary of the closing date to, and inclusive of, the second anniversary of the closing date, or (c) [ ]% for any payment date which occurs within the period from the day after the second anniversary of the closing date to, and inclusive of, the third anniversary of the closing date or (d) [ ]% for any payment date following the third anniversary of the closing date; (ii) the Average Loss Ratio for such payment date is equal to or greater than (a) [ ]% with respect to any payment date which occurs within the period from the closing date to, and inclusive of, the eighteen months following the closing date or (b) [ ]% with respect to any payment date which occurs following the eighteen month period following the closing date; or (iii) the Cumulative Loss Ratio for such payment date is equal to or greater than (a) [ ]% with respect to any payment date which occurs within the period from the closing date to, and inclusive of, the first anniversary of the closing date, (b) [ ] % with respect to any payment date which occurs within the period from the day after the first anniversary of the closing date to, and inclusive of, the second anniversary of the closing date, (c) [ ]% for any payment date which occurs within the period from the day after the second anniversary of the closing date to, and inclusive of, the third anniversary of the closing date, or (d) [ ]% following the third anniversary of the closing date. S-27 A reserve fund trigger event will be deemed to have terminated with respect to a payment date if no reserve fund trigger event shall exist with respect to [ ] consecutive payment dates (inclusive of the respective payment date). INTEREST RESERVE ACCOUNT The depositor will establish, and fund with an initial deposit on the closing date, the interest reserve account, for the purpose of providing additional funds for payment to the trust of carrying charges to pay certain distributions on payment dates occurring during (and on the first payment date following the end of) the funding period. In addition to the initial deposit, all investment earnings with respect to the pre-funded account are to be deposited into the interest reserve account and, pursuant to the sale and servicing agreement, the depositor is obligated to pay to the trust, on each payment date described above, amounts in respect of carrying charges from such account. The interest reserve account will be established to account for the fact that a portion of the proceeds obtained from the sale of the certificates will be initially deposited in the pre-funding account rather than invested in contracts, and the monthly investment earnings on amounts in the pre-funding account (until such amounts have been used to purchase subsequent contracts) are expected to be less than the weighted average of the interest rates of the respective classes of certificates with respect to the corresponding portion of the principal balances of respective classes of certificates, as well as the amount necessary to pay the trustees' fees. The interest reserve account is not designed to provide any protection against losses on the contracts in the trust. After the funding period, money in the interest reserve account will be released to the depositor. THE DISTRIBUTION ACCOUNT The depositor will establish and maintain with an eligible institution the certificate distribution account, in the name of the trust on behalf of the certificateholders, in which amounts released from the collection account for distribution to certificateholders will be deposited and from which all distributions to certificateholders will be made. MANDATORY REDEMPTION FOLLOWING THE FUNDING PERIOD Certificateholders will be prepaid in part, without premium, on the payment date on or immediately following the last day of the funding period if any amount remains on deposit in the pre-funding account after subsequent contracts are transferred to the trust. The aggregate principal amount of certificates to be prepaid will be an amount equal to the amount then on deposit in the pre-funding account allocated pro rata. If the amount on deposit in the pre-funding account is less than $150,000, only the Class A certificateholders will be prepaid. PAYMENTS ON THE CERTIFICATES AVAILABLE AMOUNTS The trust will pay principal and interest in respect of the certificates on each payment date from Available Amounts for the payment date, as well as amounts permitted to be S-28 withdrawn from the reserve fund. See "CERTAIN INFORMATION REGARDING THE NOTES--THE ACCOUNTS--RESERVE FUND". "Available Amounts" for any payment date are generally the sum of: - - the following amounts on deposit in the collection account which the trust received during the prior calendar month; (1) all amounts allocable to scheduled principal or interest payments on the contracts; (2) prepayments of contracts; and (3) proceeds of repossessed financed motorcycles and other proceeds of defaulted contracts; - - the purchase price paid by the depositor in repurchasing contracts from the trust on that payment date as a result of a breach of the representations and warranties with respect to those contracts in the sale and servicing agreement; - - servicer advances made by the servicer on that payment date in respect of delinquent interest payments for the prior calendar month; and - - the amount paid by the depositor to purchase the contracts when the aggregate outstanding principal balance of the contracts is reduced to less than 10% of the sum of (i) aggregate principal balance of the contracts owned by the trust as of the closing date and (ii) the initial mount on deposit in the pre-funding account. The precise calculation of the funds available to the trust on each payment date to make payments on the certificates is set forth in the definition of "Available Amounts" and the definitions of the defined terms contained in that definition set forth in the Glossary. We refer you to those definitions. SERVICING COMPENSATION AND REIMBURSEMENT OF SERVICER ADVANCES On each payment date, the servicer will be entitled to receive: - the base servicing fee in an amount equal to the product of one twelfth of one percent (1%) and the aggregate principal balance of the contracts as of the last day of the second calendar month preceding the month in which that payment date falls; and - any investment income earned on amounts on deposit in the collection account during the prior calendar month. The servicer will also be entitled to retain any late payment fees, prepayment charges, if any, and other similar fees and charges received during the prior calendar month. The servicer will reimburse itself for servicer advances out of: S-29 - amounts received by the servicer from the obligors on account of the related delinquent contract payments; - the proceeds, net of expenses incurred by the servicer, of the sale of the repossessed financed vehicles securing the related delinquent contracts; and - payments on other contracts when the servicer has determined that an advance will not be recoverable from payments by the related obligor. DISTRIBUTIONS On each payment date, the trustee will distribute the following amounts in the following order and priority from the following funds: (1) from the Available Amounts, to the servicer, reimbursement of servicer advances; (2) from Available Interest, to the servicer, payment of the base servicing fee; (3) from Available Interest, to the Class A certificateholders, an amount equal to the accrued and unpaid interest on the Class A Certificates, including any accrued and unpaid interest on the Class A Certificates payable on prior payment dates plus interest on that accrued and unpaid interest, and if the remaining Available Interest is insufficient, the Class A certificateholders will be entitled to receive interest first from funds withdrawn from the reserve fund and second, if those amounts are insufficient, from the Class B Percentage of Available Principal; (4) from Available Interest, to the Class B certificateholders, an amount equal to the accrued and unpaid interest on the Class B Certificates, including any accrued and unpaid interest on the Class B Certificates payable on prior payment dates plus interest on that accrued and unpaid interest and if the remaining Available Interest is insufficient, the Class B certificateholders will be entitled to receive interest from funds withdrawn from the reserve fund; (5) from Available Amounts, to the Class A certificateholders, an amount equal to the Class A Principal Distributable Amount for such payment date and if the remaining Available Amounts are insufficient, the Class A certificateholders will be entitled to receive principal from funds withdrawn from the reserve fund; (6) from Available Amounts, to the Class B certificateholders, an amount equal to the Class B Principal Distributable Amount for such payment date and if the remaining Available Amounts are insufficient, the Class B certificateholders will be entitled to receive principal from funds withdrawn from the reserve fund; (7) from Available Amounts, to the reserve fund, an amount necessary to increase the amount on deposit in the reserve fund to the required amount; and (8) any remaining Available Amounts to the depositor. RATINGS OF THE CERTIFICATES It is a condition of issuance that each of Standard & Poor's Rating Services and Moody's Investors Service, Inc. S-30 - rate the Class A Certificates in its [___________] rating category, - rate the Class B Certificates at least [___________] respectively. The ratings address the likelihood of the timely receipt of interest and distribution of principal in respect of each class of certificates on or before the scheduled final payment date. The ratings will be based primarily upon the contracts and the related property, the reserve fund, the yield supplement account and the subordination provided by the Class B Certificates, in the case of the Class A Certificates. We cannot assure you that any rating will not be lowered or withdrawn by the assigning rating agency. In the event that ratings with respect to the certificates are qualified, reduced or withdrawn, no person or entity will be obligated to provide any additional credit enhancement with respect to the certificates. The ratings should be evaluated independently from similar ratings on other types of certificates. A rating is not a recommendation to buy, sell or hold the certificates, inasmuch as these ratings do not comment as to market price or suitability for a particular investor. The ratings do not address the likelihood of distributions of principal in respect of any class of certificates prior to the scheduled final payment date or the possibility of the imposition of United States withholding tax with respect to non-United States Persons. MATERIAL FEDERAL INCOME TAX CONSEQUENCES TREATMENT OF TRUST AS GRANTOR TRUST Winston & Strawn, as federal tax counsel to the trust, will deliver its opinion that the trust will be treated for federal income tax purposes as a grantor trust and not as an association (or a publicly traded partnership) taxable as a corporation. They will further opine that each certificateholder will be treated for federal income tax purposes as the owner of a pro rata undivided interest in the income and assets of the trust. These opinions are subject to the further explanation, assumptions and qualifications described in the accompanying prospectus under the heading "MATERIAL FEDERAL INCOME TAX CONSEQUENCES--GRANTOR TRUST". For federal income tax purposes, the trust will be deemed to have acquired the following assets: the principal and interest due with respect to each contract (excluding the portion retained by the seller), any rights to receive payments under a yield supplement agreement, and certain other rights in favor of the trust with respect to payments due on the contracts. TAX TREATMENT OF INVESTORS Each certificateholder will be required to report on its federal income tax return its pro rata share of the entire income from the contracts in the trust, including interest, original issue discount, prepayment fees, assumption fees, any gains on disposition of contracts, and late payment charges. A certificateholder will also be required to report any payments received under a yield supplement agreement to the extent that these payments are treated as income. Each certificateholder will be entitled to deduct its pro rata share of servicing fees, prepayment fees, assumption fees, and any losses recognized upon disposition of contracts. A S-31 certificateholder's recognition of income required to be reported on its return and its ability to deduct expenses of the trust are subject to the further explanation, assumptions and qualifications described in detail in the accompanying prospectus. ERISA CONSIDERATIONS CLASS A CERTIFICATES Subject to the considerations set forth below and under "ERISA CONSIDERATIONS" in the accompanying prospectus, the Class A Certificates may be purchased by an employee benefit plan, an individual retirement account or a similar arrangement (a "Benefit Plan") subject to ERISA or Section 4975 of the United States Internal Revenue Code of 1986, as amended (the "Code"). A fiduciary of a Benefit Plan must determine that the purchase of a Class A Certificate is consistent with its fiduciary duties under ERISA and does not result in a nonexempt prohibited transaction as defined in Section 406 of ERISA or Section 4975 of the Code. The United States Department of Labor (the "DOL") has granted to [ ] and [ ]administrative exemptions (Prohibited Transaction Exemptions [ ] and [ ], as amended by Prohibited Transaction Exemption 97-34 (the "Exemptions")) from some of the prohibited transaction rules of ERISA with respect to the initial purchase, the holding and the subsequent resale by Benefit Plans of certificates representing interests in asset-backed pass-through trusts that consist of receivables, loans and other obligations that meet the conditions and requirements of the Exemptions. The receivables covered by the Exemptions include motor vehicle installment obligations such as the contracts. The Exemptions also apply to transactions in connection with the servicing, management and operation of the trust which might otherwise constitute prohibited transactions. Among the conditions that must be satisfied for either of the Exemptions to apply to the acquisition by a Benefit Plan of the Class A Certificates are the following: 1. The acquisition of the Class A Certificates by a Benefit Plan is on terms (including the price for that Class A Certificates) that are at least as favorable to the Benefit Plan as they would be in an arm's-length transaction with an unrelated party. 2. The rights and interests evidenced by the Class A Certificates acquired by the Benefit Plan are not subordinated to the rights and interests evidenced by other certificates of the trust. 3. The Class A Certificates acquired by the Benefit Plan have received a rating at the time of the acquisition that is in one of the three highest generic rating categories from Standard & Poor's Rating Services ("S&P"), Moody's Investors Service, Inc. ("Moody's"), Duff & Phelps Inc. ("D&P") or Fitch IBCA, Inc. ("Fitch" and together with S&P, Moody's and D&P, the "Rating Services"). 4. The trustee is not an affiliate of any member of the Restricted Group (as defined below). S-32 5. The sum of all payments made to and retained by the underwriters in connection with the purchase of the Class A Certificates represents not more than reasonable compensation for underwriting the Class A Certificates. The sum of all payments made to and retained by the depositor pursuant to the transfer of the contracts to the trust represents not more than the fair market value of those contracts. The sum of all payments made to and retained by any servicer represents not more than reasonable compensation for the servicer's services and reimbursement of the servicer's reasonable expenses in connection therewith. 6. The Benefit Plan investing in the Class A Certificates is an "accredited investor" as defined in Rule 501(a)(1) of Regulation D of the Commission under the Securities Act of 1933, as amended. The trust must also meet the following requirements: 1. The corpus of the trust must consist solely of assets of the type that have been included in other investment pools. 2. Certificates in those other investment pools must have been rated in one of the three highest generic rating categories of any of the Rating Services for at least one year prior to the Benefit Plan's acquisition of certificates. 3. Certificates evidencing interests in those other investment pools must have been purchased by investors other than Benefit Plans for at least one year prior to any Benefit Plan's acquisition of Class A Certificates. The Exemptions do not apply in all respects to Benefit Plans sponsored by the seller, the underwriters, the trustee, the servicer, any obligor with respect to the contracts included in the trust constituting more than 5% of the aggregate unamortized principal balance of the assets in the trust or any affiliate of those parties (the "Restricted Group"). As of the date hereof, no obligor with respect to the contracts included in the trust constitutes more than 5% of the aggregate unamortized principal balance of the trust (i.e., the initial principal amount of the certificates). Moreover, each Exemption provides relief from specified self-dealing/conflict of interest prohibited transactions that may arise when a fiduciary causes a Benefit Plan to invest in a trust holding receivables on which the fiduciary (or its affiliate) is obligor only if, among other requirements, 1. in the case of the acquisition of Class A Certificates in connection with the initial issuance, at least 50% of each class of certificates in which Benefit Plans have invested is acquired by persons independent of the Restricted Group and at least 50% of the aggregate interest in the trust is acquired by persons independent of the Restricted Group; 2. a Benefit Plan's investment in the Class A Certificates does not exceed 25% of all of the Class A Certificates outstanding at the time of the acquisition; 3. immediately after the acquisition, no more than 25% of the assets of a Benefit Plan with respect to which a person has discretionary authority or renders S-33 investment advice are invested in certificates representing interests in trusts containing assets sold or serviced by the same entity; 4. the fiduciary (or its affiliate) is obligor with respect to 5 percent or less of the fair market value of receivables held in the trust; and 5. the Benefit Plan is not sponsored by a member of the Restricted Group. The seller believes that the Exemptions will apply to the acquisition, holding and resale of the Class A Certificates by a Benefit Plan and that all conditions of the Exemptions other than those within the control of investors will be met. However, there can be no assurance that the DOL or the IRS will not take a contrary position, nor that that position will be sustained. One or more alternative exemptions may be available with respect to specified prohibited transactions to which the Exemptions are not applicable, depending in part upon the type of a Benefit Plan's fiduciary making the decision to acquire the Class A Certificates and the circumstances under which that decision is made. See "ERISA CONSIDERATIONS" in the accompanying Prospectus. Any Benefit Plan which acquires a beneficial ownership interest in a Class A Certificates will be deemed, by virtue of the acceptance and acquisition of that ownership interest, to have represented to the depositor and the trustee that that Benefit Plan is an "accredited investor" for purposes of Rule 501(a)(1) of Regulation D under the Securities Act. CLASS B CERTIFICATES Class B Certificates may not be acquired by an employee benefit plan (as defined in Section 3(3) of ERISA) that is subject to the provisions of Title I of ERISA or a plan (as defined in Section 4975(e)(1) of the Code) or any person acting on behalf of such a plan or using the assets of such a plan to acquire the Class B Certificates or any entity whose underlying assets include plan assets by reason of a plan's investment in the entity, except as provided below with respect to insurance company general accounts. By its acceptance of a Class B Certificate, each holder thereof will be deemed to have represented and warranted that it is not subject to the foregoing limitation. In 1995, the DOL issued PTCE 95-60. Section III of PTCE 95-60 exempts from the application of the prohibited transaction provisions of Sections 406(a), 406(b) and 407(a) of ERISA and Section 4975 of the Code transactions in connection with the servicing, management and operation of a trust (such as the trust) in which an insurance company general account has an interest as a result of its acquisition of certificates issued by the trust, provided that certain conditions are satisfied. If these conditions are met, insurance company general accounts would be allowed to purchase classes of certificates (such as the Class B Certificates) which do not meet the requirements of the Exemptions solely because they (i) are subordinated to other classes of certificates in the trust and/or (ii) have not received a rating at the time of the acquisition in one of the three generic highest rating categories from any of the Rating Services. All other conditions of the Exemptions would have to be satisfied in order for PTCE 95-60 to be available. Before purchasing Class B Certificates, an insurance company general account seeking to rely on Section III of PTCE 95-60 should itself confirm that all applicable conditions and other requirements have been satisfied. S-34 ALL CERTIFICATES A purchaser of the certificates should be aware, however, that even if the conditions specified in one or more exemptions are met, the scope of the relief provided by the applicable exemption or exemptions might not cover all acts that might be construed as prohibited transactions. Prospective Benefit Plan investors should consult with their legal advisors concerning the impact of ERISA and the Code, the applicability of the Exemptions or any other exemptions, and the potential consequences of any purchase in their specific circumstances, prior to making an investment in a certificate. A governmental plan as defined in Section 3(32) of ERISA is not subject to ERISA or Code Section 4975. However, that governmental plan may be subject to federal, state or local law which is to a material extent similar to the provisions of ERISA or Code Section 4975 ("Similar Law"). A fiduciary of a governmental plan should make its own determination as to the need for and availability of any exemptive relief under such Similar Law. LEGAL PROCEEDINGS None of the depositor, the servicer, the seller or the trust are parties to any legal proceeding which could have a material adverse impact on your interest in the certificates or in the trust's assets. UNDERWRITING Subject to the terms and conditions set forth in the underwriting agreement among the depositor, the seller and the underwriters, the depositor has agreed to sell to each of the underwriters named below and each of those underwriters has severally to purchase the following respective initial certificate balances of the certificates at the respective public offering prices less the respective underwriting discounts shown on the cover page of this prospectus supplement: INITIAL CERTIFICATE INITIAL CERTIFICATE BALANCE OF BALANCE OF UNDERWRITER CLASS A CERTIFICATES CLASS B CERTIFICATES ----------- -------------------- -------------------- In the underwriting agreement, the underwriters have agreed, subject to the terms and conditions set forth therein, to purchase all of the certificates being offered, if any of the certificates are purchased. In the event of default by the underwriters, the underwriting agreement provides that, in certain circumstances, the underwriting agreement may be terminated. Distribution of the certificates may be made by the underwriters from time to time in one or more negotiated transactions, or otherwise, at varying prices to be determined at the time of sale. The underwriters may effect such transactions by selling the certificates to or through S-35 dealers, and such dealers may receive compensation in the form of underwriting discounts, concessions or commissions from the underwriters. In connection with the sale of the certificates, the underwriters may be deemed to have received compensation from the seller in the form of underwriting compensation. The underwriters and any dealers that participate with the underwriters in the distribution of the certificates may be deemed to be an underwriter and any commissions received by them and any profit on the resale of the certificates positioned by them may be deemed to be underwriting discounts and commissions under the Securities Act. The underwriters may allow and the dealers may reallow to other dealers a discount not in excess of the amount noted in the table below: SELLING CONCESSION REALLOWANCE CLASS NOT TO EXCEED NOT TO EXCEED ----- ------------- ------------- A B After the initial public offering of the certificates, the offering prices and other selling terms may be varied by the underwriters. In connection with the offering of the certificates, [____________], on behalf of the underwriters, may engage in overallotment, stabilizing transactions or syndicate covering transactions in accordance with Regulation M under the Securities Exchange Act of 1934. Overallotment transactions involve syndicate sales in excess of the offering size creating a syndicate short position. Stabilizing transactions permit bids to purchase the certificates so long as the stabilizing bids do not exceed a specified minimum. Syndicate covering transactions involve purchases of certificates in the open market after the distribution has been completed in order to cover syndicate short positions. Such over-allotment transactions, stabilizing and syndicate covering transactions may cause the price of the certificates to be higher than they would otherwise be in the absence of those transactions. The underwriters do not represent that the underwriters will engage in those transactions nor that such transactions, once commenced, will not be discontinued without notice. The depositor and some of its affiliates have agreed to indemnify the underwriters against some liabilities in connection with the sale of certificates, including liabilities under the Securities Act of 1933, as amended. The certificates have no established trading market. The underwriters have advised us that the underwriters intend to make a market in the certificates but are not obligated to do so and may discontinue market making at any time without notice. No assurance can be given as to the liquidity of the trading market for the certificates. Neither the seller nor the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above, if engaged in, may have on the prices of the certificates. In addition, neither the seller nor the underwriters make any representation that the underwriter will engage in such transactions or that such transactions, once commenced, will not be discontinued without notice. The underwriters have represented and agreed that: S-36 (i) they have not offered or sold and, prior to the expiration of the period of six months from the closing date, will not offer or sell any certificates to persons in the United Kingdom, except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulation 1995; (ii) they have complied and will comply with all applicable provisions of the Financial Services Act 1986 with respect to anything done by them in relation to the certificates in, from or otherwise involving the United Kingdom; and (iii) they have only issued or passed on and will only issue or pass on in the United Kingdom any document received by it in connection with the issue of the certificates to a person who is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1995, or is a person to whom such document may otherwise lawfully be issued or passed on. LEGAL MATTERS Winston & Strawn, Chicago, Illinois, has provided a legal opinion relating to the certificates in its capacity as special counsel to the depositor and the servicer. Certain legal matters for the underwriters will be passed upon by [___________]. The pooling and servicing agreement and the certificates will be governed by the laws of the State of Illinois. S-37 ANNEX I GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES Except in certain limited circumstances, the globally offered Securities (the "GLOBAL SECURITIES") will be available only in book-entry form. Investors in the Global Securities may hold such Global Securities through DTC and, in the case of the Notes, Euroclear or Clearstream. The Global Securities 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 Securities through Euroclear and Clearstream will be conducted in the ordinary way in accordance with their normal rules and operating procedures and in accordance with conventional eurobond practice (I.E. seven calendar day settlement). Secondary market trading between investors holding Global Securities through DTC will be conducted according to the rules and procedures applicable to U.S. corporate debt obligations. Secondary cross-market trading between Euroclear or Clearstream and DTC participants holding Global Securities will be effected on a delivery-against-payment basis through the respective depositaries of Euroclear and Clearstream (in such capacity) and as DTC participants. Non-U.S. holders (as described below) of Global Securities will be subject to U.S. withholding taxes unless such holders meet certain requirements and deliver appropriate U.S. tax documents to the securities clearing organizations or their participants. INITIAL SETTLEMENT All Global Securities will be held in book-entry form by DTC in the name of Cede & Co. as nominee of DTC. Investors' interests in the Global Securities will be represented through financial institutions acting on their behalf as direct and indirect participants in DTC. As a result, Euroclear and Clearstream will hold positions on behalf of their participants through their respective depositaries, which in turn will hold such positions in accounts as DTC participants. Investors electing to hold their Global Securities through DTC will follow the settlement practices applicable to similar issues on pass-through certificates. Investors' securities custody accounts will be credited with their holdings against payment in same-day funds on the settlement date. Investors electing to hold their Global Securities through Euroclear or Clearstream accounts will follow the settlement procedures applicable to conventional eurobonds, except that there will be no temporary global security and no "LOCK-UP" or restricted period. Global Securities will be credited to the securities custody accounts on the settlement date against payments in same-day funds. S-38 SECONDARY MARKET TRADING Since the purchaser determines the place of delivery, it is important to establish 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 similar issues of pass-through certificates in same-day funds. TRADING BETWEEN EUROCLEAR AND/OR CLEARSTREAM PARTICIPANTS. Secondary market trading between Euroclear participants or Clearstream participants will be settled using the procedures applicable to conventional eurobonds in same-day funds. TRADING BETWEEN DTC SELLER AND EUROCLEAR OR CLEARSTREAM PURCHASER. When Global Securities are to be transferred from the account of a DTC participant to the account of a Euroclear participant or a Clearstream participant, the purchaser will send instructions to Euroclear or Clearstream through a Euroclear participant or Clearstream participant at least one business day prior to settlement. Euroclear or Clearstream will instruct the respective depositary, as the case may be, to receive the Global Securities against payment. Payment will include interest accrued on the Global Securities from and including the last coupon payment date to and excluding the settlement date. Payment will then be made by the respective depositary to the DTC participant's account against delivery of the Global Securities. After settlement has been completed, the Global Securities will be credited to the respective clearing system and by the clearing system, in accordance with its usual procedures, to the Euroclear participant's or Clearstream participant's account. The Global Securities credit will appear the next day (European time) and the cash debit will be back-valued to, and the interest on the Global Securities will accrue from, the value date; (which would be the preceding day when settlement occurred in New York). If settlement is not completed on the intended value date (I.E., the trade fails), the Euroclear or Clearstream cash debit will be valued instead as of the actual settlement date. Euroclear participants and Clearstream participants will need to make available to the respective clearing systems the funds necessary to process same-day funds settlement. The most direct means of doing so is to pre-positions funds for settlement, either from cash on hand or existing lines of credit, as they would for any settlement occurring within Euroclear or Clearstream. Under this approach, they may take on credit exposure to Euroclear or Clearstream until the Global Securities are credited to their accounts one day later. As an alternative, if Euroclear or Clearstream has extended a line of credit to them, Euroclear participants or Clearstream participants can elect to pre-position funds and allow that credit line to be drawn upon the finance settlement. Under this procedure, Euroclear participants or Clearstream participants purchasing Global Securities would incur overdraft charges for one day, assuming they cleared the overdraft when the Global Securities were credited to their accounts. However, interest on the Global Securities would accrue from the value date. Therefore, in many cases the investment income on the Global Securities earned during that one-day period may substantially reduce or offset the amount of such overdraft charges, although this S-39 result will depend on each Euroclear participant's or Clearstream participant's particular cost of funds. Since the settlement is taking place during New York business hours, DTC Participants can employ their usual procedures for sending Global Securities to the respective Depositary for the benefit of CEDEL Participants or Clearstream 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 EUROCLEAR OR CLEARSTREAM SELLER AND DTC PURCHASER. Due to time zone differences in their favor, Euroclear participants and Clearstream participants may employ their customary procedures for transactions in which Global Securities are to be transferred by the respective clearing system, through the respective Depositary, to a DTC participant. The seller will send instructions to Euroclear or Clearstream through a Euroclear participant or Clearstream participant at least one business day prior to settlement. In these cases, Euroclear or Clearstream 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 Securities 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 Euroclear participant or Clearstream participant the following day, and receipt of the cash proceeds in the Euroclear participant's or Clearstream 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 Euroclear participant or Clearstream participant have a line of credit with its respective clearing system and elect to be in debit in anticipation or 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 Euroclear participant's or Clearstream participant's account would instead be valued as of the actual settlement date. Finally, day traders that use, Euroclear or Clearstream and that purchase Global Securities from DTC participants for delivery to Euroclear participants or Clearstream participants should note that these trades would automatically fail on the sale side unless affirmative action were taken. At least three techniques should be readily available to eliminate this potential problem: (a) borrowing through Euroclear or Clearstream for one day (until the purchase side of the day trade is reflected in their Euroclear or Clearstream accounts) in accordance with the clearing system's customary procedures; (b) borrowing the Global Securities in the U.S. from a DTC participant no later than one day prior to settlement, which would give the Global Securities sufficient time to be reflected in their Euroclear or Clearstream account in order to settle the sale side of the trade; or S-40 (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 Euroclear participant or Clearstream participant. CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENT A beneficial owner of Global Securities holding securities through CEDEL or Clearstream (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 issued 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 OR FORM W-8BEN). Beneficial owners of Securities that are non-U.S. Persons can obtain a complete exemption from the withholding tax by filing a signed Form W-8 (Certificate of Foreign Status) or Form W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding). If the information shown on Form W-8 changes, a new Form W-8 or Form W-8BEN must be filed within 30 days of such change. After December 31, 2000, only Form W-8BEN will be acceptable EXEMPTION FOR NON-U.S. PERSONS WILL EFFECTIVELY CONNECTED INCOME (FORM 4224 OR FORM W-8ECI). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S. branch, for which the interest income is effectively connected with its conduct of a trade or business in the United States, can obtain an exemption from the withholding tax by filing Form 4224 (Exemption from Withholding of Tax on Income Effectively Connected with the Conduct of a Trade or Business in the United States) or Form W-8ECI (Certificate of Foreign Person's Claim for Exemption from Withholding on Income Effectively Connected with the Conduct of a Trade or Business in the United States). EXEMPTION OR REDUCED RATE FOR NON-U.S. PERSONS RESIDENT IN TREATY COUNTRIES (FORM 1001 OR FORM W-8BEN). Non-U.S. Persons that are Securityholders residing in a country that has a tax treaty with the United States can obtain an exemption or reduced tax rate (depending on the treaty terms) by filing Form 1001 (Ownership, Exemption or Reduced Rate Certificate). If the treaty provides only for a reduced rate, withholding tax will be imposed at that rate unless the filer alternatively files Form W-8 or Form W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding). Form 1001 may be filed by the Securityholder or his agent. After December 31, 2000, only Form W-8BEN will be acceptable. 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). S-41 U.S. FEDERAL INCOME TAX REPORTING PROCEDURES. The holder of a Global Security or in the case of a Form 1001 or a Form 4224 filer, his agent, files by submitting the appropriate form to the person through whom it holds (the clearing agency, in the case of persons holding directly on the books of the clearing agency). Form W-8, Form 1001 and Form 4224 are effective until December 31, 2000. Form W-8BEN and Form W-8ECI are effective until the third succeeding calendar year from the date the form is signed. 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, any state thereof or the District of Columbia, (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 the trust and one or more United States persons have the authority to control all substantial decisions of the trust. Notwithstanding the preceding sentence, to the extent provided in Treasury regulations, certain trusts in existence on August 20, 1996, and treated as United States persons under the United States Internal Revenue Code of 1986, as amended (the "Code") and applicable Treasury regulations thereunder prior to such date, that elect to continue to be treated as United States persons under the Code or applicable Treasury regulations thereunder also will be a U.S. Person. This summary does not deal with all aspects of U.S. Federal income tax withholding that may be relevant to foreign holders of the Global Securities. Investors are advised to consult their own tax advisors for specific tax advice concerning their holding and disposing of the Global Securities. S-42 GLOSSARY OF TERMS AVAILABLE AMOUNTS means, with respect to any payment date, the sum of the Available Interest and the Available Principal for such payment date. AVAILABLE INTEREST means, with respect to any payment date, the total, without duplication, of the following amounts received by the servicer on or in respect of the contracts during the prior calendar month: - all amounts allocable to scheduled interest payments on the contracts; - the interest component of all prepayments of contracts; - the interest component of all proceeds of repossessed financed motorcycles and other proceeds of defaulted contracts; - the interest component of the purchase price paid by the depositor in repurchasing contracts from the trust on that payment date as a result of a breach of the representations and warranties with respect to those contracts in the sale and servicing agreement; - all amounts received in respect of carrying charges transferred from the interest reserve account; - all amounts received in respect of interest, dividends, gains, income and earnings on investment of funds in the trust accounts; - servicer advances made by the servicer on that payment date in respect of delinquent interest payments for the prior calendar month; and - the interest component of the amount paid by the seller to purchase the contracts when the aggregate principal balance of the contracts is reduced to less than 10% of the sum of (i) the aggregate outstanding principal balance of the contracts as of the closing date and (ii) the initial mount on deposit in the pre-funding account. AVAILABLE PRINCIPAL means, with respect to any payment date, the total, without duplication, of the following amounts received by the servicer on or in respect of the contracts during the prior calendar month: - all amounts allocable to scheduled principal payments on the contracts; - the principal component of all prepayments of contracts; - the principal component of all proceeds of repossessed motorcycles and other proceeds of defaulted contracts; - the principal component of the purchase price paid by the depositor in repurchasing contracts from the trust on that payment date as a result of a breach of the representations and warranties with respect to those contracts in the sale and servicing agreement; and S-43 - the principal component of the amount paid by the seller to purchase the contracts when the aggregate principal balance of the contracts is reduced to less than 10% of the sum of (i) the aggregate outstanding principal balance of the contracts as of the closing date and (ii) the initial amount on deposit in the pre-funding account. AVERAGE DELINQUENCY RATIO with respect to any payment date, is equal to the arithmetic average of the Delinquency Ratios for the payment date and the two immediately preceding payment dates. AVERAGE LOSS RATIO for any payment date is equal to the arithmetic average of the Loss Ratios for such payment date and the two immediately preceding payment dates. The "LOSS RATIO" for any payment date is equal to the fraction (expressed as a percentage) derived by dividing (x) the Net Liquidation Losses for all contracts that became Liquidated Contracts during the immediately preceding month multiplied by 12 by (y) the outstanding Principal Balances of all contracts as of the beginning of the related month. CUMULATIVE LOSS RATIO for any payment date means the fraction (expressed as a percentage) computed by the servicer by dividing (a) the aggregate Net Liquidation Losses for all contracts since the cutoff date through the end of the related month by (b) the sum of (i) the principal balance of the contracts as of the cutoff date plus (b) the principal balance of any subsequent contracts as of the related subsequent cutoff date. DELINQUENCY AMOUNT as of any payment date means the principal balance of all contracts that were delinquent 60 days or more as of the end of the related month (including contracts in respect of which the related motorcycles have been repossessed and are still inventory). DELINQUENCY RATIO for any payment date is equal to the fraction (expressed as a percentage) derived by dividing (a) the Delinquency Amount during the immediately preceding month by (b) the Principal Balance of the contracts as of the beginning of the related month. A LIQUIDATED CONTRACT means any defaulted contract as to which the servicer has determined that all amounts which it expects to recover from or on account of such contract have been recovered; PROVIDED that any defaulted contract in respect of which the related motorcycle has been realized upon and disposed of and the proceeds of such disposition have been realized shall be deemed to be a Liquidated Contract; and PROVIDED FURTHER, a contract which has been repossessed and has not been sold by the servicer for a period in excess of [___] days from such date of repossession or a contract which has been delinquent more than [___] days shall be deemed to be a Liquidated Contract with a zero balance. NET LIQUIDATION LOSSES means, with respect to a Liquidated Contract, the amount, if any, by which (a) the outstanding Principal Balance of such Liquidated Contract plus accrued and unpaid interest thereon at the annual interest rate stated in such Liquidated Contract to the date on which such Liquidated Contract became a Liquidated Contract exceeds (b) the Net Liquidation Proceeds for such Liquidated Contract. S-44 NET LIQUIDATION PROCEEDS means, as to any Liquidated Contract, the proceeds realized on the sale or other disposition of the related motorcycle, including proceeds realized on the repurchase of such motorcycle by the originating dealer for breach of warranties, and the proceeds of any insurance relating to such motorcycle, after payment of all expenses incurred thereby, together, in all instances, with the expected or actual proceeds of any recourse rights relating to such contract as well as any post disposition proceeds received by the servicer. PRINCIPAL BALANCE means, (a) with respect to any contract as of any date, an amount equal to the unpaid principal balance of such contract as of the opening of business on the cut-off date, reduced by all payments and other amounts received by the servicer as of such date allocable to principal; provided, however, that (i) if (x) a contract is repurchased by the depositor because of a breach of a representation or warranty, or if (y) the depositor gives notice of its intent to purchase the contracts in connection with an optional termination of the trust, in each case the Principal Balance of such contract or contracts shall be deemed to be zero for the prior calendar month in which such event occurs and for each calendar month thereafter and (ii) from and after the prior calendar month in which a contract becomes a defaulted contract, the Principal Balance of such contract shall be deemed to be zero; and (b) where the context requires, the aggregate Principal Balances described in clause (a) for all such contracts. UNITED STATES PERSONS means: - A citizen or resident of the United States; - A corporation or partnership organized in or under the laws of the United States, any state thereof or the District of Columbia; - An estate the income of which is includible in gross income for United States federal income tax purposes, regardless of its source; or A trust, (a) with respect to which a court within the United States is able to exercise primary supervision over its administration, and one or more United States fiduciaries have the authority to control all of its substantial decisions, or (b) otherwise, the income of which is subject to U.S. federal income tax regardless of its source. S-45 Harley-Davidson Motorcycle Trust [ ] BALANCE SHEET AS OF [__________], [_____] Assets -- Cash............................ $ Beneficial Equity......................... $ Liabilities............................... $ NOTES TO THE BALANCE SHEET Harley-Davidson Motorcycle Trust [ ] is a limited purpose business trust established under the laws of the State of Delaware. It was formed on [ ] under a trust agreement dated as of [ ] between the depositor and the trustee. The activities of the trust are limited by the terms of the trust agreement to acquiring, owning and managing loan contracts and related assets, issuing and making payments on certificates and other related activities. Prior to and including [ ], the trust did not conduct any activities. The depositor will pay all fees and expenses related to the organization and operations of the trust, other than withholding taxes, imposed by the United States or any other domestic taxing authority. The depositor has also agreed to indemnify the trustee and certain other persons involved in the sale of certificates. S-46 UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL DEALERS EFFECTING TRANSACTIONS IN THE SECURITIES OFFERED BY THIS PROSPECTUS SUPPLEMENT, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. $ HARLEY-DAVIDSON MOTORCYCLE TRUST [ ] $[ ] [ ]% HARLEY-DAVIDSON MOTORCYCLE CONTRACT BACKED CERTIFICATES, CLASS A $[ ] [ ]% HARLEY-DAVIDSON MOTORCYCLE CONTRACT BACKED CERTIFICATES, CLASS B HARLEY-DAVIDSON CREDIT CORP. SELLER AND SERVICER HARLEY-DAVIDSON CUSTOMER FUNDING CORP. DEPOSITOR --------------------- PROSPECTUS SUPPLEMENT --------------------- [UNDERWRITERS] SUBJECT TO COMPLETION, DATED MAY 22, 2000 PROSPECTUS THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. HARLEY-DAVIDSON MOTORCYCLE TRUSTS HARLEY-DAVIDSON MOTORCYCLE CONTRACT BACKED NOTES HARLEY-DAVIDSON MOTORCYCLE CONTRACT BACKED CERTIFICATES (ISSUABLE IN SERIES) HARLEY-DAVIDSON CUSTOMER FUNDING CORP. AS DEPOSITOR HARLEY-DAVIDSON CREDIT CORP., AS SELLER AND SERVICER THE TRUSTS: The depositor will form a new trust to issue each series of securities. The trust will offer the securities under this prospectus and a prospectus supplement which will be prepared separately for each series. Each trust will own a pool of motorcycle retail installment contracts. THE OFFERED SECURITIES: - will consist of motorcycle contract backed securities sold periodically in one or more series which may include one or more classes of notes and/or one or more classes of certificates; - will be paid only from the assets of the related trust; - will be rated in one of the four highest rating categories by at least one nationally recognized statistical rating organization; - may have one or more forms of credit enhancement; and - will be issued as part of a designated series that may include one or more classes with payment rights that are senior or subordinate to the rights of one or more of the other classes of securities. ----------------- YOU SHOULD CAREFULLY CONSIDER THE FACTORS SET FORTH UNDER "RISK FACTORS" ON PAGE 9 OF THIS PROSPECTUS AND THE OTHER RISK FACTORS INCLUDED IN THE ACCOMPANYING PROSPECTUS SUPPLEMENT. ----------------- NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED THAT THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ----------------- The amounts, prices and terms of each offering of securities will be determined at the time of sale and will be described in a prospectus supplement that will be attached to this prospectus. This prospectus may not be used to offer and sell any series of securities unless accompanied by the prospectus supplement for that series. Prospectus dated ___________, 2000. TABLE OF CONTENTS
PAGE Important Notice About Information Presented in this Prospectus and the Accompanying Prospectus Supplement.....1 Prospectus Summary.............................................................................................1 Risk Factors...................................................................................................9 Harley-Davidson Motorcycles...................................................................................18 Other Manufacturers...........................................................................................18 Harley-Davidson Financial Services, Inc.......................................................................18 The Seller and Servicer.......................................................................................19 The Depositor.................................................................................................21 The Trusts....................................................................................................21 Use of Proceeds...............................................................................................23 The Trustee...................................................................................................23 Weighted Average Lives of the Securities......................................................................24 Factors and Trading Information...............................................................................25 Description of the Notes and Indenture........................................................................25 Description of the Certificates...............................................................................33 Information Regarding the Securities..........................................................................36 Description of the Transfer and Servicing Agreements..........................................................47 Legal Aspects of the Contracts................................................................................63 Material Federal Income Tax Consequences......................................................................70 ERISA Considerations..........................................................................................91 Ratings of the Securities.....................................................................................95 Plan of Distribution..........................................................................................95 Legal Matters.................................................................................................95 Where You Can Find More Information...........................................................................96
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT We provide information to you about the securities in two separate documents that offer varying levels of detail: - this prospectus - which provides general information, some of which may not apply to a particular series of securities including your series, and - the accompanying prospectus supplement - which provides a summary of the specific terms of your series of securities. We have included cross-references in this prospectus and the accompanying prospectus supplement to captions in these materials where you can find further discussions. The table of contents included in this prospectus and the accompanying prospectus supplement provide the pages on which these captions are located. References to "we", "our" and "us" refer to Harley-Davidson Customer Funding Corp. Whenever we use words like "intends," "anticipates" or "expects" or similar words in this prospectus, we are making a forward-looking statement, or a projection of what we think will happen in the future. Forward-looking statements are inherently subject to a variety of circumstances, many of which are beyond our control and could cause actual results to differ materially from what we anticipate. Any forward-looking statements in this prospectus speak only as of the date of this prospectus. We do not assume any responsibility to update or review any forward-looking statement contained in this prospectus to reflect any change in our expectation about the subject of that forward-looking statement or to reflect any change in events, conditions or circumstances on which we have based any forward-looking statement. You should rely only on the information contained in this document, including the information described under the heading "WHERE YOU CAN FIND MORE INFORMATION" in the prospectus. We have not authorized anyone to provide you with any different information or make any representation not contained in this prospectus. If anyone makes such a representation to you, you should not rely on it. PROSPECTUS SUMMARY The following is only a summary of selected information from the prospectus and provides a general overview of relevant terms of the securities. It does not contain all the information that may be important to you. You should read carefully this entire prospectus and the accompanying prospectus supplement to understand all of the terms of the offering. In addition, you may wish to read the documents governing the transfers and servicing of the contracts, the formation of the trusts and the issuance of the securities. Those documents have been filed as exhibits to the registration statement of which this prospectus is a part. There are material risks associated with an investment in the securities. See "RISK FACTORS" in this prospectus and in the accompanying prospectus supplement for a discussion of factors you should consider before investing in the securities. Trust............................... For each series of securities, the depositor will form either a grantor trust or an owner trust. An "owner trust" will issue notes and certificates and will be formed by a trust agreement between the depositor and the trustee of the owner trust. A "grantor trust" will issue only certificates and will be formed by a pooling and servicing agreement among the depositor, the servicer and the trustee of the grantor trust. Depositor........................... Harley-Davidson Customer Funding Corp., a wholly-owned subsidiary of Harley-Davidson Credit Corp. The depositor will deposit the contracts into the trust. Seller.............................. Harley-Davidson Credit Corp. will sell the contracts to the depositor for deposit into the trust. Originating Dealers................. Motorcycle dealers originate the contracts in accordance with the underwriting standards set by Harley-Davidson Credit Corp. under dealer agreements governing the assignment of the contracts to the seller. The seller acquires the contracts from the originating dealers in the ordinary course of its business pursuant to the dealer agreements. Servicer............................ Harley-Davidson Credit Corp. will service the contracts unless otherwise specified in your prospectus supplement. Trustee............................. The trustee of the trust for your series of securities will be identified in your prospectus supplement. Indenture Trustee................... If the trust issues notes, the trustee for the indenture pursuant to which the notes will be issued will be identified in your prospectus supplement. Administrator....................... Harley-Davidson Credit Corp. will provide notices and 1 perform other administrative functions of each trust. The Securities...................... A series of securities may include: - one or more of classes of notes which will be issued pursuant to an indenture; and/or - one or more classes of certificates, whether or not a class of notes is issued as part of the series. Terms of the Securities............. Your prospectus supplement provides the particular terms of your class of notes and/or certificates, including: - the stated principal amount of each class of notes and the stated certificate balance of each class of certificates; and - the interest rate, which may be fixed, variable, adjustable or some combination of these rates, or method of determining the interest rate. The terms of a class of notes may differ from those of other classes of notes of the same series and the terms of a class of certificates may differ from those of other classes of certificates of the same series in one or more aspects, including: - timing and priority of payments; - seniority; - allocations of losses; - interest rate or formula for calculating the interest rate; - amount of interest or principal payments; - whether interest or principal will be payable to holders of the class if specified events occur; - the right to receive collections from designated portions of the contracts owned by the trust; - scheduled final payment date; and - the ability of holders of a class of notes or certificates to direct the indenture trustee or the 2 trustee to take specified remedies. Trust Assets........................ The property of each trust will primarily be a pool of contracts secured by new and used motorcycles and amounts due or collected under the contracts on or after a cut-off date specified in your prospectus supplement and will include related assets including: - security interests in the financed motorcycles; - proceeds from claims on insurance policies covering the financed motorcycles or the obligors; - certain rebates of premiums and other amounts relating to insurance policies and other items financed under the contracts; - the rights of the depositor in the agreements identified in your prospectus supplement; - amounts deposited in bank accounts specified in your prospectus supplement; and - proceeds from liquidated assets, including repossessed motorcycles. The Contracts....................... All of the contracts will be retail installment contracts originated directly by the seller or purchased by the seller from the originating dealers or other entities that finance the retail purchase of new and used motorcycles. Your prospectus supplement provides information about: - the initial aggregate principal balance of the contracts transferred to the trust; - the number of contracts; - the average contract principal balance; - the geographical distribution of the contracts; - the distribution of the contracts by annual percentage rate; - the remaining term of the contracts; - the weighted average remaining term of the
3 contracts; and - the weighted average annual percentage rate on the contracts. Mandatory Purchase or Replacement of a Contract............................ The depositor will make representations and warranties regarding the contracts when it transfers the contracts to the trust, and the seller will make representations and warranties regarding the contracts when it sells the contracts to the depositor. In the event of an uncured breach of any of these representations that materially and adversely affects the trust's or securityholders' interest in a contract or the collectibility of a contract, the depositor will be obligated to repurchase that contract from the trust and the seller will be obligated to repurchase that contract from the depositor. See "DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS-REPRESENTATIONS AND WARRANTIES MADE BY THE SELLER AND THE DEPOSITOR" in this prospectus. Credit And Cash Flow Enhancement......................... The depositor may arrange for protection from losses to one or more classes of the securities. Credit enhancement may include: - a cash collateral account; - a spread account; - subordination of one or more other classes of securities; - one or more reserve funds; - over-collateralization; - letters of credit or other credit or liquidity facilities; - surety bonds; - guaranteed investment contracts; - repurchase obligations; - yield supplement agreements; 4 - cash deposits; - swap or other interest rate protection agreements; - third party payments or other support; or - other arrangements which may become suitable in light of credit enhancement practices or developments in the future. In addition, the depositor may develop and include in the trusts features designed to ensure the timely payment of amounts owed to you. These cash flow enhancement features may include any one or more of the following: - yield supplement agreements; - liquidity facilities; - cash deposits; - third party payments or other support; or - other arrangements which may become suitable in light of cash flow enhancement practices or developments in the future. Your prospectus supplement will describe the specific terms of any credit or cash flow enhancement applicable to your securities. Servicing; Servicing Fee............ The servicer will be responsible for servicing, managing and administering the contracts and financed motorcycles, and maintaining custody of, enforcing and making collections on the contracts. The trust will pay the servicer a monthly fee equal to a percentage of the principal balance of the contracts at the beginning of each month. The fee will be payable out of amounts received on the contracts. The servicer will also receive additional servicing compensation in the form of investment earnings on certain bank accounts of the trust and late fees, prepayment fees and other administrative fees and expenses or similar charges received in respect of the contracts by the servicer during that month. See "DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS-SERVICING-SERVICING COMPENSATION AND 5 PAYMENT OF EXPENSES" in this prospectus. Advances............................ The servicer may be obligated to advance interest that is due but unpaid by an obligor. The servicer will not be obligated to make an advance if it determines that it will not be able to recover that advance from an obligor. The trust will reimburse the servicer for the advances the servicer has made from late collections on the contracts for which it has made advances or from collections generally if the servicer determines that an advance will not be recoverable from an obligor. Your prospectus supplement will describe the nature of the servicer's obligation to make advances to the trust and the reimbursement of those advances. You should refer to "DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS-SERVICING-ADVANCES" in this prospectus for more detailed information on advances and reimbursement of advances. Optional Purchase of Contracts........................... Once the aggregate outstanding principal balance of the contracts is less than 10% of the sum of (i) the aggregate outstanding principal balance of the contracts owned by the trust as of the closing date and (ii) the initial amount on deposit in the prefunding account, if any, the seller, at its option, may repurchase all of the contracts held by the trust. Upon such a purchase, the securities of that trust will be prepaid in full. See "DESCRIPTION OF THE NOTES AND INDENTURE-OPTIONAL PURCHASE OF CONTRACTS AND REDEMPTION OF NOTES" and "DESCRIPTION OF THE CERTIFICATES-OPTIONAL PURCHASE OF CONTRACTS AND REDEMPTION OF CERTIFICATES" in this prospectus. TAX STATUS: If your prospectus supplement specifies that the related trust will be Grantor Trusts...................... treated as a "grantor trust," Winston & Strawn, as counsel to the trust, will deliver an opinion that: - the trust will be treated as a grantor trust for federal income tax purposes and not as an "ASSOCIATION" or "PUBLICLY-TRADED PARTNERSHIP" taxable as a corporation; and - each certificateholder will be treated as the owner of a pro rata undivided interest in the income and assets 6 of the trust. Owner Trusts........................ If your prospectus supplement specifies that the related trust will be treated as an "owner trust": 1. Winston & Strawn will deliver an opinion that: - the notes will be characterized as debt for federal income tax purposes; and - the trust will not be characterized as an "ASSOCIATION" or "PUBLICLY TRADED PARTNERSHIP" taxable as a corporation; 2. by purchasing a note, you will agree to treat your note as debt for federal, state and local income tax purposes; and 3. by purchasing a certificate, you will agree to treat the trust as a partnership in which you are a partner for federal, state and local income tax purposes. You should refer to "MATERIAL FEDERAL INCOME TAX CONSEQUENCES" in this prospectus and your prospectus supplement for more detailed information on the application of federal income tax laws and consult your tax advisor about the federal income tax consequences of purchasing, owning and disposing of notes and/or certificates, and the tax consequences in any state or other taxing jurisdiction. FASITs.............................. If your prospectus supplement specifies that an election will be made for the trust to be treated as a "financial asset securitization investment trust," or FASIT, Winston & Strawn will deliver an opinion that, assuming timely filing of a FASIT election and compliance with the terms of the governing documents, the trust, or one or more segregated pools of trust assets, will qualify as one or more FASITs. ERISA Considerations................ Subject to the considerations described in "ERISA CONSIDERATIONS" in this prospectus and your prospectus supplement, employee benefit plans that are subject to the Employee Retirement Income Security Act of 1974, as amended, may purchase: - notes issued by an "owner trust"; and - certificates of a class issued by a "grantor trust" that 7 are not subordinated to any other class. Unless your prospectus supplement specifies otherwise, employee benefit plans and individual retirement accounts may not purchase: - subordinated classes of certificates issued by a "grantor trust"; or - certificates issued by an "owner trust". You should refer to "ERISA CONSIDERATIONS" in this prospectus and your prospectus supplement for more detailed information regarding the ERISA eligibility of any class of securities.
8 RISK FACTORS The following risk factors and the risk factors in your prospectus supplement describe the principal risk factors relating to an investment in the securities. You should carefully consider the following risk factors and the additional risk factors described in the section captioned "RISK FACTORS" in your prospectus supplement before you invest in any class of securities. YOU MUST RELY ON THE TRUST'S ASSETS FOR REPAYMENT WHICH MAY NOT BE SUFFICIENT TO MAKE FULL PAYMENTS ON YOUR SECURITIES The securities represent interests solely in the trust or indebtedness of the trust and will not be insured or guaranteed by the originating dealers, the seller, the servicer, the depositor, or any of their respective affiliates, or the related trustee or any other person or entity. The only source of payment for your securities is payments received on the contracts held by the trust and credit enhancement, if any, for your securities. The amount of credit enhancement available to cover shortfalls in distributions of interest on and principal of your securities may be limited. If the credit enhancement is exhausted, you will be paid solely from payments on the contracts. YOU MAY EXPERIENCE REDUCED RETURNS ON YOUR INVESTMENT DUE TO PREPAYMENTS ON THE CONTRACTS, REPURCHASES OF THE CONTRACTS, LIQUIDATIONS OF DEFAULTED CONTRACTS AND EARLY TERMINATION OF THE TRUST A higher than anticipated level of prepayments of the contracts or liquidations of defaulted contracts may cause a trust to pay principal on your securities sooner than you expected. Also, a trust may pay principal on your securities sooner than you expected if the depositor or the servicer repurchases contracts from the trust. You may not be able to reinvest the principal paid to you at yields that are equivalent to the yields on your securities; therefore, the ultimate return you receive on your investment in the securities may be less than the return you expected on the securities. The contracts included in the trust may be prepaid, in full or in part, voluntarily or as a result of defaults, theft of or damage to the related motorcycles or for other reasons. The depositor will be required to repurchase a contract from the trust if a breach of its representations and warranties relating to that contract materially and adversely affects the trust's or the securityholders' interest in the contract or the collectibility of the contract. In that event, the seller will be obligated to repurchase the contract from the depositor. Certain motorcycle dealer agreements between each of the originating dealers and the seller require the originating dealer to repurchase certain motorcycles repossessed by the seller in the event of a default by the obligor pursuant to contracts designated as full recourse. This recourse to the dealers will be assigned by the seller to the depositor pursuant to the transfer and sale agreement, assigned from the depositor to the trust pursuant to the agreement and, if applicable, pledged by the trust to the indenture trustee pursuant to the indenture. There can be no assurance that an originating dealer will perform its obligations under such motorcycle dealer agreements if and when required to do so. In addition, the servicer will be required to purchase contracts from the trust if it breaches certain covenants with respect to those contracts. The seller may direct the depositor to purchase all remaining contracts from the trust when the aggregate outstanding principal balance of the contracts is less than 10% of the sum of (i) the aggregate outstanding principal balance of the contracts owned by the trust as of the closing date and (ii) the initial amount on deposit in the pre-funding account, if any. 9 The depositor cannot fully predict the extent to which prepayments on the contracts by the related obligors will shorten the life of the securities. The rate of prepayments on the contracts may be influenced by a variety of economic, social and other factors including: - changes in customer requirements; - the level of interest rates; - the level of casualty losses; and - the overall economic environment. The depositor cannot assure you that prepayments on the contracts held by the trust will conform to any historical experience. The depositor cannot predict the actual rates of prepayments which will be experienced on the contracts. However, your prospectus supplement may present information as to the principal balances of the securities remaining on each payment date under several hypothetical prepayment rates. You will bear all reinvestment risk resulting from prepayments on the contracts and the corresponding acceleration of payments on the securities. See "WEIGHTED AVERAGE LIVES OF THE SECURITIES" in this prospectus. CERTAIN EVENTS OF DEFAULT UNDER THE INDENTURE MAY RESULT IN INSUFFICIENT FUNDS TO MAKE PAYMENTS ON YOUR SECURITIES If the trust fails to pay principal of any class of notes on its final scheduled payment date, or fails to pay interest on any class of notes within five days of its due date, the indenture trustee or the holders of more than 50% of the notes or the class or the classes of notes described in your prospectus supplement may declare the entire amount of the notes to be due immediately. If this happens, the holders of more than 50% (or such higher percentage as specified in your prospectus supplement) of the notes or the class or classes of notes described in your prospectus supplement may direct the indenture trustee to sell the contracts and prepay the notes. In such event, there may not be sufficient funds to pay all of the classes of securities in full. PAID-AHEAD SIMPLE INTEREST CONTRACTS MAY AFFECT THE WEIGHTED AVERAGE LIFE OF THE SECURITIES If an obligor on a simple interest contract makes a payment on the contract ahead of schedule, the weighted average life of the securities could be affected. This is because the additional scheduled payments will be treated as a principal prepayment and applied to reduce the principal balance of the related contract. Obligors are generally not required to make any scheduled payments during the period for which the contract was paid-ahead. During this period, interest will continue to accrue on the contract principal balance, but the contract would not be considered delinquent. Furthermore, when an obligor resumes the required payments, they may be insufficient to cover the interest that has accrued since the last payment by that obligor. Generally paid-ahead payments shorten the weighted average lives of the securities when the paid-ahead amount is applied to the payment of principal on the securities; however, in certain circumstances the weighted average lives of the securities may be extended. In addition, liquidation proceeds will be applied first to reimburse any advances made by the servicer. Therefore, to the extent the servicer makes advances on a paid-ahead simple interest contract which subsequently goes into 10 default, the loss on this contract may be larger than would have been the case had advances not been made. The seller's portfolio of contracts has historically included simple interest contracts which have been paid-ahead by one or more scheduled monthly payments. We cannot predict the number of contracts which may become paid-ahead simple interest contracts or the amount of scheduled payments which may be paid ahead. THE PRICE AT WHICH YOU CAN RESELL YOUR SECURITIES MAY DECREASE IF THE RATINGS OF YOUR SECURITIES DECLINE At the initial issuance of the offered securities, at least one nationally recognized statistical rating organization will rate the offered securities in one of the four highest rating categories. At any time, a rating agency may lower its ratings of the offered securities or withdraw its ratings entirely. If a rating assigned to any security is lowered or withdrawn for any reason, you may not be able to resell your securities or you may be able to resell them only at a substantial discount. For more detailed information regarding the ratings assigned to the offered securities, see "RATINGS OF THE SECURITIES" in this prospectus and in your prospectus supplement. SUBORDINATION MAY CAUSE SOME CLASSES OF SECURITIES TO BEAR ADDITIONAL CREDIT RISK AND DOES NOT ENSURE PAYMENT OF THE MORE SENIOR CLASSES OF SECURITIES The trust may pay interest and principal on some classes of securities prior to paying interest and principal on other classes of securities. The subordination of some classes of securities to others means that the subordinated classes of securities are more likely to suffer the consequences of delinquent payments and defaults on the contracts than the more senior classes of securities. The senior classes of securities could lose the credit enhancement provided by the subordinate classes if delinquencies and defaults on the contracts increase and if the collections on the contracts and any credit enhancement described in your prospectus supplement are insufficient to pay even the senior classes of securities. Your prospectus supplement will describe any subordination provisions applicable to your securities. FUTURE DELINQUENCY AND LOSS EXPERIENCE OF THE CONTRACTS MAY VARY SUBSTANTIALLY FROM THE SERVICER'S HISTORICAL EXPERIENCE In your prospectus supplement, we will present the historical delinquency and loss experience of the portfolio of contracts originated directly or purchased by the seller and serviced by the servicer. However, the actual results for the contracts transferred to your trust could be substantially worse. If so, you may not receive interest and principal payments on your securities in the amounts and at the times you expect. INTERESTS OF OTHER PERSONS IN THE CONTRACTS OR THE FINANCED MOTORCYCLES COULD REDUCE THE FUNDS AVAILABLE TO MAKE PAYMENTS ON YOUR SECURITIES A person could acquire an interest in a contract that is superior to that of the trust because the servicer will retain possession of the contracts. If a person purchases contracts, or takes a security interest therein, for value in the ordinary course of its business and obtains possession of the contracts without 11 actual knowledge of the trust's interest, that person will acquire an interest in the contracts superior to the interest of the trust and some or all of the collections on the contracts may be not available to make payments on the securities. A person could also acquire an interest in a financed motorcycle that is superior to that of the trust because of the failure to identify the trust as the secured party on the related certificate of title. The seller will assign its security interests in the financed motorcycles to the depositor, and the depositor will assign its security interests in the financed motorcycles to the trust. The seller's assignment to the depositor, and the depositor's subsequent assignment to the trust, are subject to state vehicle registration laws. These registration laws require that the secured party's name appear on the certificate or similar registration of title in order for the secured party's security interest to be perfected. To facilitate servicing and reduce administrative costs, the servicer will continue to hold the certificates of title or ownership for the motorcycles and will not endorse or otherwise amend the certificates of title or ownership to identify the trust as the new secured party. As a result, the trust may not have a perfected security interest in the financed motorcycles in certain states because the certificates or similar registrations of title will not be amended to reflect the assignment of the security interests in the financed motorcycles to the trust. In addition, because the trust will not be identified as the secured party on any certificate of title or similar registration of title, the security interest of the trust in the motorcycles may be defeated through fraud, forgery, negligence or error. The holders of some types of liens, such as tax liens or mechanics liens, may have priority over the trust's security interest in the financed motorcycles. The trust may lose its security interest in a financed motorcycle confiscated by the government. In the event that the trust must rely upon repossession and sale of the financed motorcycle securing a defaulted contract to recover amounts due on the defaulted contract, the trust's ability to realize upon the financed motorcycle would be limited by the failure to have a perfected security interest in the related financed motorcycle or the existence of a senior security interest in the financed motorcycle. In this event, you may be subject to delays in payment and may incur losses on your investment in the securities as a result of defaults or delinquencies by obligors. See "LEGAL ASPECTS OF THE CONTRACTS-SECURITY INTERESTS" in this prospectus. LIMITATIONS ON ENFORCEABILITY OF SECURITY INTERESTS IN THE FINANCED MOTORCYCLES MAY HINDER THE TRUST'S ABILITY TO REALIZE THE VALUE OF THE FINANCED MOTORCYCLES State law limitations on the enforceability of security interests and the manner in which a secured party may dispose of collateral may limit or delay the trust's ability to obtain or sell the financed motorcycles. This could reduce or delay the availability of funds to make payments on your securities. Under these state law limitations: - some jurisdictions require that the obligor be notified of the default and be given a period of time within which it may cure the default prior to or after repossession; and - the obligor may have the right to redeem collateral for its obligations prior to actual sale by paying the secured party the unpaid balance of the obligation plus the secured party's expenses for repossessing, holding and preparing the collateral for disposition. 12 CONTRACTS THAT FAIL TO COMPLY WITH CONSUMER PROTECTION LAWS MAY BE UNENFORCEABLE, WHICH MAY RESULT IN LOSSES ON YOUR INVESTMENT The contracts are consumer contracts subject to many federal and state consumer protection laws. If any of the contracts do not comply with one or more of these laws, the servicer may be prevented from or delayed in collecting amounts due on the contracts. If that happens, payments on the securities could be delayed or reduced. See "LEGAL ASPECTS OF THE CONTRACTS-CONSUMER PROTECTION LAWS" in this prospectus. Each of the depositor and seller will make representations and warranties relating to the contracts' compliance with consumer protection laws and the enforceability of the contracts. If those representations and warranties are not true as to any contract and the breach materially and adversely affects the trust's or the securityholders' interest in the contract or the collectibility of the contract, the depositor will be obligated to repurchase the contract from the trust and the seller will be required to repurchase the contract from the depositor. REPURCHASE OBLIGATION OF THE DEPOSITOR AND THE SELLER PROVIDES YOU ONLY LIMITED PROTECTION AGAINST PRIOR LIENS ON THE CONTRACTS Federal or state law may grant liens on contracts that have priority over the trust's interest. If the creditor associated with any prior lien on a contract exercises its remedies, the cash proceeds from the contract and related financed motorcycle available to the trust will be reduced. In that event, there may be a delay or reduction in distributions to you. An example of a lien arising under federal or state law is a tax lien on property of the seller or depositor arising prior to the time a contract is conveyed to the trust. Such a tax lien would have priority over the interest of the trust in the contracts. The seller will represent and warrant to the depositor, and the depositor will represent and warrant to the trust, that there are no prior liens on the contracts. In addition, the seller will represent and warrant to the depositor, and the depositor will represent and warrant to the trust, that it will not grant any lien on the contracts. If those representations and warranties are not true as to any contract and the breach materially and adversely affects the trust's or the securityholders' interest in the contract or the collectibility of the contract, the depositor will be obligated to repurchase the contract from the trust and the seller will be required to repurchase the contract from the depositor. There can be no assurance that the depositor or the seller will be able to repurchase a contract at the time when it is asked to do so. BANKRUPTCY OF THE OBLIGORS MAY REDUCE OR DELAY COLLECTIONS ON THE CONTRACTS, AND THE SALE OF FINANCED MOTORCYCLES RELATING TO DEFAULTING OBLIGORS MAY BE DELAYED OR MAY NOT RESULT IN COMPLETE RECOVERY OF AMOUNTS DUE Bankruptcy and insolvency laws affect the risk of loss on the contracts of obligors who become subject to bankruptcy proceedings. Those laws could result in the write-off of contracts of bankrupt obligors or result in delay in payments due on the contracts. For example, if the obligor becomes bankrupt or insolvent, the trust may need the permission of a bankruptcy court to obtain and sell its collateral. As a result, you may be subject to delays in receiving payments, and you may also suffer losses if available credit enhancement for losses is insufficient. 13 IF A BANKRUPTCY COURT DETERMINES THAT THE TRANSFER OF CONTRACTS FROM THE ORIGINATING DEALERS TO THE SELLER OR FROM THE SELLER TO THE DEPOSITOR WAS NOT A TRUE SALE, THEN PAYMENTS ON THE CONTRACTS COULD BE DELAYED RESULTING IN LOSSES OR DELAYS IN PAYMENTS ON YOUR SECURITIES If an originating dealer or the seller became a debtor in a bankruptcy case, creditors of that party, or that party acting as debtor-in-possession, may assert that the transfer of the contracts was ineffective to remove the contracts from that party's estate. In that case, the distribution of payments on the contracts to the trust might be subject to the automatic stay provisions of the United States bankruptcy code. This would delay the distribution of those payments to you for an uncertain period of time. Furthermore, reductions in payments under the contracts to the trust may result if the bankruptcy court rules in favor of the creditors or the debtor-in-possession. In either case, you may experience delays or reductions in distributions or payments to you. In addition, a bankruptcy trustee would have the power to sell the contracts if the proceeds of the sale could satisfy the amount of the debt deemed owed by the originating dealer or the seller, as the case may be. The bankruptcy trustee could also substitute other collateral in lieu of the contracts to secure the debt. Additionally, the bankruptcy court could adjust the debt if the originating dealer or the seller were to file for reorganization under Chapter 11 of the bankruptcy code. Any of these actions could result in losses or delays in payments on your securities. The originating dealers and the seller will each represent and warrant that its conveyance of the contracts is a valid sale and transfer of the contracts. See "LEGAL ASPECTS OF THE CONTRACTS-BANKRUPTCY CONSIDERATIONS." IF A BANKRUPTCY COURT DECIDES TO CONSOLIDATE THE ASSETS AND LIABILITIES OF THE DEPOSITOR AND THE SELLER, PAYMENTS ON THE CONTRACTS COULD BE DELAYED RESULTING IN LOSSES OR DELAYS IN PAYMENTS ON THE SECURITIES If the seller became a debtor in a bankruptcy case, the seller, a creditor or party acting as debtor-in-possession could request a bankruptcy court to order that the seller's assets and liabilities be substantially consolidated with the depositor's assets and liabilities. If the bankruptcy court consolidated the assets and liabilities of the seller and the depositor, delays and possible reductions in the amounts of distributions on the securities could occur. See "LEGAL ASPECTS OF THE CONTRACTS-BANKRUPTCY CONSIDERATIONS." PROCEEDS OF THE SALE OF CONTRACTS MAY NOT BE SUFFICIENT TO PAY YOUR SECURITIES IN FULL; FAILURE TO PAY PRINCIPAL ON YOUR SECURITIES WILL NOT CONSTITUTE AN EVENT OF DEFAULT UNTIL MATURITY If so directed by the holders of the requisite percentage of outstanding notes following an acceleration of the notes upon an event of default, the indenture trustee in certain circumstances will sell the contracts owned by the trust. However, there is no assurance that the market value of those contracts will at any time be equal to or greater than the aggregate outstanding principal balance of the securities. Therefore, upon a sale of the contracts, there can be no assurance that sufficient funds will be available to repay your securities in full. In addition, the amount of principal required to be paid to you on each payment date will generally be limited to amounts available in the collection account and the reserve fund, if any. The failure to pay principal of your securities generally will not result in the occurrence of an event of default until the final scheduled payment date for your securities. See "DESCRIPTION OF THE NOTES AND INDENTURE-THE INDENTURE-EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT" in this prospectus. 14 COMMINGLING OF COLLECTIONS COULD RESULT IN REDUCED PAYMENTS TO YOU If permitted by the rating agencies, rating the securities the servicer may hold collections it receives from the obligors on the contracts with its own funds until the day prior to the next date on which distributions will be made on the securities. If the servicer does not pay these amounts to the trust when required to do so, the trust may be unable to make the payments owed on your securities. In the event the servicer becomes a debtor in a bankruptcy case, the trust may not have a perfected security interest in these collections. In either case, you may suffer losses on your investment. YOU MAY NOT BE ABLE TO RESELL YOUR SECURITIES There is currently no secondary market for the securities. We cannot assure you that a secondary market will develop and if it does develop how liquid it will be. Thus, you may not be able to resell your securities at all, or may be able to do so only at a substantial discount. The underwriters may assist in resales of the securities but they are not obligated to do so. IF THE TRUST ENTERS INTO A CURRENCY OR AN INTEREST RATE SWAP, PAYMENTS ON THE SECURITIES WILL BE DEPENDENT ON PAYMENTS MADE UNDER THE SWAP AGREEMENT If the trust enters into a swap agreement, its ability to protect itself from shortfalls in cash flow caused by currency or interest rate changes will depend to a large extent on the terms of the swap agreement and whether the swap counterparty performs its obligations under the swap. If the trust does not receive the payments it expects under the swap agreement, the trust may not have adequate funds to make all payments owed on your securities when due. THE RATING OF A SWAP COUNTERPARTY MAY AFFECT THE RATINGS OF THE SECURITIES If a trust enters into a swap, the rating agencies that rate the trust's securities will consider the provisions of the swap agreement and the rating of the swap counterparty. If a rating agency downgrades the debt rating of the swap counterparty, it may downgrade the rating of the securities. In such an event, you may not be able to resell your securities or you may be able to resell them only at a substantial discount. YOU MAY EXPERIENCE REINVESTMENT RISK ASSOCIATED WITH PRE-FUNDING ACCOUNTS If so provided in the prospectus supplement, on the closing date an amount will be deposited into the pre-funding account. The amount on deposit in the pre-funding account will be used to purchase subsequent contracts from the depositor (which, concurrently will acquire such subsequent contracts from the seller) from time to time during the funding period specified in the prospectus supplement. If the principal amount of the eligible subsequent contracts acquired by the seller from originating dealers during the funding period is less than the amount on deposit in the pre-funding account, the seller may have insufficient subsequent contracts to transfer to the depositor. Any conveyance of subsequent contracts to a trust is also subject to the satisfaction, on or before the related subsequent transfer date, of the following conditions precedent, among others: (i) each such subsequent contract must satisfy the eligibility criteria specified in the related transfer and sale agreement, pooling and servicing agreement or sale and servicing agreement, as applicable; (ii) the seller and the depositor shall not have selected such subsequent contracts in a manner that is adverse to the interests of 15 holders of the securities; and (iii) as of the cutoff dates for such subsequent contracts, all of the contracts in the trust, including the subsequent contracts to be conveyed to the trust as of such date, must satisfy the parameters described in the prospectus supplement. To the extent that the amount on deposit in the pre-funding account has not been applied to the purchase of subsequent contracts by the end of the funding period, any amounts remaining in the pre-funding account will be distributed as a prepayment of principal to you, in the amounts and pursuant to the priorities set forth in the prospectus supplement. To the extent you receive such a prepayment of principal, there may not then exist a comparably favorable reinvestment opportunity and you will bear all reinvestment risk resulting from such prepayments. THE TRUST HAS LIMITED RECOURSE AGAINST THE SELLER AND THE DEPOSITOR None of the seller, the depositor or any of their affiliates is generally obligated to make any payments in respect of any notes, the certificates or the contracts of the trust. However, in connection with the sale of contracts by the depositor to the trust, the depositor will make representations and warranties with respect to the characteristics of such contracts and, in certain circumstances, the depositor may be required to repurchase contracts with respect to which such representations and warranties have been breached. The seller will correspondingly be obligated to the depositor under the transfer and sale agreement (which rights of the depositor against the seller will be assigned to the trust) to repurchase the contracts from the depositor contemporaneously with the depositor's repurchase of the contracts from the trust. See "DESCRIPTION OF THE SALE AND SERVICING AGREEMENTS AND POOLING AND SERVICING AGREEMENTS-SALE AND ASSIGNMENT OF CONTRACTS". THE TRUST DOES NOT HAVE SIGNIFICANT ASSETS OR SOURCES OF FUNDS OTHER THAN THE CONTRACTS The trust does not have and will not be permitted or expected to have, any significant assets or sources of funds other than the contracts and, to the extent provided in your prospectus supplement, a pre-funding account, a reserve fund and any other credit enhancement or trust property. The notes will represent obligations solely of, and the certificates will represent interests solely in, the trust, and neither the notes nor the certificates will be insured or guaranteed by the depositor, the servicer, the trustee, the indenture trustee or any other person or entity (except as may be described in your prospectus supplement). Consequently, you must rely for repayment upon payments on the contracts and, if and to the extent available, amounts on deposit in the pre-funding account (if any), the reserve fund (if any) and any other credit enhancement, all as specified in your prospectus supplement. Any such credit enhancement will not cover all contingencies, and losses in excess of amounts available pursuant to any credit enhancement will be borne directly by you. SOCIAL, ECONOMIC AND OTHER FACTORS MAY AFFECT THE PERFORMANCE OF THE CONTRACTS AND THE AVAILABILITY OF SUBSEQUENT CONTRACTS Economic conditions in countries, states or U.S. Territories where obligors reside may affect the delinquency, loan loss and repossession experience of the trust with respect to the contracts. The performance by such obligors, or the ability of the seller to acquire from originating dealers sufficient subsequent contracts for purchase with the amount on deposit in the pre-funding account (if any), may be affected by a variety of social and economic factors including, but not limited to, interest rates, unemployment levels, the rate of inflation, and consumer perception of economic conditions generally. However, neither the seller nor the depositor is able to determine or predict whether or to what extent 16 economic or social factors will affect the performance by any obligors, or the availability of subsequent contracts in cases where subsequent contracts are to be transferred to the trust as specified in the prospectus supplement. THE HOLDERS OF THE NOTES OR THE CLASS OR CLASSES OF NOTES DESCRIBED IN YOUR PROSPECTUS SUPPLEMENT MAY REMOVE THE SERVICER WITHOUT THE CONSENT OF THE HOLDERS OF THE CERTIFICATES OR THE OTHER CLASSES OF NOTES To the extent specified in your prospectus supplement, if there is a servicer default under the sale and servicing agreement, the indenture trustee or the holders of either the notes or the class or classes of notes described in your prospectus supplement may remove the servicer without the consent of the indenture trustee or the holders of the certificates or the other classes of notes. Neither the trustee nor the holders of the certificates will have the ability, without the concurrence of the holders of the notes or certain classes of notes, to remove the servicer if a servicer default occurs. THE RATINGS ON YOUR SECURITIES MAY BE LOWERED OR WITHDRAWN It is a condition to the issuance of the offered securities that they be rated in one of the four highest rating categories by at least one nationally recognized statistical rating organization. A rating is not a recommendation to purchase, hold or sell securities inasmuch as such rating does not comment as to market price or suitability for a particular investor. Ratings of securities will address the likelihood of the payment of principal and interest thereon pursuant to their terms. The ratings of securities will not address the likelihood of an early return of invested principal. There can be no assurance that a rating will remain for a given period of time or that a rating will not be lowered or withdrawn entirely by a rating agency if in its judgment circumstances in the future so warrant. For more detailed information regarding the ratings assigned to any class of a particular series of securities, see "RATINGS OF THE SECURITIES" in your prospectus supplement. 17 HARLEY-DAVIDSON MOTORCYCLES All of the motorcycles securing contracts were manufactured by Harley-Davidson, Inc. ("HARLEY-DAVIDSON"), except that not more than 8.0% of the contracts (including all subsequent contracts) may relate to, and be secured by, motorcycles manufactured by Buell Motorcycle Company, a wholly-owned subsidiary of Harley-Davidson ("BUELL"), and not more than 10.0% of the contracts (including all subsequent contracts) may relate to, and be secured by, motorcycles manufactured by other manufacturers as described below. Buell produces "PERFORMANCE" motorcycles using engines and certain other parts manufactured by Harley-Davidson. Harley-Davidson produces and sells premium heavyweight motorcycles. Within the heavyweight class, Harley-Davidson sells touring motorcycles (equipped for long-distance touring), as well as custom motorcycles which emphasize the distinctive styling associated with certain classic Harley-Davidson motorcycles. Harley-Davidson motorcycles are based on variations of five basic chassis designs and are powered by one of four air cooled, twin cylinder engines of "V" configuration which have displacements of 883cc, 1200cc, 1340cc, 1450cc and 1550cc. Harley-Davidson manufactures its own engines and frames and is the only major manufacturer of motorcycles in the United States. Buell produces "SPORTS PERFORMANCE" and "SPORT TOURING" motorcycles using Harley-Davidson engines that are further modified in the manufacturing process, as well as certain other Harley-Davidson parts. The "SPORTS PERFORMANCE" and "SPORT TOURING" aspect of the motorcycles refers to overall handling characteristics of the motorcycle, including cornering, acceleration and braking. Buell's overall share of the "SPORTS PERFORMANCE" and "SPORT TOURING" market has grown to approximately 18% as of December 31, 1999. OTHER MANUFACTURERS Except as otherwise specified in your prospectus supplement, contracts aggregating not more than 10.0% of the aggregate principal balances of all contracts in a trust (including subsequent contracts) may relate to, and be secured by, motorcycles manufactured by Honda, Yamaha, Suzuki, Kawasaki as well as certain other manufacturers. Such motorcycles fall within two categories: "touring cycles" (with displacements typically over 750cc) which are generally intended for use in long distance travel, and "street legal cycles", which include all other motorcycles which may be licensed for street use under applicable state or local law and which are not generally viewed as falling with the "touring cycle" category. HARLEY-DAVIDSON FINANCIAL SERVICES, INC. Harley-Davidson Financial Services, Inc. ("HDFS") (formerly known as Eaglemark Financial Services, Inc.) is the financing division of Harley-Davidson. HDFS was originally formed in June 1992 with a capital infusion of $10,000,000 from Harley-Davidson and an additional $15,000,000 capital contribution from a major institutional investor in January 1993. In November 1995, Harley-Davidson purchased the equity owned by the major institutional investor and, as of December 31, 1999, HDFS is a wholly-owned subsidiary of Harley-Davidson. The business of HDFS, through its 100% ownership of Harley-Davidson Credit Corp., has been to provide financial services programs to Harley-Davidson and Buell motorcycle dealers and customers in the United States and Canada. 18 In addition, HDFS markets the Harley-Davidson Chrome VISA card, through licensing agreements, in the United States and Canada, and offers wholesale and retail financing programs for Harley-Davidson's European motorcycle dealers through joint ventures with other finance companies. HDFS also provides financial services programs for personal aircraft products in the United States. THE SELLER AND SERVICER GENERAL Harley-Davidson Credit Corp. ("HDCC") (formerly known as Eaglemark, Inc.) is a Nevada corporation and is a wholly-owned subsidiary of HDFS. HDCC began operations in January 1993 when it purchased the $85 million wholesale financing portfolio of certain Harley-Davidson dealers from ITT Commercial Finance; subsequently, HDCC entered the retail consumer finance business. HDCC provides wholesale and retail financial services programs to Harley-Davidson and Buell dealers and consumers in the United States and Canada. Wholesale financial services include floorplan and open account financing for motorcycles and motorcycle parts and accessories, real estate loans, computer loans, showroom remodeling loans and, through Harley-Davidson Insurance Services, Inc., a wholly-owned subsidiary of HDFS ("HDI"), the brokerage of a range of commercial insurance products. Retail financial services include installment lending for new and used Harley-Davidson and Buell motorcycles and the brokerage of a range of motorcycle insurance policies and extended service contracts through HDI. HDI acts as an insurance agent and does not assume any underwriting risk with regard to insurance policies and extended service agreements. HDCC's financing, insurance and credit card programs are designed to work together as a package that appeals to the needs of Harley-Davidson's customers. The intent of such a package is to increase dealer and customer loyalty to HDCC while improving revenue and profits over time. HDCC's principal executive offices are located at 4150 Technology Way, Carson City, Nevada 89706 (telephone 775/886-3200). As of December 31, 1999, HDCC had total assets of $814.1 million, and stockholder's equity of $131.9 million. UNDERWRITING AND ORIGINATION The contracts in each trust have been or will be purchased by the seller from a network of Harley-Davidson dealers located throughout the United States and, in certain instances, Canada. The seller's personnel contact dealers and explain the seller's available financing plans, terms, prevailing rates and credit and financing policies. If the dealer wishes to use the seller's available customer financing, the dealer must make an application to the seller for approval. Contracts that the seller purchases are written on forms provided or approved by the seller and are purchased on an individually approved basis in accordance with the seller's guidelines. The dealer submits the customer's credit application and purchase order to the seller's office where an analysis of the creditworthiness of the proposed buyer is made. The analysis includes a review of the proposed buyer's paying habits, collateral information, length and likelihood of continued employment and certain other procedures. The seller's current underwriting guidelines for contracts generally require that the monthly payment on the contract, together with the obligor's other fixed monthly obligations, not exceed 40% of the obligor's monthly gross income; provided, however, that the seller may originate a contract in excess of 40% of 19 an obligor's monthly gross income if the obligor makes a larger down payment or has an exceptionally good credit rating or other offsetting factors exist. With respect to contracts for new motorcycles, and for used motorcycles of model year 1991 or later, the seller generally finances up to 90% of the motorcycle's sales price. The seller generally finances up to 85% of such amount for used motorcycles of a model year earlier than 1991. The seller will also finance, as part of the principal balance of the respective contract, certain dealer installed accessories, sales tax and title fees as well as premiums for the term of the contract on optional credit life and accident and health insurance, premiums for extended warranty insurance, premiums for GAP insurance and premiums for required physical damage insurance on the motorcycle. If the application meets the seller's guidelines and the credit is approved, the seller purchases the contract when the customer accepts delivery of the motorcycle. INDIVIDUAL MOTORCYCLE INSURANCE The terms of each contract require that for the life of the contract, each motorcycle is to be covered by a collision and comprehensive insurance policy which covers physical damage risks and names the seller as a loss payee. The amount of insurance coverage is limited to the value of the motorcycle. In the transfer and sale agreement, the seller will represent and warrant that each motorcycle was covered by the required insurance at the time of the related contract's origination. Pursuant to the contract terms, the servicer may "FORCE PLACE" (i.e., purchase on its own, with a corresponding claim for reimbursement against the obligor to the extent provided in the applicable contract) collision and comprehensive insurance with respect to the related motorcycle in those situations in which the obligor has not maintained the required insurance. If the servicer does "FORCE PLACE" insurance, as conveyee and assignee of the contracts, the trust will be entitled to the benefits of such insurance. Following repossession of a motorcycle by the servicer, the servicer does not maintain such insurance. In the event the servicer repossesses a motorcycle on behalf of the trust, the servicer will act as self-insurer for any damage to such motorcycle until it is resold. COLLECTION PROCEDURES The servicer will make reasonable efforts to collect all payments due with respect to the contracts held by any trust and will, consistent with the related sale and servicing agreement or pooling and servicing agreement, follow such collection procedures as it follows with respect to comparable motor vehicle retail installment sale contracts and installment loans it services for itself or others. The servicer's collection efforts include having personnel, using a predictive dialer, call a delinquent obligor on a pre-determined basis every third day in the event such obligor is eleven to twenty-nine days delinquent (with the exception of first payment defaults and loans classified as "DELTA ACCOUNTS" which are called beginning on the second day of delinquency). At thirty days delinquent, the account is reassigned from the predictive dialer team to a dedicated senior collection associate and is called every third day in the event the obligor is thirty to less than ninety days delinquent and every day in the event the obligor is greater than ninety days delinquent. The servicer's general approach is to restructure a delinquent loan as opposed to repossessing the related motorcycle; however, the servicer's approach with respect to a specific obligor is affected by the obligor's responsiveness and attitude. Consistent with this approach, the servicer may, in its discretion, arrange with the obligor on a contract to extend or modify the payment schedule, but no such arrangement will, for purposes of any sale and servicing agreement or pooling and servicing agreement, modify the original due dates or the amount of the scheduled payments or extend the final payment date of any contract beyond the last day of the due 20 period relating to the latest maturity date (as specified with respect to the pool of contracts in the related prospectus supplement). The servicer may sell the motorcycle securing the respective contract at public or private sale, or take any other action permitted by applicable law. See "LEGAL ASPECTS OF THE CONTRACTS" in this prospectus. REPOSSESSION Certain information concerning the experience of the seller pertaining to delinquencies, repossessions and net losses with respect to new and used motorcycle contracts will be set forth in the prospectus supplement. There can be no assurance that the delinquency, repossession and net loss experience on any particular pool of contracts will be comparable to prior experience or to such information. YEAR 2000 The seller and servicer initiated and completed a program designed to resolve the potential impact of the year 2000 on the ability of its computerized information systems to accurately process information that may be date sensitive. The seller and servicer identified the critical data storage and operating systems and developed plans to ensure the readiness of systems to process dates beyond the year 2000. Furthermore, the seller and servicer communicated with the originating dealers, financial institutions and suppliers to determine the risk created by those parties' failure to remediate their own year 2000 issues. To date, neither the seller nor the servicer has experienced any material problems relating to the year 2000 issue. In addition, neither the seller nor the depositor expects to incur material costs in the future as a result of the year 2000 issue. There is no assurance that neither the seller nor servicer will experience problems in the future as a result of the year 2000 issue. THE DEPOSITOR The depositor will be Harley-Davidson Customer Funding Corp., a special-purpose finance subsidiary of Harley-Davidson Credit Corp. All of the common stock of the depositor will be owned by Harley-Davidson Credit Corp. All of the officers and directors of the depositor will be employed by Harley-Davidson Credit Corp. or Harley-Davidson Financial Services, Inc., except that at least two directors of the depositor will at all times be independent of Harley-Davidson Credit Corp., Harley Davidson Financial Services, Inc. and Harley-Davidson, Inc. THE TRUSTS The depositor will establish each trust pursuant to a trust agreement or a pooling and servicing agreement for the transactions described in this prospectus. Each trust will be a common law trust or a statutory trust. Each trust may issue one or more classes of securities, representing debt of or beneficial ownership interests in the trust. On or before the date of the initial issuance of any securities by a trust, the seller will sell the pool of contracts and the related property to the depositor pursuant to a transfer and sale agreement and the depositor will transfer the pool of contracts and the related property to the trust in exchange for the securities issued by the trust pursuant to a sale and servicing agreement or a pooling and servicing agreement. 21 To the extent provided in the prospectus supplement, the depositor may convey additional contracts to the trust after the closing date as frequently as daily during a funding period specified in the prospectus supplement. The trust will purchase any contracts subsequently added to the trust with amounts deposited in a pre-funding account on the closing date. Any subsequent contracts will be required to conform to the requirements described in the prospectus supplement. Any subsequent contracts will also be assets of the trust. Any funds remaining on deposit in a pre-funding account at the end of the funding period will be used to prepay principal on the securities as specified in your prospectus supplement. To the extent provided in the prospectus supplement, all or a portion of the principal collected on the contracts may be applied by the trustee to the acquisition of subsequent contracts during a period specified in the prospectus supplement rather than used to make or distribute payments of principal to securityholders during that period. These securities would then possess an interest only period, also commonly referred to as a "REVOLVING PERIOD", which will be followed by an "AMORTIZATION PERIOD", during which principal will be paid. Any interest only or revolving period may terminate prior to the end of the specified period and result in the earlier than expected principal repayment of the securities. The property of each trust, as further specified in your prospectus supplement, will consist of: - the contracts and the right to receive all scheduled payments and prepayments received on the contracts on or after the cut-off date, but excluding any scheduled payments due on or after, but received prior to, the cut-off date; - amounts that may be held in separate trust accounts maintained by the trustee or the indenture trustee for the trust, including any reserve fund or interest reserve account; - security interests in the financed motorcycles securing the contracts and any related property; - rights with respect to any repossessed financed motorcycles; - the rights to proceeds from claims on theft, physical damage, credit life and disability insurance policies covering the financed motorcycles or the obligors; - certain rebates of premiums and other amounts relating to insurance policies, extended service contracts or other repair agreements and other items financed under the contracts; - the depositor's rights against the seller under the transfer and sale agreement pursuant to which the seller sold the pool of contracts to the depositor; - the right to receive payments from the depositor obligated to repurchase contracts which do not meet specified representations made by depositor in the sale and servicing agreement or the pooling and servicing agreement; - the trust's rights against the servicer under the sale and servicing agreement or the pooling and servicing agreement; 22 - credit or cash flow enhancement for the securities specified in the prospectus supplement; and - all proceeds of the foregoing. The property of a trust may also include a derivative arrangement for any series or any class of securities. A derivative arrangement may include a guaranteed rate agreement, a maturity liquidity facility, a tax protection agreement, an interest rate cap or floor agreement, an interest rate or currency swap agreement or any other similar arrangement. If the property of the trust includes any of these types of assets, additional information concerning them will be provided to you in your prospectus supplement. If the trust issues notes, the trust will pledge its assets to the indenture trustee for the benefit of the noteholders to secure its obligations under the notes. No trust will engage in any business activity other than: - issuing notes and/or ownership interests in the trust; - purchasing contracts, security interests in the related financed motorcycles and related property; - holding and dealing with assets of the trust; - making payments on the securities it issued; - entering into and performing the duties, responsibilities and functions required under the pooling and servicing agreement, the sale and servicing agreement, the indenture and related documents; and - matters incidental to the foregoing. The assets of a trust will be separate from the assets of all other trusts created by the depositor. Accordingly, the assets of one trust will not be available to make payments on the securities issued by any other trust. USE OF PROCEEDS Unless otherwise provided in the related prospectus supplement, the trust will use the net proceeds received from the sale of the securities (i) to purchase the initial contracts and related assets from the trust depositor, and (ii) to make a deposit into the pre-funding account, if any. The seller will use the net proceeds from the trust depositor's purchase of the initial contracts, as well as subsequent contracts, for general corporate purposes. THE TRUSTEE The prospectus supplement will specify the trustee for each trust and, if the trust is issuing notes, the indenture trustee under the indenture. The trustee's or the indenture trustee's liability in connection with the issuance and sale of the related securities is limited solely to the express obligations set forth in the related trust agreement, pooling and servicing agreement, sale and servicing agreement or indenture. 23 A trustee may resign at any time, in which event, the depositor will be obligated to appoint a successor. An indenture trustee may resign at any time, in which event, the trust or the administrator, on the trust's behalf, will be obligated to appoint a successor. A trustee that becomes insolvent or otherwise ceases to be eligible to continue in that capacity under the related pooling and servicing agreement or trust agreement may be removed by the depositor. An indenture trustee that becomes insolvent or otherwise ceases to be eligible to continue in its capacity under the indenture may be removed by the trust or the administrator, on the trust's behalf. In those circumstances, the servicer or the administrator, as the case may be, will be obligated to appoint a successor. Any resignation or removal of a trustee will not become effective until acceptance of the appointment of a successor trustee. In addition, the holders of more than 50% of the aggregate principal amount of the notes or the class or classes of the notes described in your prospectus supplement may remove the indenture trustee without cause and may appoint a successor indenture trustee. If a trust issues a class of notes that is subordinated to one or more other classes of notes and an event of default occurs under the indenture, the indenture trustee may be deemed to have a conflict of interest under the Trust Indenture Act of 1939 and may be required to resign as trustee for one or more of the classes of notes. In any such case, the indenture will provide for a successor indenture trustee to be appointed for those classes of notes. Each of the trustee and the indenture trustee and any of its respective affiliates may hold securities in its own name or as a pledgee. For the purpose of meeting the legal requirements of some jurisdictions, the servicer and the related trustee will have the power to appoint co-trustees or separate trustees of all or any part of the trust. You will find the addresses of the principal offices of the trust, the trustee and, if applicable, the indenture trustee in your prospectus supplement. WEIGHTED AVERAGE LIVES OF THE SECURITIES The weighted average lives of the securities of any trust will be a function of the weighted average lives of the contracts held by the trust. The weighted average lives of the contracts will be influenced by the rate at which the principal balances of the related contracts are paid. The term "WEIGHTED AVERAGE LIFE" means the average amount of time during which each dollar of principal of a contract is outstanding. All of the contracts will be prepayable at any time without penalty to the obligor. If full or partial prepayments are received on the contracts, the actual weighted average lives of the contracts will be shorter than the scheduled weighted average lives of the contracts set forth in your prospectus supplement. Prepayments include optional prepayments by obligors, liquidations due to default, partial prepayments from rebates of extended warranties and insurance premiums, as well as receipts of proceeds from physical damage, credit life and disability insurance policies. Prepayment rates are influenced by a variety of economic, social and other factors, including the fact that an obligor generally may not sell or transfer the financed motorcycle securing a contract without obtaining the certificate of title from the servicer. We cannot predict the rate of prepayment on the contracts in either stable or changing interest rate environments. The servicer maintains limited records of the historical prepayment experience of the contracts included in its portfolio but is not aware of any publicly available industry statistics for the entire industry that set forth prepayment experience for receivables similar to the contracts. The servicer believes that its prepayment experience is consistent with that generally found in the industry. However, 24 neither the servicer nor the depositor can assure you that prepayments will conform to historical experience. The weighted average lives of the securities will also be impacted to the extent that the depositor or the seller is obligated to repurchase contracts from a given trust as a result of breaches of particular representations and warranties relating to the contracts. See "DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS-SALE AND ASSIGNMENT OF CONTRACTS BY SELLER" and "-TRANSFER OF CONTRACTS BY DEPOSITOR" in this prospectus. The weighted average lives of the securities will also be impacted to the extent the servicer is obligated to purchase contracts from a given trust as a result of breaches of certain covenants relating to the contracts. See "DESCRIPTION OF THE TRANSFER AND SERVICING Agreements-Servicing" in this prospectus. In addition, early retirement of the securities may be effected by the exercise of the option of the depositor, at the direction of the servicer, to purchase all of the contracts remaining in the trust when the aggregate outstanding principal balance of the contracts is less than 10% of the sum of (i) the aggregate outstanding principal balance of the contracts owned by the trust as of the closing date and (ii) the initial amount on deposit in the pre-funding account, if any. You will bear all of the reinvestment risk resulting from the rate of prepayments of the contracts. Your prospectus supplement may set forth additional information regarding the maturity and prepayment considerations applicable to your pool of contracts and your securities. FACTORS AND TRADING INFORMATION The "NOTE FACTOR" or, if applicable, the "CERTIFICATE FACTOR" for any class of securities issued by an "owner trust" will be a seven-digit decimal indicating the principal amount of that class of securities on the payment date as a fraction of the respective principal amount of that class as of the closing date. The servicer will compute the note factor and, if applicable, the certificate factor each month. Initially, each factor will be 1.0000000 and thereafter will decline to reflect reductions in the principal amount of each class of notes and, if applicable, the reductions in the certificate balance. The servicer will compute the principal amount by allocating payments in respect of the contracts to principal and interest using the simple interest method. The portion of the principal amount of any class of notes and of the certificate balance for any class of certificates for a given month allocable to a securityholder can be determined by multiplying the original denomination of the holder's security by the related note factor or certificate factor, as the case may be, for that month. The "POOL FACTOR" for any class of certificates issued by a "grantor trust" will be a seven-digit decimal indicating the principal amount of that class of certificates on the payment date as a fraction of the respective principal amount thereof as of the closing date. The servicer will compute the pool factor each month and will calculate the pool factor by dividing the certificate balance for that class of certificates as of the close of business on the last day of the preceding month by the aggregate certificate balance of the certificates as of the closing date. You will receive monthly reports concerning the payments received on the contracts, the aggregate principal balance of the contracts, the related note factors, certificate factors, pool factors and various other items of information pertaining to the trust. Furthermore, the trustee or the indenture trustee will furnish you with information for tax reporting purposes not later than on the latest date permitted by law. See "DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS-SERVICING-STATEMENTS TO SECURITYHOLDERS" in this prospectus. DESCRIPTION OF THE NOTES AND INDENTURE 25 GENERAL The issuance of each series of notes will be under an indenture, a form of which was filed with the Securities and Exchange Commission as an exhibit to the registration statement of which this prospectus is a part. In addition, a copy of the indenture for a series of notes will be filed with the Securities and Exchange Commission following the issuance of each series of securities. This summary describes the material terms common to each indenture and the notes. This summary is subject to, and qualified in its entirety by reference to, all of the provisions of the indenture and the notes. The notes will be issued in fully registered form only and will represent the obligations of a separate trust. Notes will be available for purchase by you in the denominations specified in your prospectus supplement. Your prospectus supplement will provide additional information specific to your notes. PAYMENTS Your prospectus supplement will describe as to your class of notes: - the timing and priority of payments of principal and interest; - the amount and method of determining payments of principal and interest; - the priority of the application of the trust's available funds to its expenses and payments on its securities; and - the interest rates or the formula for determining the interest . Your rights to receive payments may be senior or subordinate to the rights of holders of other classes of notes. Furthermore, each class of notes may have a different interest rate, which may be a fixed, variable or adjustable interest rate or any combination of the foregoing. See "INFORMATION REGARDING THE SECURITIES-INTEREST RATES" in this prospectus. Payments of principal and interest on any class of notes will be made on a pro rata basis among all noteholders of that class. If the amount of funds available to make a payment on a class of notes is less than the required payment, the noteholders will receive their pro rata share of the amount available for that class. PRO-RATA PAY/SUBORDINATE NOTES One or more classes of notes may be payable on an interest only or principal only basis. In addition, the notes may include two or more classes that differ as to timing, sequential order, priority of payment, interest rate or amount of payments of principal or interest or both. Payments of principal or interest or both on any class may be made upon the occurrence of specified events, in accordance with a schedule or formula, or on the basis of collections from designated assets of the trust. A series may include one or more classes of notes, as to which accrued interest will not be distributed but rather will be added to the principal or notional balance of the notes on each payment date. 26 VARIABLE FUNDING NOTE A trust may issue one or more classes of notes having particular maturity dates and at the same time the trust may issue variable funding notes which relate to those particular maturity dates. These notes may have a balance that may decrease based on the amortization of contracts or increase based on principal collections used to purchase additional contracts. OPTIONAL PURCHASE OF CONTRACTS AND REDEMPTION OF NOTES At its option, the seller may purchase all of the contracts owned by a trust on any payment date following the date on which the aggregate outstanding principal balance of the contracts is less than 10% of the sum of (i) the aggregate outstanding principal balance of the contracts owned by the trust as of the closing date and (ii) the initial amount on deposit in the pre-funding account, if any. Except as otherwise described in your prospectus supplement, the purchase price to be paid in connection with the purchase shall be at least equal to the sum of: - the unpaid principal balance of the contracts as of that payment date; - accrued but unpaid interest on the securities to that payment date; - unreimbursed servicer advances; and - accrued but unpaid servicer fees. If the seller purchases the contracts, the related notes will be repaid in full on the payment date on which the purchase occurs. In no event will you or the trust be subject to any liability to the seller as a result of or arising out of the seller's optional purchase of the contracts. VOTING RIGHTS Your prospectus supplement may specify certain circumstances under which the consent, approval, direction or request of the holders of a specified percentage of the outstanding principal amount of the notes or certain classes of notes must be obtained, given or made, or under which such holders are permitted to take an action or give a notice. Your prospectus supplement may further specify that one class of notes will control the voting with respect to all classes of notes. THE INDENTURE MODIFICATION OF INDENTURE WITHOUT NOTEHOLDER CONSENT The trust and the indenture trustee may, without your consent, correct or supplement any provision in the indenture that is ambiguous or inconsistent with any other provision of the indenture. In addition, if the indenture trustee receives an opinion of counsel that a modification will not have a material adverse effect on the noteholders, the trust and the indenture trustee may, without your consent, enter into one or more supplemental indentures to, among other things, add, modify or eliminate any provisions of the indenture or modify your rights as a noteholder. MODIFICATION OF INDENTURE WITH NOTEHOLDER CONSENT 27 With the consent of the holders of more than 50% (or such higher percentage as specified in your prospectus supplement) of the outstanding principal amount of the notes or the class or classes of notes described in your prospectus supplement, the trust and the indenture trustee may modify the indenture and your rights under it. Without the consent of the holder of each outstanding note affected, however, no modification may: - reduce the principal amount or interest rate or change the due date of any payment; - impair your right to sue to enforce payment provisions of the indenture; - reduce the percentage of the aggregate principal amount of the notes to amend certain sections of the indenture or certain other related agreements; - permit the creation of any lien on collateral under the indenture ranking prior to or on a parity with the lien of the indenture; - adversely affect the manner of determining notes outstanding for voting purposes; - reduce the percentage of the aggregate principal amount of the notes needed to sell or liquidate the assets of a trust if the proceeds of sale will be insufficient to pay the notes in full; or - modify the provisions of the indenture relating to these types of indenture modifications without the consent of all noteholders. EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT Events of default under each indenture will consist of: - a default for five days or more in the payment of interest due on any note; - failure to pay the unpaid principal amount of any class of notes when due and payable; - a default in the observance or performance of any covenant or agreement of the trust (other than those specifically addressed above), which default continues for 30 days after written notice thereof is given to the trust by the indenture trustee or by holders of at least 25% of the aggregate principal amount of the notes or the class or classes of notes described in your prospectus supplement; - any representation or warranty made by the trust in the indenture or in any certificate delivered pursuant thereto was incorrect as of the time made, and continues to be incorrect for a period of 30 days after notice thereof is given to the trust by the indenture trustee or by holders of at least 25% of the aggregate principal amount of the notes or the class or classes of notes described in your prospectus supplement; or - events of bankruptcy, insolvency, receivership or liquidation of the trust. 28 If an event of default should occur and be continuing with respect to the notes of a series, other than an event of default caused by an event of bankruptcy, insolvency, receivership or liquidation of the trust, the indenture trustee or the holders of more than 66 2/3% (or a lesser percentage as specified in your prospectus supplement, but in no case not less than 50%) of the aggregate principal amount of the notes or the class or classes of notes described in your prospectus supplement may declare the principal amount of the notes to be immediately due and payable. If an event of default caused by an event of bankruptcy, insolvency, receivership or liquidation of the trust should occur and be continuing with respect to the notes of a series, the principal amount of the notes will be immediately due and payable. This declaration may be rescinded by the holders of more than 66 2/3% (or a lesser percentage as specified in your prospectus, but in no case not less than 50%) of the aggregate principal amount of the notes or the class or classes of notes described in your prospectus supplement. If the notes of a series have been declared to be due and payable following an event of default, the indenture trustee may: - institute proceedings to collect amounts due or foreclose on the trust assets; - exercise remedies as a secured party; or - sell the trust assets, or elect to have the trust maintain possession of the trust assets. The indenture trustee, however, may not sell the trust assets following an event of default other than a default in the payment of principal or a default for five days or more in the payment of interest, unless: - the holders of all the outstanding notes consent to the sale; - the proceeds of the sale are sufficient to pay in full the principal and accrued interest on all the outstanding notes at the date of the sale; or - there has been an event of default for failure to pay principal or interest on the notes and the indenture trustee determines that the trust assets would not be sufficient on an ongoing basis to make all payments on the notes as the payments would have become due if the obligations had not been declared due and payable and the indenture trustee provides written notice to the rating agencies and obtains the consent of the holders of more than 66-2/3% (or a lesser percentage as specified in your prospectus supplement, but in no case not less than 50%) of the aggregate principal amount of the notes or the class or classes of notes described in your prospectus supplement. Following a declaration upon an event of default that the notes are immediately due and payable, the application of any proceeds of any sale of the trust assets will be in the order of priority described in the prospectus supplement for your class of notes. If an event of default occurs and is continuing, 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 which it may incur in complying with that request. Holders of more than 50% of the aggregate principal amount of the notes or the class or classes of notes described in your 29 prospectus supplement will have the right to direct the time, method and place of conducting any proceeding or any remedy available to the indenture trustee. Additionally, holders of more than 50% of the aggregate principal amount of the notes or the class or classes of notes described in your prospectus supplement may, in some cases, waive any default, except a default in the payment of principal or interest or a default in respect of a covenant or provision of the indenture that cannot be modified without the waiver or consent of all of the holders of the outstanding notes. No holder of a note will have the right to institute any proceeding with respect to the indenture, unless: - the holder previously has given to the indenture trustee written notice of a continuing event of default; - the holders of not less than 25% in principal amount of the outstanding notes or the class or classes of notes described in your prospectus supplement make written request of the indenture trustee to institute the proceeding in its own name as indenture trustee; - the holder or holders offer the indenture trustee reasonable indemnity; - the indenture trustee has for 60 days failed to institute the proceeding; and - no direction inconsistent with that written request has been given to the indenture trustee during the 60-day period by the holders of more than 50% of the notes or the class or classes of notes described in your prospectus supplement. Notwithstanding the foregoing, noteholders will have the absolute and unconditional right to receive payment of principal of and interest on a note and to institute suit for the enforcement of such payment, which right will not be impaired without the individual noteholder's consent. In addition, the indenture trustee and noteholders, by accepting the notes, will covenant that they will not at any time institute against the depositor or the trust any bankruptcy, reorganization or other proceeding under any federal or state bankruptcy or similar law. Neither the trustee, the holder of any certificate, the seller, the depositor, or any of their respective owners, beneficiaries, agents, officers, directors, employees, affiliates, successors or assigns will be personally liable for the payment of the notes or for any agreement or covenant of the trust contained in the indenture. COVENANTS Each indenture will provide that the trust may not consolidate with or merge into any other entity, unless: - the entity formed by or surviving the consolidation or merger is organized under the laws of the United States, any state or the District of Columbia; 30 - the entity expressly assumes the trust's obligation to make due and punctual payments upon the notes and the performance or observance of every agreement and covenant of the trust under the indenture; - no event of default shall have occurred and be continuing immediately after the merger or consolidation; - the rating agencies rating the notes (and, if so provided in the indenture, the certificates) advise the indenture trustee that the ratings then in effect would not be reduced or withdrawn as a result of the merger or consolidation; - the indenture trustee has received an opinion of counsel to the effect that the consolidation or merger would have no material adverse tax consequence to the trust or to any noteholder or certificateholder; and - any action as is necessary to maintain the lien and security interest of the indenture trustee shall have been taken. Each indenture will provide that the trust will not, among other things: - except as expressly permitted by the related indenture, trust agreement, sale and servicing agreement or pooling and service agreement, transfer any of the assets of the trust; - claim any credit on or make any deduction from, the principal and interest payable in respect of the related notes, other than amounts withheld under the bankruptcy code or applicable state law, or assert any claim against any present or former holder of notes because of the payment of taxes levied or assessed upon the trust; - permit the validity or effectiveness of the indenture to be impaired or permit the release of any person from any covenants or obligations relating to the notes under the indenture except as expressly permitted in the indenture; or - except as expressly permitted in the indenture, permit any lien or claim to burden any assets of the trust. Each indenture will provide that each trust may engage in only those activities specified above under "THE TRUSTS." Each trust will be prohibited from incurring, assuming or guaranteeing any indebtedness other than indebtedness incurred under the notes and the indenture or otherwise in accordance with the related indenture, trust agreement and sale and servicing agreement. ANNUAL COMPLIANCE STATEMENT Each trust will be required to file annually with the applicable indenture trustee a written statement as to the fulfillment of its obligations under the indenture. 31 INDENTURE TRUSTEE'S ANNUAL REPORT Each indenture trustee will be required to mail each year to all noteholders of the related series a brief report relating to: - its eligibility and qualification to continue as indenture trustee under the related indenture; - any amounts advanced by it under the indenture; - the amount, interest rate and maturity date of certain indebtedness owing by the trust to the indenture trustee in its individual capacity; - the property and funds physically held by the indenture trustee; and - any action taken by it that materially affects the notes and that has not been previously reported. SATISFACTION AND DISCHARGE OF INDENTURE The discharge of an indenture will occur with respect to the assets securing the notes of a series upon the delivery to the related 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 of the notes and payment of all amounts and obligations, if any, which the trust owes to the noteholders or indenture trustee on behalf of the noteholders. TRUST ACCOUNTS Under each indenture, if the applicable indenture trustee has a rating of A-1+/P-1 by Standard & Poor's Rating Services and Moody's Investors Service, Inc., the indenture trustee will establish and maintain segregated bank accounts for the trust. If the applicable indenture trustee has a rating lower than A-1+/P-1, the indenture trustee will establish and maintain segregated trust accounts or accounts in a qualified institution. These accounts will include, among others, a "COLLECTION ACCOUNT" and a "DISTRIBUTION ACCOUNT." The trust accounts may, as described in the prospectus supplement for your notes, also include a cash collateral or reserve fund account as credit enhancement. "QUALIFIED INSTITUTION" means the corporate trust department of the indenture trustee or any other depositary institution: - organized under the laws of the United States or any state or any domestic branch of a foreign bank; - the deposits of which are insured by the Federal Deposit Insurance Corporation; and - which has, or whose parent corporation has, short-term or long-term debt ratings acceptable to Moody's Investors Service, Inc. and Standard & Poor's Ratings Services. 32 The indenture trustee will invest funds in the trust accounts at the direction of the servicer. All investments will be generally limited to investments acceptable to the rating agencies rating the notes as being consistent with the ratings of those notes that will mature not later than the business day preceding the applicable payment date or any later date approved by the rating agencies. If the rating agencies permit the investment of funds on deposit in a cash collateral or reserve fund account in investments that mature beyond a payment date, the amount of cash available in the cash collateral or reserve fund account may be less than the amount required to be withdrawn from that trust account to cover shortfalls in collections on the contracts and a temporary shortfall in the amounts paid to the noteholders may result. Investment earnings on funds deposited in the trust accounts will be paid to the person described in your prospectus supplement. DESCRIPTION OF THE CERTIFICATES GENERAL The issuance of each series of certificates will be under the terms of a trust agreement or a pooling and servicing agreement, a form of each of which has been filed with the Securities and Exchange Commission as an exhibit to the registration statement of which this prospectus is a part. In addition, a copy of the trust agreement or the pooling and servicing agreement for a series of certificates will be filed with the Securities and Exchange Commission following the issuance of the certificates. This summary describes the material terms common to the certificates issued by each trust. This summary is subject to, and qualified in its entirety by reference to, all the provisions of the certificates, the trust agreement or pooling and servicing agreement, as applicable. The certificates of each series will be issued in fully registered form only and will represent an ownership interest in the trust. Certificates will be available for purchase by you in the denominations specified in your prospectus supplement. Your prospectus supplement will provide additional information specific to your certificates. DISTRIBUTIONS Your prospectus supplement will describe as to your class of certificates: - the timing and priority of distributions on account of principal and interest; - the amount and method of determining distributions on account of principal and interest; - the priority of the application of the trust's available funds to its expenses and distributions on its securities; - allocation of losses on the contracts among the classes of certificates; and - the interest rates or the formula for determining the interest rates. Your rights to receive distributions may be senior or subordinate to holders of other classes of certificates. Furthermore, each class of certificates may have a different interest rate, which may be a fixed, variable or adjustable interest rate or any combination of the foregoing. See "INFORMATION REGARDING THE SECURITIES-INTEREST RATES" in this prospectus. 33 Distributions of principal and interest with respect to any class of certificates will be made on a pro rata basis among all certificateholders of that class. If the amount of funds available to make a distribution with respect to a class of certificates is less than the required payment, the certificateholders will receive their pro rata share of the amount available for that class. PRO-RATA PAY/SUBORDINATE CERTIFICATES One or more classes of certificates may be payable on an interest only or principal only basis. In addition, the certificates may include two or more classes that differ as to timing, sequential order, priority of payment, interest rate or amount of distributions of principal or interest or both. Distributions of principal or interest or both on any class may be made upon the occurrence of specified events, in accordance with a schedule or formula, or on the basis of collections from designated assets of the trust. A series may include one or more classes of certificates, as to which accrued interest will not be distributed but rather will be added to the principal or notional balance of the certificates on each payment date. OPTIONAL PURCHASE OF CONTRACTS AND PREPAYMENT OF CERTIFICATES At its option, the seller may purchase all of the contracts owned by a trust on any payment date following the date on which the aggregate outstanding principal balance of the contracts is less than 10% of the sum of (i) the aggregate outstanding principal balance of the contracts owned by the trust as of the closing date and (ii) the initial amount on deposit in the pre-funding account, if any. Except as otherwise described in your prospectus supplement, the purchase price to be paid in connection with the purchase shall be at least equal to the sum of: - the unpaid principal balance of the contracts as of that payment date; - accrued but unpaid interest on the certificates to the payment date; - unreimbursed servicer advances; and - accrued but unpaid servicer fees. If the seller purchases the contracts, the related certificates will be paid in full on the payment date on which the purchase occurs. In no event will you or the trust be subject to any liability to the seller as a result of or arising out of the seller's optional purchase of the contracts. THE POOLING AND SERVICING AGREEMENT MODIFICATION OF THE POOLING AND SERVICING AGREEMENT WITHOUT CERTIFICATEHOLDER CONSENT In the case of a "grantor trust", the depositor and the trustee may, without your consent, correct or supplement any provision in the pooling and servicing agreement that is ambiguous or inconsistent with any other provision of the pooling and servicing agreement. In addition, if the trustee receives an opinion of counsel that a modification will not have a material adverse effect on the certificateholders, the depositor and the trustee may, without your consent, enter into one or more supplements to the pooling and servicing agreement to, among other things, add, modify or eliminate any provisions of the pooling and servicing agreement or modify your rights as a certificateholder. 34 MODIFICATION OF POOLING AND SERVICING AGREEMENT WITH CERTIFICATEHOLDER CONSENT With the consent of the holders of more than 50% of the outstanding principal amount of the certificates or the class or classes of certificates described in your prospectus supplement, the depositor and the trustee may modify the pooling and servicing agreement and your rights under it. Without the consent of the holder of each outstanding certificate affected, however, no modification may: - reduce the principal amount or pass-through rate or change the due date of any distribution; - modify the manner of application of collections in respect of the contracts to distributions in respect of the certificates; - impair your right to sue to enforce payment provisions of the pooling and servicing agreement; - reduce the percentage of the aggregate certificate balance of the certificates needed for consents of certificateholders; - permit the creation of any lien on collateral under the pooling and servicing agreement ranking prior to or on a parity with the lien of the pooling and servicing agreement; - adversely affect the manner of determining certificates outstanding for voting purposes; or - modify the provisions of the pooling and servicing agreement relating to these types of pooling and servicing agreement modifications without the consent of all certificateholders. TRUST ACCOUNTS Under the pooling and servicing agreement or trust agreement, if the applicable trustee has a rating of A-1+/P-1 by Standard & Poor's Rating Services and Moody's Investors Service, Inc., the trustee will establish and maintain segregated bank accounts for the trust. If the applicable trustee has a rating lower than A-1+/P-1, the trustee will establish and maintain segregated trust accounts or accounts in a qualified institution. These accounts will include, among others, a "COLLECTION ACCOUNT". "QUALIFIED INSTITUTION" means the corporate trust department of the trustee or any other depositary institution: - organized under the laws of the United States or any state or any domestic branch of a foreign bank; - the deposits of which are insured by the Federal Deposit Insurance Corporation; and 35 - which has, or whose parent corporation has, short-term or long-term debt ratings acceptable to Moody's Investors Service, Inc. and Standard & Poor's Ratings Services. The trustee will invest funds in the trust accounts at the direction of the servicer. All investments will be generally limited to investments acceptable to the rating agencies rating the certificates as being consistent with the ratings of those certificates that will mature not later than the business day preceding the applicable payment date or any later date approved by the rating agencies. See "DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS" in this prospectus for summaries of the material terms of the trust agreements, sale and servicing agreements and pooling and servicing agreements pursuant to which certificates will be issued. INFORMATION REGARDING THE SECURITIES INTEREST RATES A class of securities may bear interest at a fixed, variable or adjustable rate per annum, as more fully described below and in your prospectus supplement. FIXED RATE SECURITIES. Each class of fixed rate securities will bear interest at the applicable per annum interest rate or pass through rate, specified in the applicable prospectus supplement. Interest on each class of fixed rate securities will be computed on the basis of a 360-day year consisting of twelve 30-day months or on such other day count basis as is specified in your prospectus supplement. FLOATING RATE SECURITIES. Each class of floating rate securities will bear interest during each applicable interest period at a rate per annum determined by reference to a base rate, plus or minus a specified spread, if any, or multiplied by the spread multiplier, if any, as specified in the applicable prospectus supplement. The "SPREAD" is a number of basis points to be added to or subtracted from the related base rate. The "SPREAD MULTIPLIER" is a percentage of the related base rate by which that base rate will be multiplied to determine the applicable interest rate. Your prospectus supplement will designate one of the following base rates as applicable to a floating rate security: - London interbank offered rate; - commercial paper rates; - Treasury rate; - federal funds rate; - negotiable certificates of deposit rate; or - any other base rate that is set forth in your prospectus supplement. Your prospectus supplement will specify whether the interest rate will be reset daily, weekly, monthly, quarterly, semiannually, annually or some other specified period and the dates on which that interest rate will be reset. If the reset date does not fall on a business day, then the reset date will be 36 postponed to the next succeeding business day; except that with respect to securities having a base rate based on the London interbank offered rate, if the reset date falls in the next succeeding calendar month, then the reset date will be the immediately preceding business day. Interest on each class of floating rate security will accrue on an Actual/360 basis, an Actual/Actual basis, or a 30/360 basis. For floating rate securities calculated on an Actual/360 basis and Actual/Actual basis, accrued interest for each interest period will be calculated by multiplying: 1. the face amount of that floating rate security; 2. the applicable interest rate; and 3. the actual number of days in the related interest period, and dividing the resulting product by 360 or the actual number of days in the related year, as applicable. For floating rate securities calculated on a 30/360 basis, accrued interest for an interest period will be computed on the basis of a 360-day year consisting of twelve 30-day months, irrespective of how many days are actually in that interest period. Floating rate securities may also have either or both of the following: - a maximum limitation, or ceiling, on the rate at which interest may accrue during any interest period; and - a minimum limitation, or floor, on the rate at which interest may accrue during any interest period. The applicable interest rate will in not exceed the maximum rate permitted by applicable law. Each trust issuing floating rate securities will appoint a calculation agent to calculate interest rates on each class of floating rate securities. Your prospectus supplement will set forth the identity of the calculation agent, which may be the related trustee or indenture trustee with respect to that series. All determinations of interest by the calculation agent shall, in the absence of manifest error, be conclusive for all purposes and binding on the holders of floating rate securities of a given class. All percentages resulting from any calculation on floating rate securities will be rounded to the nearest one hundred-thousandth of a percentage point, with five one millionths of a percentage point rounded upwards, and all dollar amounts used in or resulting from that calculation on floating rate securities will be rounded to the nearest cent. CD RATE SECURITIES. The base rate for any securities having a base rate based on a CD rate for each reset date shall be either: - the rate for negotiable certificates of deposit having the index maturity designated in the applicable prospectus supplement as published in H.15(519) under the heading "CDs (Secondary Market)" as of the second business day prior to the reset date; or - if that rate is not published prior to 3:00 p.m., New York City time on that business day, the rate for negotiable certificates of deposit having the index maturity designated in the applicable prospectus supplement as published in H.15 Daily Update under the 37 heading "CDs (Secondary Market)" or such other recognized electronic source used for the purpose of displaying such rate; or - if by 3:00 p.m., New York City time on that business day, that rate is not yet published in either H.15(519) or H.15 Daily Update or such other recognized electronic source used for the purpose of displaying such rate, the arithmetic mean of the secondary market offered rates as of 10:00 a.m., New York City time on that business day, of three leading nonbank dealers in negotiable U.S. dollar certificates of deposit in the City of New York selected by the calculation agent for negotiable certificates of deposit of major United States money market banks with a remaining maturity closest to the index maturity designated in the applicable prospectus supplement in an amount that is representative for a single transaction in that market at that time. "H.15(519)" means the publication entitled "Federal Reserve Statistical Release H.15(519), Selected interest rates," or any successor publication, published by the Board of Governors of the Federal Reserve System. "H.15 DAILY UPDATE" means the publication entitled "H.15 Daily Update, Selected interest rates," or any successor publication, published by the Board of Governors of the Federal Reserve System. COMMERCIAL PAPER RATE SECURITIES. The base rate of any securities having a base rate based on commercial paper rates for each reset date shall be either: - the money market yield on the reset date of the rate for commercial paper having the index maturity specified in your prospectus supplement, as published in H.15(519) under the heading "Commercial Paper-Nonfinancial" as of the second business day prior to the reset date; or - if that rate is not published prior to 3:00 p.m., New York City time on that business day, the money market yield on the second business day prior to the reset date of the rate for commercial paper of the specified index maturity as published in H.15 Daily Update or such other recognized electronic source used for the purpose of displaying such rate under the heading "Commercial Paper-Nonfinancial"; or - if by 3:00 p.m., New York City time on that business day, that rate is not yet published in either H.15(519) or H.15 Daily Update or such other recognized electronic source used for the purpose of displaying such rate, the money market yield of the arithmetic mean of the offered rates, as of 11:00 a.m., New York City time, on that date of three leading dealers of commercial paper in the City of New York selected by the calculation agent for commercial paper of the specified index maturity placed for an industrial issuer whose bonds are rated "AA" or the equivalent by a nationally recognized rating agency. "MONEY MARKET YIELD" means a yield calculated in accordance with the following formula: D x 360 ----- Money Market Yield = 360 - (D x M) x 100 38 where "D" refers to the applicable per annum rate for commercial paper quoted on a bank discount basis and expressed as a decimal, and "M" refers to the actual number of days in the interest period for which interest is being calculated. FEDERAL FUNDS RATE SECURITIES. The base rate for any securities having a base rate based on the federal funds rate for each reset date shall be either: - the rate set forth in H.15(519) for that date opposite the caption "Federal Funds (Effective)" as such rate is displayed on Bridge Telerate, Inc. Page 120 (or any other page as may replace that page); or - if that rate does not appear on Bridge Telerate, Inc. Page 120 or is not published in H.15(519) prior to 3:00 p.m., New York City time, the rate set forth in H.15 Daily Update or such other recognized electronic source used for the purpose of displaying such rate under the heading "Federal Funds/Effective Rate"; or - if by 3:00 p.m., New York City time, that rate does not appear on Bridge Telerate, Inc. Page 120 or is not yet published in either H.15(519) or H.15 Daily Update or such other recognized electronic source used for the purpose of displaying such rate, the arithmetic mean of the rates for the last transaction in overnight United States dollar federal funds arranged by three leading brokers of federal funds transactions in the City of New York selected by the calculation agent prior to 9:00 a.m., New York City time. LIBOR SECURITIES. The base rate for any securities having a base rate based on LIBOR will be determined by the calculation agent as follows: 1. On the second London business day prior to the reset date, the calculation agent will determine the offered rates for deposits in U.S. dollars for the period of the index maturity specified in the applicable prospectus supplement, as either - if "LIBOR Bloomberg" is specified in the applicable prospectus supplement, the arithmetic mean of the offered rates for deposits in the index currency having the index maturity designated in the applicable prospectus supplement, commencing on the reset date, that appear on the page specified in the applicable prospectus supplement as of 11:00 a.m. London time, on the second London business day prior to the reset date, if at least two offered rates appear (unless, described above, only a single rate is required) on that page, or - if "LIBOR Telerate" is specified in the applicable prospectus supplement, the rate for deposits in the index currency having the index maturity designated in the applicable prospectus supplement, commencing on reset date that appears on the page specified in the applicable prospectus supplement as of 11:00 a.m. London time, on the second London business day prior to the reset date. 2. If "LIBOR Bloomberg" is specified and fewer than two offered rates appear on the designated page or if LIBOR Telerate is specified and no rate appears on the designated 39 page, the calculation agent will request the principal London offices of each of four major banks in the London interbank market to provide the calculation agent with its offered quotations for deposits in the index currency for the period of the index maturity designated in the applicable prospectus supplement, commencing on the reset date, to prime banks in the London interbank market at approximately 11:00 a.m., London time, on the second London business day prior to the reset date and in a principal amount that is representative for a single transaction in that index currency in that market at that time. - If at least two of those quotations are provided, LIBOR will be the arithmetic mean of those quotations. - If fewer than two quotations are provided, LIBOR will be the arithmetic mean of the rates quoted at approximately 11:00 a.m., in the applicable principal financial center, on the second London business day prior to the reset date by three major banks in that principal financial center for loans in the index currency to leading European banks, having the index maturity designated in the applicable prospectus supplement and in a principal amount that is representative for a single transaction in that index currency in that market at that time; provided, however, that if the banks so selected by the calculation agent are not quoting offered rates as mentioned in this sentence, LIBOR will be LIBOR in effect on the reset date. "INDEX CURRENCY" means the currency specified in the applicable prospectus supplement as the currency for which LIBOR shall be calculated. If no currency is specified in the applicable prospectus supplement, the index currency shall be U.S. dollars. "PRINCIPAL FINANCIAL CENTER" will generally be the capital city of the country of the specified index currency, except that with respect to U.S. dollars, Deutsche marks, Canadian dollars, Australian dollars, Italian lira, Swiss francs, Dutch guilders and Euros, the principal financial center shall be New York, Frankfurt, Toronto, Sydney, Milan, Zurich, Amsterdam and London, respectively. TREASURY RATE SECURITIES. The base rate for any securities having a base rate based on the Treasury rate for each reset date shall be either: - the rate for the most recent auction of Treasury bills having the index maturity specified in the applicable prospectus supplement, as that rate shall be set forth under the heading "Investment Rate" on the display on Bridge Telerate, Inc. Page 56 or Bridge Telerate, Inc. Page 57 (or such other page as may replace either of those pages opposite the index maturity) or, - if Treasury bills of the index maturity have been auctioned but that rate for those Treasury bills does not appear on either Bridge Telerate, Inc. Page 56 or Bridge Telerate, Inc. Page 57 prior to 3:00 p.m., New York City time, the auction average rate for those Treasury bills announced by the United States Department of the Treasury, or - if the results of the auction of Treasury bills having the specified index maturity are not announced as provided above by 3:00 p.m., New York City time, or if that auction is not held in a particular week, the rate published in H.15(519) under the heading "U.S. Government Securities-Treasury bills-Secondary market", or 40 - if that rate does not appear on H.15(519) by 3:00 p.m., New York City time, the rate set forth in H.15 Daily Update or such other recognized electronic source used for the purpose of displaying that rate under the heading "U.S. Government Securities-Treasury bills-Secondary market," or - if those results are not published in H.15 Daily Update or another recognized electronic source used for the purpose of displaying such rate, by 3:00 p.m. New York City time, the arithmetic mean of the secondary market bid rates, as of approximately 3:30 p.m., New York City time, on that date, of three leading primary United States government securities dealers selected by the calculation agent for the issue of Treasury bills with a remaining maturity closest to the specified index maturity. INDEXED SECURITIES. Any class of securities may consist of securities in which the amounts payable on the final scheduled payment date and/or the interest payable on any payment date is determined by reference to a measure which will be related to the exchange rates of one or more currencies or composite currencies or the price of commodities or stocks, on dates as specified in the applicable prospectus supplement. Holders of indexed securities may receive a principal amount on the related final scheduled payment date that is greater than or less than the face amount of the indexed securities depending upon the relative value on the related final payment date of the specified indexed item. The applicable prospectus supplement will contain information as to the method for determining the principal amount payable on the related final scheduled payment date, if any, and, where applicable, historical information with respect to the specific indexed item or items and special tax considerations associated with an investment in indexed securities. For purposes of determining the rights of a holder of a security indexed as to principal in respect of voting for or against amendments to the related trust agreement, indenture, or other related agreements, as the case may be, and modifications and the waiver of rights under those agreements, the principal amount of that indexed security shall be deemed to be the face amount thereof upon issuance less any payments allocated to principal of that indexed security. If the principal amount of an indexed security is based on an index calculated or announced by a third party and that third party either suspends the calculation or announcement of that index or changes the basis upon which that index is calculated, then that index shall be calculated by an independent calculation agent named in the applicable prospectus supplement on the same basis, and subject to the same conditions and controls, as applied to the original third party. If for any reason that index cannot be calculated on the same basis and subject to the same conditions and controls as applied to the original third party, then the principal amount of that indexed security shall be calculated in the manner set forth in the applicable prospectus supplement. Any determination of that independent calculation agent shall, in the absence of manifest error, be binding on all parties. The applicable prospectus supplement will describe whether the principal amount of the related indexed security, if any, that would be payable upon repayment prior to the applicable final scheduled payment date will be the face amount of that indexed security, the principal amount of that indexed security at the time of repayment or another amount described in that prospectus supplement. CREDIT AND CASH FLOW ENHANCEMENT The amounts and types of credit and cash flow enhancement arrangements and the applicable provider, if any, will be set forth in the applicable prospectus supplement. This credit or cash flow enhancement may be in one or more of the following forms: 41 - subordination of one or more classes of securities; - spread account; - reserve fund; - over-collateralization; - letter of credit; - credit or liquidity facility; - financial guaranty insurance policy; - surety bond; - guaranteed investment contract or other interest rate protection agreement; - repurchase obligation; - yield supplement agreement; - swap or other interest rate protection agreement; - other agreements with respect to third party payments or other support; or - cash deposit or other arrangement that may be described in your prospectus supplement. Credit and cash flow enhancement is intended to enhance the likelihood that you will receive the full amount of principal and interest due on your securities and to decrease the likelihood that that you will experience losses. The enhancement for a class or series of securities will not provide protection against all risks of loss and will not guarantee repayment of the entire principal of and interest on those securities. If losses occur which exceed the amount covered by any credit or cash flow enhancement or which are not covered by any credit or cash flow enhancement, you will bear your allocable share of deficiencies, as described in your prospectus supplement. In addition, if a form of enhancement covers more than one class or series of securities, you will be subject to the risk that the enhancement will be exhausted by the claims of securityholders of other classes or series. If so provided in the prospectus supplement, the depositor or the trust may replace the credit or cash flow enhancement for any class of securities with another form of credit or cash flow enhancement without the consent of the securityholders, provided that the rating agencies rating that class of securities confirm that that substitution will not result in the reduction or withdrawal of the rating of that class of securities. RESERVE FUND The depositor or a third party may establish for a series or class of securities an account or reserve fund, which will be maintained with a collateral agent or the related trustee or indenture trustee. The 42 reserve fund will be funded by an initial deposit by the depositor or a third party on the closing date in the amount set forth in your prospectus supplement and, if the related trust has a pre-funding account, will also be funded on each date that the trust acquires subsequent contracts from the depositor to the extent described in the applicable prospectus supplement. The amount on deposit in the reserve fund will be increased on each payment date thereafter up to the reserve fund required amount by the deposit in the reserve fund of the amount of collections on the related contracts available therefor as described in the prospectus supplement. Your prospectus supplement will describe the circumstances and manner under which payments may be made out of the reserve fund, either to make payments or distributions to you or to the servicer or a third party. Monies on deposit in the reserve fund may be invested in investments acceptable to the rating agencies rating the securities as being consistent with the ratings of those securities under the circumstances and in the manner described in the related sale and servicing agreement, pooling and servicing agreement or indenture. Earnings on investment of funds in the reserve fund in eligible investments will be paid to the person described in your prospectus supplement under the circumstances described in your prospectus supplement on each payment date. Any monies remaining on deposit in the reserve fund upon termination of the trust also will be released to the depositor or its assignee. BOOK-ENTRY REGISTRATION Each class of securities offered by this prospectus will be represented by one or more certificates registered in the name of Cede & Co., as nominee of The Depository Trust Company. Unless your prospectus supplement states otherwise, you may hold your securities through DTC in the United States, or Clearstream, Luxembourg or the Euroclear System in Europe, if you are a participant of those systems, or indirectly through organizations that are participants in those systems. 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 under to Section 17A of the Securities Exchange Act of 1934. DTC was created to hold securities for its direct participants and to facilitate the clearance and settlement of securities transactions between its direct participants through electronic book-entries, thereby eliminating the need for physical movement of certificates. DTC's direct participants include: - the underwriters offering the securities to you; - securities brokers and dealers; - banks; - trust companies; and - clearing corporations, and may include other organizations. Indirect access to the DTC system is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a direct participant, either directly or indirectly. 43 To facilitate subsequent transfers, DTC will register all deposited securities in the name of DTC's nominee, Cede & Co. DTC has no knowledge of the actual holders of the securities; DTC's records reflect only the identify of its direct participants to whose accounts the securities are credited, which may or may not be the securityholders. DTC's direct and indirect participants will remain responsible for keeping account of their holdings on behalf of their customers. You have no entitlement to receive a certificate representing your interest in a class of securities. As long as the securities are registered in the name of Cede & Co., any action to be taken by your or any other holders will be taken by DTC upon instructions from DTC's participants. All distributions, notices, reports and statements to you will be delivered to Cede & Co., as the registered holder of the securities, for distribution to you in compliance with DTC procedures. You will receive all payments of principal and interest on the securities through direct participants or indirect participants. DTC will forward the payments to its direct participants which will forward them to the indirect participants or securityholders. Under a book-entry format, you may experience some delay in their receipt of payments, since payments will be forwarded to Cede & Co. as nominee of DTC. The trustee or indenture trustee will not recognize you as a holder of securities under the trust agreement, pooling and servicing agreement or indenture. You may exercise the rights as a holders of securities only indirectly through DTC and its direct participants and indirect participants. Because DTC can act only on behalf of direct participants, who in turn act on behalf of indirect participants, and on behalf of banks, trust companies and other persons approved by it, there may be limits on your ability to pledge the securities to persons or entities that do not participate in the DTC system, or to otherwise act with respect to securities, due to the absence of physical securities for the securities. Arrangements among the various parties govern conveyance of notices and other communications by: - DTC to direct participants; - by direct participants to indirect participants; and - by direct participants and indirect participant to holders, subject to any statutory or regulatory requirements as may be in effect from time to time. Standing instructions and customary practices govern payments by DTC participants to you, as is the case with securities held for the accounts of customers in bearer form or registered in "street name" and will be the responsibility of the DTC participant and not of DTC, the indenture trustee, the trustee, the depositor or the seller, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment or distribution of principal and interest to DTC is the responsibility of the indenture trustee or trustee, disbursement of the payments or distributions to direct participants shall be the responsibility of DTC and disbursement of payments to you shall be the responsibility of the direct participants and the indirect participants. Purchases of securities under the DTC system must be made by or through direct participants, which will receive a credit for the securities on DTC's records. The ownership interest of each actual holder is in turn to be recorded on the direct participants' and indirect participants' records. You will not receive written confirmation from DTC of your purchase, but you are expected to receive written confirmations providing details of the transaction, as well as periodic statements of your holdings, from 44 the direct participant or indirect participant through which you entered into the transaction. Entries made on the books of DTC's participants acting on behalf of you evidence transfers of ownership interests in the securities. DTC has advised the depositor that it will take any action permitted to be taken by a holder of securities only at the direction of one or more direct participants to whose accounts with DTC the securities are credited. Additionally, DTC has advised the depositor that to the extent that the pooling and servicing agreement, the trust agreement or the indenture, as applicable, requires that any action may be taken only by holders representing a specified percentage of the aggregate outstanding principal amount of the securities, DTC will take the action only at the direction of and on behalf of direct participants, whose holdings include undivided interests that satisfy the specified percentage. DTC may discontinue providing its services as securities depositary with respect to any class of securities at any time by giving reasonable notice to the trustee or the indenture trustee, as applicable. Under these circumstances, in the event that a successor securities depositary is not obtained, fully registered, certificated securities are required to be printed and delivered. A trust may decide to discontinue use of the system of book-entry transfers through DTC or a successor securities depositary. In that event, fully registered, certificated securities will be delivered to you. See "-ISSUANCE OF DEFINITIVE SECURITIES." The information in this section concerning DTC and DTC's book-entry system are from sources that the depositor believes to be reliable, but the depositor does not take any responsibility for the accuracy of this information. Clearstream and Euroclear will hold omnibus positions on behalf of the participants in the Clearstream and Euroclear systems, respectively, through customers' securities accounts in Clearstream's and Euroclear's names on the books of their respective depositaries which in turn will hold these positions in customers' securities accounts in the depositaries' names on the books of DTC. Clearstream is incorporated under the laws of Luxembourg as a professional depositary. Clearstream holds securities for its participants and facilitates the clearance and settlement of securities transactions between its participants through electronic book-entry changes in accounts of its participants, thereby eliminating the need for physical movement of certificates. Indirect access to Clearstream is also available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Clearstream participant, either directly or indirectly. Euroclear was created in 1968 to hold securities for participants of Euroclear and to clear and settle transactions between Euroclear's 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. The Brussels, Belgium office of Morgan Guaranty Trust Company of New York operates Euroclear, under contract with Euroclear Clearance Systems S.C., a Belgian cooperative corporation. Euroclear's operator conducts all operations and all Euroclear securities clearance accounts and Euroclear cash accounts are accounts with Euroclear's operator. Euroclear Clearance Systems S.C. establishes policy for Euroclear on behalf of Euroclear's participants, including banks, securities brokers and dealers, and other professional financial intermediaries. 45 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. Morgan Guaranty Trust Company of New York is the Belgian branch of a New York banking corporation which is a member bank of the Federal Reserve System. As such, the Board of Governors of the Federal Reserve System and the New York Banking Department, as well as the Belgian Banking Commission, regulates and examines it. Euroclear holds all securities on a fungible basis without attribution of specific certificates to specific securities clearance accounts. The Euroclear operator acts under the Euroclear terms and conditions only on behalf of Euroclear's participants, and has no record of or relationship with persons holding through Euroclear's participants. Transfers between direct participants will comply with DTC rules. Transfers between Clearstream's participants and Euroclear's participants will comply with their rules and operating procedures. DTC will effect, under DTC rules, cross-market transfers between persons holding directly or indirectly through DTC in the United States, on the one hand, and directly or indirectly through Clearstream or Euroclear, on the other, through the relevant European international clearing system through its depository; however, these cross-market transactions will require delivery of instructions to the relevant European international clearing system by the counterparty in this system as required by its rules and procedures and within its established deadlines, European time. The relevant European international clearing system will, if the transaction meets its settlement requirement, deliver instructions to its depositary to take action to effect final settlement on its behalf by delivering or receiving securities in DTC, and making or receiving payment using its normal procedures for same-day funds settlement applicable to DTC. Clearstream participants and Euroclear participants may not deliver instructions directly to the depositories. Because of time-zone differences, credits of securities in Clearstream or Euroclear as a result of a transaction with a DTC participant will be made during the subsequent securities settlement processing day, dated the business day following the DTC settlement date, and the credits or any transactions in the securities settled during the processing day will be reported to the relevant Clearstream participant or Euroclear participant on that business day. Cash received in Clearstream or Euroclear as a result of sales of securities by or through a Clearstream participant or a Euroclear participant to a DTC participant will be received with value on the DTC settlement date but will be available in the relevant Clearstream or Euroclear cash account only as of the business day following settlement in DTC. Although DTC, Clearstream and Euroclear have agreed to the foregoing procedures in order to facilitate transfers of securities among participants of DTC, Clearstream and Euroclear, they are under no obligation to perform or continue to perform these procedures and these procedures may be discontinued at any time. Except as required by law, none of the seller, the servicer, the depositor, the trustee or the indenture trustee will have any liability for any aspect of the records relating to, actions taken or implemented by, or payments made on account of, beneficial ownership interests in the securities held through DTC, or for maintaining, supervising or reviewing any records or actions relating to beneficial ownership interests. 46 ISSUANCE OF DEFINITIVE SECURITIES The trust will issue the notes, if any, and certificates in fully registered, definitive form to beneficial owners or their nominees rather than to DTC or its nominee, only if: (1) DTC is no longer willing or able to discharge properly its responsibilities as depository with respect to the securities, and the trustee or the indenture trustee is unable to locate a qualified successor; (2) The administrator of the trust or the trustee, as applicable, at its option, elects to terminate the book-entry system through DTC; or (3) After the occurrence of an event of default under the indenture or a servicer default under the sale and servicing agreement or the pooling and servicing agreement, holders representing more than 50% of the notes or the certificates, as the case may be, of that series, acting together as a single class, advise the applicable indenture trustee or trustee through DTC in writing that the continuation of a book-entry system through DTC with respect to those notes or certificates is no longer in the best interests of the holders of those securities. Upon the occurrence of any of the three events described immediately above, the applicable indenture trustee or trustee must notify all beneficial owners for each class of securities held through DTC of the availability of securities in fully registered, definitive form. Upon surrender by DTC of the global note representing the securities and instructions for reregistration, the indenture trustee or trustee will issue these fully registered, definitive securities, and the indenture trustee or trustee will recognize the holders of fully registered, definitive securities. Additionally, upon the occurrence of any event described above, the indenture trustee or trustee will distribute principal of and interest on the securities directly to you as required by the indenture, trust agreement or pooling and servicing agreement, as applicable. Distributions will be made by check, mailed to your address as it appears on the register maintained by the applicable trustee or indenture trustee. Upon at least five days' notice to holders of a class of securities, however, the indenture trustee or trustee will make the final payment on any security only upon presentation and surrender of the security at the office or agency specified in the notice of final distribution to the securityholders. The indenture trustee or trustee will make the final payment in this manner whether the securities are in book-entry form or definitive form. You may transfer any fully registered, definitive security of any class at the offices of the indenture trustee or trustee or its agent in New York, New York, which the indenture trustee or trustee shall designate on or prior to the issuance of any fully registered, definitive securities with respect to that class. There is no service charge for any registration of transfer or exchange, but the indenture trustee or trustee may require payment of a sum sufficient to cover any tax or other governmental charge imposed in connection with the transfer or exchange. DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS This section summarizes the material terms of the following agreements: 47 - the transfer and sale agreement pursuant to which the seller will sell and assign all right, title and interest in the pool of contracts and the related property to the depositor; - the sale and servicing agreement or pooling and servicing agreement pursuant to which the depositor will deposit the pool of contracts and the related property to the trust and the servicer will agree to service those contracts; - the trust agreement, or in the case of a grantor trust, the pooling and servicing agreement, pursuant to which a trust will be created and certificates will be issued; and - the administration agreement pursuant to which Harley-Davidson Credit Corp. will undertake specified administrative duties with respect to a trust that issues notes. Forms of these documents, which we collectively refer to as the "TRANSFER AND SERVICING AGREEMENTS", have been filed as exhibits to the registration statement of which this prospectus is a part. In addition, a copy of the relevant transfer and servicing agreements relating to a series of securities will be filed with the Securities and Exchange Commission following the sale of those securities. This summary describes the material terms expected to be common to each transfer and servicing agreement. This summary is subject to, and qualified in its entirety by reference to, all the provisions of the transfer and servicing agreements relating to a particular series. You should read the forms of the transfer and servicing agreements filed as noted above. SALE AND ASSIGNMENT OF CONTRACTS BY SELLER Harley-Davidson Credit Corp. will be the seller of the contracts and the related property to the depositor for deposit into the trust. The seller will acquire the contracts originated by the originating dealers throughout the United States and, in certain instances, Canada, pursuant to dealer agreements. On or before the applicable closing date, the seller will sell to the depositor under a transfer and sale agreement all of its interest in the following: - the contracts and the right to receive all scheduled payments and prepayments received on the contracts on or after the cut-off date, but excluding any scheduled payments due on or after, but received prior to, the cut-off date; - security interests in the financed motorcycles securing the contracts and any related property; - the rights to proceeds from claims on theft, physical damage, credit life and disability insurance policies covering the financed motorcycles or the obligors; - certain rebates of premiums and other amounts relating to insurance policies, extended service contracts or other repair agreements and other items financed under the contracts; and - all proceeds of the foregoing. 48 TRANSFER OF CONTRACTS BY THE DEPOSITOR Pursuant to a sale and servicing agreement or pooling and servicing agreement, on the applicable closing date, the depositor will transfer to the trust all of its interest in the following: - all property acquired by the depositor from the seller under the transfer and sale agreement; - amounts that may be held in separate trust accounts maintained by the trustee or indenture trustee for the trust, including any reserve fund or interest reserve account; - the depositor's rights against the seller under the transfer and sale agreement pursuant to which the seller sold the pool of contracts to the depositor; and - all proceeds of the foregoing. The depositor will designate the servicer as custodian to maintain physical possession, as the trust's agent, of the retail installment contracts and any other documents relating to the contracts. To facilitate servicing and save administrative costs, the documents will not be physically segregated from other similar documents that are in the servicer's possession. However, UCC financing statements will be filed in the applicable jurisdictions reflecting: - the sale and assignment of the contracts and the security interests in the financed motorcycles by the originating dealers to the seller; - the sale and assignment of the contracts and the security interests in the financed motorcycles and the related property by the seller to the depositor; - the transfer of the contracts, the security interests in the financed motorcycles, the related property and the depositor's rights against the seller under the transfer and sale agreement; and - if applicable, the pledge by the trust of the trust assets to the indenture trustee. The seller and servicer's accounting records and computer systems will also reflect these assignments and, if applicable, the pledge. Because the contracts will remain in the servicer's possession, if a subsequent purchaser were able to take physical possession of the contracts without knowledge of the assignment, the trust's interest in the contracts could be defeated. In addition, in some cases, the trust's security interest in collections that have been received by the servicer but not yet remitted to the related collection account could be defeated. See "LEGAL ASPECTS OF THE CONTRACTS-SECURITY INTERESTS" in this prospectus. The depositor will cause the applicable trustee and the indenture trustee, if any, concurrently with the depositor's transfer and assignment of the contracts and related property to the trust, to execute and deliver the related notes and/or certificates to the depositor. The depositor will apply the net proceeds received from the sale of the certificates and the notes of a given series to the purchase of the related contracts from the seller and, to the extent specified in the applicable prospectus supplement, to make any required initial deposit into the reserve fund and the interest reserve account, if any. 49 CONVEYANCE OF CONTRACTS On the closing date: - the seller will sell, transfer, assign, set over and otherwise convey the initial contracts and related assets to the depositor; - the depositor will sell, transfer, assign, set over and otherwise convey to the trust all right, title and interest in the initial contracts and related assets; and - if applicable, the trust will pledge to the indenture trustee all right, title and interest in the initial contracts and related assets. The initial contracts will be described on a list delivered to the trustee and, if applicable, the indenture trustee, and certified by a duly authorized officer of the depositor. Such list will include the amount of monthly payments due on each initial contract as of the initial cutoff date, the contractual rate of interest on each contract and the maturity date of each contract. Such list will be available for inspection by any securityholder at the principal office of the servicer. Shortly after the conveyance of the initial contracts to the trust, the servicer's compliance officer will have completed a review of all the documents that the seller has customarily kept on file relating to the contracts, including the certificates of title to, or other evidence of a perfected security interest in, the related motorcycles, and confirmed the accuracy of the list of initial contracts delivered to the trustee and, if applicable, the indenture trustee. The depositor will deliver to the trustee, and, if applicable, the indenture trustee, a report of a nationally recognized independent public accounting firm which states that such firm has performed specific procedures for a sample of the initial contracts supplied by the seller. Any contract discovered not to agree with such list in a manner that is materially adverse to the interests of the noteholders and, if applicable, certificateholders, will be required to be repurchased by the seller, or, if the discrepancy relates to the unpaid principal balance of a contract, the seller may deposit cash in the collection account in an amount sufficient to offset such discrepancy. In addition to the initial contracts, the trust's assets will include the trust's rights under the sale and servicing agreement in respect of the depositor's obligation to purchase from the seller, and concurrently convey to the trust, subsequent contracts purchased as of the applicable subsequent cutoff date. Any conveyance of subsequent contracts will be subject to the satisfaction of certain conditions including: - each such subsequent contract satisfies the eligibility criteria specified in the transfer and sale agreement and the related subsequent purchase agreement executed thereunder; - the depositor shall have delivered certain opinions of counsel to the trustee, the underwriters and the rating agencies with respect to the validity and other aspects of the conveyance of all such subsequent contracts; and - the rating agencies shall have each notified the depositor and the trustees in writing that the ratings on the notes and, if applicable, certificates will not be lowered following the addition of such subsequent contracts. 50 REPRESENTATIONS AND WARRANTIES MADE BY THE SELLER AND THE DEPOSITOR The seller will make certain representations and warranties in the transfer and sale agreement with respect to each contract, including that (references to the closing date below being deemed, in respect of subsequent contracts, to refer to the date such subsequent contracts are transferred to the depositor): (a) as of the related cutoff date, the most recent scheduled payment was made or was not delinquent more than 30 days and, to the best of the seller's knowledge, all payments on the contract were made by the obligor; (b) as of the closing date, no provision of a contract has been waived, altered or modified in any respect, except by instruments or documents contained in the files customarily maintained by the servicer for each contract; (c) each contract is a genuine, legal, valid and binding obligation of the obligor and is enforceable in accordance with its terms (except as may be limited by laws affecting creditors' rights generally); (d) as of the closing date, no contract is subject to any right of rescission, set-off, counterclaim or defense; (e) as of the contract's origination date, each motorcycle securing a contract is covered by certain insurance policies described under "THE SELLER AND SERVICER-INDIVIDUAL MOTORCYCLE INSURANCE"; (f) each contract was originated by a Harley-Davidson motorcycle dealer in the ordinary course of such dealer's business (which dealer had all necessary licenses and permits to originate the contracts in the state where such dealer was located), was fully and properly executed by the parties thereto and was sold by such dealer to the seller without any fraud or misrepresentation on the part of such dealer; (g) no contract was originated in or is subject to the laws of any jurisdiction whose laws would make the transfer, sale and assignment of the contract pursuant to the transfer and sale agreement or the sale and servicing agreement unlawful, void or voidable; (h) each contract and each sale of the related motorcycle complies with all requirements of any applicable federal, state, provincial, or local law and regulations thereunder, including, without limitation, usury, truth in lending, motor vehicle installment loan and equal credit opportunity laws, with such compliance not being affected by the depositor's conveyance and assignment of the contracts to the trust, or, if applicable, the trust's pledge of the contracts to the indenture trustee, and the seller will maintain in its possession, available for inspection by or delivery to the depositor, the trustee, and, if applicable, the indenture trustee, evidence of compliance with all such requirements; (i) as of the closing date no contract has been satisfied, subordinated in whole or in part or rescinded and the motorcycle securing the contract has not been released from the lien of the contract in whole or in part; (j) each contract creates a valid, subsisting and enforceable first priority security interest in favor of the seller in the motorcycle securing such contract; such security interest has been conveyed and assigned by the seller to the depositor; (k) the original certificate of title, certificate of lien or other notification (the "LIEN CERTIFICATE") issued by the body responsible for the registration of, and the issuance of certificates of title relating to, motor vehicles and liens thereon (the "REGISTRAR OF TITLES") of the applicable state to a secured party which indicates the lien of the secured party on such motorcycles is recorded on the original certificate of title; and the original certificate 51 of title for each such motorcycle shows, or if a new or replacement Lien Certificate is being applied for with respect to such motorcycle the Lien Certificate will be received within 180 days of the closing date and will show, the seller as original secured party under each contract and as the holder of a first priority security interest in such motorcycle (and with respect to each contract for which the Lien Certificate has not yet been returned from the Registrar of Titles, the seller has received written evidence from the related dealer that such Lien Certificate showing the seller as lienholder has been applied for); (l) the seller's security interest has been validly assigned by the seller to the depositor pursuant to UCC financing statements in order that immediately after the sale, each contract will be secured by an enforceable and perfected first priority security interest in the related motorcycle in favor of the trust as secured party, which security interest is prior to all other liens upon and security interests in such motorcycle which now exist or may hereafter arise or be created (except, as to priority, for any lien for taxes, labor, materials or any state law enforcement agency affecting a motorcycle and for the lien of the indenture, if applicable); (m) all parties to each contract had capacity to execute such contract; (n) no contract has been sold, conveyed and assigned or pledged to any other person other than the depositor, as transferee of the seller and the trust as transferee of the depositor and, if applicable, the indenture trustee as pledgee of the trust and prior to the transfer of the contract to the depositor, the seller had good and marketable title to each contract free and clear of any encumbrance, equity, loan, pledge, charge, claim or security interest, and as of the closing date, the trust and the owner trustee or, if applicable, the indenture trustee, will have a first priority perfected security interest therein; (o) as of the related cutoff date, there was no default, breach, violation or event permitting acceleration under any contract (except for payment delinquencies permitted by clause (a) above), no event which with notice and the expiration of any grace or cure period would constitute a default, breach, violation or event permitting acceleration under such contract, and the seller has not waived any of the foregoing; (p) as of the closing date, there are, to the best of the seller's knowledge, no liens or claims which have been filed for work, labor or materials affecting a motorcycle securing a contract, which are or may be liens prior or equal to the lien of the contract; (q) each contract has a fixed rate of interest and provides for monthly payments of principal and interest which, if timely made, would fully amortize the loan on a simple interest basis over its term; (r) each contract contains customary and enforceable provisions such as to render the rights and remedies of the holder thereof adequate for realization against the collateral of the benefits of the security; (s) the description of each contract set forth in the list delivered to the trustee and, if applicable, the indenture trustee is true and correct; and (t) there is only one original of each contract. The seller will also make certain representations and warranties with respect to the contracts in the aggregate as set forth in your prospectus supplement. In the event of a breach of any representation or warranty with respect to a contract that materially and adversely affects the trust's or any noteholder's or certificateholder's interest in the contract or the collectibility of the contract, the depositor will be obligated to repurchase the contract from the trust and 52 the seller will be obligated to repurchase the contract from the depositor. Any purchase shall be made at least two business days prior to the first determination date after the date on which the servicer, the trustee or the indenture trustee becomes aware and gives notice to the depositor or the seller of the breach or the depositor or the seller becomes aware of the breach at a price equal to the required payoff amount of the contract. The related trustee or the indenture trustee may enforce this purchase obligation on your behalf, and will constitute your sole remedy available against the depositor or the seller for any uncured breach of its representations and warranties in the sale and servicing agreement or pooling and servicing agreement, as applicable, and the transfer and sale agreement, except that the seller will indemnify the trust, the trustee, and, if applicable, the indenture trustee against losses, damages, liabilities and claims which may be asserted against any of them as a result of third-party claims arising out of the facts giving rise to that breach. Upon the purchase by the seller of a contract, the indenture trustee, if any, the trust and the depositor will release the contract and its interest in the related financed motorcycles to the seller. COLLECTION ACCOUNT In the case of a trust issuing notes, the indenture trustee will establish and maintain the collection account in the name of the indenture trustee for the benefit of the noteholders under the indenture. In the case of a trust issuing only certificates, the trustee will maintain the collection account in the name of the trustee for the benefit of the certificateholders under the pooling and servicing agreement. The servicer will deposit the following amounts into the collection account no later than the second business day after processing by the servicer: - all payments made by the obligors under the contracts; - all proceeds of the contracts and the financed motorcycles; and - all payments made by the seller under the related transfer and sale agreement, or the depositor under the sale and servicing agreement or pooling and servicing agreement to repurchase any contract as a result of a breach of a representation or warranty, as described under "-REPRESENTATIONS AND WARRANTIES MADE BY THE SELLER AND THE DEPOSITOR" above. However, if the conditions to making monthly deposits into the collection account set forth in the sale and servicing agreement or pooling and servicing agreement (including the satisfaction of the minimum ratings of the servicer and the absence of a servicer default) are satisfied and if permitted by the rating agencies rating the securities, the servicer may retain collections received on the contracts during each month until the business day immediately prior to the related payment date. Pending deposit into the collection account, the servicer will not be obligated to segregate collections from its own funds and may use collections for its own benefit. To the extent set forth in the applicable prospectus supplement, the servicer may, in order to satisfy the requirements set forth in the sale and servicing agreement or pooling and servicing agreement obtain a letter of credit or other security for the benefit of the related trust to secure timely remittances of collections on the contracts. The servicer may withdraw from the collection account any amounts deposited in error or required to be repaid to an obligor, based on the servicer's good-faith determination that the amount was deposited in error or must be returned to the obligor. 53 Collections on a contract made during a month will be applied in the following order: - first, to accrued interest; - second, to pay any expenses and late or extension fees owing; and - third, to principal until the principal balance is brought current. Any collections on a contract remaining after those applications will be considered an "EXCESS PAYMENT". Excess payments relating to contracts will be applied as a prepayment of principal. SERVICING The servicer will be obligated under the sale and servicing agreement or pooling and servicing agreement, as applicable, to service the contracts with reasonable care, using that degree of skill and attention that the servicer generally exercises with respect to all comparable motor vehicle retail installment contracts it services for itself and others in accordance with its credit and collections policies and applicable law. In performing these duties, the servicer shall comply in all material respects with its credit and collection policies and procedures described above under "THE SELLER AND SERVICER-UNDERWRITING AND ORIGINATION", as modified from time to time. The servicer may delegate servicing responsibilities to third parties or affiliates, provided that the servicer will remain obligated to the related trust for the proper performance of its servicing responsibilities. The servicer is responsible for: - reviewing the contract files in the normal course of business; - monitoring and tracking any property and sales taxes to be paid by obligors; - billing, collecting and recording payments from obligors; - communicating with and providing billing records to obligors; - depositing funds into the collection account; - receiving payments as the trust's agent on the insurance policies maintained by the obligors and communicating with insurers; - issuing reports to the trustee and indenture trustee, if any, specified in the relevant transfer and servicing agreements; - repossessing and remarketing financed motorcycle following obligor defaults; and - paying the fees and ordinary expenses of the trusts, trustee and the indenture trustee. The servicer is obligated to act in a commercially reasonable manner with respect to the repossession and disposition of financed motorcycles following a contract default with a view to realizing proceeds at least equal to the financed motorcycle's fair market value. 54 If the servicer determines that eventual payment in full of a contract is unlikely, the servicer will follow its normal practices and procedures to recover all amounts due upon that contract, including repossessing and disposing of the related financed motorcycle at a public or private sale, or taking any other action permitted by applicable law. See "LEGAL ASPECTS OF THE CONTRACTS" in this prospectus. The servicer will be entitled to recover all reasonable out-of-pocket expenses incurred by it in liquidating a contract and disposing of the related financed motorcycle. The servicer may, consistent with its customary servicing procedures, grant to the obligor on any contract an extension of payments due under such contract if: (i) the extension period is limited to 45 days; (ii) the obligor has not received an extension during the previous twelve-month period; (iii) the evidence supports the obligor's willingness and capability to resume monthly payments; and (iv) such extension is consistent with the servicer's customary servicing procedures and with the sale and servicing agreement or pooling and servicing agreement. Exceptions to this extension policy may be authorized by the servicer's management on a case-by-case basis consistent with the servicer's prudent business practices. If so specified in your prospectus supplement, a "backup servicer" may be appointed and assigned certain oversight servicing responsibilities with respect to the contracts. The identity of any backup servicer, as well as a description of its responsibilities, of any fees payable to such backup servicer and the source of payment of such fees, will be included in your prospectus supplement. EVIDENCE AS TO COMPLIANCE Annually, the servicer will be obligated to deliver to the trustee and the indenture trustee if any, a report from a nationally recognized accounting firm stating that the accounting firm has audited the financial statements of the servicer and issued an opinion on those financial statements and that the accounting firm has examined and provided a report as to the servicer's controls over the servicing of the contracts. Annually the servicer will be obligated to deliver to the trustee and the indenture trustee, if any, a certificate signed by an officer stating that the servicer has fulfilled its obligations under the sale and servicing agreement or the pooling and servicing agreement, as applicable, during the preceding twelve-month period in all material respects or, if there has been a default in the fulfillment of any obligation, describing such default. You may obtain copies of these reports and certificates by delivering a request in writing to the trustee or the indenture trustee, as the case may be, at the address set forth in your prospectus supplement. SERVICER DEFAULT A servicer default under a sale and servicing agreement or pooling and servicing agreement will occur if: 55 - the servicer fails to make any payment or deposit required under the securities, the sale and servicing agreement, the pooling and servicing agreement or the transfer and sale agreement and such failure continues for four business days after the date on which such payment or deposit was due; - the servicer fails to observe or perform in any material respect any covenant or agreement in the securities, the sale and servicing agreement, the pooling and servicing agreement or the transfer and sale agreement which continues unremedied for thirty days after the date on which such failure commences; - the servicer assigns its duties or rights under the sale and servicing agreement, the pooling and servicing agreement or the transfer and sale agreement, except as specifically permitted under the sale and servicing agreement, the pooling and servicing agreement or the transfer and sale agreement, or attempts to make such an assignment; - an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect shall have been commenced against the servicer and shall not have been dismissed within 90 days, or a court having jurisdiction in the premises enters 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 appoints a receiver, liquidator, assignee, custodian, trustee or sequestrator (or similar official) of the servicer, or for any substantial liquidation of its affairs; - the servicer commences a voluntary case under any applicable bankruptcy, insolvency or similar law, or consents to the entry of an order for relief in an involuntary case under any such law, or consents 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 creditors, or fails to, or admits in writing its inability to, pay debts as they become due, or takes any corporate action in furtherance of the foregoing; - the failure of the servicer to deliver the monthly report pursuant to the terms of the sale and servicing agreement or the pooling and servicing agreement and such failure remains uncured for five business days after the date on which such failure commences; or - any representation, warranty or statement of the servicer made in the sale and servicing agreement, the pooling and servicing agreement or any certificate, report or other writing delivered pursuant to the sale and servicing agreement or the pooling and servicing agreement shall prove to be incorrect in any material respect as of the time when the same shall have been made and the incorrectness of such representation, warranty or statement has a material adverse effect on the trust and, within 30 days after written notice has been given to the servicer or the trust depositor by the trustee or, if applicable, the indenture trustee, the circumstances or condition in respect of which such representation, warranty or statement was incorrect have not been eliminated or otherwise cured. The servicer will be required under the sale and servicing agreement or the pooling and servicing agreement to give the trustees and, if applicable, the indenture trustee, the rating agencies, the noteholders and the certificateholders notice of an event of termination promptly upon the occurrence of such event. 56 RIGHTS UPON SERVICER DEFAULT If a servicer default remains unremedied, the indenture trustee or the holders of more than 50% of the aggregate principal amount of the notes or the class or classes of notes described in your prospectus supplement or, if the trust has no notes outstanding, the trustee or the holders of more than 50% of the aggregate certificate balance of the certificates or the class or classes of certificates described in your prospectus supplement may terminate all of the rights and obligations of the servicer under the sale and servicing agreement or pooling and servicing agreement. When this happens, the indenture trustee, the trustee or a successor servicer selected by the indenture trustee or the trustee will succeed to all the responsibilities, duties and liabilities of the servicer under the sale and servicing agreement or pooling and servicing agreement. If the indenture trustee or the trustee is unwilling or unable to act as the successor servicer, it may appoint, or petition a court to appoint, a successor servicer. The indenture trustee or the trustee may arrange for compensation to the successor servicer but that compensation may not exceed the base servicing fee payable to the servicer. Any successor servicer will not be liable for any acts or omissions of the prior servicer occurring prior to a transfer of the servicer's servicing and related functions or for any breach by the prior servicer of any of its obligations. If a trust has notes outstanding, the holders of more than 50% of the aggregate principal amount of the notes or the class or classes of notes described in your prospectus supplement may waive any servicer default, other than a default in making any required deposits into the collection account. If a trust has no notes outstanding, the holders of more than 50% of the aggregate certificate balance of the certificates or the class or classes of certificates described in your prospectus supplement may waive any servicer default, other than a default in making any required deposits into the collection account. Following an event of termination, the indenture trustee will terminate the lockbox agreement and direct all obligors under the contracts to make all payments under the contracts to the indenture trustee, or to a lockbox established by the indenture trustee. CERTAIN MATTERS REGARDING THE SERVICER The servicer may not resign from its obligations under the sale and servicing agreement or pooling and servicing agreement except if its duties are no longer permissible under applicable law. No resignation will become effective until a successor servicer has assumed the servicer's obligations and duties under the sale and servicing agreement or pooling and servicing agreement. Removal of the servicer is permissible only upon the occurrence of a servicer default as discussed above. Each sale and servicing agreement and pooling and servicing agreement will provide that neither the servicer nor any of its directors, officers, employees or agents will be under any liability to the trust or you for taking any action or for refraining from taking any action pursuant to that agreement or for errors in judgment; except that neither the servicer nor any person will be protected against any liability that would otherwise be imposed by reason of willful misfeasance, bad faith or negligence in the performance of the servicer's duties under that agreement or by reason of reckless disregard of its obligations and duties under that agreement. In addition, the servicer will not be obligated to appear in, prosecute or defend any legal action that is not incidental to the servicer's servicing responsibilities under the related sale and servicing 57 agreement or pooling and servicing agreement and that, in its opinion, may cause it to incur any expense or liability. The servicer may, however, undertake any reasonable action that it may deem necessary or desirable in respect of that agreement, the rights and duties of the parties thereto and the interests of the securityholders under that agreement. In that event, the legal expenses and costs of that action and any liability resulting therefrom will be expenses, costs and liabilities of the servicer, and the servicer will not be entitled to be reimbursed therefor. Under the circumstances specified in each sale and servicing agreement or pooling and servicing agreement, any entity into which the servicer may be merged or consolidated, or any entity resulting from any merger or consolidation to which the servicer is a party, or any entity succeeding to all or substantially all of the business of the servicer will be the successor of the servicer under that agreement. SERVICING COMPENSATION AND PAYMENT OF EXPENSES Compensation to the servicer will include a base monthly fee equal: - to the product of the percentage per annum specified in your prospectus supplement multiplied by the monthly principal balance of the contracts at the beginning of the month, plus any - late fees; - prepayment charges, if any; - documentation fees; - extension fees and other administrative charges; and - if specified in the prospectus supplement, investment earnings on funds deposited in the trust accounts. The servicer will pay all expenses incurred by it in connection with its activities under the transfer and servicing agreements and the annual fees and expenses of the trustee and the indenture trustee, if any. The servicer will be authorized to waive any administrative fees or extension fees that may be collected in the ordinary course of servicing any contract. STATEMENTS TO TRUSTEES AND THE TRUST On or prior to each payment date the servicer will provide to the applicable indenture trustee, if any, and the applicable trustee a statement setting forth with respect to a series of securities substantially the same information that is required to be provided in the periodic reports to be provided to securityholders of that series described under "-STATEMENTS TO SECURITYHOLDERS" below. STATEMENTS TO SECURITYHOLDERS With respect to each series of securities that includes notes, on or prior to each payment date, the servicer will prepare and provide to the related indenture trustee a statement to be delivered to you on that payment date. With respect to each series of securities that includes certificates, on or prior to each 58 payment date, the servicer will prepare and provide to the related trustee a statement to be delivered to you on the payment date. Each statement will include the following information: - the amount of the payment allocable to the principal amount of each class of those notes and to the certificate balance of each class of those certificates; - the amount of the payment allocable to interest on each class of securities of that series; - the amount of the distribution allocable to the yield supplement deposit, if any; - the aggregate principal balance of the contracts as of the close of business on the last day of the preceding month; - the amount of base servicing fees paid to the servicer; - the interest rate or pass-through rate for the interest period relating to the next succeeding payment date for any class of notes or certificates of that series with variable or adjustable rates; - the amount, if any, otherwise distributable to one or more subordinated classes of notes or certificates that has instead been distributed to more senior classes of notes or certificates on that payment date; - the outstanding principal amount and the note factor for each class of those notes, and either the certificate balance and the certificate factor for each class of those certificates or the outstanding principal amount and the pool factor for each class of those certificates, each after giving effect to all payments allocable to the principal of each class of notes and to the certificate balance of the certificates on that date; - the amount of advances made by the servicer in respect of the related contracts and the preceding month and the amount of unreimbursed advances in respect of contracts determined by the servicer to be defaulted contracts during that month; - the balance of any related reserve fund, interest reserve account or other credit or liquidity enhancement on that date, after giving effect to changes thereto on that date and the amount of those changes; - the total amount of monthly prepayments determined by the servicer to be due in one or more future months on deposit in the related trust account or held by the servicer, if permitted by the rating agencies rating the securities, with respect to the related contracts and the change in that amount from the immediately preceding payment date; - the number and aggregate principal balance of contracts delinquent computed as of the end of the related due period; - the number and aggregate principal balance of contracts that became liquidated contracts during the immediately preceding due period, the amount of liquidation 59 proceeds for such due period, the amount of liquidation expenses being deducted from liquidation proceeds for such due period, the net liquidation proceeds and the net liquidation losses for such due period; - average and cumulative loss and delinquency information as of such payment date; - the number of contracts and the aggregate principal balance of such contracts, as of the first day of the due period relating to such payment date (after giving effect to payments received during such due period and to any transfers of subsequent contracts to the trust occurring on or prior to such payment date); - the aggregate principal balance and number of contracts that were repurchased by the depositor with respect to the related due period, identifying such contracts and the repurchase price for such contracts; and - such other customary factual information as is available to the servicer as the servicer deems necessary and can reasonably obtain from its existing data base to enable securityholders to prepare their tax returns. You may obtain copies of the statements by delivering a request in writing addressed to the applicable trustee or indenture trustee at its address set forth in your prospectus supplement. Within the prescribed period of time for tax reporting purposes after the end of each calendar year during the term of each trust, the applicable trustee or indenture trustee will mail to each person who at any time during that calendar year has been a securityholder with respect to that trust and received any payment a statement containing information for the purposes of that securityholder's preparation of federal income tax returns. See "MATERIAL FEDERAL INCOME TAX CONSEQUENCES" in this prospectus. COLLECTIONS With respect to each trust, the servicer will deposit all payments on the related contracts (from whatever source) and all proceeds of such contracts collected during each collection period specified in your prospectus supplement into the related collection account within two business days after receipt thereof. The servicer is required to use its best efforts to cause an obligor to make all payments on the contracts directly to one or more lockbox banks, acting as agent for the trust pursuant to a lockbox administration agreement. In addition, the servicer may in the future collect payments from obligors through other methods, including direct debit programs and the internet. ADVANCES The servicer will be obligated to advance each month an amount equal to accrued and unpaid interest on any contract which was delinquent with respect to the related due period, but only to the extent that the servicer believes that the amount of such advance will be recoverable from collections on the contracts. The servicer will deposit any advances in the collection account no later than the day preceding the related payment date. The servicer will be entitled to recoup advances on a contract by means of a first priority withdrawal from Available Amounts on any payment date. The servicer will not be obligated to make an advance to the extent that it determines, in its sole discretion, that the advance will not be recovered from subsequent collections on or in respect of the related contract. 60 All advances are reimbursable to the servicer, without interest, if and when a payment relating to a contract with respect to which an advance has previously been made is subsequently received. In addition, upon the determination by the servicer that a contract is a defaulted contract, it will be entitled to recover unreimbursed advances in respect of that contract from collections on or in respect of other contracts. A defaulted contract means a contract with respect to which there has occurred one or more of the following: (i) all or some portion of any payment under the contract is 120 days or more delinquent, (ii) repossession (and expiration of any redemption period) of a motorcycle securing a contract or (iii) the servicer has determined in good faith that an obligor is not likely to resume payment under a contract. NET DEPOSITS As an administrative convenience and as long as specified conditions are satisfied, the servicer will be permitted to make the deposit of collections, aggregate advances and payments for purchases of contracts from the trust for or with respect to a month net of payments to be made to the servicer with respect to that month. The servicer may cause to be made a single, net transfer to the collection account. The servicer, however, will account to the related trustee, and you with respect to each trust as if all deposits, payments and transfers were made individually. With respect to any trust that issues both certificates and notes, if the related payment dates are not the same for all classes of securities, all distributions, deposits or other remittances made on a payment date will be treated as having been distributed, deposited or remitted on the same payment date for the applicable month for purposes of determining other amounts required to be distributed, deposited or otherwise remitted on a payment date. LIST OF SECURITYHOLDERS Three or more holders of the notes of any class in a series or one or more holders of those notes of that class evidencing not less than 25% of the aggregate principal amount of those notes then outstanding may, by written request to the related indenture trustee, obtain access to the list of all noteholders maintained by that indenture trustee for the purpose of communicating with other noteholders with respect to their rights under the related indenture or under those notes. An indenture trustee may elect not to afford the requesting noteholders access to the list of noteholders if it agrees to mail the desired communication or proxy, on behalf of and at the expense of the requesting noteholders, to all noteholders of that series. Three or more holders of the certificates of any class in a series or one or more holders of those certificates of that class evidencing not less than 25% of the certificate balance of those certificates may, by written request to the related trustee, obtain access to the list of all certificateholders maintained by that trustee for the purpose of communicating with other certificateholders with respect to their rights under the related trust agreement or pooling and servicing agreement or under those certificates. The related trustee will provide to the servicer within 15 days after receipt of a written request from the servicer, a list of the names of all noteholders or certificateholders of record as of the most recent applicable record date. No transfer and servicing agreement will provide for the holding of annual or other meetings of securityholders. 61 INSOLVENCY OF TRUST Each trust agreement will provide that the related trustee does not have the power to commence a voluntary proceeding in bankruptcy with respect to the related trust without the unanimous prior approval of all certificateholders of that trust and the delivery to that trustee by each certificateholder of a certificate certifying that that certificateholder reasonably believes that that trust is insolvent. PAYMENT OF NOTES Upon the payment in full of all outstanding notes issued by a trust and the satisfaction and discharge of the related indenture, the trustee will succeed to all the rights of the indenture trustee, and the certificateholders of that series will succeed to all the rights of the noteholders of that series, under the related sale and servicing agreement, except as otherwise provided in the sale and servicing agreement. ADMINISTRATION AGREEMENT Harley-Davidson Credit Corp., in its capacity as administrator, will enter into an administration agreement with each trust that issues notes and the related indenture trustee pursuant to which the administrator will agree to provide notices and perform other administrative obligations of the trust under the related indenture. For its services under the administration agreement the administrator may be entitled to receive a monthly administration fee, which administration fee will be paid by the depositor. The amount of the administration fee, if any, will be set forth in your prospectus supplement. AMENDMENT The parties may, without your consent, correct or supplement any provision in the transfer and servicing agreements that is ambiguous or inconsistent with any other provision in the transfer and servicing agreements. In addition, the parties may amend any transfer and servicing agreement without the consent of any securityholder to add any provisions to or change in any manner or eliminate any of the provisions of a transfer and servicing agreement if the indenture trustee or trustee receives an opinion of counsel that the modification will not have a material adverse effect on the securityholders. Any transfer and servicing agreement may also be amended in any respect by the parties with the consent of the holders of more than 50% of the aggregate principal amount of the notes or the class or classes of the notes described in your prospectus supplement issued by the trust or, if the trust has no notes outstanding, the holders of more than 50% of the aggregate certificate balance of the certificates or the class or classes of the certificates described in your prospectus supplement, except that no amendment: - that reduces the amount or changes the timing of any collections on any contracts or payments required to be distributed on any security; - that changes the interest rate on any security, that adversely affects the priority of payment of principal or interest to the securityholders; or - that reduces the percentage of securityholders required to consent to these amendments or any waiver under the transfer and servicing agreement, 62 may be effective without the consent of the holder of each security. Also, an amendment under the foregoing sentence will not be effective unless each rating agency rating the securities confirms that the amendment will not result in a reduction, qualification or withdrawal of the ratings on the securities. TERMINATION The obligations of the servicer, the depositor, the trustee and indenture trustee with respect to you pursuant to the trust agreement, the sale and servicing agreement, pooling and servicing agreement or indenture will terminate upon the earlier to occur of (i) the maturity or other liquidation of the last contract and the disposition of any amounts received upon liquidation of any property remaining in the trust, or (ii) the payment to all securityholders of all amounts required to be paid to them pursuant to the indenture and the trust agreement or pooling and servicing agreement; PROVIDED, HOWEVER, in no event shall the trust continue beyond the expiration of 21 years from the death of the last survivor of the descendants of Joseph P. Kennedy, the late Ambassador of the United States to the Court of St. James, living on the closing date (each a "TERMINATION EVENT"). The seller's representations, warranties and indemnities will survive any termination of the sale and servicing agreement or pooling and servicing agreement. Upon termination, amounts in the collection account, if any, will be paid to the depositor. The trustee and, if applicable, the indenture trustee will give written notice of termination to each securityholder of record. The final distribution to you will be made only upon surrender and cancellation of your notes or certificates at the office or agency of the trustee or, if applicable, the indenture trustee specified in the notice of termination. Any funds remaining in the trust, after the trustee or, if applicable, the indenture trustee has taken certain measures to locate you and such measures have failed, will be distributed to the depositor. LEGAL ASPECTS OF THE CONTRACTS GENERAL The transfer of the contracts to the applicable trust, the perfection of the security interests in the contracts and the enforcement of rights to realize on the motorcycles as collateral for the contracts are subject to a number of federal and state laws. Uniform Commercial Code financing statements will be filed in the applicable jurisdictions reflecting the transfer or pledge of the contracts and the security interests in the motorcycles and the related property by the seller to the depositor and by the depositor to the trust and, if applicable, by the trust to the indenture trustee. A person could acquire an interest in a contract that is superior to that of the trust or the indenture trustee because the servicer will retain possession of the contracts. If a person purchases contracts, or takes a security interest therein, for value in the ordinary course of its business and obtains possession of the contracts without actual knowledge of the trust's or indenture trustee's interest, that person will acquire an interest in the contracts superior to the interest of the trust or the indenture trustee. SECURITY INTERESTS GENERAL 63 In states in which the contracts evidence the credit sale of new and used motorcycles by originating dealers to obligors, the contracts also constitute personal property security agreements and include grants of security interests in the motorcycles under the applicable Uniform Commercial Code. Perfection of security interests in financed motor motorcycles is generally governed by the motor vehicle registration laws of the state in which the vehicle is located. In most states, a security interest in a motor vehicle is perfected by obtaining possession of the certificate of title to the motor vehicle or notation of the secured party's lien on the motor vehicle's certificate of title. All contracts acquired by the seller from the originating dealers will name the seller as obligee or assignee and as the secured party. The seller will also take all actions necessary under the laws of the state in which the related financed motorcycle is located to perfect its security interest in that financed motorcycle, including, where applicable, having a notation of its lien recorded on the related certificate of title and/or obtaining possession of that certificate of title. Because Harley-Davidson Credit Corp. will continue to service the contracts as servicer under the sale and servicing agreement or the pooling and servicing agreement, as applicable, the obligors on the contracts will not be notified of the sale from the seller to the depositor or the sale from the depositor to the related trust or, if applicable, the pledge to the related indenture trustee. PERFECTION The seller will sell and assign its security interest in the financed motorcycles to the depositor and the depositor will assign its security interest in the financed motorcycles to the trust and, if applicable, the trust will assign its security interest in the financed motorcycles to the indenture trustee. However, because of the administrative burden and expense, none of the seller, the depositor or the related trust will amend any certificate of title to identify the trust or indenture trustee as the new secured party on that certificate of title relating to a financed motorcycle. However, UCC financing statements with respect to the transfer to the depositor of the seller's security interest in the financed motorcycles and the transfer to the trust of the depositor's security interest in the financed motorcycles and, if applicable, the transfer to the indenture trustee of the trust's security interest in the financed motorcycles will be filed. In addition, the servicer will continue to hold any certificates of title relating to the financed motorcycles in its possession as custodian for that trust. See "DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS" in this prospectus. In most states, an assignment is an effective conveyance of a security interest without amendment of any lien noted on a motor vehicle's certificate of title. Although re-registration of the motor vehicle is not necessary to convey a perfected security interest in the financed motorcycles to the trust or the indenture trustee, because neither the trust nor the indenture trustee will be listed as lienholder on the certificates of title, the security interest of that trust or the indenture trustee in the motorcycle could be defeated through fraud, forgery, negligence or error. In the absence of fraud or forgery by the motorcycle owner or the servicer or administrative error by state or local agencies, the notation of the seller's lien on the certificates of title will be sufficient to protect the trust and the indenture trustee against the rights of subsequent purchasers of a financed motorcycle or subsequent lenders who take a security interest in a financed motorcycle. The seller and depositor will each represent and warrant that the seller a perfected security interest in each financed motorcycle. If there are any financed motorcycles as to which the seller failed to obtain a perfected security interest, the security interest of the trust and the indenture trustee would be subordinate to, among others, subsequent purchasers of the financed motorcycles and holders of perfected security interests in the financed motorcycles. To the extent that failure has a material and adverse effect on the trust's, the indenture trustee's or any securityholder's interest in the related contract 64 or the collectibility of the contract, however, it would constitute a breach of the warranties of the seller and the depositor. Accordingly, the depositor would be required to repurchase the related contract from the trust and the seller will be required to purchase that contract from the depositor, unless the breach was cured. The depositor will assign to the related trust its rights to cause the seller to repurchase that contract under the related transfer and sale agreement and, if applicable, the related trust will pledge to the indenture trustee its rights to cause the depositor to repurchase that contract under the related sale and servicing agreement. See "DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS" and "RISK FACTORS-INTERESTS OF OTHER PERSONS IN THE CONTRACTS OR THE FINANCED MOTORCYCLES COULD REDUCE FUNDS AVAILABLE TO MAKE PAYMENTS ON YOUR SECURITIES" in this prospectus. CONTINUITY OF PERFECTION Under the laws of most states, the perfected security interest in a vehicle would continue for four months after the motor vehicle is moved to a state that is different from the one in which it is initially registered and thereafter until the owner re-registers the motor vehicle in the new state. A majority of states generally require surrender of a certificate of title to re-register a motor vehicle. In those states, such as California, that require a secured party to hold possession of the certificate of title to maintain perfection, the secured party would learn of the re-registration through the request from the obligor under the related contract to surrender possession of the certificate of title. In the case of motor motorcycles registered in states providing for the notation of a lien on the certificate of title but not possession by the secured party, such as Texas, the secured party would receive notice of surrender from the state of re-registration if the security interest is noted on the certificate of title. Thus, the secured party would have the opportunity to re-perfect its security interest in the vehicle in the state of relocation. However, these procedural safeguards will not protect the secured party if through fraud, forgery or administrative error, the obligor somehow procures a new certificate of title that does not list the secured party's lien. Additionally, in states that do not require a certificate of title for registration of a motor vehicle, re-registration could defeat perfection. In the ordinary course of servicing the contracts, the servicer will take steps to effect re-perfection upon receipt of notice of re-registration or information from the obligor as to relocation. Similarly, when an obligor sells a financed motorcycle, the servicer must surrender possession of the certificate of title or will receive notice as a result of its lien noted on the certificate of title and accordingly will have an opportunity to require satisfaction of the related contract before release of the lien. The servicer will be obligated to take appropriate steps, at the servicer's expense, to maintain perfection of security interests in the financed motorcycles and will be obligated to purchase the related contract if it fails to do so and that failure has a material and adverse effect on the trust's or any securityholder's interest in the contract or the collectibility of the contract. PRIORITY OF LIENS ARISING BY OPERATION OF LAW Under the laws of most states, liens for repairs performed on a motor vehicle and liens for unpaid taxes take priority over even a perfected security interest in a financed motorcycle. The Internal Revenue Code also grants priority to specified federal tax liens over the lien of a secured party. The laws of some states and federal law permit the confiscation of motor motorcycles by governmental authorities under some circumstances if used in unlawful activities, which may result in the loss of a secured party's perfected security interest in the confiscated vehicle. The seller will represent and warrant to the depositor and the depositor will represent and warrant to the trust that, to its knowledge, as of the related closing date, each security interest in a financed motorcycle is prior to all other present liens upon and security interests in that financed motorcycle. However, liens for repairs or taxes could arise, or the confiscation of a financed motorcycle could occur, at any time during the term of a contract. No notice will be given to 65 related trustee, indenture trustee or you in respect of a given trust if a lien arises or confiscation occurs that would not give rise to the depositor's or seller's repurchase obligation. REPOSSESSION In the event of default by an obligor, the holder of the related contract has all the remedies of a secured party under the UCC, except where specifically limited by other state laws. Among the UCC remedies, the secured party has the right to perform repossession by self-help means, unless it would constitute a breach of the peace or is otherwise limited by applicable state law. Unless a motor vehicle financed by the seller is voluntarily surrendered, self-help repossession is the method employed by the servicer in most states and is accomplished simply by retaking possession of the financed motorcycle. In cases where an obligor objects or raises a defense to repossession, or if otherwise required by applicable state law, a court order must be obtained from the appropriate state court, and that vehicle must then be recovered in accordance with that order. In some jurisdictions, the secured party is required to notify that obligor of the default and the intent to repossess the collateral and to give that obligor a time period within which to cure the default prior to repossession. In some states, an obligor has the right to reinstate its contract and recover the collateral by paying the delinquent installments or other amounts due. NOTICE OF SALE; REDEMPTION RIGHTS The UCC and other state laws require the secured party to provide an obligor with reasonable notice of the date, time and place of any public sale and/or the date after which any private sale of the collateral may be held. In most states, an obligor has the right to redeem the collateral prior to actual sale by paying the secured party the unpaid principal balance of the obligation, accrued interest on the obligation plus reasonable expenses for repossessing, holding and preparing the collateral for disposition and arranging for its sale, plus, in some jurisdictions, reasonable attorneys' fees. In some states, an obligor has the right to redeem the collateral prior to actual sale by payment of delinquent installments or the unpaid balance. DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS The proceeds of resale of the motor vehicle generally will be applied first to the expenses of resale and repossession and then to the satisfaction of the indebtedness. While some states impose prohibitions or limitations on deficiency judgments if the net proceeds from resale do not cover the full amount of the indebtedness, a deficiency judgment can be sought in those states that do not prohibit or limit those judgments. In addition to the notice requirement described above, the UCC requires that every aspect of the sale or other disposition, including the method, manner, time, place and terms, be "commercially reasonable." Generally, courts have held that when a sale is not "commercially reasonable," the secured party loses its right to a deficiency judgment. However, the deficiency judgment would be a personal judgment against the obligor for the shortfall, and a defaulting obligor can be expected to have very little capital or sources of income available following repossession. Therefore, in many cases, it may not be useful to seek a deficiency judgment or, if one is obtained, it may be settled at a significant discount or be uncollectible. In addition, the UCC permits the obligor or other interested party to recover for any loss caused by noncompliance with the provisions of the UCC. Also, prior to a sale, the UCC permits the obligor or other interested person to prohibit the secured party from disposing of the collateral if it is established that the secured party is not proceeding in accordance with the "default" provisions under the UCC. 66 Occasionally, after resale of a repossessed vehicle and payment of all expenses and indebtedness, there is a surplus of funds. In that case, the UCC requires the creditor to remit the surplus to any holder of a subordinate lien with respect to that vehicle or if no lienholder exists, the UCC requires the creditor to remit the surplus to the obligor. BANKRUPTCY CONSIDERATIONS The depositor has taken steps that are intended to make it unlikely that the voluntary or involuntary application for relief by the seller under the United States Bankruptcy Code or similar applicable state laws will result in consolidation of the assets and liabilities of the depositor with those of the seller. These steps include the creation of the depositor as a wholly-owned, limited purpose subsidiary pursuant to articles of incorporation and bylaws containing restrictions on the nature of the depositor's business and on its ability to commence a voluntary case or proceeding under any insolvency law without the unanimous affirmative vote of all of its directors. In addition, to the extent that the seller granted a security interest in the contracts to the depositor, and that interest was validly perfected before the bankruptcy or insolvency of the seller and was not taken or granted in contemplation of insolvency or with the intent to hinder, delay or defraud the seller or its creditors, that security interest should not be subject to avoidance, and payments to the trust with respect to the contracts should not be subject to recovery by a creditor or trustee in bankruptcy of the seller. However, delays in payments on the securities and possible reductions in the amount of those payments could occur if: 1. a court were to conclude that the assets and liabilities of the depositor should be consolidated with those of the seller in the event of the application of applicable insolvency laws to the seller, as the case may be; 2. a filing were made under any insolvency law by or against the depositor; or 3. an attempt were to be made to litigate any of the foregoing issues. On each closing date, Winston & Strawn will give an opinion to the effect that, based on a reasoned analysis of analogous case law, although there is no precedent based on directly similar facts, and, subject to facts, assumptions and qualifications specified in the opinion and applying the principles set forth in the opinion, in the event of a voluntary or involuntary bankruptcy case in respect of the seller under Title 11 of the United States Bankruptcy Code at a time when the seller was insolvent, the property of the seller would not properly be substantively consolidated with the assets of the depositor. Among other things, that opinion will assume that each of the depositor and the seller will follow specified procedures in the conduct of its affairs, including maintaining records and books of account separate from those of the other, refraining from commingling its assets with those of the other, and refraining from holding itself out as having agreed to pay, or being liable for, the debts of the other. The depositor and the seller intend to follow these and other procedures related to maintaining their separate identities. However, there can be no assurance that a court would not conclude that the assets and liabilities of the depositor should be consolidated with those of the seller. The seller will represent and warrant that the sale of the related contracts to the depositor is a valid sale. Notwithstanding the foregoing, if the seller were to become a debtor in a bankruptcy case, a court could take the position that the sale of contracts to the depositor should instead be treated as a pledge of 67 those contracts to secure a borrowing of the seller. If a court were to reach such conclusions, or a filing were made under any insolvency law by or against the depositor, or if an attempt were made to litigate any of the foregoing issues, delays and possible reduction in payments on the securities could occur. In addition, if the transfer of contracts to the depositor is treated as a pledge instead of a sale, a tax or government lien on the property of the seller arising before the transfer of a contract to the depositor may have priority over the depositor's interest in that contract. The seller and the depositor will treat the transactions described in this prospectus as a sale of the contracts to the depositor, so that the automatic stay provisions of the United States Bankruptcy Code should not apply to the contracts if the seller were to become a debtor in a bankruptcy case. Furthermore, if an originating dealer or the seller became a debtor in a bankruptcy case, creditors of that party, or that party acting as debtor-in-possession, may assert that the transfer of the contracts was ineffective to remove the contracts from that party's estate. In that case, the distribution of payments on the contracts to the trust might be subject to the automatic stay provisions of the United States bankruptcy code. This would delay the distribution of those payments to you for an uncertain period of time. Furthermore, reductions in payments under the contracts to the trust may result if the bankruptcy court rules in favor of the creditors or the debtor-in-possession. In either case, you may experience delays or reductions in distributions or payments to you. In addition, a bankruptcy trustee would have the power to sell the contracts if the proceeds of the sale could satisfy the amount of the debt deemed owed by the originating dealer or the seller, as the case may be. The bankruptcy trustee could also substitute other collateral in lieu of the contracts to secure the debt. Additionally, the bankruptcy court could adjust the debt if the originating dealer or the seller were to file for reorganization under Chapter 11 of the bankruptcy code. Any of these actions could result in losses or delays in payments on your securities. Each of the originating dealers and the seller will represent and warrant that the conveyance of the contracts by it is in each case a valid sale and transfer of the contracts. Also, cash collections on the contracts may be commingled with general funds of the servicer and, in the event of a bankruptcy of the servicer, a court may conclude that the trust does not have a perfected security interest in those collections. CONSUMER PROTECTION LAWS Numerous federal and state consumer protection laws and related regulations impose substantial requirements upon lenders and servicers involved in consumer finance. These laws include the Truth-in-Lending Act, the Equal Credit Opportunity Act, the Federal Trade Commission Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B and Z, the Soldiers' and Sailors' Civil Relief Act of 1940, the Texas Consumer Credit Code, state adoptions of the National Consumer Act and of the Uniform Consumer Credit Code and state motor vehicle retail installment sales acts and other similar laws. Also, state laws impose finance charge ceilings and other restrictions on consumer transactions and require contract disclosures in addition to those required under federal law. These requirements impose specific statutory liabilities upon creditors who fail to comply with their provisions. In some cases, this liability could affect an assignee's ability to enforce consumer finance contracts such as the contracts. The so-called "Holder-in-Due-Course" Rule of the Federal Trade Commission (the "FTC RULE"), the provisions of which are generally duplicated by the Uniform Consumer Credit Code, other statutes or the common law in some states, has the effect of subjecting a seller (and specified creditors and their 68 assignees) in a consumer credit transaction to all claims and defenses that the obligor in the transaction could assert against the seller of the goods. Liability under the FTC Rule is limited to the amounts paid by the obligor under the contract, and the holder of the contract may also be unable to collect any balance remaining due under that contract from the obligor. Most of the contracts will be subject to the requirements of the FTC Rule. Accordingly, each trust, as holder of the related contracts, will be subject to any claims or defenses that the purchaser of the applicable financed motorcycle may assert against the seller of the related financed motorcycle. As to each obligor, these claims are limited to a maximum liability equal to the amounts paid by the obligor on the related contract. Under most state motor vehicle dealer licensing laws, sellers of motor motorcycles are required to be licensed to sell motor motorcycles at retail sale. Furthermore, federal odometer regulations promulgated under the Motor Vehicle Information and Cost Savings Act require that all sellers of new and used motorcycles furnish a written statement signed by the seller certifying the accuracy of the odometer reading. If the originating dealer is not properly licensed or if a written odometer disclosure statement was not provided to the purchaser of the related financed motorcycle, an obligor may be able to assert a defense against the originating dealer. If an obligor were successful in asserting any of those claims or defenses, that claim or defense would constitute a breach of the depositor's representations and warranties under the related sale and servicing agreement or pooling and servicing agreement and a breach of the seller's warranties under the related transfer and sale agreement and would, if the breach materially and adversely affects the collectibility of the contract or the interests of the trust or the securityholders in the contract, create an obligation of the depositor and the seller, respectively, to repurchase the contract unless the breach is cured. See "DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS" in this prospectus. Courts have applied general equitable principles to secured parties pursuing repossession and litigation involving deficiency balances. These equitable principles may have the effect of relieving an obligor from some or all of the legal consequences of a default. In several cases, consumers have asserted that the self-help remedies of secured parties under the UCC and related laws violate the due process protections provided under the 14th Amendment to the Constitution of the United States. Courts have generally upheld the notice provisions of the UCC and related laws as reasonable or have found that the repossession and resale by the creditor do not involve sufficient state action to afford constitutional protection to borrowers. The seller and the depositor will represent and warrant that each contract complies with all requirements of law in all material respects. Accordingly, if an obligor has a claim against a trust for violation of any law and that claim materially and adversely affects that trust's or the securityholder's interest in a contract or the collectibility of the contract, that violation would constitute a breach of the representations and warranties of the seller and the depositor would create an obligation of the seller and the depositor to repurchase the contract unless the breach is cured. See "DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS" in this prospectus. OTHER LIMITATIONS In addition to the laws limiting or prohibiting deficiency judgments, numerous other statutory provisions, including federal bankruptcy laws and related state laws, may interfere with or affect the ability of a secured party to realize upon collateral or to enforce a deficiency judgment. For example, in a Chapter 13 proceeding under the federal bankruptcy law, a court may prevent a creditor from 69 repossessing a vehicle and, as part of the rehabilitation plan, reduce the amount of the secured indebtedness to the market value of the vehicle at the time of bankruptcy, as determined by the court, leaving the creditor as a general unsecured creditor for the remainder of the indebtedness. A bankruptcy court may also reduce the monthly payments due under a contract or change the rate of interest and time of repayment of the indebtedness. Under the terms of the Soldiers' and Sailors' Relief Act of 1940 (the "Relief Act"), an obligor who enters the military service after the origination of that obligor's contract (including an obligor who is a member of the National Guard or is in reserve status at the time of the origination of the obligor's contract and is later called to active duty) may not be charged interest above an annual rate of 6% during the period of that obligor's active duty status, unless a court orders otherwise upon application of the lender. In addition, some states, including California, allow members of its national guard to extend payments on any contract obligation if called into active service by the Governor for a period exceeding 7 days. It is possible that the foregoing could have an effect on the ability of the servicer to collect the full amount of interest owing on some of the contracts. In addition, both the Relief Act and the laws of some states, including California, New York and New Jersey, impose limitations that would impair the ability of the servicer to repossess the released financed motorcycle during the obligor's period of active duty status. Thus, if that contract goes into default, there may be delays and losses occasioned by the inability to exercise the trust's rights with respect to the contract and the related financed motorcycle in a timely fashion. Any shortfall pursuant to either of the two preceding paragraphs, to the extent not covered by amounts payable to the securityholders from amounts on deposit in the related reserve fund or from coverage provided under any other credit enhancement mechanism, could result in losses to the securityholders. MATERIAL FEDERAL INCOME TAX CONSEQUENCES GENERAL The following is a discussion of the material United States federal income tax consequences of the purchase, ownership and disposition of notes or certificates issued by a trust as described in this prospectus. The discussion that follows constitutes the opinion of Winston & Strawn, federal tax counsel to the depositor. Winston & Strawn prepared or reviewed the statements in this prospectus under the heading "MATERIAL FEDERAL INCOME TAX CONSEQUENCES" and is of the opinion that those statements are correct in all material respects. The conclusions of law contained in this discussion constitute the opinion of Winston & Strawn, federal tax counsel, being rendered for the benefit of investors in the notes or certificates. In addition to this opinion, Winston & Strawn will separately provide to the depositor, each trust and certain other parties to each of the transactions contemplated by this prospectus more limited opinions regarding the classification of the trust and the characterization of the notes and the certificates for federal income tax purposes. Those separate opinions are fully described below with respect to each type of trust. This discussion is based upon current provisions of the Internal Revenue Code of 1986, as amended (the "CODE"), existing and proposed Treasury Regulations, current administrative rulings, judicial decisions and other applicable authorities in effect as of the date of this prospectus, all of which are subject to change, possibly with retroactive effect. There are no cases, regulations, or Internal Revenue Service rulings on comparable transactions or instruments to those described in this prospectus. 70 As a result, there can be no assurance that the Internal Revenue Service will not challenge the conclusions of federal tax counsel reached in this description of Material Federal Income Tax Consequences, and no ruling from the Internal Revenue Service has been or will be sought on any of the issues discussed below. Furthermore, legislative, judicial or administrative changes may occur, perhaps with retroactive effect, which could affect the accuracy of the statements set forth below. This discussion does not attempt to deal with all aspects of federal income taxation that may be relevant to all holders of notes and certificates in light of their personal investment or tax circumstances. Also, this discussion does not describe tax consequences to certain types of holders who may be subject to special treatment under the federal income tax laws including, without limitation, financial institutions, dealers in securities or currencies, insurance companies, and persons who hold the notes or certificates as part of a straddle, hedging or conversion transaction. Investors and preparers of tax returns (including returns filed by any trust described in this prospectus) should be aware that under applicable Treasury Regulations a provider of advice on specific issues of law is not considered an income tax return preparer unless the advice (1) is given with respect to events that have occurred at the time the advice is rendered and is not given with respect to the consequences of contemplated actions, and (2) is directly relevant to the determination of an entry on a tax return. Accordingly, taxpayers should consult their own tax advisors and tax return preparers regarding the preparation of any item on a tax return, even where the anticipated tax treatment has been discussed in this prospectus. The depositor suggests that you consult with your own tax advisors as to the federal, state, local, foreign and any other tax consequences to you of the purchase, ownership and disposition of the notes and the certificates. As mentioned above, the depositor and each trust (as well as certain other parties to each transaction) will be provided with an opinion of Winston & Strawn, as federal tax counsel, as described in the related prospectus supplement, regarding certain specific federal income tax matters as discussed below regarding the character of each trust and the notes and certificates (if any) it issues. An opinion of federal tax counsel, however, is not binding on the Internal Revenue Service or the courts. The form of that opinion will be filed, together with the final documentation for the respective trust transaction, with the Securities Exchange Commission under Form 8-K. For purposes of the following summary, references to the trust, the notes, the certificates and related terms, parties and documents refer to each trust and the notes, certificates and related terms, parties and documents applicable to such trust. The federal income tax consequences to certificateholders will vary depending on whether the trust is an owner trust or a grantor trust. As an alternative to those two types of trusts, a trust could elect to be treated as a financial asset securitization investment trust, generally referred to as a FASIT. A summary of the federal income tax consequences pertaining to each type of trust is set forth below. The prospectus supplement for each series of notes or certificates will specify the treatment of the trust for federal income tax purposes. To the extent any given series of notes or certificates differs from the assumptions or conditions set forth in the following discussion or changes occur in the relevant tax laws, or in their application, any additional tax considerations will be disclosed in the applicable prospectus supplement. The discussion of those additional tax considerations, to the extent they are conclusions of law, will also constitute the opinion of federal tax counsel being rendered for the benefit of investors as of the date of the prospectus supplement. Because it will be later in time than the prospectus, that opinion of federal tax counsel may modify, clarify, change or otherwise supplement the opinion represented by the legal conclusions contained in this discussion of Material Federal Income Tax Consequences. 71 OWNER TRUSTS A trust structured as an owner trust will typically issue one or more classes of notes, intended to be treated as debt for federal income tax purposes, and certificates, representing equity interests in the trust. The characterization of the trust for federal income tax purposes depends in part upon whether the certificates are owned by a single holder, such as the depositor, or by multiple holders. This summary of material federal income tax consequences with respect to the issuance of notes or certificates by an owner trust is divided into three parts. The first part describes characterization of the trust as a pass-through entity rather than as a corporation or other entity subject to tax at the entity level. The second part describes the taxation of an investor in the notes. The third part describes taxation of an investor in the certificates. TAX CHARACTERIZATION OF OWNER TRUSTS Winston & Strawn, as federal tax counsel to the depositor, will deliver its opinion that a trust established as an owner trust will not be an association (or a publicly traded partnership) taxable as a corporation for federal income tax purposes. This opinion will be based on the assumptions that the terms of the trust agreement and related documents will be complied with and that the owner or owners of certificates issued by the trust will take all action necessary, if any, or refrain from taking any inconsistent action so as to ensure the trust is, for federal income tax purposes, either disregarded as a separate entity from the depositor (or other sole certificateholder) or treated as a partnership. Winston & Strawn's opinion is also based on its conclusions that (1) the trust will constitute a business entity, (2) the nature of the income of the trust will exempt it from the rule that certain publicly traded partnerships are taxable as corporations, and (3) the trust, if a corporation, would not constitute a regulated investment company under the federal income tax laws. If certificates issued by the trust are at all times required to be owned by a single person, such as the depositor, then, for federal income tax purposes, the trust may be disregarded as a separate entity from the owner of its certificates. In this situation, although it is the opinion of Winston & Strawn that the notes issued by the trust will be characterized as indebtedness for federal income tax purposes (as discussed below), no assurance can be given that this characterization of the notes will prevail. If the Internal Revenue Service successfully asserted that one or more of the notes did not represent debt for federal income tax purposes, the notes might be treated as equity interests in the trust. As a result, the trust would be considered to have multiple equity owners (rather than just the single owner of the trust certificates). In that case, the trust would be characterized as a partnership for federal income tax purposes and the tax consequences to holders of notes which were recharacterized as equity would be similar to those discussed below under "-TAX TREATMENT OF INVESTORS IN CERTIFICATES". Rather than having a single owner of certificates issued by the trust, it is possible that the trust may issue certificates to multiple owners. In that situation, the certificate owners would be treated as equity owners of the trust and the trust would be characterized as a partnership for federal income tax purposes. In any case where the trust is treated as a partnership for federal income tax purposes, it is the opinion of Winston & Strawn that it will not constitute a publicly traded partnership. That opinion will be based upon Winston & Strawn's assumption that (1) the nature of the income of the trust will exempt it from publicly traded partnership characterization and/or (2) the trust will at all times have fewer than 100 owners of its equity interests. If, contrary to the opinion of Winston & Strawn, the trust were treated as a 72 publicly traded partnership or were otherwise taxable as a corporation for federal income tax purposes, it would be subject to corporate income tax on its taxable income. The trust's taxable income would include all its income on the receivables and other assets owned by the trust, which may be reduced by the interest expense on the notes issued by the trust to the extent the notes are properly characterized as debt. Any such corporate income tax could materially reduce cash available to make payments on the notes and distributions on the certificates. If the trust were classified as a partnership, other than a publicly traded partnership taxable as a corporation, the trust itself would not be subject to United States federal income tax. Instead, holders of equity interests in the partnership would be required to take into account their allocable share of the trust's income and deductions as discussed below under "-TAX TREATMENT OF INVESTORS IN CERTIFICATES." TAX TREATMENT OF INVESTORS IN NOTES TREATMENT OF THE NOTES AS INDEBTEDNESS. The depositor and the owners of the notes, by their purchase of notes, will agree to treat the notes as debt for federal income tax purposes. Winston & Strawn, as federal tax counsel, will, except as otherwise provided in the related prospectus supplement, advise the trust that the notes will be classified as debt for federal income tax purposes. The discussion below assumes this characterization of the notes is correct. INTEREST ON THE NOTES. An investor will be taxed on the amount of payments of interest on a note as ordinary interest income at the time it accrues or is received in accordance with the investor's regular method of accounting for United States federal income tax purposes. This treatment assumes that all payments on the notes are denominated in U.S. dollars. It also assumes that the payment of interest on the notes constitutes "QUALIFIED STATED INTEREST" under Treasury Regulations relating to original issue discount and that an investor does not acquire its notes as "STRIPPED NOTES" or at an original issue discount as discussed below. If these assumptions are incorrect with respect to any notes issued by a trust, additional tax considerations with respect to those notes will be disclosed in the related prospectus supplement. A holder of a note that has a fixed maturity date of not more than one year from the issue date of that note (which will be referred to in this paragraph as a "short-term note") may be subject to special rules. An accrual basis holder of a short-term note (and some cash method holders, including regulated investment companies, as set forth in Section 1281 of the Code) generally would be required to report interest income as interest accrues on a straight-line basis or under a constant yield method over the term of each interest period. Other cash basis holders of a short-term note would, in general, be required to report interest income as interest is paid (or, if earlier, upon the taxable disposition of the short-term note). However, a cash basis holder of a short-term note reporting interest income as it is paid may be required to defer a portion of any interest expense otherwise deductible on indebtedness incurred to purchase or carry the short-term note until the taxable disposition of the short-term note. A cash basis taxpayer may elect under Section 1281 to accrue interest income on all nongovernment debt obligations with a term of one year or less, in which case the taxpayer would not be subject to the interest expense deferral rule referred to in the preceding sentence. Special rules apply if a short-term note is purchased for more or less than its principal amount. SALE OR OTHER DISPOSITION OF A NOTE. An investor who disposes of a note, whether by sale, exchange for other property, or payment by the trust, will recognize taxable gain or loss equal to the difference between the amount realized on the sale or other disposition, not including any amount attributable to accrued but unpaid interest, and the investor's adjusted tax basis in the note. In general, an 73 investor's adjusted tax basis in a note will be equal to the investor's initial purchase price increased by any accrued original issue discount or market discount previously included in income by the investor and decreased by the amount of any bond premium previously amortized and the amount of any payments, other than payments of stated interest, previously received by the investor with respect to the note. Any gain or loss recognized upon the sale or other disposition of a note will be capital gain or loss so long as the note is a "capital asset" in the hands of the investor. For non-corporate investors, capital gain recognized on the sale or other disposition of a note held by the investor for more than one year will be taxed at a maximum rate of 20%. Capital gain for a note held for one year or less is taxed at the rates applicable to ordinary income, i.e., up to 39.6%. Taxpayers must aggregate capital gains and losses for each taxable year. In the event a taxpayer realizes a net capital loss for any year there are limitations on the amount of these capital losses which can be deducted. PURCHASE AT A DISCOUNT. An investor who purchases a note as part of the initial offering by the trust for an issue price that is less than its "STATED REDEMPTION PRICE AT MATURITY" will generally be considered to have purchased the note at an original issue discount for United States federal income tax purposes. In general, the stated redemption price at maturity for a note is equal to the principal amount. If a note is acquired with original issue discount the investor will be required to include in income each year, taxable as ordinary income in the same manner as cash interest payments, a portion of the original issue discount. For cash basis investors, such as individuals, the requirement that original issue discount be accrued as income each year means the investor recognizes taxable income even though the investor does not receive cash corresponding to that income. The amount of original issue discount accrued as income each year is based upon a formula which looks at the constant yield on the notes and the term to maturity so as to annually allocate a proportionate share of original issue discount. Under these rules, investors generally will be required to include in income increasingly greater amounts of original issue discount in successive accrual periods. For purposes of calculating the daily portion of original issue discount to be accrued as income, the method of determining yield to maturity is not clear, and in particular it is not clear whether prepayments on the underlying contracts should be taken into account in determining such yield. In determining the weighted average maturity of the notes for purposes of calculating original issue discount, the depositor expects to use a reasonable assumption regarding prepayment of the contracts owned by the trust. No representation is made as to the actual prepayments to be made on the contracts. This method of calculating the accrual of original issue discount will cause the accrual of original issue discount to either increase or decrease (but never below zero) in any given accrual period to reflect the fact that prepayments are occurring at a faster or slower rate than the prepayment assumption used in respect of the contracts. In determining whether a note has original issue discount, the issue price of the note may not necessarily equal the investor's purchase price, although they generally should be the same. The issue price of a note will equal the initial offering price to the public, not including bond houses, brokers or similar persons or organizations acting in the capacity of underwriters or wholesalers, at which price a substantial amount of the notes is sold. If an investor acquires a note in a secondary market transaction for a purchase price which is less than the principal amount or other amount payable at maturity of the note, the difference is referred to for tax purposes as market discount. Similarly to original issue discount, an investor must accrue a portion of the market discount each year. The amount of market discount which accrues annually will be calculated on a straight-line basis over the remaining term to maturity of the note unless the investor elects to accrue market discount using the constant yield method, i.e., the original issue discount method. Unlike original 74 issue discount, however, an investor does not include accrued market discount in ordinary income each year. Rather, the aggregate amount of accrued market discount is included in income when an investor sells or otherwise disposes of the note. At that time, the portion of the amount realized by the investor on the sale or other disposition of the note equal to accrued market discount is taxed as ordinary income, which has a maximum tax rate of 39.6%, rather than the long term capital gain maximum tax rate of 20%. If an investor would prefer to be taxed on the annual accrual of market discount each year rather than being taxed on the aggregate amount of all accrued market discount when the note is sold or otherwise disposed of, the investor can file an election to do so. This election would apply to all of the investor's debt investments acquired in or after the taxable year in which the notes are acquired and not just to the notes issued by the trust. Limitations imposed by the federal tax laws which are intended to match deductions with the taxation of income may defer deductions for interest paid by an investor on indebtedness incurred or continued, or short sale expenses incurred, to purchase or carry a note with market discount. A noteholder who elects to include market discount in gross income as it accrues is exempt from this rule. Whenever an investor accrues and includes in income an amount of original issue discount or market discount, the investor's adjusted basis in the corresponding note is increased by that same amount. As a result, the investor would recognize a lower capital gain or greater capital loss on the sale or other disposition of the note. In general, if the amount of original issue discount or market discount would be less than one-fourth of one percent (0.25%) of the note's principal or other stated redemption price at maturity multiplied by the number of full years included in determining the weighted average maturity of the notes, the investor can disregard the original issue discount or market discount rules. PURCHASE AT A PREMIUM. If an investor purchases a note for a price that exceeds the principal amount or other amount payable at maturity, the investor will be considered to have an amortizable bond premium. An investor can elect to accrue a portion of the premium each year as a deduction to offset interest income on the corresponding note. The amount of premium which can be amortized and deducted each year is calculated using a constant yield method over the remaining term to maturity of the note. The deduction is available only to offset interest income on the corresponding note; it cannot be used as a deduction to the extent it exceeds taxable note interest. The adjusted tax basis which an investor has in a note must be reduced by the amount of premium for which a deduction is claimed. Because the basis is reduced, the investor would recognize a larger taxable capital gain, or a smaller capital loss, on the sale or other disposition of the note. If an investor elects to amortize and deduct premium, the election will apply to all of the investor's debt investments and not just to the notes. If an investor purchases in a secondary market transaction a note which was originally issued with original issue discount for an amount which is less than the sum of all amounts payable on the note after the purchase date other than payments of qualified stated interest but in excess of its adjusted issue price, I.E., the original issue price plus any accrued original issue discount as those terms are described above, the excess is referred to for tax purposes as "ACQUISITION PREMIUM." The investor would be permitted to reduce the daily portions of original issue discount the investor would otherwise include in income by an amount corresponding to the ratio of (1) the excess of the investor's purchase price for the note over the adjusted issue price of the note as of the purchase date to (2) the excess of all amounts payable on the 75 note after the purchase date, other than payments of qualified stated interest, over the note's adjusted issue price. ELECTION TO TREAT ALL INTEREST AS ORIGINAL ISSUE DISCOUNT. An investor may elect to include in gross income all interest that accrues on a note using the constant-yield method described above under the heading "PURCHASE AT A DISCOUNT" with modifications described below. For purposes of this election, interest includes qualified stated interest, original issue discount, de minimis original issue discount, market discount, de minimis market discount, and unstated interest, as adjusted by any amortizable bond premium or acquisition premium. In applying the constant-yield method to a note with respect to which this election has been made, the issue price of the note will equal the electing investor's adjusted basis in the note immediately after its acquisition. The issue date of the note will be the date of its acquisition by the electing investor, and no payments on the note will be treated as payments of qualified stated interest. This election, if made, may not be revoked without the consent of the Internal Revenue Service. Investors should consult with their own tax advisors as to the effect in their circumstances of making this election. INFORMATION REPORTING AND BACKUP WITHHOLDING. The trust or an agent acting on its behalf will be required to report annually to the Internal Revenue Service, and to each non-corporate noteholder, the amount of interest paid on the notes for each calendar year. Each non-corporate noteholder, other than noteholders who are not subject to the reporting requirements, will be required to provide, under penalties of perjury, a certificate, Form W-9, containing the noteholder's: (1) name, (2) address, (3) correct federal taxpayer identification number, and (4) a statement that the noteholder is not subject to backup withholding. Should a non-exempt noteholder fail to provide the required certification, the trust will be required to withhold or cause to be withheld 31% of the interest otherwise payable to the noteholder and remit the withheld amounts to the Internal Revenue Service as a credit against the noteholder's federal income tax liability. FOREIGN NOTEHOLDERS. Special tax rules apply to the purchase of notes by foreign persons. For U.S. tax purposes, foreign investors include any person who is not (1) a citizen or resident of the United States, (2) a corporation, partnership or other entity organized in or under the laws of the United States, any state thereof or the District of Columbia, (3) an estate the income of which is includible in gross income for U.S. federal income tax purposes, regardless of its source, 76 (4) a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust, or (5) a trust that has a valid election in effect under applicable United States Treasury Regulations to be treated as a United States person. Interest paid or accrued to a foreign investor that is not effectively connected with the conduct of a trade or business within the United States by the investor will generally be considered "portfolio interest" and not be subject to United States federal income tax or withholding tax as long as the foreign investor is not actually or constructively a 10 percent shareholder of the trust or a controlled foreign corporation related to the trust through stock ownership. Additionally, the foreign investor must provide or have a financial institution provide on its behalf to the trust or paying agent an appropriate statement or Form W-8 (or successor form), that is signed under penalties of perjury, certifying that the beneficial owner of the note is a foreign person and providing that foreign person's name and address. If the information provided in this statement changes, the foreign investor must provide a new Form W-8 (or successor form) within 30 days. If the foreign investor fails to satisfy these requirements so that interest on the investor's notes was not portfolio interest, interest payments would be subject to United States federal income and withholding tax at a rate of 30% unless reduced or eliminated under an applicable income tax treaty. To qualify for any reduction as the result of an income tax treaty, the foreign investor must provide the paying agent with Form 1001 (or successor form). The realization of any capital gain on the sale or other taxable disposition of a note by a foreign investor will be exempt from United States federal income and withholding tax, provided that (1) the gain is not effectively connected with the conduct of a trade or business in the United States by the investor, and (2) in the case of an individual foreign investor, the investor is not present in the United States for 183 days or more during the taxable year. If an individual foreign investor is present in the U.S. for 183 days or more during the taxable year, the gain on the sale or other disposition of the notes could be subject to a 30% withholding tax unless reduced by treaty. If the interest, gain or income on a note held by a foreign investor is effectively connected with the conduct of a trade or business in the United States by the investor, the noteholder will be subject to United States federal income tax on the interest, gain or income at regular federal income tax rates. At the same time, the noteholder may be exempt from withholding tax if a Form 4224 (or successor form) is furnished to the paying agent. In addition, if the 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, as adjusted for certain items, unless it qualifies for a lower rate under an applicable tax treaty. Regardless of when a foreign investor acquired a note, recently adopted Treasury Regulations will become effective for note payments made after December 31, 2000. The new regulations make certain changes to the withholding, backup withholding and information reporting rules just described and attempt to unify certification requirements and modify reliance standards. It is suggested that prospective investors consult their own tax advisors regarding the new regulations. If a foreign investor fails to provide necessary documentation to the trust or its paying agent regarding the investor's taxpayer identification number or certification of exempt status, a 31% backup withholding tax may be applied to note payments to that investor. Any amounts withheld under the 77 backup withholding rules will be allowed as a refund or a credit against the foreign investor's U.S. federal income tax liability provided the required information is furnished to the Internal Revenue Service. POSSIBLE ALTERNATIVE TREATMENTS OF THE NOTES. If, contrary to the opinion of Winston & Strawn, the Internal Revenue Service successfully asserted that one or more of the notes did not represent debt for federal income tax purposes, the notes might be treated as equity interests in the trust. If so treated, the trust might be a publicly traded partnership taxable as a corporation with the adverse consequences described above (and the resulting taxable corporation would not be able to reduce its taxable income by deductions for interest expense on notes recharacterized as equity). See "-OWNER TRUSTS-TAX CHARACTERIZATION OF OWNER TRUSTS" in this prospectus. Alternatively, it is possible that the trust might be treated as a partnership that would not be taxable as a corporation. However, treatment of the notes as equity interests in a partnership could have adverse tax consequences to certain holders. For example, income to certain tax-exempt entities (including pension funds) could constitute "UNRELATED BUSINESS TAXABLE INCOME;" income to foreign holders generally would be subject to U.S. tax and U.S. tax return filing and withholding requirements; individual holders might be subject to certain limitations on their ability to deduct their share of trust expenses; and income from the trust's assets would be taxable to noteholders without regard to whether cash distributions are actually made from the trust or any particular noteholder's method of accounting. TAX TREATMENT OF INVESTORS IN CERTIFICATES TREATMENT OF TRUST AS A PARTNERSHIP. As mentioned above, in any case where the trust issues certificates to multiple owners, the trust will be treated by the depositor as a partnership for federal income tax purposes. The depositor and the servicer will agree, and each certificateholder will agree by its purchase of certificates, to treat the trust as a partnership for purposes of federal and state income tax, franchise tax and any other tax measured in whole or in part by income, with the assets of the partnership being the assets held by the trust, the partners of the partnership being the certificateholders, and the notes being debt of the partnership. The trust, the depositor, and the certificateholders will take all necessary actions, if any, and refrain from taking any inconsistent actions, so as to ensure that the trust will be treated as a partnership under the final Treasury Regulations which allow an entity to elect status as a partnership. A variety of alternative characterizations are possible. For example, because the certificates have certain features characteristic of debt, the certificates might be considered debt of the depositor or the trust. Any such characterization should not result in materially adverse tax consequences to certificateholders as compared to the consequences from treatment of the certificates as equity in a partnership, described below. The following discussion assumes that the certificates represent equity interests in a partnership and that all payments on the certificates are denominated in U.S. dollars. PARTNERSHIP TAXATION. As a partnership, the trust will not be subject to federal income tax. Rather, each certificateholder will be required to separately take into account such holder's allocated share of income, gains, losses, deductions and credits of the trust. The trust's income will consist primarily of interest and finance charges earned on the contracts owned by the trust (including appropriate adjustments for any market discount, original issue discount and bond premium), any yield supplement deposits and any gain upon collection or disposition of the contracts. The trust's deductions will consist primarily of interest accruing with respect to the notes, servicing and other fees, and losses or deductions upon collection or disposition of the contracts. 78 The tax items of a partnership are allocable to the partners in accordance with the applicable federal income tax laws and the partnership agreement (I.E., the trust agreement and related documents). The trust agreement will provide, in general, that the certificateholders will be allocated taxable income of the trust for each month equal to the sum of (1) the interest that accrues on the certificates in accordance with their terms for such month, including interest accruing at the pass-through rate for such month and interest on amounts previously due on the certificates but not yet distributed; (2) any trust income attributable to discount on the contracts that corresponds to any excess of the principal amount of the certificates over their initial issue price; (3) monthly prepayment premium payable to the certificateholders; and (4) any other amounts of income payable to the certificateholders for the month including, for example, any yield supplement deposits. That allocation of income will be reduced by any amortization by the trust of premium on contracts that corresponds to any excess of the issue price of certificates over their principal amount. All remaining taxable income of the trust will be allocated to the trust depositor. Based on the economic arrangement of the parties, this approach for allocating trust income should be permissible under the applicable Treasury Regulations, although no assurance can be given that the Internal Revenue Service would not require a greater amount of income to be allocated to certificateholders. Certificateholders may be allocated income equal to the entire pass-through rate plus the other items described above, even though the trust might not have sufficient cash to make current cash distributions equal to that amount. In that situation, cash basis holders will in effect be required to report income from the certificates on the accrual basis and certificateholders may become liable for taxes on trust income even if they have not received cash from the trust to pay such taxes. In addition, because tax allocations and tax reporting will be done on a uniform basis for all certificateholders, but certificateholders may be purchasing certificates at different times and at different prices, certificateholders may be required to report on their tax returns taxable income that is greater or less than the amount reported to them by the trust. See the discussion below under "-ALLOCATIONS BETWEEN TRANSFERORS AND TRANSFEREES." Most or all of the taxable income allocated to a certificateholder that is a tax-exempt entity (including an individual retirement account) will constitute "UNRELATED BUSINESS TAXABLE INCOME" generally taxable to such a holder for federal income tax purposes. With respect to any certificateholder who is an individual, an individual taxpayer's share of certain expenses of the trust (including fees to the servicer, but not interest expense) would be miscellaneous itemized deductions. Such deductions might be disallowed to the individual in whole or in part and might result in such holder being taxed on an amount of income that exceeds the amount of cash actually distributed to such holder over the life of the trust. The trust will make all tax calculations relating to income and allocations to certificateholders on an aggregate basis with respect to the entire pool of contracts owned by the trust. If the Internal Revenue Service were to require that such calculations be made separately for each contract, the trust might be required to incur additional expense but it is believed that there would not be a material adverse effect on certificateholders. DISCOUNT AND PREMIUM. It is believed that the contracts will not be issued with original issue discount, and, therefore, the trust should not have income due to the accrual of original issue discount. However, the purchase price paid by the trust for contracts may be greater or less than the remaining principal balance of the contracts at the time of purchase. If so, the contracts will have been acquired at a 79 premium or market discount as the case may be. As indicated above, the trust will make this calculation on an aggregate basis with respect to the entire pool of contracts owned by the trust, but might be required to recompute it on a contract-by contract basis. If the trust acquires the contracts at a market discount or premium, it will elect to include any such discount in income currently as it accrues over the life of such contracts or to offset any such premium against interest income on such contracts. See "-TAX TREATMENT OF INVESTORS IN NOTES-PURCHASE AT A DISCOUNT" and "-PURCHASE AT A PREMIUM" in this prospectus. As indicated above, a portion of such market discount income or premium deduction may be allocated to certificateholders. DISTRIBUTIONS TO CERTIFICATEHOLDERS. Certificateholders generally will not recognize gain or loss with respect to distributions from the trust. A certificateholder will recognize gain, however, to the extent that any money distributed exceeds the certificateholder's adjusted basis in the certificates (as described below under "-DISPOSITION OF CERTIFICATES") immediately before the distribution. If a certificateholder is required to recognize an aggregate amount of income (not including income attributable to disallowed itemized deductions described above) over the life of the certificates that exceeds the aggregate cash distributions with respect thereto, the amount of that excess will generally give rise to a capital loss upon the retirement of the certificates. Any gain or loss will generally be long-term gain or loss if the holding period of the certificate is more than one year. SECTION 708 TERMINATION. Under Section 708 of the Code, if 50% or more of the outstanding equity interests in the trust are sold or exchanged within any 12-month period, the trust will be deemed to terminate and then be reconstituted for federal income tax purposes. If such a termination occurs, the assets of the terminated trust (the "old trust") are deemed to be constructively contributed to a reconstituted trust (the "new trust") in exchange for interests in the new trust. Such interests would be deemed distributed to the partners, or certificateholders, of the old trust in liquidation thereof, which would not constitute a sale or exchange. Accordingly, if the sale of the trust's interests terminated the partnership under Section 708 of the Code, the certificateholder's basis in its ownership interest would not change. The trust's taxable year would also terminate as a result of a constructive termination and, if the certificateholder was on a different taxable year than the trust, the termination could result in the bunching of more than twelve months of the trust's income or loss in the certificateholder's income tax return for the year in which the trust was deemed to terminate. DISPOSITION OF CERTIFICATES. Generally, capital gain or loss will be recognized on the sale of certificates, so long as the certificate is a "capital asset" in the hands of the investor, in an amount equal to the difference between the amount realized and the holder's tax basis in the certificates sold. A certificateholder's tax basis in a certificate will generally equal the holder's cost increased by the holder's share of trust income (that was includible in the certificateholder's income) and decreased by any distributions received with respect to such certificate. In addition, both the tax basis in the certificates and the amount realized on a sale of a certificate would include the holder's share of the notes and other liabilities of the trust. A holder acquiring certificates at different prices may be required to maintain a single aggregate adjusted tax basis in all of the certificates, and, upon sale or other disposition of some of the certificates, allocate a portion of that aggregate tax basis to the certificates sold (rather than maintaining a separate tax basis in each certificate for purposes of computing gain or loss on a sale of that certificate). Any gain on the sale of a certificate attributable to the holder's share of unrecognized accrued market discount on the contracts owned by the trust would generally be treated as ordinary income to the 80 holder and would give rise to special tax reporting requirements. The trust does not expect to have any other assets that would give rise to such special reporting requirements. Thus, to avoid those special reporting requirements, the trust will elect to include market discount in income as it accrues as previously stated. ALLOCATIONS BETWEEN TRANSFERORS AND TRANSFEREES. In general, the trust's taxable income and losses will be determined monthly and the tax items for a particular calendar month will be apportioned among the certificateholders in proportion to the principal amount of certificates owned by them as of the close of the last day of the month. As a result, a holder purchasing certificates may be allocated tax items (which will affect its tax liability and tax basis) attributable to periods before the actual transaction. The use of such a monthly convention may not be permitted by existing regulations. If a monthly convention is not allowed (or only applies to transfers of less than all of the partner's interest), taxable income or losses of the trust might be reallocated among the certificateholders. The depositor will be authorized to revise the trust's method of allocation between transferors and transferees to conform to a method permitted by future regulations. SECTION 754 ELECTION. In the event that a certificateholder sells its certificates at a profit or loss, the purchasing certificateholder will have a higher or lower basis in the certificates than the selling certificateholder had. The tax basis of the trust's assets will not be adjusted to reflect that higher or lower basis unless the trust were to file an election under Section 754 of the Code. In order to avoid the administrative complexities that would be involved in keeping accurate accounting records, as well as potentially onerous information reporting requirements, the trust will not make such election. As a result, certificateholders might be allocated a greater or lesser amount of trust income than would be appropriate based on their own purchase price for certificates. ADMINISTRATIVE MATTERS. The trustee is required to keep or have kept complete and accurate books of the trust. Such books will be maintained for financial reporting and tax purposes on an accrual basis and the fiscal year of the trust will be the calendar year. The trustee will file a partnership information return (Form 1065) with the Internal Revenue Service for each taxable year of the trust and will report each certificateholder's allocable share of items of trust income and expense to holders and the Internal Revenue Service on Schedule K-l. The trustee will provide the Schedule K-1 information to nominees that fail to provide the trust with the information statement described below and such nominees will be required to forward such information to the beneficial owners of the certificates. Generally, holders must file tax returns that are consistent with the information return filed by the trust or be subject to penalties unless the holder notifies the Internal Revenue Service of all such inconsistencies. Under Section 6031 of the Code, any person that holds certificates as a nominee at any time during a calendar year is required to furnish the trust with a statement containing certain information on the nominee, the beneficial owners and the certificates so held. Such information includes (1) the name, address and taxpayer identification number of the nominee and (2) as to each beneficial owner (a) the name, address and identification number of such person, (b) whether such person is a United States person, a tax-exempt entity, a foreign government or an international organization, or any wholly owned agency or instrumentality of either of the foregoing, and (c) certain information on certificates that were held, bought or sold on behalf of such person throughout the year. In addition, brokers and financial institutions that hold certificates through a nominee are required to furnish directly to the trust information as to themselves and their ownership of certificates (a registered clearing agency is not required to furnish any such information statements to the trust). The information referred to above for 81 any calendar year must be furnished to the trust on or before the following January 31. Nominees, brokers and financial institutions that fail to provide the trust with the information described above may be subject to penalties. The trust depositor will be designated as the tax matters partner for the trust in the trust agreement and, as such, will be responsible for representing the certificateholders in any dispute with the Internal Revenue Service. The federal income tax laws provide for administrative examination of a partnership as if the partnership were a separate and distinct taxpayer. Generally, the statute of limitations for partnership items does not expire before three years after the date on which the partnership information return is filed. Any adverse determination following an audit of the return of the trust by the appropriate taxing authorities could result in an adjustment of the returns of the certificateholders, and, under certain circumstances, a certificateholder may be precluded from separately litigating a proposed adjustment to the items of the trust. An adjustment could also result in an audit of a certificateholder's returns and adjustments of items not related to the income and losses of the trust. BACK-UP WITHHOLDING. Distributions made on the certificates and proceeds from the sale of the certificates will be subject to a back-up withholding tax of 31% if, in general, the certificateholder fails to comply with certain identification procedures, unless the holder is an exempt recipient under applicable tax law provisions. See "-TAX TREATMENT OF INVESTORS IN NOTES-INFORMATION REPORTING AND BACKUP WITHHOLDING" in this prospectus. FOREIGN CERTIFICATEHOLDERS. It is not clear whether the trust would be considered to be engaged in a trade or business in the United States for purposes of federal withholding taxes with respect to non-U.S. persons because there is no clear authority dealing with that issue under facts substantially similar to those described herein. Nevertheless, the trust will withhold as if it were so engaged in order to protect the trust from possible adverse consequences of a failure to withhold. The trust expects to withhold on the portion of its taxable income that is allocable to foreign certificateholders, as if such income were effectively connect to a U.S. trade or business, at a rate of 35% for foreign holders that are taxable as corporations and 39.6% for all other foreign holders. Subsequent adoption of Treasury Regulations or the issuance of other administrative pronouncements may require the trust to change its withholding procedures. In determining a holder's withholding status, the trust may generally rely on Form W-8, Form W-9 (or successor forms) or the holder's certification of nonforeign status signed under penalties of perjury. Each foreign holder might be required to file a U.S. individual or corporate income tax return (including, in the case of a corporation, the branch profits tax) on its share of the trust's income. Each foreign holder must obtain a taxpayer identification number from the Internal Revenue Service and submit that number to the trust on Form W-8 (or successor form) in order to assure appropriate crediting of the taxes withheld. A foreign holder generally would be entitled to file with the Internal Revenue Service a claim for refund with respect to taxes withheld by the trust, taking the position that no taxes were due because the trust was not engaged in a U.S. trade or business (although no assurance can be given as to the prospects for success of the refund claim). However, even if such a position is successful, interest payments made (or accrued) to a certificateholder who is a foreign person may be considered to be guaranteed payments, but only to the extent such payments are determined without regard to the income of the trust. It is unclear whether the Internal Revenue Service would agree with that characterization. If these interest payments are properly characterized as guaranteed payments, then the interest will not constitute "PORTFOLIO INTEREST." As a result, certificateholders will be subject to 30% U.S. withholding tax, unless reduced or eliminated pursuant to an applicable treaty. In such case, a foreign 82 holder would only be entitled to claim a refund for that portion of the taxes in excess of the taxes that should be withheld with respect to the guaranteed payments. GRANTOR TRUSTS This summary of material federal income tax consequences with respect to the issuance of certificates by a grantor trust is divided into two parts. The first part describes characterization of the trust as a grantor trust. The second part describes taxation of an investor in certificates issued by a grantor trust. TAX CHARACTERIZATION OF GRANTOR TRUSTS Winston & Strawn, as federal tax counsel, will deliver its opinion that a trust structured as a grantor trust will be classified for federal income tax purposes as a grantor trust and not as an association (or a publicly traded partnership) taxable as a corporation and that, subject to the discussion below under "-STRIPPED BONDS AND STRIPPED COUPONS", each certificateholder will be treated for federal income tax purposes as the owner of a pro rata undivided interest in the income and assets of the trust. The opinion of Winston & Strawn does not foreclose the possibility of a contrary determination by the Internal Revenue Service or by a court or of a contrary position by the Internal Revenue Service or the Treasury Department in regulations or rulings issued in the future. For federal income tax purposes, the trust will be deemed to have acquired the following assets: (1) the principal of each contract, plus a portion of the interest due on each contract (the "TRUST STRIPPED BONDS"); (2) the portion of the interest due on each contract not allocable to the Trust Stripped Bonds or retained by the depositor (the "TRUST STRIPPED COUPONS"); (3) the right to receive any yield supplement deposits; (4) the proceeds of certain insurance policies on the financed assets; (5) rights under the trust agreement and (6) rights under the security agreement in favor of the trust securing the depositor's obligation to purchase subsequent contracts and deliver them to the trust. Although a grantor trust may have certain rights with respect to a reserve fund, pre-funding account or interest reserve account, such accounts would not be assets of the trust. It is possible, for federal income tax purposes, that the grantor trust may be viewed as owning a single debt obligation having a principal amount equal to the total stated principal amount of the entire pool of contracts and an interest rate equal to the pass-through rate. Accordingly, the owners of certificates would be viewed as owning an undivided interest in that single debt obligation. In that case, the tax consequences to the certificate owners would be the same as owners of notes owned by a trust structured as an owner trust described above under the heading "-OWNER TRUSTS - TAX TREATMENT OF INVESTORS IN NOTES." The remainder of the discussion in this prospectus assumes that a grantor trust certificateholder will be treated as owning an interest in each contract, a portion of the interest payable on each contract, any right to receive yield supplement deposits, and any other assets of the trust. However, for administrative convenience, the servicer will report information to investors and to the Internal Revenue Service on an aggregate basis (as though all of the contracts and the rights to payments under the yield supplement agreement were a single obligation). The amount and, in some instances, character, of the income reported to a grantor trust certificateholder may differ under this method for a particular period from that which would be reported if income were reported on a precise asset-by-asset basis. 83 TAX TREATMENT OF INVESTORS CHARACTERIZATION OF INVESTMENT. As mentioned above, each grantor trust certificateholder will be treated as the owner of a pro rata undivided interest in each of the contracts in the trust, any right to receive yield supplement deposits, and any other trust property. Any amounts received by a grantor trust certificateholder in lieu of amounts due with respect to any contract because of a default or delinquency in payment will be treated for federal income tax purposes as having the same character as the payments they replace. In each case where the interest rate on a contract exceeds the sum of the certificate pass-through rate plus the servicing fee rate, for federal income tax purposes, the depositor will be treated as having retained a fixed portion of the interest due on the contract equal to the difference between (1) the interest rate on each contract and (2) the sum of the pass-through rate and the servicing fee rate. The depositor's retained yield with respect to the contracts will be treated as "stripped coupons" within the meaning of Section 1286 of the Code and the contracts will be treated as "stripped bonds." See "-STRIPPED BONDS AND STRIPPED COUPONS" below. Each grantor trust certificateholder will be required to report on its federal income tax return in accordance with that certificateholder's method of accounting its pro rata share of the entire income from the contracts in the trust represented by certificates, including interest, original issue discount, prepayment fees, assumption fees, any gain recognized upon an assumption, late payment charges received by the servicer and any gain recognized upon collection or disposition of the contracts (but not including any portion of the depositor's retained yield). A grantor trust certificateholder will also be required to report under its usual method of accounting any payments received under any yield supplement agreement to the extent that these payments are treated as income. Each grantor trust certificateholder will be entitled to deduct its pro rata share of servicing fees, prepayment fees, assumption fees, any loss recognized upon an assumption, and late payment charges retained by the servicer, provided that those amounts are reasonable compensation for services rendered to the trust. Certificateholders that are individuals, estates or trusts will be entitled to deduct their share of expenses only to the extent those expenses exceed two percent of its adjusted gross income. Grantor trust certificateholders who are individuals may be subject to additional deduction limitations based on adjusted gross income. A grantor trust certificateholder using the cash method of accounting must take into account its pro rata share of income and deductions as and when collected by or paid to the servicer. A grantor trust certificateholder using an accrual method of accounting must take into account its pro rata share of income and deductions as they become due or are paid, whichever is earlier. Because (1) interest accrues on the contracts over differing monthly periods and is paid in arrears and (2) interest collected on a contract generally is paid to certificateholders in the following month, the amount of interest accruing to a grantor trust certificateholder during any calendar month will not equal the interest distributed in that month. PURCHASE PRICE ALLOCATION. A certificateholder must allocate the cost of its certificates among its allocable share of each of the separate assets of the trust, in accordance with the proportion of the relative fair market values of the assets as of the date the holder acquired its certificate, in order to determine its initial tax basis for its pro rata portion of each asset held by the trust. For this purpose, a certificateholder may treat the trust's rights in the security interests, the individual insurance contracts, and other rights the 84 trust may have which provide credit enhancement as part of the contracts such that no separate allocation of the certificate cost and determination of basis must be made to these rights. In addition to the contracts however, the purchase price for certificates should be allocated to the grantor trust certificateholder's undivided interest in accrued but unpaid interest, amounts collected at the time of purchase but not distributed, and, perhaps, rights to receive yield supplement deposits. As a result, the portion of the purchase price allocable to the grantor trust certificateholder's undivided interest in the contracts may be decreased. The allocation of purchase price among the assets is important for purposes of determining the amount of gain or loss recognized by a certificateholder when the trust disposes of a contract and for calculating discount or premium with respect to the contracts, all as discussed below. STRIPPED BONDS AND STRIPPED COUPONS. Although the tax treatment of stripped bonds is not entirely clear, based on recent guidance from the Internal Revenue Service, each purchaser of a grantor trust certificate will be treated as the purchaser of a stripped bond and coupon, to the extent that the contracts consist of contracts having an interest rate in excess of the sum of the pass-through rate plus the servicing fee rate. The stripped bond generally should be treated as a single debt instrument issued on the day it is purchased for purposes of calculating any original issue discount. Generally, under applicable Treasury Regulations, if the discount on a stripped bond is larger than a de minimis amount (one-fourth of one percent, or 0.25%, of the bond's principal amount or other stated redemption price at maturity multiplied by the full number of years included in determining the weighted average maturity of the bonds) that stripped bond will be considered to have been issued with original issue discount. See "-OWNER TRUSTS-TAX TREATMENT OF INVESTORS IN NOTES-ORIGINAL ISSUE DISCOUNT." Although the matter is not entirely clear, each certificateholder's share of the interest income on the contracts at the sum of the pass-through rate and the fee servicing rate will be treated as "QUALIFIED STATED INTEREST." The trustee will treat each holder's share of the interest income in this manner for tax information reporting purposes. As a result, the amount of original issue discount for each certificateholder will equal the amount, if any, by which the portion of the certificate purchase price allocable to the contracts is less than the remaining principal balance of those contracts. Generally, a certificateholder that acquires an undivided interest in contracts constituting stripped bonds that have original issue discount (referred to in this discussion as "stripped contracts") must include in gross income the sum of the "daily portions" of the original issue discount for each day on which it owns a certificate, including the date of purchase but excluding the date of disposition. In the case of an original grantor trust certificateholder, the daily portions of original issue discount with respect to the stripped contracts generally would be determined as follows. A calculation will be made of the portion of original issue discount that accrues on those contracts during each successive monthly accrual period (or shorter period in respect of the date of original issue or the final payment date). This will be done, in the case of each full monthly accrual period, by adding (1) the present value of all remaining payments to be received on the stripped contracts under the prepayment assumption used in respect of the contracts and (2) any payments received during that accrual period, and subtracting from that total the "ADJUSTED ISSUE PRICE" of the stripped contracts at the beginning of that accrual period. The adjusted issue price of the stripped contracts at the beginning of the first accrual period is the amount of the purchase price paid by the certificateholder for the certificate that is allocable to those contracts. The adjusted issue price of the stripped contracts at the beginning of a subsequent accrual period is the adjusted issue price at the beginning of the immediately preceding accrual period plus the amount of original issue discount allocable to that accrual period and reduced by the amount of any payment on the stripped contracts 85 (other than qualified stated interest) made at the end of or during that accrual period. The original issue discount accruing during that accrual period will then be divided by the number of days in the period to determine the daily portion of original issue discount for each day in the period. With respect to an initial accrual period shorter than a full monthly accrual period, the daily portions of original issue discount must be determined according to a reasonable method, provided that the method is consistent with the method used to determine the yield to maturity of the stripped contracts. For purposes of calculating the daily portion of original issue discount to be accrued as income, the method of determining yield to maturity is not clear, and in particular it is not clear whether prepayments on the underlying contracts should be taken into account in determining such yield. The method of calculating the accrual of original issue discount as described above will cause the accrual of original issue discount to either increase or decrease (but never below zero) in any given accrual period to reflect the fact that prepayments are occurring at a faster or slower rate than the prepayment assumption used in respect of the stripped contracts. Subsequent purchasers that purchase interests in stripped contracts at more than a de minimis discount should consult their tax advisors with respect to the proper method to accrue that original issue discount. PREMIUM. A certificateholder that acquires an interest in contracts at a premium over the stated redemption price at maturity of the contracts may elect to amortize that premium under a constant interest method. A premium would occur if the purchase price for a certificate exceeded the holder's proportionate share of the remaining payments due on the contracts Amortizable premium will be treated as an offset to interest income recognized by the holder on its grantor trust certificate. However, the holder's tax basis for the grantor trust certificate will be reduced to the extent that amortizable premium is claimed as a deduction to offset interest payments. A certificateholder that makes this election for a grantor trust certificate that is acquired at a premium will be deemed to have made an election to amortize bond premium with respect to all debt instruments having amortizable bond premium that the certificateholder holds during the year of the election or thereafter. It is not clear whether a reasonable prepayment assumption should be used in computing amortization of premium allowable as a deduction. If a premium is not subject to amortization using a reasonable prepayment assumption, the holder of a certificate acquired at a premium should recognize a loss if a contract is prepaid in full, equal to the difference between the portion of the prepaid principal amount of that contract that is allocable to the grantor trust certificate and the portion of the adjusted basis of the certificate that is allocable to that contract. On the other hand, if a reasonable prepayment assumption is used in calculating the amount of amortizable premium, it appears that a loss would be available, if at all, only if prepayments occur at a rate faster than the reasonable assumed prepayment rate. It is not clear whether any other adjustments would be required to reflect differences between an assumed prepayment rate and the actual rate of prepayments. MARKET DISCOUNT. Generally, all discount on an interest in stripped contracts will be treated as original issue discount under the stripped bond rules of the Code, and the rules relating to market discount on bonds will not apply. However, if the difference between the interest rate on the contracts and the pass-through rate on the certificates were determined to constitute reasonable compensation for services rendered to the trust, then the stripped bond rules described above should not apply. In that event, a certificateholder will be subject to the market discount rules to the extent that its undivided interest in a contract is considered to have been purchased at a "MARKET DISCOUNT." Generally, the amount of market discount is equal to the excess of the portion of the principal amount of a contract allocable to a holder over that holder's tax basis (i.e., the portion of the certificate purchase price allocable to that contract). At 86 the present time there is no express authority for determining whether market discount exists by reference to the entire pool of contracts rather than on a contract-by-contract basis. Market discount with respect to a contract will be considered to be zero if the amount allocable to the contract is less than one-fourth of one percent (0.25%) of the stated redemption price at maturity of the contracts multiplied by the weighted average maturity remaining after the date of purchase. Any principal payment (whether a scheduled payment or a prepayment) or any gain on disposition of a market discount instrument is required to be treated as ordinary income up to the amount of the accrued market discount at that time. The amount of accrued market discount for purposes of determining the tax treatment of subsequent principal payments or dispositions of the market discount debt instrument is reduced by the amount so treated as ordinary income. Market discount will generally be considered to accrue ratably, unless a certificateholder elects to accrue on a constant interest method. In addition, special rules may apply to the determination of the accrual of market discount where the principal of an instrument is payable in more than one installment. A holder's election to include market discount in income currently, once made, applies to all market discount obligations acquired by the holder on or after the first taxable year to which the election applies and may not be revoked without the consent of the Internal Revenue Service. A holder who acquired a grantor trust certificate at a market discount may be required to defer a portion of its interest deductions for the taxable year attributable to any indebtedness incurred or continued to purchase or carry that certificate. For these purposes, the de minimis rule referred to above applies. Any deferred interest expense would not exceed the market discount that accrues during that taxable year and is, in general, allowed as a deduction not later than the year in which the market discount is includible in income. If the holder elects to include market discount in income currently as it accrues on all market discount instruments acquired by the holder in that taxable year or thereafter, the interest expense deferral rule will not apply. Because Treasury Regulations implementing the market discount rules have not yet been issued, it is suggested that investors consult their own tax advisors regarding the application of these rules and the advisability of making the election to accrue market discount. ELECTION TO TREAT ALL INTEREST AS ORIGINAL ISSUE DISCOUNT. The original issue discount regulations permit a certificateholder to elect to accrue all interest and discount (including de minimis discount), offset by any premium, in income as interest based on a constant yield method. If that election were to be made with respect to a grantor trust certificate with market discount, the grantor trust certificateholder would be deemed to have made an election to include in income currently market discount with respect to all other debt instruments having market discount that the certificateholder acquires during the year of the election or thereafter. Similarly, a certificateholder that makes this election for a certificate that is acquired at a premium will be deemed to have made an election to amortize bond premium with respect to all debt instruments having amortizable bond premium that the certificateholder owns or acquires. The election to accrue interest, discount and premium on a constant yield method with respect to a grantor trust certificate is irrevocable except with the approval of the Internal Revenue Service. SALE OR EXCHANGE OF A CERTIFICATE. Sale or exchange of a grantor trust certificate prior to its maturity will result in the recognition by the owner of gain or loss equal to the difference, if any, between the amount received and the owner's adjusted basis in the certificate. The adjusted basis generally will equal the seller's purchase price for the certificate, increased by any accrued market discount or original issue discount previously included in the seller's gross income with respect to the certificate and reduced 87 by the amount of any previously amortized premium andby the amount of any payments on the certificate, other than payments of qualified stated interest, previously received by the seller. That gain or loss will be capital gain or loss to an owner for which a grantor trust certificate is a "CAPITAL ASSET" and will be long-term or short-term depending on whether the certificate has been owned for the long-term capital gain holding period (currently more than one year). FOREIGN CERTIFICATEHOLDERS. Interest or discount income attributable to contracts which is received by a foreign certificateholder will generally not be subject to the normal 30% withholding tax imposed with respect to such payments, provided that (1) the foreign certificateholder does not own, directly or indirectly, 10% or more of, and is not a controlled foreign corporation related to, the depositor and (2) the foreign holder fulfills certain certification requirements. Under those requirements, the holder must certify, under penalty of perjury, that it is not a "UNITED STATES PERSON" and provide its name and address on Form W-8 (or successor form). For this purpose, United States person generally means (a) a citizen or resident of the United States, (b) a corporation, partnership or other entity created or organized in or under the laws of the United States or any political subdivision thereof, (c) an estate the income of which is subject to United States federal income taxation regardless of its source, (d) a trust if a court within the United States is able to exercise primary jurisdiction over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust, or (e) a trust that has a valid election in effect under applicable United States Treasury Regulations to be treated as a United States person. Gain realized upon the sale of a certificate by a foreign certificateholder generally will not be subject to United States withholding tax. If, however, such interest or gain is effectively connected to the conduct of a trade or business within the United States by such foreign certificateholder (or in the case of gain if the certificateholder is an individual who is present in the United States for a total of 183 days or more during the taxable year in which such gain is realized), such holder will be subject to United States federal income tax thereon at the regular rates and, in addition, an investor that is a foreign corporation may be subject to a branch profits tax equal to 30% (or lower applicable treaty rate) of its "effectively connected earnings and profits" within the meaning of the Code for the taxable year, as adjusted for certain items. It is not entirely clear whether amounts received by a foreign certificateholder that are attributable to payments of yield supplement deposits received pursuant to any yield supplement agreement would not be subject to withholding tax. Potential investors who are not United States persons should consult their own tax advisors regarding the specific tax consequences to them of owning a certificate issued by a grantor trust. INFORMATION REPORTING AND BACKUP WITHHOLDING. The servicer will furnish or make available, within a reasonable time after the end of each calendar year, to each person who was a grantor trust certificateholder at any time during the year, the information that is deemed necessary or desirable to assist certificateholders in preparing their federal income tax returns, or to enable holders to make that information available to beneficial owners or financial intermediaries that hold grantor trust certificates as nominees on behalf of beneficial owners. If a non-exempt holder, beneficial owner, financial intermediary or other recipient of a payment on behalf of a non-exempt beneficial owner fails to supply a certified taxpayer identification number or if the Secretary of the Treasury determines that that person has not reported all interest and dividend income required to be shown on its federal income tax return, 31% backup withholding may be required with respect to any payments. Any amounts deducted and withheld from a payment to a recipient would be allowed as a credit against the recipient's federal income tax liability. 88 FASITS GENERAL DESCRIPTION OF FASIT Pursuant to legislation enacted by Congress in 1996, a new type of entity was created called a "financial asset securitization investment trust," or FASIT. On February 7, 2000, the Internal Revenue Service released proposed regulations regarding FASITs. As stated previously in this section of the prospectus under the caption "GENERAL", the discussion with respect to FASITs is based upon existing law, including the proposed FASIT regulations, all of which are subject to change, possibly with retroactive effect. Treatment of a trust as a FASIT is elective. The FASIT election will be made by attaching a statement to the income tax return for the owner of the "OWNERSHIP INTEREST" in the FASIT (as that interest is described below) for the taxable year that includes the startup day of the FASIT. The owner of the ownership interest may be the depositor or it may be an independent third party. There is no prescribed form for the settlement electing FASIT status. If, as is likely to be the case, an entity is formed to be the FASIT, the election statement must be signed by the person who would be responsible for signing the entity's tax return in the absence of FASIT treatment. On the other hand, if instead of a separate entity the FASIT election is only to apply to a segregated pool of assets, the election statement must be signed by each person who is the owner, for federal income tax purposes, of assets in the pool immediately before the startup day of the FASIT. If a FASIT election is made for a trust, the accompanying prospectus supplement will so indicate. For each trust for which one or more FASIT elections are to be made, Winston & Strawn, as federal tax counsel, is of the opinion that the trust, or one or more segregated pools of trust assets, will be treated as a FASIT assuming that there is (1) compliance with the terms of the pooling agreement (or similar governing documents pertaining to the acquisition of assets by the trust) and (2) compliance with any changes in the federal income tax laws pertaining to FASITs, including applicable provisions of the Code, the proposed FASIT regulations or other treasury regulations, or any judicial or administrative interpretations of the Code or regulations. The pooling agreement (or similar governing documents) will require that substantially all of the trust assets consist only of "PERMITTED ASSETS", as described below and also contains certain other restrictions necessary for the trust to be and continue to qualify as a FASIT. Based upon those same assumptions, tax counsel is of the opinion that each trust, or one or more segregated pools of trust assets, for which a FASIT election is made is organized, operated and will continue to operate in a manner so as to qualify for FASIT status. Although the Internal Revenue Service recently published regulations in proposed form with respect to FASITs, the regulations are only in proposed form and do not attempt to deal with all aspects of FASIT taxation. Accordingly, definitive statements cannot be made with respect to many aspects of the tax treatment of FASITs and the holders of certificates issued by FASITs. Investors should also note that the following FASIT discussion constitutes only a summary of the United States federal income tax consequences to FASIT certificateholders. With respect to each series of FASIT certificates, the related prospectus supplement will provide a detailed discussion regarding the federal income tax consequences associated with the particular transaction. FASIT REQUIREMENTS 89 A trust fund can qualify to elect FASIT status if it is not a "regulated investment company" as described in Section 851(a) of the Code, it issues only "regular interests" and one "ownership interest" (as described below), and substantially all of its assets are "permitted assets." For this purpose, permitted assets include (1) cash and cash equivalents, (2) any debt instrument that provides for interest payments which (A) are payable based on a fixed rate or certain variable rates, or (B) consist of a specified portion of the interest payments on the trust assets, which portion does not vary during the period such interest is outstanding, (3) foreclosure property, (4) certain hedging instruments (i.e., swap contracts, futures contracts, and guarantee arrangements) intended to hedge against the risks associated with being the obligor on FASIT regular interests, (5) contract rights to acquire debt instruments described in (2) above or hedges described in (4) above, and (6) any regular interest in a real estate mortgage investment conduit, or REMIC, or in another FASIT. The term "permitted asset" does not, however, include any debt instrument issued by the holder of the ownership interest or any person related to such holder. In order for substantially all of a FASIT's assets to consist of "permitted assets", the aggregate adjusted basis of assets held by the FASIT which are not permitted assets must be less than 1% of the aggregate adjusted basis of all of the FASIT's assets. The pooling agreement (or similar governing documents) for each FASIT will require that substantially all of the FASIT's assets consist of permitted assets at all times. However, there is the possibility that changes in the assets owned by the FASIT could adversely affect the ability of the FASIT to comply with the permitted asset requirement. Failure of the FASIT to comply with this requirement could cause it to lose FASIT status. However, certain mitigation provisions exist which may be available. The Code does not provide comprehensive rules describing the consequences of a cessation of FASIT status. Under the recently proposed regulations the owner of the FASIT ownership interest would be deemed to dispose of all of the FASIT's assets in a prohibited transaction and any gain would be subject to the prohibited transactions tax. The regular interests will be deemed satisfied for an amount which could generate cancellation of indebtedness income for investors in those FASIT regular interests. The FASIT which ceased to so qualify would, under the proposed rules, no longer be treated as a FASIT and would be prohibited from making a new FASIT election. The trust would then be classified under general tax principles. In that event, the trust could be treated as an association or other entity subject to an entity level tax. The regular interests owned by investors would also be reclassified under general tax principles. Any of the foregoing could adversely affect investors. On February 7, 2000, the Clinton Administration submitted to Congress its budget proposals for fiscal year 2001. The budget proposals include a provision which would impose on a FASIT secondary liability for the payment of federal income tax due from the owner of the FASIT's single ownership interest. As a result, if the proposal were to be enacted, the failure of the owner of the ownership interest to pay taxes due could cause the holders of regular interests to be adversely affected by reduced available funds for distribution by the FASIT. It is unclear at this time whether the Clinton budget proposal will be enacted. TAX TREATMENT OF INVESTORS FASIT interests will be classified as either FASIT regular interests, which generally will be treated as debt for federal income tax purposes, or a FASIT ownership interest, which is not treated as debt for such purposes, but rather represents the residual equity interest in a FASIT. The tax treatment of each type of interest is discussed briefly below. 90 REGULAR INTERESTS. The terms of a FASIT regular interest generally must satisfy the following requirements: (1) a stated maturity of no greater than 30 years, (2) a specified principal amount, (3) the issue price of the interest does not exceed 125% of its stated principal amount, (4) the yield to maturity of the interest is less than the applicable federal rate published by the Internal Revenue Service for the month of issue plus five percentage points, and (5) if it pays interest, such interest is payable at either (a) a fixed rate with respect to the principal amount of the regular interest or (b) certain permissible variable rates with respect to such principal amount. Regular interests which do not meet certain of those requirements, referred to as "high yield interests," may be issued by a FASIT but are permitted to be held by only certain types of investors such as domestic "C" corporations and other FASITs. Certain other limitations also apply to high yield interests, such as limits on the amount of FASIT interest income able to be offset by non-FASIT losses and deductions otherwise available to the owner of the interest. FASIT regular interests generally will be subject to the same federal income tax treatment as applies to debt instruments generally. See "-OWNER TRUSTS - TAX TREATMENT OF INVESTORS IN NOTES" in this prospectus. One significant difference, however, is that the holder of a FASIT regular interest must report income from its interest under the accrual method of accounting, even if it otherwise uses the cash receipts and disbursement method. The sale or other disposition of a FASIT regular interest generally will be subject to the same rules as apply to debt instruments generally. OWNERSHIP INTEREST. One interest issued by a trust electing to be treated as a FASIT will be designated as the sole ownership interest in the FASIT. The ownership interest need not have any particular economic characteristics. However, the ownership interest must be held directly at all times by an "ELIGIBLE CORPORATION" which includes a domestic "C" corporation that is subject to tax and is not a pass-thru entity for tax purposes such as a regulated investment company, real estate investment trust, real estate mortgage investment conduit, or cooperative. Because the ownership interest represents the residual equity interest in a FASIT, the holder of a FASIT ownership interest determines its taxable income by taking into account all assets, liabilities, and items of income, gain, deduction, loss and credit of the related FASIT. In general the character of the income to the holder of a FASIT ownership interest will be the same as the character of such income to the FASIT, except that any tax-exempt interest income taken into account by the holder of a FASIT ownership interest is treated as ordinary income. In determining that taxable income, the holder of a FASIT ownership interest must use a constant yield methodology and an accrual method of accounting and generally will be subject to the same rules of taxation for original issue discount, market discount, and amortizable premium as apply to debt instruments generally. See "-OWNER TRUSTS-TAX TREATMENT OF INVESTORS IN NOTES-PURCHASE AT A DISCOUNT" and "-PURCHASE AT A PREMIUM" in this prospectus. In addition, a holder of a FASIT ownership interest is subject to the same limitations on its ability to use non-FASIT losses and deductions to offset income from the FASIT ownership interest as are holders of FASIT high-yield regular interests. Losses on dispositions of a FASIT ownership interest generally will be disallowed as a deduction if within six months before or after the disposition, the seller of the interest acquires any other FASIT ownership interest. ERISA CONSIDERATIONS Section 406 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and Section 4975 of the Code prohibit a pension, profit-sharing or other employee benefit plan, as well as 91 individual retirement accounts and some types of Keogh Plans (each a "Benefit Plan"), from engaging in transactions involving "plan assets" with persons that are "parties in interest" under ERISA or "disqualified persons" under the Code with respect to that Benefit Plan. A violation of these "prohibited transaction" rules may result in an excise tax or other penalties and liabilities under ERISA and the Code for those persons. Employee benefit plans that are governmental plans (as defined in Section 3(32) of ERISA) and some church plans (as defined in Section 3(33) of ERISA) are not subject to ERISA requirements nor to Section 4975 of the Code. However, governmental plans may be subject to state or local laws that impose similar requirements. In addition, governmental plans and church plans that are "qualified" under Section 401(a) of the Code are subject to restrictions with respect to prohibited transactions under Section 503(a)(1)(B) of the Code, the sanction for violation being loss of "qualified" status. Certain exemptions from the prohibited transaction rules could be applicable to the purchase and holding of securities by a Benefit Plan depending on the type and circumstances of the plan fiduciary making the decision to acquire the securities. Potentially available exemptions would include, without limitation, Prohibited Transaction Class Exemption ("PTCE") 90-1, which exempts certain transactions involving insurance company pooled separate accounts; PTCE 95-60, which exempts certain transactions involving insurance company general accounts; PTCE 91-38, which exempts certain transactions involving bank collective investment funds; PTCE 84-14, which exempts certain transactions effected on behalf of a plan by a "qualified professional asset manager"; and PTCE 96-23, which exempts certain transactions effected on behalf of a plan by an "in-house asset manager." Insurance company general accounts should also discuss with their legal counsel the availability of exemptive relief under Section 401(c) of ERISA. A purchaser of securities should be aware, however, that even if the conditions specified in one or more exemptions are met, the scope of the relief provided by the applicable exemption or exemptions might not cover all acts that might be construed as prohibited transactions. ERISA also imposes certain duties on persons who are fiduciaries of Benefit Plans subject to ERISA, including the requirements of investment prudence and diversification, and the requirement that such a Benefit Plan's investments be made in accordance with the documents governing the Benefit Plan. Under ERISA, any person who exercises any authority or control respecting the management or disposition of the assets of a Benefit Plan is considered to be a fiduciary of such Benefit Plan. Benefit Plan fiduciaries must determine whether the acquisition and holding of securities and the operations of the trust would result in prohibited transactions if Benefit Plans that purchase the securities were deemed to own an interest in the underlying assets of the trust under the rules discussed below. There may also be an improper delegation of the responsibility to manage Benefit Plan assets if Benefit Plans that purchase the securities are deemed to own an interest in the underlying assets of the trust. Some transactions involving a trust might be deemed to constitute prohibited transactions under ERISA and the Code with respect to a Benefit Plan that purchased notes or certificates if assets of the trust were deemed to be assets of the Benefit Plan. Under a regulation issued by the United States Department of Labor (the "Plan Assets Regulation"), the assets of a trust would be treated as plan assets of a Benefit Plan for the purposes of ERISA and the Code only if the Benefit Plan acquired an "equity interest" in the trust and none of the exceptions contained in the Plan Assets Regulation was applicable. An equity interest is defined under the Plan Assets Regulation as an interest other than an instrument which is treated as indebtedness under applicable local law and which has no substantial equity features. The likely treatment in this context of notes and certificates of a given series will be discussed in your prospectus supplement. However, it is anticipated that the certificates will be considered equity interests 92 in the trust for purposes of the Plan Assets Regulation, and that the assets of the trust may therefore constitute plan assets if certificates are acquired by Benefit Plans. In such event, the fiduciary and prohibited transaction restrictions of ERISA and section 4975 of the Code would apply to transactions involving the assets of the trust. As a result, except in the case of senior certificates with respect to which the Exemption is available (as described below), certificates generally shall not be transferred and the trustee shall not register any proposed transfer of certificates unless it receives (i) a representation substantially to the effect that the proposed transferee is not a Benefit Plan and is not acquiring the certificates on behalf of or with the assets of a Benefit Plan (including assets that may be held in an insurance company's separate or general accounts where assets in such accounts may be deemed "plan assets" for purposes of ERISA), or (ii) an opinion of counsel in form and substance satisfactory to the trustee and the depositor that the purchase or holding of the certificates by or on behalf of a Benefit Plan will not constitute a prohibited transaction, will not result in the assets of the trust being deemed to be "plan assets" and subject to the fiduciary responsibility provisions of ERISA or the prohibited transaction provisions of ERISA and the Code or any similar law or and will not subject any trustee, the certificate administrator or the depositor to any obligation in addition to those undertaken in the trust agreement. SENIOR CERTIFICATES ISSUED BY TRUSTS Unless otherwise specified in your prospectus supplement, the following discussion applies only to nonsubordinated certificates (referred to here in as "senior certificates") issued by a trust. The U.S. Department of Labor (the "DOL") has granted to the lead underwriter named in your prospectus supplement an exemption (the "Exemption") from certain of the prohibited transaction rules of ERISA with respect to the initial purchase, the holding and the subsequent resale by Benefit Plans of certificates representing interests in asset-backed pass-through trusts that consist of certain receivables, loans and other obligations that meet the conditions and requirements of the Exemption. The receivables covered by the Exemption include motor vehicle installment sales contracts like those contained in the trust. The Exemption may apply to the acquisition, holding and resale of the senior certificates by a Benefit Plan, provided that certain conditions (certain of which are described below) are met. Among the conditions which must be satisfied for the Exemption to apply to the senior certificates are the following: (1) The acquisition of the senior certificates by a Benefit Plan is on terms (including the price for the senior certificates) that are at least as favorable to the Benefit Plan as they would be in an arm's length transaction with an unrelated party; (2) The rights and interests evidenced by the senior certificates acquired by the Benefit Plan are not subordinated to the rights and interests evidenced by other certificates of the trust; (3) The senior certificates acquired by the Benefit Plan have received a rating at the time of such acquisition that is in one of the three highest generic rating categories from either Standard & Poor's Rating Services, a division of The McGraw-Hill Companies, Inc., Moody's Investors Service, Inc., Duff & Phelps Inc. or Fitch IBCA, Inc.; (4) The trustee is not an affiliate of any other member of the Restricted Group (as defined below); 93 (5) The sum of all payments made to the underwriters in connection with the distribution of the senior certificates represents not more than reasonable compensation for underwriting the senior certificates; the sum of all payments made to and retained by the seller pursuant to the sale of the receivables to the trust represents not more than the fair market value of such receivables; and the sum of all payments made to and retained by any servicer represents not more than reasonable compensation for that servicer's services under the sale and servicing agreement or pooling and servicing agreement and reimbursement of the servicer's reasonable expenses in connection therewith; and (6) The Benefit Plan investing in senior certificates is an "accredited investor" as defined in Rule 501(a)(1) of Regulation D of the Securities and Exchange Commission under the Securities Act of 1933. On July 21, 1997, the DOL published in the Federal Register an amendment to the Exemption, which extends exemptive relief to certain mortgage-backed and asset-backed securities transactions using pre-funding accounts for trusts issuing pass-through certificates. The amendment generally allows mortgage loans or other secured receivables supporting payments to certificateholders, and having a value equal to no more than twenty-five percent (25%) of the total principal amount of the certificates being offered by the trust, to be transferred to the trust within a 90-day or three-month period following the closing date, instead of requiring that all such receivables be either identified or transferred on or before the closing date. The relief is available when certain conditions are met. The Exemption would also provide relief from certain self-dealing/conflict of interest prohibited transactions that may occur when the fiduciary (or its affiliate) is an obligor on receivables held in the trust only if, among other requirements, (i) in the case of the acquisition of senior certificates in connection with the initial issuance, at least fifty (50) percent of the senior certificates are acquired by persons independent of the Restricted Group (as defined below), (ii) such fiduciary (or its affiliate) is an obligor with respect to five (5) percent or less of the fair market value of the obligations contained in the trust, (iii) the Benefit Plan's investment in senior certificates of any class does not exceed twenty-five (25) percent of all of the senior certificates of that class outstanding at the time of the acquisition, and (iv) immediately after the acquisition, no more than twenty-five (25) percent of the assets of any Benefit Plan with respect to which the fiduciary has discretionary authority or renders investment advice are invested in certificates representing an interest in one or more trusts containing assets sold or serviced by the same entity. The Exemption does not apply to Benefit Plans sponsored by the seller, any underwriter, the trustee, any servicer, any obligor with respect to receivables included in the trust constituting more than five percent of the aggregate unamortized principal balance of the assets in the trust, or any affiliate of such parties (the "Restricted Group"). Your prospectus supplement for each series of securities will indicate the classes of securities, if any, offered thereby to which it is expected that the Exemption will apply. Due to the complexities of the "prohibited transaction" rules and the penalties imposed upon persons involved in prohibited transactions, it is important that the fiduciary of any Benefit Plan considering the purchase of securities consult with its tax and/or legal advisors regarding whether the assets of the related trust would be considered plan assets, the possibility of exemptive relief from the prohibited transaction rules and other issues and their potential consequences. Moreover, each Benefit Plan fiduciary should determine whether, under the general fiduciary standards of investment prudence and diversification, an investment in the securities is appropriate for the Benefit Plan, taking into account 94 the overall investment policy of the Benefit Plan and the composition of the Benefit Plan's investment portfolio. RATINGS OF THE SECURITIES No trust will sell securities under this prospectus unless one or more nationally recognized statistical rating organizations rate the offered securities in one of the four highest rating categories. Any rating that is made may be lowered or withdrawn by the assigning rating agency at any time if, in its judgment, circumstances so warrant. If a rating or ratings of securities is qualified, reduced or withdrawn, no person or entity will be obligated to provide any additional credit enhancement with respect to the securities so qualified, reduced or withdrawn. The ratings of the securities should be evaluated independently from similar ratings on other types of securities. A rating is not a recommendation to buy, sell or hold securities, inasmuch as a rating does not comment as to market price or suitability for a particular investor. The ratings of the securities do not address the likelihood of payment of principal on any class of securities prior to the stated maturity date of the securities, or the possibility of the imposition of United States withholding tax with respect to non-United States persons. PLAN OF DISTRIBUTION Each trust may sell securities to or through underwriters by a negotiated firm commitment underwriting and public reoffering by the underwriters, and also may sell securities directly to other purchasers or through agents. The depositor intends to offer the securities through these various methods from time to time. The seller, the depositor and certain of its affiliates may agree to indemnify the underwriters and agents who participate in the distribution of the securities against certain liabilities, including liabilities under the Securities Act of 1933, as amended, or contribute to payments the underwritten may be required to make. Funds in cash collateral accounts and the trust accounts may, from time to time, be invested in certain investments acquired from the underwriters. LEGAL MATTERS Winston & Strawn, Chicago, Illinois, will provide a legal opinion relating to the securities in its capacity as special counsel to the trust, the depositor, the seller and the servicer. In addition, certain United States federal income tax matters will be passed upon for the related trust by Winston & Strawn. Other legal matters for underwriters will be passed upon by counsel to underwriters. 95 WHERE YOU CAN FIND MORE INFORMATION Federal securities law requires the filing of certain information with the Securities and Exchange Commission, including annual, quarterly and special reports, proxy statements and other information. You can read and copy these documents at the public reference facility maintained by the Securities and Exchange Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. You can also read and copy the reports, proxy statements and other information at the following regional offices of the Securities and Exchange Commission: New York Regional Office Chicago Regional Office Seven World Trade Center Citicorp Center Suite 1300 500 West Madison Street, Suite 1400 New York, NY 10048 Chicago, IL 60661 Please call the Securities and Exchange Commission at 1-800-SEC-0330 for more information about the public reference rooms or visit Securities and Exchange Commission's web site at http://www.sec.gov to access available filings. The Securities and Exchange Commission allows offerors of securities to incorporate by reference some of the information they file with it. This means that offerors can disclose important information to you by referring you to those documents. Documents incorporated by reference will be filed under the depositor's name. The information that the depositor incorporates by reference is considered to be part of this prospectus, and later information that the depositor files with the Securities and Exchange Commission will automatically update and supersede this information. All documents filed by the depositor, on behalf of a respective trust, under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, after the date of this prospectus and prior to the termination of the offering of the securities will be incorporated by reference into this prospectus. If you are a beneficial owner of the securities to whom a prospectus has been delivered, the depositor will, on request, send you a copy of the information that has been incorporated by reference in this prospectus. The depositor will provide this information at no cost to you. Please address requests to the depositor: c/o Harley-Davidson Credit Corp., 150 South Wacker Drive, Chicago, Illinois 60606. 96 PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution The following is an itemized list of the estimated expenses to be incurred in connection with the offering of the securities being offered hereunder other than underwriting discounts and commissions. SEC Registration Fee $2,640 Printing and Engraving Expenses $50,000 Trustee's Fees and Expenses $12,500 Legal Fees and Expenses $150,000 Blue Sky Fees and Expenses $10,000 Accountants' Fees and Expenses $30,000 Rating Agency Fees $30,000 Miscellaneous Fees $50,000 ------- Total $325,150 ========
- --------------------------- * All amounts except the SEC Registration Fee are estimates of expenses incurred or to be incurred in connection with the issuance and distribution of the securities in an aggregate principal amount assumed for these purposes to be equal to $10,000,000 of securities registered hereby. Item 15. Indemnification of Directors and Officers The Nevada General Corporation Law gives Nevada corporations broad powers to indemnify their present and former directors and officers and those affiliated corporations against expenses incurred in the defense of any lawsuit to which they are made parties by reason of being or having been such directors or officers, subject to specified conditions and exclusions; gives a director or officer who successfully defends an action the right to be so indemnified; and authorizes said corporation to buy director's and officers' liability insurance. Such indemnification is not exclusive of any other right to which those indemnified may be entitled under any bylaw, agreement, vote of stockholders or otherwise. The registrant has also purchased liability policies which indemnify the registrant's officers and directors against loss arising from claims by reason of their legal liability for acts as officers and directors, subject to limitations and conditions as set forth in the policies. Pursuant to agreements which the registrant may enter into with underwriters or agents (forms of which will be included as exhibits to this registration statement), officers and directors of the registrant, and affiliates thereof, may be entitled to indemnification by such underwriters or agents against certain liabilities, including liabilities under the Securities Act of 1933, as amended, arising from information which has been or will be furnished to the registrant by such underwriters or agents that appears in the registration statement or any prospectus. Item 16. Exhibits EXHIBITS 1.1 Form of Underwriting Agreement 3.1 Articles of Incorporation of the depositor 3.2 Bylaws of the depositor 4.1 Form of Trust Agreement (including form of certificate) 4.2 Form of Indenture (including form of notes) 5.1 Opinion of Winston & Strawn with respect to legality 8.1 Opinion of Winston & Strawn with respect to tax matters 10.1 Form of Transfer and Sale Agreement 10.2 Form of Sale and Servicing Agreement 10.3 Form of Pooling and Servicing Agreement 10.4 Form of Administration Agreement 23.1 Consent of Winston & Strawn (included in Exhibit 5.1) 23.2 Consent of Ernst & Young LLP* 24.1 Power of Attorney (included on signature page) 25.1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of indenture trustee* 99.1 Agreement to Deposit Contracts 99.2 Security Agreement
- ---------------------------------- * To be filed by amendment Item 17. Undertakings The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of this registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; or (iii) To include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to such information in this registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in this registration statement shall be deemed to be a new registration statement relating to the securities offer therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. That insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the act and will be governed by the final adjudication of such issue. That, for purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed to be part of this registration statement as of the time it was declared effective. That, for the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. SIGNATURES 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, has reasonable grounds to believe that the security rating requirement set forth in the section captioned "RATINGS OF SECURITIES" will be met by the time of sale of the securities and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Chicago, State of Illinois, on May 22, 2000. Harley-Davidson Customer Funding Corp. By: /s/ Donna F. Zarcone -------------------------------- Name: Donna F. Zarcone Title: President Know all men by these presents, that each person whose signature appears below constitutes and appoints Michael E. Sulentic and Perry A. Glassgow and each of them, as his true and lawful attorney-in-fact and agent, with full powers of substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to sign any registration statement for the same offering covered by this registration statement that is to be effective upon filing pursuant to Rule 462(b) promulgated under the Securities Act of 1933 (and all post-effective amendments thereto), and to file the same, with all exhibits thereto and all documents in connection therewith with the Securities and Exchange Commission granting to said attorney-in-fact power and authority to perform any other act on behalf of the undersigned required to be done in connection therewith. Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities indicated on May 22, 2000: SIGNATURE TITLE /s/ Donna F. Zarcone Director and President --------------------------- (Principal Executive Officer) Donna F. Zarcone /s/ Michael E. Sulentic Chief Financial Officer --------------------------- (Principal Financial Officer and Michael E. Sulentic Principal Accounting Officer) /s/ Steven F. Deli --------------------------- Director Steven F. Deli /s/ Donovan A. Langford, III --------------------------- Director Donovan A. Langford, III /s/ Peter M. Husting --------------------------- Director Peter M. Husting EXHIBIT INDEX 1.1 Form of Underwriting Agreement 3.1 Articles of Incorporation of the depositor 3.2 Bylaws of the depositor 4.1 Form of Trust Agreement (including form of certificate) 4.2 Form of Indenture (including form of notes) 5.1 Opinion of Winston & Strawn with respect to legality 8.1 Opinion of Winston & Strawn with respect to tax matters 10.1 Form of Transfer and Sale Agreement 10.2 Form of Sale and Servicing Agreement 10.3 Form of Pooling and Servicing Agreement 10.4 Form of Administration Agreement 23.1 Consent of Winston & Strawn (included in Exhibit 5.1) 23.2 Consent of Ernst & Young LLP* 24.1 Power of Attorney (included on signature page) 25.1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of indenture trustee* 99.1 Agreement to Deposit Contracts 99.2 Security Agreement
- ------------------------------- *To be filed by amendment EX-1.1 2 EXHIBIT 1.1 EXHIBIT 1.1 FORM OF UNDERWRITING AGREEMENT HARLEY-DAVIDSON MOTORCYCLE TRUST [_______] $___________ _____% HARLEY-DAVIDSON MOTORCYCLE CONTRACT BACKED NOTES, CLASS A-1 $___________ _____% HARLEY-DAVIDSON MOTORCYCLE CONTRACT BACKED NOTES, CLASS A-2 $___________ _____% HARLEY-DAVIDSON MOTORCYCLE CONTRACT BACKED NOTES, CLASS B $___________ _____% HARLEY-DAVIDSON MOTORCYCLE CONTRACT BACKED CERTIFICATES HARLEY-DAVIDSON CUSTOMER FUNDING CORP. Trust Depositor HARLEY-DAVIDSON CREDIT CORP. Seller and Servicer ----------, ----- [Underwriter] Ladies and Gentlemen: Harley-Davidson Customer Funding Corp., a Nevada corporation (the "Trust Depositor") and a wholly-owned subsidiary of Harley-Davidson Credit Corp., a Nevada corporation ("Harley Credit"), proposes to cause Harley-Davidson Motorcycle Trust [_______] (the "Trust") to issue and sell to you (the "Underwriters") $___________ principal amount of its ____% Harley-Davidson Motorcycle Contract Backed Notes, Class A-1 (the "Class A-1 Notes"), $__________ principal amount of its ____% Harley-Davidson Motorcycle Contract Backed Notes, Class A-2 (the "Class A-2 Notes"), $__________ principal amount of its ____% Harley-Davidson Motorcycle Contract Backed Notes, Class B (the "Class B Notes" and, collectively with the Class A-1 Notes and the Class A-2 Notes, the "Notes") [and $__________ principal amount of its ____% Harley-Davidson Motorcycle Contract Backed Certificates (the "Certificates")]. The assets of the Trust will include a pool of Harley-Davidson motorcycle conditional sales contracts and Buell Motorcycle Company ("Buell") motorcycle conditional sales contracts (the "Initial Contracts"), certain monies received thereon on and after _______, _____ (the "Initial Cutoff Date"), all insurance proceeds and liquidation proceeds with respect thereto, security interests in the motorcycles financed thereby, the related Initial Contracts files, the Trust Accounts, proceeds of the foregoing, certain rights with respect to funds on deposit from time to time in the Reserve Fund and the Pre-Funding Account and certain other property. The Initial Contracts will be serviced for the Trust by Harley Credit. The Notes will be issued pursuant to the Indenture to be dated as of _________, _____ (as amended and supplemented from time to time, the "Indenture") between the Trust and _______________________, as indenture trustee (the "Indenture Trustee"). The Notes will be secured by the assets of the Trust pursuant to the Indenture. The Certificates will be issued pursuant to the Trust Agreement to be dated as of _________, _____ (as amended and supplemented from time to time, the "Trust Agreement"), between the Trust Depositor and ____________________, as owner trustee (the "Owner Trustee"). [The Certificates will represent fractional undivided interests in the Trust.] The Notes and the Certificates are hereinafter referred to collectively as the "Offered Securities." The Trust will acquire the Initial Contracts from the Trust Depositor pursuant to a Sale and Servicing Agreement to be dated as of ___________, ____ (as amended and supplemented from time to time, the "Sale and Servicing Agreement"), among the Trust, the Trust Depositor, Harley Credit, as servicer, and _________________, as Indenture Trustee. Harley Credit will also agree to perform certain administrative functions on behalf of the Trust pursuant to the Administration Agreement, dated as of ___________, ____ (as amended and supplemented from time to time, the "Administration Agreement") among Harley Credit, as administrator, the Trust and the Indenture Trustee. The Trust Depositor will acquire the Initial Contracts from Harley Credit on the Closing Date (as defined herein) pursuant to a Transfer and Sale Agreement to be dated as of _________, _____ (as amended and supplemented from time to time, the "Transfer and Sale Agreement") among the Trust Depositor, as purchaser, and Harley Credit, as seller. All of the assets conveyed to the Trust pursuant to the Sale and Servicing Agreement are referred to herein as the "Trust Property". Capitalized terms that are used and not otherwise defined herein shall have the respective meanings assigned thereto in the Sale and Servicing Agreement. On the Closing Date (as defined herein) $_____________ will be deposited in the Pre-Funding Account. It is intended that additional motorcycle conditional sales contracts, including all rights to receive payments thereon on or after their related Subsequent Cutoff Dates and security interests in the Harley-Davidson and Buell motorcycles financed thereby (such contracts, together with all such rights and interests, the "Subsequent Contracts" and, together with the Initial Contracts, the "Contracts"), will be purchased by the Trust Depositor from Harley Credit pursuant to one or more related Subsequent Purchase Agreements and further transferred and assigned by the Trust Depositor to the Trust and pledged by the Trust to the Indenture Trustee pursuant to one or more related Subsequent Transfer Agreements from funds on deposit in the Pre-Funding Account from time to time on or before the date which is 90 days from and including the Closing Date. In connection with the sale of the Offered Securities, the Trust Depositor and Harley Credit have prepared a Prospectus (as defined herein) dated _________, _____. The Prospectus sets forth certain information concerning the Trust Depositor, Harley Credit, the Trust and the Offered Securities. The Trust Depositor and Harley Credit hereby confirm that they have authorized the use of the Prospectus, and any amendment or supplement thereto, in connection 2 with the offer and sale of the Offered Securities by the Underwriters. Unless stated to the contrary, all references herein to the Prospectus are to the Prospectus (as defined herein) and are not meant to include any amendment or supplement thereto. 1. REPRESENTATIONS AND WARRANTIES OF HARLEY CREDIT AND THE TRUST DEPOSITOR. HARLEY CREDIT and the Trust Depositor jointly and severally represent and warrant to each Underwriter as set forth below in this Section 1: (a) The Depositor meets the requirements for use of Form S-3 under the Securities Act of 1933, as amended (the "Act"), and has filed with the Securities and Exchange Commission (the "Commission") a registration statement (Registration No. 333-______) on such Form, including a related preliminary base prospectus and a preliminary prospectus supplement, for the registration under the Act of the offering and sale of the Offered Securities. Harley Credit may have filed one or more amendments thereto, each of which amendments has previously been furnished to you. Harley Credit will next file with the Commission (i) prior to the effectiveness of such registration statement, an amendment thereto (including the form of final base prospectus and the form of final prospectus supplement relating to the Offered Securities) or (ii) after the effectiveness of such registration statement, either (A) a final base prospectus relating to the Offered Securities in accordance with Rules 430A and 424(b)(1) or (4) under the Act or (B) a final base prospectus and a final prospectus supplement relating to the Offered Securities in accordance with Rules 415 and 424(b)(2) or (5). In the case of clauses (ii) (A) and (B) above, Harley Credit has included in such registration statement, as amended at the Effective Date (as defined herein), all information (other than Rule 430A Information) required by the Act and the rules thereunder to be included in the Prospectus with respect to the Offered Securities and the offering thereof. As filed, such amendment and form of final prospectus supplement, or such final prospectus supplement, shall include all Rule 430A Information, together with all other required information, with respect to the Offered Securities and the offering thereof and, except to the extent that the Underwriters shall agree in writing to a modification, shall be in all substantive respects in the form furnished to you prior to the Execution Time or, to the extent not completed at the Execution Time, shall contain only such specific additional information and other changes (beyond that contained in the latest preliminary base prospectus and preliminary prospectus supplement, if any, that have previously been furnished to you) as Harley Credit has advised you, prior to the Execution Time, will be included or made therein. If the Registration Statement contains the undertaking specified by Regulation S-K Item 512(a), the Registration Statement, at the Execution Time, meets the requirements set forth in Rule 415(a)(1)(x). For purposes of this Agreement, "Effective Time" means the date and time as of which such registration statement, or the most recent post-effective amendment thereto, if any, was declared effective by the Commission, and "Effective Date" means the date of the Effective Time. "Execution Time" shall mean the date and 3 time that this Agreement is executed and delivered by the parties hereto. Such registration statement, as amended at the Effective Time, including all information deemed to be a part of such registration statement as of the Effective Time pursuant to Rule 430A(b) under the Act, and including the exhibits thereto and any material incorporated by reference therein, is hereinafter referred to as the "Registration Statement." "Base Prospectus" shall mean the base prospectus referred to in the first paragraph of this Section 1(a) contained in the Registration Statement at the Effective Date; PROVIDED, THAT, if the Base Prospectus used in connection with any Preliminary Prospectus Supplement or the Prospectus shall differ from the Base Prospectus contained in the Registration Statement at the Effective Date, then "Base Prospectus" shall mean the Base Prospectus included with such Preliminary Prospectus Supplement or the Prospectus, as filed pursuant to Rule 424(b). "Preliminary Prospectus Supplement" shall mean a preliminary prospectus supplement, if any, to the Base Prospectus which describes the Offered Securities and the offering thereof and is used prior to the filing of the Prospectus. "Prospectus" shall mean the prospectus supplement relating to the Offered Securities that is first filed pursuant to Rule 424(b) after the Execution Time, together with the Base Prospectus or, if no filing pursuant to Rule 424(b) is required, shall mean the prospectus supplement relating to the Offered Securities, including the Base Prospectus, included in the Registration Statement at the Effective Date including in each such case any material and documents incorporated by reference therein. "Rule 430A Information" means information with respect to the Offered Securities and the offering of the Offered Securities permitted to be omitted from the Registration Statement when it becomes effective pursuant to Rule 430A. "Rule 415", "Rule 424", "Rule 430A" and "Regulation S-K" refer to such rules or regulations under the Act. Any reference herein to the Registration Statement, the Base Prospectus, a Preliminary Prospectus Supplement or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 which were filed under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), on or before the Effective Date of the Registration Statement or the issue date of the Base Prospectus, such Preliminary Prospectus Supplement or the Prospectus, as the case may be; and any reference herein to the terms "amend", "amendment" or "supplement" with respect to the Registration Statement, the Base Prospectus, any Preliminary Prospectus Supplement or the Prospectus shall be deemed to refer to and include the filing of any document under the Exchange Act after the Effective Date of the Registration Statement or the issue date of the Base Prospectus, any Preliminary Prospectus Supplement or the Prospectus, as the case may be, deemed to be incorporated therein by reference. (b) On the Effective Date and on the date of this Agreement, the Registration Statement did or will, and, when the Prospectus is first filed (if required) in accordance with Rule 424(b) and on the Closing Date, the Prospectus (and any supplements thereto) will, comply in all material respects with the applicable requirements of the Act, the Exchange Act and the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and the respective rules and regulations 4 of the Commission thereunder (the "Rules and Regulations"); on the Effective Date, the Registration Statement did not or will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading; and, on the Effective Date, the Prospectus, if not filed pursuant to Rule 424(b), did not or will not, and on the date of any filing pursuant to Rule 424(b) and on the Closing Date, the Prospectus (together with any supplement thereto) will not, include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; PROVIDED, HOWEVER, that Harley Credit makes no representations or warranties as to the information contained in or omitted from (x) the Registration Statement or the Prospectus or any supplement thereto in reliance upon and in conformity with information furnished in writing to Harley Credit by or on behalf of the Underwriters through [______________] specifically for use in connection with the preparation of the Registration Statement or the Prospectus or any supplement thereto and (y) any Derived Information set forth in the Computational Materials (each as defined in Section 11 below), or in any amendment thereof or supplement thereto, incorporated by reference in such Registration Statement or such Prospectus (or any amendment thereof or supplement thereto) except to the extent such Derived Information results from an error or omission in any Seller-Provided Information (as defined in Section 11 below). (c) It is not necessary to qualify the Trust Agreement under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). (d) Immediately prior to the assignment of the Initial Contracts to the Trust as contemplated by the Sale and Servicing Agreement, the Trust Depositor (i) had good title to, and was the sole owner of, each Initial Contract and the other property purported to be transferred by it to the Trust pursuant to the Sale and Servicing Agreement free and clear of any pledge, mortgage, lien, security interest or other encumbrance (collectively, "Liens"), (ii) had not assigned to any person any of its right, title or interest in such Contracts or property or in the Transfer and Sale Agreement and (iii) will have the power and authority to sell such Contracts and property to the Trust, and upon the execution and delivery of the Sale and Servicing Agreement by the Owner Trustee on behalf of the Trust, the Trust will have acquired all of the Trust Depositor's right, title and interest in and to such Contracts and property free and clear of any Lien (except for the Lien of the Indenture). (e) Upon the execution and delivery of the Transfer and Sale Agreement, the Sale and Servicing Agreement and the Indenture by the respective parties thereto and the filing with the Secretaries of State of Illinois and Nevada of UCC-1 financing statements evidencing the conveyance of the Initial Contracts (i) by Harley Credit to the Trust Depositor, (ii) by the Trust Depositor to the Trust and (iii) by the Trust to the Indenture Trustee for the benefit of the Noteholders, the Trust's conveyance of the Trust Property to the Indenture Trustee pursuant to the 5 Indenture will vest in the Indenture Trustee, for the benefit of the Noteholders, a first priority perfected security interest therein, subject to no prior Lien. (f) Immediately prior to the assignment of any Subsequent Contract to the Trust as contemplated by a Subsequent Purchase Agreement, the Trust Depositor (i) had good title to, and was the sole owner of, each Subsequent Contract and the other property purported to be transferred by it to the Trust pursuant to such Subsequent Purchase Agreement free and clear of any Liens, (ii) had not assigned to any person any of its right, title or interest in such Contracts or property or in the Transfer and Sale Agreement and (iii) will have the power and authority to sell such Contracts and property to the Trust, and upon the execution and delivery of such Subsequent Purchase Agreement by the Owner Trustee on behalf of the Trust, the Trust will have acquired all of the Trust Depositor's right, title and interest in and to such Contracts and property free and clear of any Lien (except for the Lien of the Indenture). (g) Upon the execution and delivery of a Subsequent Transfer Agreement and a Subsequent Purchase Agreement by the respective parties thereto and the filing with the Secretaries of State of Illinois and Nevada of UCC-1 financing statements evidencing the conveyance of such Subsequent Contracts (i) by Harley Credit to the Trust Depositor, (ii) by the Trust Depositor to the Trust and (iii) by the Trust to the Indenture Trustee for the benefit of the Noteholders, the Trust's conveyance of the Trust Property to the Indenture Trustee pursuant to the Indenture will vest in the Indenture Trustee, for the benefit of the Noteholders, a first priority perfected security interest therein, subject to no prior Lien. (h) Neither the Trust Depositor nor the Trust is, and neither the issuance and sale of the Offered Securities nor the activities of the Trust pursuant to the Indenture or the Trust Agreement will cause the Trust Depositor or the Trust to be, an "investment company" or under the "control" of an "investment company" as such terms are defined in the Investment Company Act of 1940, as amended (the "Investment Company Act"). (i) This Agreement has been duly authorized, executed and delivered by Harley Credit and the Trust Depositor. (j) None of Harley Credit, the Trust Depositor, any of their Affiliates or anyone acting on behalf of Harley Credit, the Trust Depositor or any of their Affiliates has taken any action that would require qualification of the Trust Agreement under the Trust Indenture Act or registration of the Trust Depositor under the Investment Company Act, nor will Harley Credit, the Trust Depositor or any of their Affiliates act, nor have they authorized or will they authorize any person to act, in such manner. (k) Neither the Trust Depositor nor Harley Credit is in violation of any provision of any existing law or regulation or in default in the performance or observance of any obligation, agreement, covenant or condition contained in any 6 contract, indenture, mortgage, deed of trust, loan agreement, note, lease or other instrument to which it is a party or by which it is bound or to which any of its property is subject, which violations or defaults separately or in the aggregate would have a material adverse effect on the Trust Depositor, Harley Credit or the Trust. (l) Neither the issuance and sale of the Offered Securities, nor the execution and delivery by the Trust Depositor or Harley Credit of this Agreement, the Offered Securities, the Sale and Servicing Agreement, the Transfer and Sale Agreement, the Trust Agreement, the Administration Agreement, the Lockbox Agreement, each Subsequent Purchase Agreement, the Indenture or each Subsequent Transfer Agreement, nor the incurrence by the Trust Depositor or Harley Credit of the obligations herein and therein set forth, nor the consummation of the transactions contemplated hereunder or thereunder, nor the fulfillment of the terms hereof or thereof does or will (i) violate any existing law or regulation, applicable to it or its properties or by which it or its properties are or may be bound or affected, (ii) conflict with, or result in a breach of, or constitute a default under, any indenture, contract, agreement, deed, lease, mortgage or instrument to which it is a party or by which it or its properties are bound or (iii) result in the creation or imposition of any lien upon any of its property or assets, except for those encumbrances created under the Transfer and Sale Agreement, the Sale and Servicing Agreement, the Trust Agreement, the Indenture, each Subsequent Purchase Agreement or each Subsequent Transfer Agreement. (m) All consents, approvals, authorizations, orders, filings, registrations or qualifications of or with any court or any other governmental agency, board, commission, authority, official or body required in connection with the execution and delivery by the Trust Depositor and Harley Credit of this Agreement, the Offered Securities, the Sale and Servicing Agreement, the Transfer and Sale Agreement, the Trust Agreement, the Administration Agreement, the Indenture, the Lockbox Agreement, each Subsequent Purchase Agreement or each Subsequent Transfer Agreement, or to the consummation of the transactions contemplated hereunder and thereunder, or to the fulfillment of the terms hereof and thereof, have been or will have been obtained on or before the Closing Date (and on or before each Subsequent Transfer Date in the case of Subsequent Contracts being transferred to the Trust). (n) All actions required to be taken by the Trust Depositor and Harley Credit as a condition to the offer and sale of the Offered Securities as described herein or the consummation of any of the transactions described in the Prospectus have been or, prior to the Closing Date (or each Subsequent Transfer Date in the case of Subsequent Contracts being transferred to the Trust), will be taken. (o) The representations and warranties of each of the Trust Depositor and Harley Credit in (or incorporated in) the Sale and Servicing Agreement, the Transfer and Sale Agreement, the Trust Agreement, the Indenture, the 7 Administration Agreement, the Lockbox Agreement, each Subsequent Purchase Agreement and each Subsequent Transfer Agreement and made in any Officers' Certificate of the Trust Depositor or Harley Credit delivered pursuant to the Sale and Servicing Agreement, the Indenture, the Transfer and Sale Agreement, each Subsequent Purchase Agreement and each Subsequent Transfer Agreement will be true and correct at the time made and on and as of the Closing Date (and on each Subsequent Transfer Date in the case of Subsequent Contracts being transferred to the Trust) as if set forth herein. (p) The Initial Contracts conveyed to the Trust had aggregate outstanding balances determined as of the Initial Cutoff Date in the amount set forth in the Prospectus. (q) Each of the Trust Depositor and Harley Credit agrees it shall not grant, assign, pledge or transfer to any Person a security interest in, or any other right, title or interest in, the Contracts, except as provided in the Sale and Servicing Agreement, the Trust Agreement, the Indenture, the Transfer and Sale Agreement, each Subsequent Purchase Agreement and each Subsequent Transfer Agreement, and each agrees to take all action necessary in order to maintain the security interest in the Contracts granted pursuant to the Sale and Servicing Agreement, the Trust Agreement, the Indenture, the Transfer and Sale Agreement, each Subsequent Purchase Agreement and each Subsequent Transfer Agreement. (r) There are no actions, proceedings or investigations pending, or to the best knowledge of either the Trust Depositor or Harley Credit, threatened against the Trust Depositor or Harley Credit before any court or before any governmental authority of arbitration board or tribunal which, if adversely determined, could materially and adversely affect, either in the individual or in the aggregate, the financial position, business, operations or prospects of the Trust Depositor or Harley Credit. (s) For Illinois income, franchise and excise tax purposes, under the provisions of Illinois law as of the Closing Date, the Trust will not be classified as an association taxable as a corporation. Each Certificateholder will instead be treated for Illinois income, franchise and excise tax purposes as the owner of an interest in the Trust, in conformity with the federal income tax treatment of such Certificateholder. For Certificateholders who are not residents of, or otherwise subject to tax in Illinois, ownership of a Certificate will not be a factor in determining whether such Certificateholders are subject to Illinois income, franchise or excise taxes as the case may be. (t) Under generally accepted accounting principles, Harley Credit will report its transfer of the Contracts to the Trust Depositor pursuant to the Transfer and Sale Agreement as a sale of the Contracts. 2. REPRESENTATIONS AND WARRANTIES OF THE UNDERWRITERS. Each Underwriter represents and warrants to, and agrees with, the Trust Depositor that: 8 (a) It has not offered or sold, and will not offer or sell, any Offered Security to persons in the United Kingdom, except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances that have not resulted and will not result in an offer to the public in the United Kingdom for the purposes of the Public Offers of Securities Regulation 1995. (b) It has complied and will comply with all applicable provisions of the Financial Services Act 1986 with respect to anything done by it in relation to the Offered Securities in, from or otherwise involving the United Kingdom. (c) It has only issued or passed on and will only issue or pass on in the United Kingdom any document received by it in connection with the issue of the Offered Securities to a person who is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1995 or is a person to whom such document may otherwise lawfully be issued or passed on. 3. PURCHASE AND SALE. Subject to the terms and conditions and in reliance upon the representations and warranties herein set forth, the Trust Depositor agrees to sell to each Underwriter, and each Underwriter agrees to purchase from the Trust Depositor, each of the Offered Securities in the principal amounts and at the purchase prices set forth opposite the name of each Underwriter in Schedule I hereto. 4. DELIVERY AND PAYMENT. Delivery of and payment for the Offered Securities shall be made at 10:00 AM, Chicago time, on __________, 199__, or such later date (not later than _________, 199__) as the Underwriters shall designate, which date and time may be postponed by agreement among the Underwriters and the Trust Depositor (such date and time of delivery and payment for the Offered Securities being herein called the "Closing Date"). Delivery of the Offered Securities shall be made to the Underwriters for the account of the Underwriters against payment by the Underwriters of the purchase price thereof payable in same day funds wired to such bank as may be designated by the Trust Depositor, or such other manner of payment as may be agreed by the Trust Depositor and the Underwriters. Delivery of the Offered Securities shall be made at such location as the Underwriters shall reasonably designate at least one business day in advance of the Closing Date, and payment for the Offered Securities shall be made at the office of Winston & Strawn, 35 Wacker Drive, Chicago, Illinois. The Offered Securities shall be registered in such names and in such denominations as the Underwriters may request not less than three full business days in advance of the Closing Date. The Trust Depositor agrees to authorize and direct the Trustee to have the Offered Securities available for inspection, checking and packaging by the Underwriters in New York, New York, not later than 1:00 PM on the business day prior to the Closing Date. 5. OFFERING BY THE UNDERWRITERS: It is understood that the several Underwriters propose to offer the Offered Securities for sale to the public (which may include selected dealers), as set forth in the Prospectus. 9 6. AGREEMENTS. The Trust Depositor and Harley Credit, jointly and severally, agree with the Underwriters that: (a) Harley Credit and the Trust Depositor will use their respective best efforts to cause the Registration Statement, and any amendment thereto, if not effective at the Execution Time, to become effective. Prior to the termination of the offering of the Offered Securities, Harley Credit will not file any amendment of the Registration Statement or supplement to the Prospectus unless Harley Credit has furnished you a copy for your review prior to filing and will not file any such proposed amendment or supplement to which you reasonably object. Subject to the foregoing sentence, if the Registration Statement has become or becomes effective pursuant to Rule 430A, or filing of the Prospectus is otherwise required under Rule 424(b), Harley Credit will file the Prospectus, properly completed, and any supplement thereto, with the Commission pursuant to and in accordance with the applicable paragraph of Rule 424(b) within the time period prescribed and will provide evidence satisfactory to you of such timely filing. (b) Harley Credit will advise you promptly of any proposal to amend or supplement the Registration Statement, as filed, or the Prospectus and will not effect such amendment or supplement without your consent, which consent will not unreasonably be delayed or withheld; Harley Credit will also advise you promptly of any request by the Commission for any amendment of or supplement to the Registration Statement or the Prospectus or for any additional information; and Harley Credit will also advise you promptly of the effectiveness of the Registration Statement (unless the Registration Statement has become effective prior to Execution Time) and any amendment thereto, when the Prospectus, and any supplement thereto, shall have been filed with the Commission pursuant to Rule 424(b) and of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the institution or threat of any proceeding for that purpose, and Harley Credit will use its best efforts to prevent the issuance of any such stop order and to obtain as soon as possible the lifting of any issued stop order. (c) If, at any time when a prospectus relating to the Offered Securities is required to be delivered under the Act, any event occurs as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary at any time to amend the Registration Statement or supplement the Prospectus to comply with the Act or the Exchange Act or the respective rules thereunder, Harley Credit promptly will notify you and will prepare and file, or cause to be prepared and filed, with the Commission, subject to the second sentence of paragraph (a) of this Section 6, an amendment or supplement that will correct such statement or omission or effect such compliance. Any such filing shall not operate as a waiver or limitation of any right of the Underwriters hereunder. 10 (d) As soon as practicable, but not later than fourteen months after the Closing Date, the Trust Depositor will cause the Trust to make generally available to holders of the Offered Securities an earning statement of the Trust covering a period of at least twelve months beginning after the Closing Date that will satisfy the provisions of Section 11(a) of the Act. (e) Harley Credit will furnish to the Underwriters copies of the Registration Statement (one of which will be signed and will include all exhibits), each related preliminary prospectus (including the Preliminary Prospectus Supplement, if any), the Prospectus and all amendments and supplements to such documents, in each case as soon as available and in such quantities as the Underwriters request. Harley Credit will pay the expenses of printing or other production of all documents relating to the offering. (f) The Trust Depositor or Harley Credit will furnish to the Underwriters and to Counsel for the Underwriters, without charge, during the period referred to in paragraph (c) below, as many copies of the Prospectus and any amendments and supplements thereto as the Underwriters may reasonably request. The Trust Depositor will pay the expenses of printing or other production of all documents relating to the offering. (g) The Trust Depositor will arrange for the qualification of the Offered Securities for sale by the Underwriters under the laws of such jurisdictions as the Underwriters may designate and will maintain such qualifications in effect so long as required for the sale of the Offered Securities. The Trust Depositor will promptly advise the Underwriters of the receipt by the Trust Depositor of any notification with respect to the suspension of the qualification of the Offered Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose. (h) The Trust Depositor and Harley Credit will cooperate with the Underwriters and use their best efforts to permit the Offered Securities to be eligible for clearance and settlement through The Depository Trust Company. (i) For a period from the date of this Agreement until the retirement of the Offered Securities, the Servicer will deliver to you the monthly servicing report, the annual statements of compliance and the annual independent certified public accountants' reports furnished to the Indenture Trustee or the Owner Trustee pursuant to the Sale and Servicing Agreement, the Indenture, the Trust Agreement or the Administration Agreement, as soon as such statements and reports are furnished to the Indenture Trustee or the Owner Trustee. (j) So long as any of the Offered Securities is outstanding, Harley Credit will furnish to you (i) as soon as practicable after the end of the fiscal year all documents required to be distributed to holders of Offered Securities or filed with the Commission pursuant to the Exchange Act or any order of the Commission thereunder and (ii) from time to time, any other information concerning Harley 11 Credit or the Trust Depositor filed with any government or regulatory authority that is otherwise publicly available, as you may reasonably request. (k) To the extent, if any, that the rating provided with respect to the Offered Securities by Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Ratings Service ("S&P" and together with Moody's, the "Rating Agencies") is conditional upon the furnishing of documents or the taking of any actions by the Trust Depositor, the Trust Depositor shall furnish such documents and take such actions. (l) Until 30 days following the Closing Date, neither the Trust Depositor nor any trust or other entity originated, directly or indirectly, by the Trust Depositor or Harley Credit will, without the prior written consent of the Underwriters, offer, sell or contract to sell, or otherwise dispose of, directly or indirectly, or announce the offering of, any asset-backed securities collateralized by motorcycle contracts originated in the United States (other than the Offered Securities). (m) The Trust Depositor will enter into the Trust Agreement, Harley Credit will enter into the Administration Agreement, the Trust Depositor, Harley Credit, the Indenture Trustee and the Trust will enter into the Sale and Servicing Agreement and Harley Credit and the Trust Depositor will enter into the Transfer and Sale Agreement on or prior to the Closing Date. (n) Harley Credit will cause any Computational Materials (as defined in Section 11 hereof) with respect to the Offered Securities which are delivered by the Underwriters to Harley Credit pursuant to Section 11 hereof to be filed with the Commission on a Current Report on Form 8-K on or before the date of the filing of the Prospectus pursuant to Rule 424. (o) The Trust Depositor and Harley Credit will cause Winston & Strawn to deliver to the Underwriters or on before each Subsequent Transfer Date, one or more opinions, addressed to the Underwriters, with respect to the transfer of Subsequent Contracts substantially in the form of the opinions delivered by Winston & Strawn on the Closing Date with respect to the transfer of the Initial Contracts. (p) The Trust Depositor will deliver to the Underwriters on or before each Subsequent Transfer Date each Officer's Certificate required to be furnished to the Indenture Trustee pursuant to Section 2.04(b) of the Sale and Servicing Agreement. 7. PAYMENT OF EXPENSES, ETC. If the transactions contemplated by this Agreement are consummated or this Agreement is terminated pursuant to Section 12, the Trust Depositor will pay all expenses incident to the performance of its obligations under this Agreement, including (i) the printing and filing of the Registration Statement as originally filed and of each amendment thereto, (ii) the printing of the Preliminary Prospectus Supplement, the Prospectus and each amendment thereto, (iii) the fees of the Trustee and its counsel, (iv) the preparation, 12 issuance and delivery of the Offered Securities to the Underwriters, (v) the fees and disbursements of the Trust Depositor's accountants, (vi) the qualification of the Offered Securities under securities laws in accordance with the provisions of Section 6(g), including filing fees in connection therewith, (vii) the printing and delivery to the Underwriters of copies of the Registration Statement as originally filed and of each amendment thereto, (vii) the printing and delivery to the Underwriters of copies of the Prospectus and of each amendment thereto, (ix) the printing and delivery to the Underwriters of copies of any blue sky or legal investment survey prepared in connection with the Offered Securities and (x) any fees charged by Rating Agencies for the rating of the Offered Securities. 8. CONDITIONS TO THE OBLIGATION OF THE UNDERWRITERS. The obligation of the Underwriters to purchase the Offered Securities shall be subject to the accuracy of the representations and warranties on the part of the Trust Depositor and Harley Credit contained herein at the Execution Time and the Closing Date, to the accuracy of the statements of the Trust Depositor and Harley Credit made in any certificates pursuant to the provisions hereof, to the performance by the Trust Depositor and Harley Credit of their respective obligations hereunder and to the following additional conditions: (a) If the Registration Statement has not become effective prior to the Execution Time, unless the Underwriters agree in writing to a later time, the Registration Statement shall have become effective not later than (i) 6:00 P.M. New York City time on the date of determination of the public offering price, if such determination occurs at or prior to 3:00 P.M. New York City time on such date or (ii) 12:00 noon New York City time on the business day following the day on which the public offering price was determined, if such determination occurs after 3:00 P.M. New York City time on such date. (b) The Prospectus and any supplements thereto shall have been filed (if required) with the Commission in accordance with the Rules and Regulations and Sections 1(a) and 1(b) hereof, and prior to the Closing Date, no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been instituted or, to the knowledge of the Trust Depositor or you, shall be contemplated by the Commission or by any authority administering any state securities or blue sky law. (c) The Trust Depositor shall have furnished to the Underwriters the opinion of Winston & Strawn, counsel for the Trust Depositor, dated the Closing Date and satisfactory in form and substance to the Underwriters and Counsel for the Underwriters, to the effect that: (i) the Trust Depositor has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Nevada, with full corporate power and authority to own its properties and conduct its business as described in the Prospectus, and is duly qualified to do business as a foreign corporation and is in good standing under the laws of the State of Illinois; 13 (ii) each of the Transfer and Sale Agreement, the Sale and Servicing Agreement and the Trust Agreement have been duly authorized, executed and delivered by the Trust Depositor, and constitutes a legal, valid and binding obligation of the Trust Depositor enforceable against the Trust Depositor in accordance with its terms (subject, as to the enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors' rights generally from time to time in effect); (iii) this Agreement has been duly authorized, executed and delivered by the Trust Depositor; (iv) The direction by the Trust Depositor to the Owner Trustee to authenticate the Certificates has been duly authorized by the Trust Depositor and, when the Certificates have been duly executed, authenticated and delivered by the Owner Trustee in accordance with the Trust Agreement and delivered and paid for to the Trust Depositor pursuant to the Sale and Servicing Agreement, the Certificates will be validly issued and outstanding and entitled to the benefits of the Trust Agreement; (v) The direction by the Trust Depositor to the Indenture Trustee to authenticate the Notes has been duly authorized by the Trust Depositor and, when the Notes have been duly executed and delivered by the Owner Trustee and when authenticated by the Indenture Trustee in accordance with the Indenture and delivered and paid for pursuant to this Agreement, the Notes will constitute legal, valid and binding obligations of the Trust (subject, as to enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditor's rights generally from time to time in effect) and will be entitled to the benefits of the Indenture; (vi) no consent, approval, authorization or order of, or filing with, any court or governmental agency or body is required for the consummation of the transactions contemplated herein or in the Transfer and Sale Agreement, the Sale and Servicing Agreement, and the Indenture (collectively, the "Basic Documents"), except such as may be required under the blue sky or securities laws of any jurisdiction in connection with the purchase and sale of the Offered Securities by the Underwriters, the filing of the UCC-1 financing statements relating to the conveyance of the Contracts by Harley Credit to the Trust Depositor and of the Contracts and the other Trust Property by the Trust Depositor to the Trust and by the Trust to the Indenture Trustee on behalf of the Noteholders, and such other approvals (which shall be specified in such opinion) as have been obtained and filings as have been made or are in the process of being made; (vii) none of the sale of the Contracts by Harley Credit to the Trust Depositor pursuant to the Transfer and Sale Agreement, the sale of the Trust Property to the Trust pursuant to the Sale and Servicing Agreement, the pledge of the Trust Property to the Indenture Trustee, the issue and sale of the Notes or the 14 Certificates, the execution and delivery of this Agreement, the Sale and Servicing Agreement, the Transfer and Sale Agreement, the Trust Agreement or the Indenture Agreement, the consummation of any other of the transactions herein or therein contemplated or the fulfillment of the terms hereof or thereof will conflict with, result in a breach or violation of, or constitute a default under, any law binding on the Trust Depositor or the charter or bylaws of the Trust Depositor or the terms of any indenture or other agreement or instrument known to such counsel and to which the Trust Depositor is a party or by which it is bound, or any judgment, order or decree known to such counsel to be applicable to the Trust Depositor of any court, regulatory body, administrative agency, governmental body or arbitrator having jurisdiction over the Trust Depositor; (viii) there are no actions, proceedings or investigations pending or, to the best of such counsel's knowledge after due inquiry, threatened before any court, administrative agency or other tribunal (A) asserting the invalidity of any of the Basic Documents, (B) seeking to prevent the consummation of any of the transactions contemplated by any of the Basic Documents or the execution and delivery thereof or (C) that might materially and adversely affect the performance by the Trust Depositor of its obligations under, or the validity or enforceability of, this Agreement or any Basic Document; (ix) to the best knowledge of such counsel and except as set forth in the Prospectus, no default exists and no event has occurred which, with notice, lapse of time or both, would constitute a default in the due performance and observance of any term, covenant or condition of any agreement to which the Trust Depositor is a party or by which it is bound, which default is or would have a material adverse effect on the financial condition, earnings, prospects, business or properties of the Trust Depositor, taken as a whole; (x) the provisions of the Transfer and Sale Agreement are effective to transfer to the Trust Depositor all right, title and interest of Harley Credit in and to the Contracts, and to the knowledge of such counsel, the other Trust Property will be owned by the Trust Depositor free and clear of any Lien except for the Lien of the Sale and Servicing Agreement and the Indenture; (xi) the provisions of the Sale and Servicing Agreement are effective to transfer to the Trust all right, title and interest of the Trust Depositor in and to the Collateral and the Contracts and to the knowledge of such counsel, the other Collateral, will be owned by the Trust free and clear of any Lien except for the Lien of the Indenture; (xii) the provisions of the Indenture are effective to create, in favor of the Indenture Trustee for the benefit of the Noteholders as security for the Trust's obligations under the Notes, a valid security interest in the Contracts and that portion of the other Collateral which is subject to Article 9 of the Illinois Uniform Commercial Code (the "UCC Collateral") and the proceeds thereof; 15 (xiii) the form UCC-1 financing statements naming (A) Harley Credit as seller and the Trust Depositor as purchaser, (B) the Trust Depositor as seller and the Trust as purchaser and (C) the Trust, as debtor, and the Indenture Trustee, as secured party are in appropriate form for filing with the Secretary of State of the State of Nevada, the Secretary of State of the State of Illinois; the interest of the Indenture Trustee in the Contracts and the proceeds thereof and, to the extent that the filing of a financing statement is effective to perfect an interest in the other Trust Property under Article 9 of the Illinois Uniform Commercial Code and the Nevada Uniform Commercial Code, the other Trust Property will be perfected upon the filing of such financing statements in such filing offices; and no other interest of any other purchaser from or creditor of Harley Credit, the Trust Depositor or the Trust is equal or prior to the interest of the Trustee in the Contracts and such other Trust Property; (xiv) the Contracts are "chattel paper" under Article 9 of the Illinois Uniform Commercial Code and the Nevada Uniform Commercial Code; (xv) the Basic Documents conform in all material respects with the descriptions thereof contained in the Prospectus; (xvi) the statements in the Prospectus under the headings "Risk Factors" and "Certain Legal Aspects of the Contracts", to the extent they constitute matters of law or legal conclusions with respect thereto, have been reviewed by such counsel and are correct in all material respects; (xvii) the statements contained in the Prospectus under the headings "Description of the Notes", "Description of the Certificates" and "Certain Information Regarding the Offered Securities", insofar as such statements constitute a summary of the Offered Securities and the Basic Documents, constitute a fair summary of such documents; (xviii) the Indenture has been duly qualified under the Trust Indenture Act of 1939, as amended; (xix) the Trust has been duly formed and is validly existing as a statutory business trust and is in good standing under the laws of the State of Delaware, with full power and authority to execute, deliver and perform its obligations under the Sale and Servicing Agreement, the Indenture, the Administration Agreement, and the Notes and the Certificates; (xx) the Indenture, the Sale and Servicing Agreement and the Administration Agreement have been duly authorized and, when duly executed and delivered by the Owner Trustee, will constitute the legal, valid and binding obligations of the Trust, enforceable against the Trust in accordance with their terms, except (A) the enforceability thereof may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights and (B) the remedy of specific performance and 16 injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought; (xxi) the Trust Depositor is not, nor will the Trust Depositor become as a result of the offer and sale of the Offered Securities as contemplated in the Prospectus and the Basic Documents, an "investment company" as defined in the Investment Company Act or a company "controlled by" an "investment company" within the meaning of the Investment Company Act; (xxii) to the best knowledge of such counsel, the Trust Depositor has obtained all material licenses, permits and other governmental authorizations that are necessary to the conduct of its business; such licenses, permits and other governmental authorizations are in full force and effect, and the Trust Depositor is in all material respects complying therewith; and the Trust Depositor is otherwise in compliance with all laws, rules, regulations and statutes of any jurisdiction to which it is subject, except where non-compliance would not have a material adverse effect on the Trust Depositor; (xxiii) all actions required to be taken, and all filings required to be made, by the Trust Depositor or Harley Credit under the Act and the Exchange Act prior to the sale of the Offered Securities have been duly taken or made; (xxiv) to the best of such counsel's knowledge and information, there are no legal or governmental proceedings pending or threatened that are required to be disclosed in the Registration Statement, other than those disclosed therein; (xxv) to the best of such counsel's knowledge and information, there are no contracts, indentures, mortgages, loan agreements, notes, leases or other instruments required to be described or referred to in the Registration Statement or to be filed as exhibits thereto other than those described or referred to therein or filed or incorporated by reference as exhibits thereto, the descriptions thereof or references thereto are correct, and no default exists in the due performance or observance of any material obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, loan agreement, note, lease or other instrument so described, referred to, filed or incorporated by reference; (xxvi) the Registration Statement has become effective under the Act, any required filings of the Base Prospectus, any preliminary Base Prospectus, any Preliminary Prospectus Supplement and the Prospectus, and any supplements thereto, pursuant to Rule 424(b) have been made in the manner and within the time period required by Rule 424(b), and, to the best knowledge of such counsel, no stop order suspending the effectiveness of the Registration Statement has been issued, and no proceedings for that purpose have been instituted or are pending or contemplated under the Act, and the Registration Statement and the Prospectus, and each amendment or supplement thereto, as of their respective effective or issue dates, complied as to form in all material respects with the requirements of 17 the Act, the Exchange Act, the Trust Indenture Act and the Rules and Regulations; and (xxvii) such counsel has examined the Registration Statement and the Prospectus and nothing has come to such counsel's attention that would lead such counsel to believe that the Registration Statement (exclusive of any Computational Materials or any financial, numerical and statistical information contained therein or omitted therefrom, as to which such counsel may make no statement), at the time the Registration Statement became effective, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus (exclusive of any Computational Materials or any financial, numerical and statistical information contained therein or omitted therefrom, as to which such counsel may make no statement), at the date thereof or at the Closing Date, included or includes any untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. Such counsel shall also state that such counsel has no reason to believe that at the Execution Time the Prospectus contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading or that, at the Closing Date, the Prospectus includes an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. In rendering such opinion, such counsel may rely (A) as to matters involving the application of laws of any jurisdiction other than the State of Illinois, the State of New York, the State of Delaware or the United States, to the extent such counsel deems proper and specifies in such opinion, upon the opinion of other counsel of good standing whom such counsel believes to be reliable and who are satisfactory to Counsel for the Underwriters and (B) as to matters of fact, to the extent such counsel deems proper, on certificates of responsible officers of the Trust Depositor and public officials. All references in this Section 8(c) to the Prospectus shall be deemed to include any amendment or supplement thereto at the Closing Date. (d) The Underwriters shall have received the opinion of ______________., General Counsel for Harley Credit, dated the Closing Date and satisfactory in form and substance to the Underwriters and to Counsel for the Underwriters, to the effect that: (i) Harley Credit is duly qualified to do business as a foreign corporation and is in good standing under the laws of each jurisdiction wherein it owns or leases material properties or conducts material business and which requires such qualification; 18 (ii) Harley Credit has obtained all material licenses, permits and other governmental authorizations that are necessary to the conduct of its business; such licenses, permits and other governmental authorizations are in full force and effect, and Harley Credit is in all material respects complying therewith and Harley Credit is otherwise in compliance with all laws, rules, regulations and statutes of any jurisdiction to which it is subject, except where non-compliance would not have a material adverse effect on Harley Credit; (iii) none of the execution and delivery of this Agreement or the Transfer and Sale Agreement, the consummation of any of the transactions therein contemplated or the fulfillment of the terms thereof will conflict with, result in a breach or violation of, or constitute a default under, any law or the charter or bylaws of Harley Credit or the terms of any indenture or other agreement or instrument known to such counsel and to which Harley Credit or the Trust Depositor is a party or by which it is bound or any judgment, order or decree known to such counsel to be applicable to Harley Credit or the Trust Depositor of any court, regulatory body, administrative agency, governmental body, or arbitrator having jurisdiction over Harley Credit or the Trust Depositor. In rendering such opinion, such counsel may rely (A) as to matters involving the application of laws of any jurisdiction other than the State of Illinois or the United States, to the extent such counsel deems proper and specifies in such opinion, upon the opinion of other counsel of good standing whom such counsel believes to be reliable and who are satisfactory to Counsel for the Underwriters and (B) as to matters of fact, to the extent such counsel deems proper, on certificates of responsible officers of Harley Credit and public officials. (e) The Underwriters shall have received the opinion of Winston & Strawn, counsel for Harley Credit, dated the Closing Date and satisfactory in form and substance to the Underwriters and to Counsel for the Underwriters, to the effect that: (i) Harley Credit has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Nevada, with full corporate power and authority to own its properties and conduct its business as described in the Prospectus; (ii) this Agreement has been duly authorized, executed and delivered by Harley Credit; (iii) the Sale and Servicing Agreement has been duly authorized, executed and delivered by Harley Credit and constitutes a legal, valid and binding obligation of Harley Credit, enforceable against Harley Credit in accordance with its terms (subject, as to the enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium, or other laws affecting creditors' rights generally from time to time in effect); 19 (iv) the Transfer and Sale Agreement has been duly authorized, executed and delivered by Harley Credit and constitutes a legal, valid and binding obligation of Harley Credit, enforceable against Harley Credit in accordance with its terms (subject, as to the enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium, or other laws affecting creditors' rights generally from time to time in effect); (v) no consent, approval, authorization or order of, or filing with, any court or governmental agency or body is required for the consummation of the transactions contemplated herein or in any Basic Document, except such as may be required under the blue sky or securities laws of any jurisdiction in connection with the purchase and sale of the Offered Securities by the Underwriters, the filing of the UCC-1 financing statements relating to the conveyance of the Contracts by Harley Credit to the Trust Depositor pursuant to the Transfer and Sale Agreement and of the Contracts and other Trust Property to the Trust and of the Contracts and other Trust Property to the Indenture Trustee for the benefit of the Noteholders pursuant to the Sale and Servicing Agreement, the Trust Agreement and the Indenture, and such other approvals (which shall be specified in such opinion) as have been obtained and filings as have been made or are in the process of being made; and (vi) none of the execution and delivery of this Agreement, the Sale and Servicing Agreement, the Transfer and Sale Agreement, the consummation of any of the transactions therein contemplated or the fulfillment of the terms thereof will conflict with, result in a breach or violation of, or constitute a default under, the charter or bylaws of Harley Credit. In rendering such opinion, such counsel may rely (A) as to matters involving the application of laws of any jurisdiction other than the State of New York, the State of Delaware, the State of Illinois or the United States, to the extent such counsel deems proper and specifies in such opinion, upon the opinion of other counsel of good standing whom such counsel believes to be reliable and who are satisfactory to Counsel for the Underwriters and (B) as to matters of fact, to the extent such counsel deems proper, on certificates of responsible officers of Harley Credit and public officials. All references in this Section 8(e) to the Prospectus shall be deemed to include any amendment or supplement thereto at the Closing Date. (f) The Underwriters shall have received an opinion addressed to it of Winston & Strawn, in its capacity as federal tax counsel for the Trust Depositor, to the effect that the statements in the Prospectus under the headings "Summary -- Tax Status" and "Federal Income Tax Consequences" accurately describe the material federal income tax consequences to holders of the Offered Securities. Winston & Strawn, in its capacity as special ERISA counsel to the Trust Depositor, shall have delivered an opinion to the effect that the statements in the Prospectus under the headings "Summary -- ERISA Considerations" and "ERISA Considerations", to the extent that they constitute statements of matters 20 of law or legal conclusions with respect thereto, have been prepared or reviewed by such counsel and accurately describe the material consequences to holders of the Offered Securities under ERISA. (g) The Underwriters shall have received from Counsel for the Underwriters such opinion or opinions, dated the Closing Date, with respect to the issuance and sale of the Offered Securities, the Prospectus (as amended or supplemented at the Closing Date) and other related matters as the Underwriters may reasonably require, and the Trust Depositor shall have furnished to such counsel such documents as they request for the purpose of enabling them to pass upon such matters. (h) The Underwriters shall have received an opinion addressed to the Underwriters, the Trust Depositor and the Servicer of _____________________, counsel to the Owner Trustee and special Delaware counsel for the Trust, dated the Closing Date and satisfactory in form and substance to the Underwriters and Counsel for the Underwriters, to the effect that: (i) The Trust has been duly organized and is validly existing in good standing as a "business trust" within the meaning of the Delaware Business Trust Act, 12 Del. C. c.38. (ii) The Trust Company is a Delaware banking corporation, duly organized and validly existing in good standing under the laws of the State of ___________ and has all necessary power and authority to enter into, to deliver and perform its obligations under the Trust Agreement and to act as the Owner Trustee and to enter into, deliver and perform its obligations as Owner Trustee under each of the other Operative Documents to which the Trust or the Owner Trustee, as the case may be, is a party. (iii) The execution, delivery and performance by the Trust of each of the Operative Documents to which it is a party (i) has been duly authorized by the Trust Agreement, and (ii) does not require the consent or approval of, or the giving of notice to, the registration with, or the taking of any other action in respect of any governmental authority or agency of the United States federal government or the State of Delaware regulating the banking and trust powers of the Trust Company, other than the filing with the Secretary of State of a certificate of trust pursuant to 12 Del.C. Section 3810, which filing has been made. Upon the due execution and delivery of the Trust Agreement by the Trust Company, the Trust Agreement duly authorizes the Trust Company, acting alone, to execute and deliver, on behalf of the Trust, each of the Operative Documents. (iv) The Trust Agreement and each other Operative Document to which the Trust is a party have been duly authorized, executed and delivered by the Trust, and the Trust Agreement and each such other Operative Document to the extent entered into by the Trust constitutes a legal, valid and binding obligation of the Trust, enforceable against the Trust in accordance with the terms thereof. The 21 Trust Agreement constitutes the legal, valid and binding obligation of the Trust Company enforceable against the Trust Company in accordance with its terms. (v) To the knowledge of such counsel, no litigation, investigation or proceeding of or before any arbitrator, court, tribunal or governmental authority is pending or threatened by or against the Trust or the Trust Company (a) with respect to any of the Operative Documents or any of the transactions contemplated thereby, or (b) which if determined adversely against the Trust or the Trust Company, as the case may be, individually or in the aggregate, would materially and adversely affect the Trust Estate or the validity of, or the right, power or authority of the Trust to enter into or perform its obligations under, the Operative Documents. (vi) To the knowledge of such counsel, there exist no liens affecting the interests of the Trust in and to the Trust Estate resulting from acts or omissions to act of or claims against the Trust, except liens created by the Operative Documents. (vii) Neither the execution and delivery by the Trust Company or the Trust, as the case may be, of the Operative Documents, nor the fulfillment of or compliance by the Trust Company or the Trust, as the case may be, with the respective provisions thereof, conflicts with, or results in a breach of the terms, conditions or provisions of, or constitutes a default under, or results in a violation of, the charter or by-laws of the Trust Company, any law of the State of Delaware or any federal law of the United States of America governing the banking and trust powers of the Trust Company or, to the best knowledge of such counsel, any agreement, indenture, instrument, order, judgment or decree to which the Trust Company, the Trust or any of their respective properties is subject. (viii) Insofar as Article 9 of the Uniform Commercial Code as in effect in the State of Delaware (the "UCC") is applicable (without regard to conflict of laws principles), and assuming that the security interest in Harley Credit's rights in the Contracts and the proceeds thereof that may be perfected under the UCC solely by the filing of a financing statement with the Secretary of State (the "Harley Credit Collateral"), has been duly created and has attached, upon the filing of the Harley Credit Financing Statement with the Secretary of State, the Trust Depositor will have a perfected security interest in all right, title and interest of Harley Credit in the Harley Credit Collateral identified in the Harley Credit Financing Statement. (ix) Insofar as Article 9 of the UCC is applicable (without regard to conflict of laws principles), and assuming that the security interest in the Trust Depositor's rights in the Contracts and the proceeds thereof that may be perfected under the UCC solely by the filing of a financing statement with the Secretary of State (the "Trust Depositor Collateral"), has been duly created and has attached, upon the filing of the Trust Depositor Financing Statement with the Secretary of State, the Trust will have a perfected security interest in all right, title and interest 22 of the Trust Depositor in the Trust Depositor Collateral identified in the Trust Depositor Financing Statement. (x) Insofar as Article 9 of the UCC is applicable (without regard to conflict of laws principles), and assuming that the security interest in the Trust's rights in the Contracts and the proceeds thereof that may be perfected under the UCC solely by the filing of a financing statement with the Secretary of State (the "Trust Collateral"), has been duly created and has attached, upon the filing of the Trust Financing Statement with the Secretary of State, the Indenture Trustee will have a perfected security interest in all right, title and interest of the Trust in the Trust Collateral identified in the Trust Financing Statement. (xi) Under 12 Del. C. Sections 3805(b), no creditor of any Certificateholder (including creditors of the Trust Depositor, as Certificateholder) shall have any right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of the Trust. (xii) the Certificates have been duly authorized, executed and authenticated by the Owner Trustee on behalf of the Trust and, when the Certificates have been issued and delivered in accordance with the instructions of the Trust Depositor, the Certificates will be validly issued and entitled to the benefits of the Trust Agreement. (i) The Underwriters shall have received an opinion addressed to the Underwriters and the Trust Depositor of ____________________, counsel to ____________________________ (the "Bank"), dated the Closing Date and satisfactory in form and substance to the Underwriters and Counsel for the Underwriters, to the effect that: (i) the Bank is a banking corporation duly incorporated and validly existing under the laws of the State of __________; (ii) the Bank has the full corporate trust power to accept the office of Indenture Trustee under the Indenture and to enter into and perform its obligations under the Indenture and the Sale and Servicing Agreement; (iii) the execution and delivery of the Indenture, the Sale and Servicing Agreement and the performance by the Bank of its obligations under the Indenture and the Sale and Servicing Agreement have been duly authorized by all necessary corporate action of the Bank and each has been duly executed and delivered by the Bank; (iv) the Indenture and the Sale and Servicing Agreement constitute valid and binding obligations of the Bank enforceable against the Bank in accordance with their terms under the laws of the State of _________ and the federal law of the United States; 23 (v) the execution and delivery by the Bank of the Indenture and the Sale and Servicing Agreement do not require any consent, approval or authorization of, or any registration or filing with, any ___________ or United States federal governmental authority; (vi) each of the Notes has been duly authenticated by the Bank, as Indenture Trustee; (vii) neither the consummation by the Bank of the transactions contemplated in the Indenture or the Sale and Servicing Agreement nor the fulfillment of the terms thereof by the Bank will conflict with, result in a breach or violation of, or constitute a default under, any law or the charter, bylaws or other organizational documents of the Bank, or the terms of any indenture or other agreement or instrument known to such counsel and to which the Bank or any of its subsidiaries is a party or by which it is bound, or any judgment, order or decree known to such counsel to be applicable to the Bank or any of its subsidiaries of any court, regulatory body, administrative agency, governmental body or arbitrator having jurisdiction over the Bank or any of its subsidiaries; (viii) to the knowledge of such counsel there is no action, suit or proceeding pending or threatened against the Bank (as Indenture Trustee under the Indenture or in its individual capacity) before or by any governmental authority that, if adversely decided, would materially and adversely affect the ability of the Bank to perform its obligations under the Indenture or the Sale and Servicing Agreement; and (ix) the execution and delivery by the Bank of, and the performance by the Bank of its obligations under, the Indenture and the Sale and Servicing Agreement will not subject any of the property or assets of the Trust, or any portion thereof, to any lien created by or arising under the Bank that are unrelated to the transactions contemplated in such Agreements. (j) The Underwriters shall have received such opinions, addressed to the Underwriters and dated the Closing Date, as are delivered to the Rating Agencies. (k) The Underwriters shall have received an opinion from Winston & Strawn, counsel for the Trust Depositor, dated the Closing Date and satisfactory in form and substance to the Underwriters and Counsel for the Underwriters regarding 1) the true-sale of the Contracts by Harley Credit to the Trust Depositor and 2) the true-sale or first perfected security interest by the Trust Depositor to the Trust and the conveyance by the Trust of the Contracts and other Trust Property to the Indenture Trustee for the benefit of the Noteholders. (l) The Underwriters shall have received an opinion from Winston & Strawn, counsel for the Trust Depositor, dated the Closing Date and satisfactory in form and substance to the Underwriters and Counsel for the Underwriters regarding substantive consolidation. 24 (m) The Underwriters shall have received a certificate dated the Closing Date of any of the Chairman of the Board, the President, the Executive Vice President, any Vice President, the Treasurer, any Assistant Treasurer, the principal financial officer or the principal accounting officer of the Trust Depositor in which such officer shall state that, to the best of his or her knowledge after reasonable investigation: (i) the representations and warranties of the Trust Depositor contained in this Agreement and the Basic Documents are true and correct; the Trust Depositor has complied with all agreements and satisfied all conditions on its part to be performed or satisfied under such agreements at or prior to the Closing Date; (ii) since the date of the Prospectus, no material adverse change, or any development involving a prospective material adverse change, in or affecting particularly the business or properties of the Trust Depositor has occurred; and (iii) no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted or are contemplated by the Commission. (n) The Underwriters shall have received a certificate dated the Closing Date of any of the Chairman of the Board, the President, the Executive Vice President, any Vice President, the Treasurer, any Assistant Treasurer, the principal financial officer or the principal accounting officer of Harley Credit in which such officer shall state that, to the best of his or her knowledge after reasonable investigation: (i) the representations and warranties of Harley Credit contained in this Agreement and the Basic Documents are true and correct; Harley Credit has complied with all agreements and satisfied all conditions on its part to be performed or satisfied under such agreements at or prior to the Closing Date; (ii) since the date of the most recent financial information included in the Prospectus, no material adverse change, or any development involving a prospective material adverse change, in or affecting particularly the business or properties of Harley Credit has occurred; and (iii) no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted or are contemplated by the Commission. (o) The Underwriters shall have received evidence satisfactory to it that, on or before the Closing Date, UCC-1 financing statements have been or are being filed in the office of the Secretary of State of the State of Nevada, the Secretary of State of the State of Illinois reflecting the sale of the Contracts by Harley Credit to the Trust Depositor and of the Contracts and other Trust Property by the Trust Depositor to the Trust and the conveyance by the Trust of the contracts and other Trust Property to the Indenture Trustee for the benefit of the Noteholders. 25 (p) At the Execution Time and at the Closing Date, Arthur Andersen & Co. shall have furnished to the Underwriters a letter or letters, dated respectively as of the Execution Time and as of the Closing Date, substantially in the forms of the drafts to which the Underwriters have previously agreed and otherwise in form and substance satisfactory to the Underwriters and to Counsel for the Underwriters. (q) Subsequent to the Execution Time or, if earlier, the dates as of which information is given in the Prospectus, there shall not have been any change or any development involving a prospective change in or affecting the business or properties of Harley Credit or the Trust Depositor the effect of which is, in the judgment of the Underwriters, so material and adverse as to make it impractical or inadvisable to market the Offered Securities as contemplated by the Prospectus. (r) The Notes shall have been rated "Aaa" by Moody's and "AAA" by S&P. (s) The Certificates shall have been rated at least "___" by Moody's and "____" by S&P. (t) On or prior to the Closing Date, the Offered Securities shall have been accepted for settlement through the facilities of the Depository Trust Company. (u) On the Closing Date, $___________ aggregate principal amount of the Certificates shall have been issued and delivered to the Trust Depositor. (v) Prior to the Closing Date, the Trust Depositor shall have furnished to the Underwriters such further information, certificates and documents as the Underwriters may reasonably request. If any of the conditions specified in this Section 8 shall not have been fulfilled in all material respects when and as provided in this Agreement, or if any of the opinions and certificates mentioned above or elsewhere in this Agreement shall not be in all material respects reasonably satisfactory in form and substance to the Underwriters and Counsel for the Underwriters, this Agreement and all obligations of the Underwriters hereunder may be canceled at, or at any time prior to, the Closing Date by the Underwriters. Notice of such cancellation shall be given to the Trust Depositor in writing or by telephone or telegraph confirmed in writing. 9. REIMBURSEMENT OF EXPENSES. If the sale of the Offered Securities provided for herein is not consummated because any condition to the obligation of the Underwriters set forth in Section 8 hereof is not satisfied, because of any refusal, inability or failure on the part of Harley Credit or the Trust Depositor to perform any agreement herein or to comply with any provision hereof other than by reason of a default by the Underwriters in payment for the Offered Securities on the Closing Date, Harley Credit and the Trust Depositor will reimburse the Underwriters upon demand for all out-of-pocket expenses (including reasonable fees and disbursements of counsel) that shall have been incurred by it in connection with the proposed purchase and sale of the Offered Securities. 26 10. INDEMNIFICATION AND CONTRIBUTION. (a) The Trust Depositor and Harley Credit, jointly and severally, agree to indemnify and hold harmless each Underwriter, the directors, officers, employees and agents of each Underwriter and each person who controls each Underwriter within the meaning of either the Securities Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Securities Act, the Exchange Act or other federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, Preliminary Prospectus Supplement, the Prospectus or any information provided by the Trust Depositor or Harley Credit to any holder or prospective purchaser of Offered Securities or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and agrees to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; PROVIDED, HOWEVER, that the Trust Depositor and Harley Credit will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made (x) in the Preliminary Prospectus Supplement or the Prospectus, or in any amendment thereof or supplement thereto, in reliance upon and in conformity with written information furnished to Harley Credit by or on behalf of the Underwriters through [_______________] specifically for inclusion therein or (y) in any Derived Information (as defined in Section 11 below) included by the Underwriters in any Computational Materials provided by the Underwriters to Harley Credit or any amendment or supplement thereof unless such untrue statement or alleged untrue statement or omission or alleged omission made in any Derived Information results from an error or omission in any Seller-Provided Information (as defined herein). This indemnity agreement will be in addition to any liability that the Trust Depositor or Harley Credit may otherwise have. (b) Each Underwriter, severally and not jointly, agrees to indemnify and hold harmless the Trust Depositor and Harley Credit, their directors, their officers and each person who controls the Trust Depositor or Harley Credit within the meaning of either the Securities Act or the Exchange Act, to the same extent as the foregoing indemnity from the Trust Depositor and Harley Credit to each Underwriter, but only with reference to (x) written information relating to the Underwriters furnished to the Trust Depositor by the Underwriters through [______________] specifically for inclusion in the Registration Statement, the Preliminary Prospectus Supplement or the Prospectus (or in any amendment or supplement thereto) or (y) any Derived Information included by such Underwriter in any Computational Materials provided by such Underwriter to Harley Credit or any amendment or supplement thereof; PROVIDED, HOWEVER that the indemnity with respect to clause (y) above shall not apply to any untrue statement or alleged untrue statement or omission or alleged omission made in any Derived Information that results from an error or omission in any Seller-Provided Information. This indemnity agreement will be in addition to any liability that an Underwriter may otherwise have. For the purpose of clause (x) of this indemnity, the Trust Depositor and Harley Credit acknowledge that the statements set forth in the first sentence of the next to the last paragraph and in the last paragraph of the cover page and under the heading "Plan of Distribution" in the 27 Preliminary Prospectus Supplement and the Prospectus constitute the only information furnished in writing by or on behalf of the Underwriters through [______________] for inclusion in the Registration Statement, the Preliminary Prospectus Supplement or the Prospectus (or in any amendment or supplement thereto). (c) Upon receipt by an indemnified party under this Section 10 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 10, promptly notify the indemnifying party in writing of the commencement thereof; but the failure so to notify the indemnifying party (i) will not relieve it from liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint counsel of the indemnifying party's choice at the indemnifying party's expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the indemnified party or parties except as set forth below); PROVIDED, HOWEVER, that such counsel shall be satisfactory to the indemnified party. Notwithstanding the indemnifying party's election to appoint counsel to represent the indemnified party in an action, the indemnified party shall have the right to employ separate counsel (including local counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest, (ii) the actual or potential defendants in, or targets of, any such action include both the indemnified parties and the indemnifying party and the indemnified parties shall have reasonably concluded that there may be legal defenses available to them and/or other indemnified parties that are different from or additional to those available to the indemnifying party, (iii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party. An indemnifying party will not, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding. (d) In the event that the indemnity provided in paragraph (a) or (b) of this Section 10 is unavailable to or insufficient to hold harmless an indemnified party for any reason, the Trust Depositor, Harley Credit and each Underwriter agree to contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending same) (collectively "Losses") to which the Trust Depositor, Harley Credit and the several Underwriters may be subject in such proportion as is appropriate to reflect the relative benefits received by the Trust Depositor and Harley Credit on the one hand and by the several Underwriters on the other from the offering of the Offered Securities; PROVIDED, HOWEVER, that in no case shall any Underwriter be responsible for any 28 amount in excess of the purchase discount or commission applicable to the Offered Securities purchased by such Underwriter hereunder. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the Trust Depositor, Harley Credit and each Underwriter shall contribute in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Trust Depositor and Harley Credit on the one hand and of the several Underwriters on the other in connection with the statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. Benefits received by the Trust Depositor and Harley Credit shall be deemed to be equal to the total net proceeds from the offering (before deducting expenses), and benefits received by any Underwriter shall be deemed to be equal to the total purchase discounts and commissions received by such Underwriter from the Trust Depositor in connection with the purchase of the Offered Securities hereunder. Relative fault shall be determined by reference to whether any alleged untrue statement or omission relates to information provided by the Trust Depositor and Harley Credit on the one hand or the several Underwriters on the other. The Trust Depositor, Harley Credit and the several Underwriters agree that it would not be just and equitable if contribution were determined by pro rata allocation or any other method of allocation that does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this paragraph (d), no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 10, each person who controls any Underwriter within the meaning of either the Securities Act or the Exchange Act and each director, officer, employee and agent of such Underwriter shall have the same rights to contribution as such Underwriter, and each person who controls the Trust Depositor or Harley Credit within the meaning of either the Securities Act or the Exchange Act and each officer and director of the Trust Depositor or Harley Credit shall have the same rights to contribution as the Trust Depositor or Harley Credit, subject in each case to the applicable terms and conditions of this paragraph (d). 11. COMPUTATIONAL MATERIALS. It is understood that the Underwriters may provide to prospective investors certain Computational Materials and ABS Term Sheets in connection with offering of the Offered Securities, subject to the following conditions: (a) Each Underwriter hereby agrees to comply with applicable laws and regulations in connection with the use of Computational Materials, including the No-Action Letter of May 20, 1994 issued by the Commission to Kidder, Peabody Acceptance Corporation I, Kidder, Peabody & Co. Incorporated and Kidder Structured Asset Corporation, as made applicable to other issuers and underwriters by the Commission in response to the request of the Public Securities Association dated May 24, 1994 (collectively, the "Kidder/PSA Letter"), as well as the PSA Letter referred to below. Each Underwriter hereby agrees to comply with applicable laws and regulations in connection with the use of ABS Term Sheets, including the No Action Letter of February 17, 1995 issued by the Commission to the Public Securities Association (the PSA Letter" and, together with the Kidder/PSA Letter, the "No-Action Letters"). (b) For purposes hereof, "Computational Materials" as used herein shall have the meaning given such term in the No-Action Letters, but shall include only those Computational Materials that have been prepared or delivered to prospective investors by or at 29 the direction of the Underwriters. For purposes hereof, "ABS Term Sheets" and "Collateral Term Sheets" as used herein shall have the meanings given such terms in the PSA Letter but shall include only those ABS Term Sheets or Collateral Term Sheets that have been prepared or delivered to prospective investors by or at the direction of the Underwriters. (c) (i) All Computational Materials and ABS Term Sheets provided to prospective investors that are required to be filed with the Commission pursuant to the No-Action Letters shall bear a legend including the following statement: "THE INFORMATION HEREIN IS PRELIMINARY, AND WILL BE SUPERSEDED BY THE APPLICABLE PROSPECTUS SUPPLEMENT AND BY ANY OTHER INFORMATION SUBSEQUENTLY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION." (ii) In the case of Collateral Term Sheets, such legend shall also include the following statement: "THE INFORMATION CONTAINED HEREIN WILL BE SUPERSEDED BY THE DESCRIPTION OF THE ASSETS CONTAINED IN THE PROSPECTUS SUPPLEMENT RELATING TO THE SECURITIES AND [EXCEPT WITH RESPECT TO THE INITIAL COLLATERAL TERM SHEET] SUPERSEDES ALL INFORMATION CONTAINED IN ANY COLLATERAL TERM SHEETS RELATING TO THE COLLATERAL PREVIOUSLY PROVIDED BY [__________________]" Harley Credit shall have the right to require additional specific legends or notations to appear on any Computational Materials or ABS Term Sheets, the right to require changes regarding the use of terminology and the right to determine the types of information appearing therein. Notwithstanding the foregoing, this subsection (c) will be satisfied if all Computational Materials and ABS Term Sheets referred to therein bear a legend in a form previously approved in writing by Harley Credit. (d) The Underwriters shall provide Harley Credit with representative forms of all Computational Materials and ABS Term Sheets prior to their first use, to the extent such forms have not previously been approved by Harley Credit for use by the Underwriters. The Underwriters shall provide to Harley Credit, for filing on Form 8-K, copies (in such format as required by Harley Credit) of all Computational Materials and ABS Term Sheets that are required to be filed with the Commission pursuant to the No-Action Letters. The Underwriters may provide copies of the foregoing in a consolidated or aggregated form including all information required to be filed. All Computational Materials and ABS Term Sheets described in this subsection (d) must be provided to Harley Credit not later than 10:00 AM New York time one business day before filing thereof is required pursuant to the terms of this Agreement. Each Underwriter agrees that it will not provide to any investor or prospective investor in the Notes or Certificates any Computational Materials or ABS Term Sheets on or after the day on which Computational Materials and ABS Term Sheets are required to be provided to Harley Credit pursuant to this Section 11(d) (other than copies of Computational Materials or ABS Term Sheets previously submitted to Harley Credit in accordance with this Section 11(d) for filing 30 with the Commission), unless such Computational Materials or ABS Term Sheets are preceded or accompanied by the delivery of a Prospectus to such investor or prospective investor. (e) All information included in the Computational Materials and ABS Term Sheets shall be generated based on substantially the same methodology and assumptions that are used to generate the information in the Prospectus Supplement as set forth therein; PROVIDED, HOWEVER, that the Computational Materials and ABS Term Sheets may include information based on alternative methodologies or assumptions if specified therein. If any Computational Materials or ABS Term Sheets that are required to be filed were based on assumptions with respect to the contracts included in the Trust that differ from the final Pool Information in any material respect or on structuring terms of the Offered Securities that were revised in any material respect prior to the printing of the Prospectus, the Underwriters shall prepare revised Computational Materials or ABS Term Sheets, as the case may be, based on the final Pool Information and structuring assumptions, circulate such revised Computational Materials and ABS Term Sheets to all recipients of the preliminary versions thereof that indicated or subsequently indicate orally to the Underwriters they will purchase all or any portion of the Offered Securities, and include such revised Computational Materials and ABS Term Sheets (marked, "as revised") in the materials delivered to Harley Credit pursuant to subsection (d) above. As used herein, "Pool Information" means information with respect to the characteristics of the contracts , as provide by or on behalf of Harley Credit to the Underwriters in final form and set forth in the Prospectus Supplement. (f) Harley Credit shall not be obligated to file any Computational Materials or ABS Term Sheets that have been determined to contain any material error or omission; PROVIDED, HOWEVER, that, at the request of the Underwriters, Harley Credit will file Computational Materials or ABS Term Sheets that contain a material error or omission if clearly marked "superseded by materials dated _____" and accompanied by corrected Computational Materials or ABS Term Sheets that are marked, "material previously dated _____, as corrected." In the event that, within the period during which the Prospectus is required to be delivered under the Act, any Computational Materials or ABS Term Sheets are determined, in the reasonable judgment of Harley Credit or the Underwriters, to contain a material error or omission, the Underwriters shall prepare a corrected version of such Computational Materials or ABS Term Sheets, shall circulate such corrected Computational Materials and ABS Term Sheets to all recipients of the prior versions thereof that either indicated orally to the Underwriters they would purchase all or any portion of the Offered Securities, or actually purchased all or any portion thereof, and shall deliver copies of such corrected Computational Materials and ABS Term Sheets (marked, "as corrected") to Harley Credit for filing with the Commission in a subsequent Form 8-K submission. (g) Harley Credit and the Underwriters shall receive a letter from Arthur Andersen & Co., certified public accountants, satisfactory in form and substance to Harley Credit and the Underwriters, to the effect that such accountants have performed certain specified procedures agreed to by Harley Credit and the Underwriters, as a result of which they determined that the specified information that is included in the Computational Materials and ABS Term Sheets (if any) provided by the Underwriters to Harley Credit for filing on Form 8-K as provided in this Section 11 has been accurately computed or compiled from the Seller Provided Information. 31 (h) If the Underwriters do not provide any Computational Materials or ABS Term Sheets to Harley Credit pursuant to subsection (d) above, each Underwriter shall be deemed to have represented, as of the Closing Date, that it did not provide any prospective investors with any information in written or electronic form in connection with the offering of the Offered Securities that is required to be filed with the Commission in accordance with the No-Action Letters. (i) In the event of any delay in the delivery by the Underwriters to Harley Credit of all Computational Materials and ABS Term Sheets required to be delivered in accordance with subsection (d) above, or in the delivery of the accountant's comfort letter in respect thereof pursuant to Section 11(g), Harley Credit shall have the right to delay the release of the Prospectus to investors or to the Underwriters, to delay the Closing Date and to take other appropriate actions in each case as necessary in order to allow Harley Credit to comply with its obligation to file the Computational Materials and ABS Term Sheets with the Commission. (j) For purposes of this Agreement, as to the Underwriters, the term "Derived Information" means such portion, if any, of the information that: (i) is delivered to Harley Credit by the Underwriters pursuant to this Section 11 for filing with the Commission on Form 8-K; (ii) is not contained in the Prospectus without taking into account information incorporated therein by reference; and (iii) does not constitute Seller-Provided Information. "Seller-Provided Information" means any computer tape concerning the assets comprising the Trust and any other information with respect to the Offered Securities or such assets furnished to the Underwriters by Harley Credit for use as contemplated herein. 12. TERMINATION. This Agreement shall be subject to termination in the absolute discretion of the Underwriters, by notice given to the Trust Depositor prior to delivery of and payment for the Offered Securities, if prior to such time (i) trading in securities generally on the New York Stock Exchange or the Nasdaq Stock Market's National Market shall have been suspended or limited or minimum prices shall have been established on either such exchange, (ii) a banking moratorium shall have been declared either by federal or New York State authorities or (iii) there shall have occurred any outbreak or escalation of hostilities, declaration by the United States of a national emergency or war, or other calamity or crisis the effect of which on financial markets is such as to make it, in the judgment of the Underwriters, impracticable or inadvisable to proceed with the offering or delivery of the Offered Securities as contemplated by the Prospectus. 13. NO BANKRUPTCY PETITION. Each Underwriter covenants and agrees that, prior to the date which is one year and one day after the payment in full of all securities issued by the Trust Depositor or by a trust for which the Trust Depositor was the depositor, which securities were rated by any nationally recognized statistical rating organization, it will not institute against, or join any other Person in instituting against, the Trust Depositor any bankruptcy, reorganization, 32 arrangement, insolvency or liquidation proceedings or other proceedings under any federal or state bankruptcy or similar law. 14. REPRESENTATIONS AND INDEMNITIES TO SURVIVE. The respective agreements, representations, warranties, indemnities and other statements of the Trust Depositor and Harley Credit and their respective officers and of the several Underwriters set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of any Underwriter, the Trust Depositor or Harley Credit or any of the officers, directors or controlling persons referred to in Section 12 hereof, and will survive delivery of and payment for the Offered Securities. The provisions of Sections 9 and 10 hereof shall survive the termination or cancellation of this Agreement. 15. NOTICES. All communications hereunder will be in writing and effective only on receipt, and, if sent to the Underwriters, will be mailed, delivered or telegraphed and confirmed to them c/o [_______________]; or if sent to the Trust Depositor, will be mailed, delivered or telegraphed and confirmed to it at Harley-Davidson Customer Funding Corp., 4150 Technology Way, Carson City, Nevada 89706, Attention: President; or if sent to Harley Credit, will be mailed, delivered, telegraphed and confirmed to it at Harley-Davidson Credit Corp., 4150 Technology Way, Carson City, Nevada 89706, Attention: President. 16. SUCCESSORS. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the officers and directors and controlling persons referred to in Section 10 hereof, and, except as expressly set forth herein, no other person will have any right or obligation hereunder. 17. APPLICABLE LAW. This Agreement will be governed by and construed in accordance with the laws of the State of New York. 18. BUSINESS DAY. For purposes of this Agreement, "business day" means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which national banking associations in the cities of Chicago, Illinois or New York, New York are authorized or obligated by law, executive order or regulation to close. 19. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original, but all such Counterparts will together constitute one and the same agreement. 33 If the foregoing is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicate hereof, whereupon this Agreement and your acceptance shall represent a binding agreement among the Trust Depositor, Harley Credit and the several Underwriters. Very truly yours, HARLEY-DAVIDSON CUSTOMER FUNDING CORP. By: ------------------------------ Name: Title: HARLEY-DAVIDSON CREDIT CORP. By: ------------------------------ Name: Title: The foregoing Agreement is hereby confirmed and accepted as of the date first above written. [ ] ------------------- - ---------------------------------- By: [ ] ---------------------- By: --------------------------- Name: Title: 34 SCHEDULE I HARLEY-DAVIDSON MOTORCYCLE TRUST [_____]
OFFERED SECURITY PRINCIPAL AMOUNT PRICE CLASS A-1 NOTES - ------------------------- $---------- -------% CLASS A-2 NOTES - ------------------------- $---------- -------% CLASS B NOTES - ------------------------- $---------- -------% [CERTIFICATES - ------------------------- $---------- -------%]
35 EX-3.1 3 EXHIBIT 3.1 ARTICLES OF INCORPORATION OF HARLEY-DAVIDSON CUSTOMER FUNDING CORP. ARTICLE I NAME The name of the corporation (hereinafter called the "CORPORATION") is Harley-Davidson Customer Funding Corp. ARTICLE II REGISTERED OFFICE AND REGISTERED AGENT The address of the Corporation's registered office in the State of Nevada is One East First Street, Reno, Nevada 89501. The name of its registered agent at such address is The Corporation Trust Company of Nevada. ARTICLE III CORPORATE PURPOSES The nature of the business to be conducted or promoted by the Corporation is to engage in the following activities: (a) to purchase or otherwise acquire, own, hold, transfer or sell interests in, or interests in pools of, accounts, drafts, notes receivable, installment sale agreements, conditional sale agreements, promissory notes with or without related security agreements, operating and finance leases, installment payment agreements and similar types of financing agreements or obligations or rights to payment thereunder or arising in connection therewith, including monies paid, due or to become due thereunder or in connection therewith, and together with any related collateral security or contract rights, whether constituting real or personal property, securing such agreements or obligations or supporting the payment thereof (including the acquisition of ownership interests in real or personal property the subject of leases) (collectively, any of the foregoing the "ASSETS"); (b) to enter into, and perform its obligations under, any agreements with affiliates relating to or effecting the transfers and conveyances of Assets as described above; (c) to transfer the Assets or interests therein (including for the purpose of establishing, forming or funding one or more trusts ("TRUSTS")), pursuant to one or more indentures, pooling agreements, pooling and servicing agreements, sale agreements, receivables purchase agreements, sale and servicing agreements or other agreements ("AGREEMENTS") entered into by and among, among others, the Corporation, any trustee or trustees or collateral agent named therein (a "TRUSTEE"), and any entity acting as servicer for the Assets, as well as certain other financing entities (collectively hereinafter referred to as the "ENTITIES"), and to perform its obligations under any such Agreements; (d) to hold and enjoy any and all of the rights and privileges of any certificates ("CERTIFICATES"), notes ("NOTES"), participation interests ("PARTICIPATION INTERESTS"), deferred payments ("DEFERRED PAYMENTS") or other ownership interests ("OWNERSHIP INTERESTS") issued by or sold by the Entities to the Corporation under the related Agreements and to hold and enjoy all of the rights and privileges of any class of any series of Certificates, Notes, Participation Interests, Deferred Payments or Ownership Interests including any class of Certificates, Notes, Participation Interests, Deferred Payments or Ownership Interests which may be subordinate to any other class of Certificates, Notes, Participation Interests, Deferred Payments or Ownership Interests and except to the extent otherwise provided in any Certificates, Notes, Participation Interests, Deferred Payments, Ownership Interests or Agreement, to sell, assign, pledge or otherwise transfer any such Certificates, Notes, Participation Interests, Deferred Payments or Ownership Interests or any interest therein; (e) to issue, sell, authorize and deliver one or more series and/or classes or certificates, bonds, notes or other evidences of indebtedness secured or collateralized by, or otherwise representing interests in, one or more pools of Assets (or by notes or certificates of any series or class issued by one or more Trusts established or funded by the Corporation) (collectively, any of the foregoing being "Securities"); (f) to perform its obligations under the Agreements pursuant to which any Certificates, Notes, Participation Interests, Deferred Payments or other Ownership Interests are issued, sold or serviced; (g) to invest the proceeds derived from the sale or ownership of the Assets as determined by the Corporation's Board of Directors; and (h) to enter into any additional agreements or undertakings, engage in any further activities, and to exercise any other powers permitted to corporations organized under the laws of the State of Nevada, that are related or incidental to the foregoing and necessary, convenient or advisable to accomplish the foregoing. ARTICLE IV COMMON STOCK The total number of shares of capital stock which the Corporation has authority to issue is one thousand (1,000) shares, designated as Common Stock, and all of such shares shall be without par value. -2- ARTICLE V DENIAL OF PREEMPTIVE RIGHTS No holder of any class of capital stock of the Corporation, whether now or hereafter authorized, shall be entitled, as such, as a matter of right, to subscribe for or purchase any part of any new or additional issue of capital stock of the Corporation of any class whatsoever, or of securities convertible into or exchangeable for capital stock of the Corporation of any class whatsoever, whether now or hereafter authorized, or whether issued for cash, property or services. ARTICLE VI BOARD OF DIRECTORS; POWERS The Corporation shall be governed by a Board of Directors. The number of directors shall be fixed pursuant to the By-laws. The initial Board of Directors consists of four directors, the names and addresses of which are as follows:
- ------------------------------------------------------------ --------------------------------------------------------- NAME ADDRESS - ------------------------------------------------------------ --------------------------------------------------------- Donna F. Zarcone 150 South Wacker Drive Suite 3100 Chicago, Illinois 60606 - ------------------------------------------------------------ --------------------------------------------------------- Steven F. Deli 150 South Wacker Drive Suite 3100 Chicago, Illinois 60606 - ------------------------------------------------------------ --------------------------------------------------------- Donovan A. Langford, III Oakbrook Terrance Tower Suite 2242 1 Tower Lane Oakbrook Terrace, Illinois 60181 - ------------------------------------------------------------ --------------------------------------------------------- Peter M. Husting 12 Indian Hill Road Winnetka, Illinois 60093 - ------------------------------------------------------------ ---------------------------------------------------------
In furtherance and not in limitation of the powers conferred by statute, the Board of Directors of the Corporation is expressly authorized: (a) To make, alter, amend or repeal the By-Laws, except as otherwise expressly provided in any By-Law made by the holders of the capital stock of the Corporation entitled to vote thereon. Any By-Law may be altered, amended or repealed by the holders of the capital stock of the Corporation entitled to vote thereon at any annual meeting or at any special meeting called for that purpose; PROVIDED, HOWEVER, that no By-Laws hereafter adopted by the stockholders shall invalidate any prior act of the Board of Directors which would have been valid if such By-Laws had not been adopted. -3- (b) Subject to the provisions of Article III, to take, lease, purchase or otherwise acquire, and to own, use, hold, sell, convey, exchange, lease, mortgage or otherwise encumber, work, improve, develop, divide and otherwise handle, deal in, or dispose of real estate, real and personal property and any interest or right therein. (c) To determine the use and disposition of any surplus and net profits of the Corporation, including the determination of the amount of working capital required, to set apart out of any of the funds of the Corporation, whether or not available for dividends, a reserve or reserves for any proper purpose and to abolish any such reserve in the manner in which it was created. (d) To designate, by resolution passed by a majority of the whole Board of Directors, one or more committees, each committee to consist of one or more directors of the Corporation, which, to the extent provided in the resolution designating the committee or in the By-Laws of the Corporation, shall, subject to the limitations prescribed by law, have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by a majority of the whole Board of Directors. (e) To exercise, in addition to the powers and authorities hereinbefore or by law conferred upon it, any such powers and authorities and do all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the laws of the State of Nevada and of the Articles of Incorporation, including without limitation Article III hereof and of the By-Laws of the Corporation. ARTICLE VII CORPORATE RESTRICTIONS (a) At all times that the Corporation has issued and has outstanding, or any Trust established or funded by the Corporation has issued and has outstanding, any series or class of Securities which has been rated by a nationally recognized rating agency outstanding, the Board of Directors shall include at least two individuals who are Independent Directors. As used herein, an "INDEPENDENT DIRECTOR" shall be an individual who: (i) is not and has not been employed by Harley-Davidson Credit Corp. ("HDCC") or any of its subsidiaries or affiliates, as a director, officer, employee, partner, attorney or counsel within the five years immediately prior to such individual's appointment as an Independent Director; (ii) is not (and is not affiliated with a company or a firm that is) a significant advisor or consultant to HDCC or any of its subsidiaries and affiliates; (iii) is not affiliated with a significant customer or supplier of HDCC or any of its subsidiaries or affiliates; (iv) is not affiliated with a company of which HDCC or any of its subsidiaries and affiliates is a significant customer or supplier, (v) does not have significant personal services contract(s) with HDCC or any of its subsidiaries or affiliates; (vi) is not affiliated with a tax-exempt entity that receives significant contributions from HDCC or any of its subsidiaries or affiliates; (vii) is not the beneficial owner at the time of such individual's appointment as an Independent Director, or at any time thereafter while serving as an -4- Independent Director, of such number of shares of any classes of common stock of HDCC the value of which constitutes more than 5% of the outstanding common stock of HDCC; (viii) does not at any time hold any beneficial or economic interest in the Corporation; and (ix) is not a spouse, parent, sibling or child of any person described in clauses (i) through (viii). (b) As used in paragraph (a) of this Article VII, the following terms shall have the following meanings: (i) an "AFFILIATE" of a person, or a person "AFFILIATED WITH," a specified person, shall mean a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the specified person. (ii) The term "CONTROL" (including the terms "CONTROLLING," "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise; provided, however, that a person shall not be deemed to control another person solely because he or she is a director of such other person. (iii) The term "PERSON" shall mean any individual, partnership, firm, corporation, association, trust, unincorporated organization or other entity, as well as any syndicate or group deemed to be a person pursuant to Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, as in effect on the date of incorporation of the Corporation. (iv) A "SUBSIDIARY" of HDCC shall mean any corporation a majority of the voting stock of which is owned, directly or indirectly through one or more other subsidiaries by HDCC. (v) A person shall be deemed to be, or to be affiliated with, a company or firm that is a "SIGNIFICANT ADVISOR OR CONSULTANT TO HDCC OR ANY OF ITS SUBSIDIARIES OR AFFILIATES" if he, she, or it, as the case may be, received or would receive fees or similar compensation from HDCC or any of its subsidiaries or affiliates in excess of the lesser of (A) 3% of the consolidated gross revenues which HDCC and its subsidiaries received for the sale of their products and services during the last fiscal year of HDCC; (B) 5% of the gross revenues of the person during the last calendar year if such person is a self-employed individual; and (C) 5% of the consolidated gross revenues received by such company or firm for the sale of its products and services during its last fiscal year, if the person is a company or firm; PROVIDED, HOWEVER, that director's fees and expense reimbursements shall not be included in the gross revenues of an individual for purposes of this determination. (vi) A "SIGNIFICANT CUSTOMER OF HDCC OR ANY OF ITS SUBSIDIARIES OR AFFILIATES" shall mean a customer from which HDCC and any of its subsidiaries or affiliates collectively in the last fiscal year of HDCC received payments in consideration for the products and services of HDCC and its subsidiaries or affiliates which are in excess of -5- 3% of the consolidated gross revenues of HDCC and its subsidiaries during such fiscal year. (vii) A "SIGNIFICANT SUPPLIER OF HDCC OR ANY OF ITS SUBSIDIARIES OR AFFILIATES" shall mean a supplier to which HDCC and any of its subsidiaries or affiliates collectively in the last fiscal year of HDCC made payments in consideration for the supplier's products and services in excess of 3% of the consolidated gross revenues of HDCC and its subsidiaries during such fiscal year. (viii) HDCC or any of its subsidiaries and affiliated shall be deemed a "SIGNIFICANT CUSTOMER" of a company if HDCC and any of its subsidiaries and affiliates collectively were the direct source during such company's last fiscal year of in excess of 5% of the gross revenues which such company received for the sale of its products and services during such fiscal year. (ix) HDCC or any of its subsidiaries and affiliates shall be deemed a "SIGNIFICANT SUPPLIER" of a company if HDCC and any of its subsidiaries and affiliates collectively received in such company's last fiscal year payments from such company in excess of 5% of the gross revenues which such company received during such fiscal year for the sale of its products and services. (x) A person shall be deemed to have "SIGNIFICANT PERSONAL SERVICES CONTRACT(S) WHICH HDCC OR ANY OF ITS SUBSIDIARIES OR AFFILIATES" if the fees and other compensation received by the person pursuant to personal services contract(s) with HDCC and any of its subsidiaries or affiliates exceed or would exceed 5% of his or her gross revenues during the last calendar year. (xi) A tax-exempt entity shall be deemed to receive "SIGNIFICANT CONTRIBUTIONS FROM HDCC OR ANY OF ITS SUBSIDIARIES OR AFFILIATES" if such tax-exempt entity received during its last fiscal year contributions from HDCC or its subsidiaries or affiliates in excess of the lesser of (A) 3% of the consolidated gross revenues of HDCC and its subsidiaries during such fiscal year and (B) 5% of the contributions received by the tax-exempt entity during such fiscal year. (c) Notwithstanding any other provision of the Articles of Incorporation or any provision of law that otherwise so empowers the Corporation, the Corporation shall not, without (i) the affirmative vote of 100% of the members of the Board of Directors of the Corporation, including the affirmative vote of the Independent Directors (ii) the affirmative vote of shareholders holding at least two-thirds (2/3) of the total number of outstanding shares of Common Stock of the Corporation, and (iii) written confirmation, from each nationally recognized rating agency which has rated Securities issued by the Corporation or by any Trust established or funded by the Corporation, that the then-current ratings on such Securities will not be reduced or withdrawn as a result thereof, do any of the following: (A) engage in any business or activity other than those set forth in Article III; -6- (B) incur any indebtedness for borrowed money, or assume or guaranty any indebtedness of any other entity, other than (x) indebtedness evidenced by, or incurred in connection with, any issue of Securities, (y) indebtedness not exceeding 1% of the Corporation's total assets at such time on account of incidentals or services supplied or furnished to the Corporation in the ordinary course of its business, and (z) indebtedness to HDCC or any affiliate thereof incurred in connection with the acquisition of Assets, which indebtedness shall be subordinated to all obligations under the Agreements; (C) dissolve or liquidate, in whole or in part; or consolidate or merge with or into any other entity or convey, transfer or lease its properties and assets substantially as an entirety to any entity, or permit any entity to merge into it or convey, transfer or lease its properties and assets substantially as an entirety to it, unless: (y) the entity (if other than the Corporation) formed or surviving the consolidation or merger or which acquires the properties and assets of the Corporation is organized and existing under the laws of any State of the United States or the District of Columbia; expressly assumes the due and punctual payment of, and all obligations of the Corporation, including those obligations of the Corporation under any Agreement; and has articles of incorporation containing provisions substantially identical to the provisions of Article III, this Article VII, Article XIV, and Article XV; and (z) immediately after giving effect to the transaction, no default or event of default has occurred and is continuing under any indebtedness of the Corporation or any agreement relating to such indebtedness. (d) Notwithstanding any other provision of these Articles of Incorporation or any provision of law that otherwise so empowers the Corporation, the Corporation shall not, for so long as the Corporation is able to pay its debts generally as they become due, and without the affirmative vote of 100% of the members of the Board of Directors of the Corporation, (i) institute proceedings to be adjudicated bankrupt or insolvent, (ii) consent to the institution of bankruptcy or insolvency proceedings against it, (iii) file a petition seeking or consent to reorganization or relief under any applicable federal or state law relating to bankruptcy, (iv) seek or consent to the appointment of a receiver, liquidator, assignee, trustee, or sequestrator (or other similar official) of the Corporation or a substantial part of its property, (v) make any assignment for the benefit of creditors or admit its inability to pay its debts generally as they become due, or (vi) authorize or take corporate action in furtherance of any such action. If there shall not be, as and to the extent required by this Article VII, Independent Directors then in office and acting as required by this Article VII, a vote on any matter set forth in this paragraph (d) shall not be taken unless and until Independent Directors meeting the requirements of this Article VII shall have been appointed and qualified. ARTICLE VIII DIRECTORS PROTECTED A member of the Board of Directors of the Corporation, or a member of any committee designated by the Board of Directors, shall, in the performance of his/her duties, be fully -7- protected in relying in good faith upon the books of account or other records of the Corporation and upon such information, opinions, report or statements as are presented to the Corporation by any of the Corporation's officers or employees or committees of the Board of Directors, or by any other person as to matters the member reasonably believes are within such other person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation. Neither the amendment nor repeal of this Article VIII, nor the adoption of any provision of these Articles of Incorporation inconsistent with this Article VIII, shall eliminate or reduce the effect of this Article VIII in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article VIII, would accrue or arise prior to such amendment, repeal or adoption of an inconsistent provision. ARTICLE IX CORPORATE EXISTENCE The Corporation is to have perpetual existence. ARTICLE X NO LIABILITY OF HOLDERS OF CAPITAL STOCK FOR CORPORATE DEBTS The holder or holders of the capital stock of the Corporation shall not be personally or directly liable for the payment of the Corporation's debts and the private property of the holders of the capital stock of the Corporation shall not be subjected to the payment of debts of the Corporation to any extent whatsoever. ARTICLE XI TRANSACTIONS WITH DIRECTORS AND OFFICERS No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his/her or their votes are counted for such purpose, if: (1) the material facts as to the relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative vote of a majority of disinterested directors, even though the disinterested directors be less than a quorum; or (2) the material facts as to the relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by the vote of the stockholders; or (3) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board of Directors, a committee thereof or the stockholders. Common or interested directors may be counted in determining the presence of a -8- quorum at a meeting of the Board of Directors or of a committee thereof which authorizes the contract or transaction. ARTICLE XII INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS (a) Any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation), by reason of the fact that he/she is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent (for purposes of this Article, such person shall include a trustee) of another corporation, partnership, joint venture, trust or other enterprise, shall be indemnified and held harmless by the Corporation to the fullest extent legally permissible under the General Corporation Law of the State of Nevada, as amended from time to time, against all expenses, liabilities and losses (including attorneys' fees and disbursements), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if he/she acted in good faith and in a manner he/she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful; PROVIDED, that any amounts payable by the Corporation in accordance with this subsection (a) of Article XII hereof, shall be payable solely to the extent of funds actually received by the Corporation in excess of funds necessary to pay in full all outstanding Securities rated by a nationally recognized rating agency. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of NOLO CONTENDERE or its equivalent, shall not, of itself, create a presumption that the person seeking indemnification did not act in good faith and in a manner which he/she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his/her conduct was unlawful. Entry of a judgment by consent as part of a settlement shall not be deemed a final adjudication of liability for negligence or misconduct in the performance of duty, nor of any other issue or matter. (b) To the extent that a director, officer, employee or agent of, or serving at the request of, the Corporation (as described in clause (a) of this Article XII) has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in clause (a), or in defense of any claim, issue or matter therein, he/she shall be indemnified by the Corporation against expenses (including attorneys' fees and disbursements) actually and reasonably incurred by him/her in connection therewith without the necessity of any action being taken by the Corporation other than the determination, in good faith, that such defense has been successful. In all other cases wherein indemnification is provided by this Article XII, unless ordered by a court, indemnification shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he/she has met the applicable standard of conduct specified in this Article XII. Such determination shall be made (1) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (2) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or -9- (3) by the holders of a majority of the shares of capital stock of the Corporation entitled to vote thereon. (c) Expenses (including attorneys' fees and disbursements) incurred by an officer or director in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors in the specific case upon receipt of any undertaking by or on behalf of such director or officer to repay such amount unless it shall ultimately be determined that he is not entitled to be indemnified by the Corporation. Expenses (including attorneys' fees and disbursements) incurred by other employees or agents in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon such terms and conditions, if any, as the Board of Directors deems appropriate. (d) No director shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty by such director as a director. Notwithstanding the foregoing sentence, a director shall be liable to the extent provided by applicable law (i) for breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct, fraud or a knowing violation of law, (iii) pursuant to Section 78.300 of the Nevada General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. No amendment to or repeal of this clause (d) of this Article XII shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal. (e) The indemnification and advancement of expenses provided by this Article XII shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement may be entitled under any By-Law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office, and shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such person. (f) By action of the Board of Directors, notwithstanding any interest of the directors in such action, the Corporation may purchase and maintain insurance, in such amounts as the Board of Directors deems appropriate, on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against him/her and incurred by him/her in any such capacity, or arising out of his/her status as such, whether or not the Corporation shall have the power to indemnify him against such liability under the provisions of this Article XII. -10- ARTICLE XIII COMPROMISE OR ARRANGEMENT BETWEEN CORPORATION AND ITS CREDITORS OR STOCKHOLDERS Whenever a compromise or arrangement is proposed between the Corporation and its creditors or any class of them and/or between the Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Nevada may, on the application in a summary way of the Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for the Corporation under the provisions of Sections 78.347 or 78.630 of the Nevada General Corporation Law or on the application of trustees in dissolution or of any receiver or receivers appointed for the Corporation under the provisions of Sections 78.590, 78.635 and 78.650 of the Nevada General Corporation Law, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of the Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all creditors or class of creditors, and/or on all the stockholders or class of stockholders, of the Corporation, as the case may be, and also on the Corporation. ARTICLE XIV RESERVATION OF RIGHT TO AMEND ARTICLES OF INCORPORATION The Corporation shall not amend, alter, change or repeal Article III, Article VII, this Article XIV or Article XV unless it has received (i) prior written confirmation from each nationally recognized rating agency which has rated any Securities that the current ratings on such Securities will not be reduced or withdrawn as a result of such amendment, alteration, change or repeal, (ii) the affirmative vote of 100% of the members of the Board of Directors (which shall include the Independent Directors) of the Corporation, and (iii) the affirmative vote of shareholders holding at least two-thirds (2/3) of the total number of outstanding shares of capital stock of the Corporation entitled to vote thereon. Subject to the foregoing limitation, the Corporation reserves the right to amend, alter, change or repeal any provision contained in these Articles of Incorporation, in the manner now or hereafter prescribed by the law of the State of Nevada, and all the provisions of these Articles of Incorporation and all rights and powers conferred in these Articles of Incorporation on stockholders, directors and officers are subject to this reserved power. -11- ARTICLE XV CORPORATE PROCEDURES (a) The Corporation's assets will not be commingled with those of any direct or ultimate parent of the Corporation or any other person or entity and will hold all of its assets in its own name; (b) The Corporation will maintain separate corporate records and books of account from those of any subsidiaries, affiliates, or the direct or ultimate parent of the Corporation or any other person or entity; (c) The Corporation will not transfer any direct or indirect ownership interest of more than a 49% interest therein, unless such transfer is conditioned upon the delivery of a non-consolidation opinion acceptable to the Entities; (d) The Corporation will maintain bank accounts separate from any other person or entity; (e) The Corporation will maintain separate financial statements, showing its assets and liabilities separate and apart from those of any other person or entity and not to have its assets listed on the financial statement of any other entity; (f) The Corporation will pay its own liabilities and expenses solely out of its own funds; (g) The Corporation will observe all corporate and other organizational formalities; (h) The Corporation will maintain an arm's length relationship with its affiliates and to enter into transactions with affiliates only on a commercially reasonable basis; (i) The Corporation will pay the salaries of its own employees from its own funds; (j) The Corporation will maintain a sufficient number of employees in light of its contemplated business operations; (k) The Corporation will not guarantee or become obligated for the debts of any other entity or person; (l) The Corporation will not hold out its credit as being available to satisfy the obligations of any other person or entity; (m) The Corporation will not acquire the obligations or securities of its affiliates or owners, including partners, members or shareholders, as appropriate; (n) The Corporation will not make loans to any other person or entity or to buy or hold evidence of indebtedness issued by any other person or entity (other than cash, investment grade securities or from the Entities); -12- (o) The Corporation will allocate fairly and reasonably any overhead expenses that are shared with an affiliate, including paying for office space and services performed by any employee of an affiliate; (p) The Corporation will hold itself out as a separate entity; (q) The Corporation will correct any known misunderstanding regarding its separate identity; (r) The Corporation will not identify itself as a division of any other person or entity; and (s) The Corporation will maintain adequate capital in light of its contemplated business purposes. ARTICLE XVI ELECTION OF DIRECTORS Elections of directors need not be by written ballot unless the By-Laws of the Corporation shall so provide. ARTICLE XVII RECORDS OUTSIDE STATE The books and records of the Corporation may, subject to any statutory requirements, be kept at a location or locations outside the State of Nevada as may be designated by the Board of Directors or in the By-Laws of the Corporation. ARTICLE XVIII COMBINATIONS WITH INTERESTED SHAREHOLDES ELECTION The Corporation expressly elects not to be governed by Sections 78.411 to 78.444, inclusive, of the Nevada General Corporation Law. -13- ARTICLE XIX INCORPORATOR The name and the mailing address of the Incorporator are as follows:
- ------------------------------------------------------------ --------------------------------------------------------- NAME ADDRESS - ------------------------------------------------------------ --------------------------------------------------------- Michael T. Mullins Winston & Strawn 35 West Wacker Drive Chicago, Illinois 60601 - ------------------------------------------------------------ --------------------------------------------------------- * * * * * * *
CERTIFICATE OF ACCEPTANCE OF APPOINTMENT OF RESIDENT AGENT: The Corporation Trust Company of Nevada hereby accepts appointment as Resident Agent for Harley-Davidson Customer Funding Corp. The Corporation Trust Company of Nevada by: - ---------------------------------------- ---------------------- (Signature of Resident Agent) (Date) -14- The undersigned, being the Incorporator named above, in order to form a corporation pursuant to Title 7, Chapter 78 of the Nevada Revised Statutes, does make this certificates hereby declaring and certifying that this is my act and deed and that the facts herein stated are true, and accordingly have hereunto set my hand this 12th day of May, 2000. /s/ Michael T. Mullins ------------------------- Sole Incorporator STATE OF ILLINOIS) ) SS. COUNTY OF COOK ) On this 12th day of May, 2000 personally appeared before me, a Notary Public in and for the State of County aforesaid, Michael T. Mullins, known to me to be the person who executed the foregoing Articles of Incorporation, and who acknowledged to me that he executed the same freely and voluntarily and for the uses and purposes therein described. WITNESS my hand and official seal, this 12th day of May, 2000. /s/ Notary Public EX-3.2 4 EXHIBIT 3.2 BY-LAWS OF HARLEY-DAVIDSON CUSTOMER FUNDING CORP. ARTICLE I OFFICES Section 1.1. REGISTERED OFFICE. The registered office of the Corporation shall be as set forth in the Corporations Articles of Incorporation, as they may be amended from time to time. Section 1.2. OTHER OFFICES. The Corporation may also have offices at such other places both within and without the State of Nevada as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II STOCKHOLDERS' MEETING Section 2.1. PLACE OF MEETINGS. All meetings of the stockholders, whether annual or special, shall be held in the City of Chicago, State of Illinois, at such place as may be fixed from time to time by the Board of Directors, or at such other place either within or without the State of Nevada as may be designated from time to time by the Board of Directors and stated in the notice of meeting. Section 2.2. ANNUAL MEETINGS. An annual meeting of the stockholders, commencing with the year 2001, shall be held on the second Monday in December in each year, if not a legal holiday in the City of Chicago, State of Illinois, and if a legal holiday in the City of Chicago, State of Illinois, then on the next secular day following, at 12:00 noon, or at such other date and time as shall be designated by the Board of Directors and stated in the notice of meeting, at which they shall elect a Board of Directors, and transact such other business as may properly be brought before the meeting. Section 2.3. NOTICE OF MEETING. Written notice of the annual meeting stating the place, date and hour of the meeting, shall be given not less than ten or more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the Corporation. Section 2.4. STOCKHOLDERS' LIST. At least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder, shall be prepared by the Secretary. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting at the place within the city where the meeting is to be held which place shall be specified in the notice of meeting, or if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 2.5. SPECIAL MEETINGS. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the Articles of Incorporation, may be called by the President and shall be called by the Secretary at the request of a majority of the Board of Directors, or at the request in writing of stockholders owning at least a majority of the number of shares of the Corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. Business transacted at any special meeting shall be limited to the purposes stated in the notice of special meeting. Section 2.6. NOTICE OF SPECIAL MEETING. Written notice of a special meeting, stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called, shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the Corporation. Section 2.7. QUORUM. The holders of a majority of the shares issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall be requisite and shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute, by the Articles of Incorporation or by these By-Laws. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholder entitled to vote thereat, present in person or represented by proxy, shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, of the place, date and hour of the adjourned meeting, until a quorum shall again be present or represented by proxy. At the adjourned meeting at which a quorum shall be present or represented by proxy, the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than sixty days, or if after the adjournment, a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 2.8. VOTING. When a quorum is present at any meeting, the vote of the holders of a majority of the shares having voting power, present in person or represented by proxy, shall decide any question brought before such meeting, unless the question is one upon which, by express provision of the statutes or of the Articles of Incorporation or of these By-Laws, a different vote is required in which case such express provision shall govern and control the decision of such question. Each stockholder shall have one vote for each share of stock having voting power registered in his name on the books of the Corporation, except as otherwise provided in the Articles of Incorporation. -2- Section 2.9. PROXIES. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. Section 2.10. UNANIMOUS CONSENT. Whenever the vote of stockholders at a meeting thereof is required or permitted to be taken for or in connection with any corporate action by any provisions of the statutes or of the Articles of Incorporation or these By-Laws, the meeting, notice of the meeting, and vote of stockholders may be dispensed with if all the stockholders who would have been entitled to vote upon the action, if such meeting were held, shall consent in writing to such corporate action being taken. ARTICLE III DIRECTORS Section 3.1. GENERAL POWERS. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors which may exercise all such powers of the Corporation and do all such acts and things as are not by the Nevada General Corporation Law nor by the Articles of Incorporation nor by these By-Laws directed or required to be exercised or done by the stockholders. Section 3.2. NUMBER OF DIRECTORS. The number of directors which shall constitute the whole Board shall be not less than three (3) nor more than eight (8). Each director shall be elected at the annual meeting of the stockholders, and shall hold office until his successor is elected and qualified or until his earlier resignation or removal. Section 3.3. VACANCIES. If the office of a director becomes vacant by reason of death, resignation, retirement disqualification, removal from office, or otherwise, or a new directorship is created, the holders of a plurality of shares issued and outstanding and entitled to vote in elections of directors, shall choose a successor or successors, or a director to fill the newly created directorship, who shall hold office for the unexpired term or until the next election of directors. Section 3.4. PLACE OF MEETINGS. The Board of Directors may hold its meetings outside of the State of Nevada, at the office of the Corporation or at such other places as they may from time to time determine, or as shall be fixed in the respective notices or waivers of notice of such meetings. Section 3.5. COMMITTEES OF DIRECTORS. The Board of Directors may, by resolution or resolutions passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be -3- affixed to all papers which may require it; but no such committee shall have the power of authority in reference to amending the Articles of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amendment to the By-Laws, of the Corporation; and, unless the resolution, By-Laws, or Articles of Incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. The committees shall keep regular minutes of their proceedings and report the same to the Board of Directors when required. Section 3.6. COMPENSATION OF DIRECTORS. Directors, as such, may receive such stated salary for their services and/or such fixed sums and expenses of attendance for attendance at each regular or special meeting of the Board of Directors as may be established by resolution of the Board; provided that nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. Section 3.7. ANNUAL MEETING. The annual meeting of the Board of Directors shall be held within ten days after the annual meeting of the stockholders in each year. Notice of such meeting, unless waived, shall be given by mail or telegram to each director elected at such annual meeting, at his address as the same may appear on the records of the Corporation, or in the absence of such address, at his residence or usual place of business, at least three days before the day on which such meeting is to be held. Said meeting may be held at such place as the Board may fix from time to time or as may be specified or fixed in such notice or waiver thereof. Section 3.8. SPECIAL MEETINGS. Special meetings of the Board of Directors may be held at any time on the call of the President or at the request in writing of at least 40% of the directors. Notice of any such meeting, unless waived, shall be given by mail or telegram to each director at his address as the same appears on the records of the Corporation not less than one day prior to the day on which such meeting is to be held if such notice is by telegram, and not less than two days prior to the day on which the meeting is to be held if such notice is by mail. If the Secretary shall fail or refuse to give such notice, then the notice may be given by the officer or any one of the directors making the call. Any such meeting may be held at such place as the Board may fix from time to time or as may be specified or fixed in such notice or waiver thereof. Any meeting of the Board of Directors shall be a legal meeting without any notice thereof having been given, if all the directors shall be present thereat, and no notice of a meeting shall be required to be given to any directors who shall attend such meeting. Section 3.9. ACTION WITHOUT MEETING. Any action required or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting, if a written consent to such action is signed by all members of the Board or such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board of Directors. -4- Members of the Board of Directors, or any committee designated by the Board, may participate in a meeting of the Board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this section shall constitute presence in person at such meeting. Section 3.10. QUORUM AND MANNER OF ACTING. Except as otherwise provided in these By-Laws, a majority of the total number of directors as at the time specified by the By-Laws shall constitute a quorum at any regular or special meeting of the Board of Directors. Except as otherwise provided by statute, by the Articles of Incorporation or by these By-Laws, the vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors. In the absence of a quorum, a majority of the directors present may adjourn the meeting from time to time until a quorum shall be present. Notice of any adjourned meeting need not be given, except that notice shall be given to all directors if the adjournment is for more than thirty days. ARTICLE IV OFFICERS Section 4.1. EXECUTIVE OFFICERS. The executive officers of the Corporation shall be a President, such number of Vice Presidents, if any, as the Board of Directors may determine, a Secretary and a Treasurer. One person may hold any number of said offices. Section 4.2. ELECTION, TERM OF OFFICE AND ELIGIBILITY. The executive officers of the Corporation shall be elected annually by the Board of Directors at its annual meeting or at a special meeting held in lieu thereof. Each officer, except such officers as may be appointed in accordance with the provisions of Section 4.3, shall hold office until his successor shall have been duly chosen and qualified or until his death, resignation or removal. None of the officers need be members of the Board. Section 4.3. SUBORDINATE OFFICERS. The Board of Directors may appoint such Assistant Secretaries, Assistant Treasurers, Controller and other officers, and such agents as the Board may determine, to hold office for such period and with such authority and to perform such duties as the Board may from time to time determine. The Board may, by specific resolution, empower the chief executive officer of the Corporation or the Executive Committee to appoint any such subordinate officers or agents. Section 4.4. REMOVAL. The President, any Vice President, the Secretary and/or the Treasurer may be removed at any time, either with or without cause, but only by the affirmative vote of the majority of the total number of directors as at the time specified by the By-Laws. Any subordinate officer appointed pursuant to Section 4.3 may be removed at any time, either with or without cause, by the majority vote of the directors present at any meeting of the Board or by any committee or officer empowered to appoint such subordinate officers. Section 4.5. THE PRESIDENT. The President shall be the chief executive officer of the Corporation. He shall have executive authority to see that all orders and resolutions of the -5- Board of Directors are carried into effect and, subject to the control vested in the Board of Directors by statute, by the Articles of Incorporation, or by these By-Laws, shall administer and be responsible for the management of the business and affairs of the Corporation. He shall preside at all meetings of the stockholders and the Board of Directors; and in general shall perform all duties incident to the office of the President and such other duties incident to the office of the President and such other duties as from time to time may be assigned to him by the Board of Directors. Section 4.6. THE VICE PRESIDENTS. In the event of the absence or disability of the President, each Vice President, in the order designated, or in the absence of any designation, then in the order of their election, shall perform the duties of the President. The Vice Presidents shall also perform such other duties as from time to time may be assigned to the them by the Board of Directors or by the chief executive officer of the Corporation. Section 4.7. THE SECRETARY. The Secretary shall: (a) Keep the minutes of the meetings of the stockholders and of the Board of Directors; (b) See that all notices are duly given in accordance with the provisions of these By-Laws or as required by law; (c) Be custodian of the records and of the seal of the Corporation and see that the seal or a facsimile or equivalent thereof is affixed to or reproduced on all documents, the execution of which on behalf of the Corporation under its seal is duly authorized; (d) Have charge of the stock record books of the Corporation; (e) In general, perform all duties incident to the office of Secretary, and such other duties as are provided by these By-Laws and as from time to time are assigned to him by the Board of Directors or by the chief executive officer of the Corporation. Section 4.7 THE ASSISTANT SECRETARIES. If one or more Assistant Secretaries shall be appointed pursuant to the provisions of Section 4.3 respecting subordinate officers, then, at the request of the Secretary, or in his absence or disability, the Assistant Secretary designated by the Secretary (or in the absence of such designations, then any one of such Assistant Secretaries) shall perform the duties of the Secretary and when so acting shall have all the powers of, and be subject to all the restrictions upon, the Secretary. Section 4.8. THE TREASURER. The Treasurer shall: (a) Receive and be responsible for all funds of and securities owned or held by the Corporation and, in connection therewith, among other things: keep or cause to be kept full and accurate records and accounts for the Corporation; deposit or cause to be deposited to the credit of the Corporation all moneys, funds and securities so received in such bank or other depositary as the Board of -6- Directors or an officer designated by the Board may from time to time establish; and disburse or supervise the disbursement of the funds of the Corporation as may be properly authorized. (b) Render to the Board of Directors at any meeting thereof, or from time to time when ever the Board of Directors or the chief executive officer of the Corporation may require, financial and other appropriate reports on the condition of the Corporation; (c) In general, perform all the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the Board of Directors or by the chief executive officer of the Corporation. Section 4.9. THE ASSISTANT TREASURERS. If one or more Assistant Treasurers shall be appointed pursuant to the provisions of Section 4.3 respecting subordinate officers, then, at the request of the Treasurer, or in his absence or disability, the Assistant Treasurer designated by the Treasurer (or in the absence of such designation, then any one of such Assistant Treasurers) shall perform all the duties of the Treasurer and when so acting shall have all the powers of and be subject to all the restrictions upon, the Treasurer. Section 4.10. SALARIES. The salaries of the officers shall be fixed from time to time by the Board of Directors, and no officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the Corporation. Section 4.11. BONDS. If the Board of Directors or the chief executive officer shall so require, any officer or agent of the Corporation shall give bond to the Corporation in such amount and with such surety as the Board of Directors or the chief executive officer, as the case may be, may deem sufficient, conditioned upon the faithful performance of their respective duties and offices. Section 4.12. DELEGATION OF DUTIES. In case of the absence of any officer of the Corporation or for any other reason which may seem sufficient to the Board of Directors, the Board of Directors may, for the time being, delegate his powers and duties, or any of them, to any other officer or to any director. ARTICLE V SHARES OF STOCK Section 5.1. REGULATION. Subject to the terms of any contract of the Corporation, the Board of Directors may make such rules and regulations as it may deem expedient concerning the issue, transfer, and registration of certificates for shares of the stock of the Corporation, including the issue of new certificates for lost, stolen or destroyed certificates, and including the appointment of transfer agents and registrars. Section 5.2. STOCK CERTIFICATES. Certificates for shares of the stock of the Corporation shall be respectively numbered serially for each class of stock, or series thereof, as they are issued, shall be impressed with the corporate seal or a facsimile thereof, and shall be -7- signed by the President or a Vice President, and by the Secretary or Treasurer, or an Assistant Secretary or an Assistant Treasurer, provided that such signatures may be facsimiles on any certificate countersigned by a transfer agent other than the Corporation or its employee. Each certificate shall exhibit the name of the Corporation, the class (or series of any class) and number of shares represented thereby, and the name of the holder. Each certificate shall be otherwise in such form as may be prescribed by the Board of Directors. Section 5.3. RESTRICTION ON TRANSFER OF SECURITIES. A restriction on the transfer or registration of transfer of securities of the Corporation may be imposed either by the Articles of Incorporation or by these By-Laws or by an agreement among any number of security holders or among such holders and the Corporation. No restriction so imposed shall be binding with respect to securities issued prior to the adoption of the restriction unless the holders of the securities are parties to an agreement or voted in favor of the restriction. A restriction on the transfer of securities of the Corporation is permitted by this Section if it: (a) Obligates the holder of the restricted securities to offer to the Corporation or to any other holders of securities of the Corporation or to any other person or to any combination of the foregoing a prior opportunity, to be exercised within a reasonable time, to acquire the restricted securities; or (b) Obligates the Corporation or any holder of securities of the Corporation or any other person or any combination of the foregoing to purchase the securities which are the subject of an agreement respecting the purchase and sale of the restricted securities; or (c) Requires the Corporation or the holders of any class of securities of the Corporation to consent to any proposed transfer of the restricted securities or to approve the proposed transferee of the restricted securities; or (d) Prohibits the transfer of the restricted securities to designated persons or classes of persons; and such designation is not manifestly unreasonable; or (e) Restricts transfer or registration of transfer in any other lawful manner. Unless noted conspicuously on the security, a restriction, even though permitted by this Section, is ineffective except against a person with actual knowledge of the restriction. Section 5.4. TRANSFER OF SHARES. Subject to the restrictions permitted by Section 5.3, shares of the capital stock of the Corporation shall be transferable on the books of the Corporation by the holder thereof in person or by his duly authorized attorney, upon the surrender or cancellation of a certificate or certificates for a like number of shares. As against the Corporation, a transfer of shares can be made only on the books of the Corporation and in the manner hereinabove provided, and the Corporation shall be entitled to treat the registered holder of any share as the owner thereof and shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the statutes of the State of Nevada. -8- Section 5.5. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD. (a) In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty nor less than ten days before the date of such meeting. If no record is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; providing, however, that the Board of Directors may fix a new record date for the adjourned meeting. (b) In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors. If no record date has been fixed by the Board of Directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by the Nevada Corporation Law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in the State of Nevada, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings by stockholders are recorded. Delivery made to a Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by the Nevada General Corporation Law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action. (c) In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect to any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. Section 5.6. LOST CERTIFICATE. Any stockholder claiming that a certificate representing shares of stock has been lost, stolen or destroyed may make an affidavit or affirmation of the fact and, if the Board of Directors so requires, advertise the same in a manner designated by the Board, and give the Corporation a bond of indemnity in form and with security for an amount satisfactory to the Board (or an officer or officers designated by the Board), whereupon a new certificate may be issued of the same tenor and representing the same number, -9- class and/or series of shares as were represented by the certificate alleged to have been lost, stolen or destroyed. ARTICLE VI BOOKS AND RECORDS Section 6.1. LOCATION. The books, accounts and records of the Corporation may be kept at such place or places within or without the State of Nevada as the Board of Directors may from time to time determine. Section 6.2. INSPECTION. The books, accounts, and records of the Corporation shall be open to inspection by any member of the Board of Directors at all times; and open to inspection by the stockholders at such times, and subject to such regulations as the Board of Directors may prescribe, except as otherwise provided by statute. ARTICLE VII DIVIDENDS AND RESERVES Section 7.1. DIVIDENDS. The Board of Directors of the Corporation, subject to any restrictions contained in the Articles of Incorporation and other lawful commitments of the Corporation, may declare and pay dividends upon the shares of its capital stock either out of the surplus of the Corporation, as defined in and computed in accordance with the Nevada General Corporation Law, or in case there shall be no such surplus, out of the net profits of the Corporation for the fiscal year in which the dividend is declared and/or the preceding fiscal year. If the capital of the Corporation, computed in accordance with the Nevada General Corporation Law, shall have been diminished by depreciation in the value of its property, or by losses, or otherwise, to an amount less than the aggregate amount of the capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets, the Board of Directors of the Corporation shall not declare and pay out of such net profits any dividends upon any shares of any classes of its capital stock until the deficiency in the amount of capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets shall have been repaired. Dividends may be paid in cash, in property, or in shares of the Corporation's capital stock. Section 7.2. RESERVES. The Board of Directors of the Corporation may set apart, out of any of the funds of the Corporation available for dividends, a reserve or reserves for any proper purpose and may abolish any such reserve. ARTICLE VIII MISCELLANEOUS PROVISIONS Section 8.1. FISCAL YEAR. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors. -10- Section 8.2. DEPOSITORIES. The Board of Directors or an officer designated by the Board shall appoint banks, trust companies, or other depositories in which shall be deposited from time to time the money or securities of the Corporation. Section 8.3. CHECKS, DRAFTS AND NOTES. All checks, drafts, or other orders for the payment of money and all notes or other evidence or indebtedness issued in the name of the Corporation shall be signed by such officer or officers or agent or agents as shall from time to time be designated by resolution of the Board of Directors or by an officer appointed by the Board. Section 8.4. CONTRACTS AND OTHER INSTRUMENTS. The Board of Directors may authorize any officer, agent or agents to enter into any contract or execute and deliver any instrument in the name and on behalf of the Corporation and such authority may be general or confined to specific instances. Section 8.5. INSURANCE. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another Corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the Nevada General Corporation Law. Section 8.6. NOTICES. Whenever under the provisions of the statutes or of the Articles of Incorporation or of these By-Laws notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, by depositing the same in post office or letter box, in a postpaid sealed wrapper, or by delivery to a telegraph company, addressed to such director or stockholder at such address as appears on the records of the Corporation, and such notice shall be deemed to be given at the time when the same shall be thus mailed or delivered to a telegraph company. Notice may also be given by facsimile transmission provided that such notice shall be immediately confirmed by a telephone call to the recipient at the number specified in the records of the Corporation and such notice shall be deemed to be given at the time when the same shall be transmitted by facsimile machine. Section 8.7. WAIVERS OF NOTICE. Whenever any notice is required to be given under the provisions of the statutes or of the Articles of Incorporation or of these By-Laws, a waiver thereof in writing signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors or members of a committee of directors need be specified in any written waiver of notice. Section 8.8. STOCK IN OTHER CORPORATIONS. Any shares of stock in any other Corporation which may be from time to time be held by this Corporation may be represented and -11- voted at any meeting of shareholders of such Corporation by the President or a Vice President, or by any other person or persons thereunto authorized by the Board of Directors, or by any proxy designated by written instrument of appointment executed in the name of this Corporation by its President or a Vice President. Shares of stock belonging to the Corporation need not stand in the name of the Corporation, but may be held for the benefit of the Corporation in the individual name of the Treasurer of any other nominee designated for the purpose by the Board of Directors. Certificates for shares so held for the benefit of the Corporation shall be endorsed in blank or have proper stock powers attached so that said certificates are at all times in due form for transfer, and shall be held for safekeeping in such manner as shall be determined from time to time by the Board of Directors. Section 8.9. AMENDMENT OF BY-LAWS. The stockholders, by the affirmative vote of the holders of a majority of the stock issued and outstanding and having voting power may, at any annual or special meeting if notice of such alteration or amendment of the By-Laws is contained in the notice of such meeting, adopt, amend, or repeal these By-Laws, and alterations or amendments of By-Laws made by the stockholders shall not be altered or amended by the Board of Directors. The Board of Directors, by the affirmative vote of a majority of the whole Board, may adopt, amend, or repeal these By-Laws at any meeting, except as provided in the above paragraph. By-Laws made by the Board of Directors may be altered or repealed by the stockholders. -12- EX-4.1 5 EXHIBIT 4.1 EXHIBIT 4.1 FORM OF TRUST AGREEMENT by and between HARLEY-DAVIDSON CUSTOMER FUNDING CORP., as Trust Depositor, and [___________________], as Owner Trustee Dated as of [___________] TABLE OF CONTENTS
PAGE ---- ARTICLE ONE DEFINITIONS..............................................................................1 Section 1.01. Capitalized Terms......................................................................1 Section 1.02. Other Definitional Provisions..........................................................4 Section 1.03. Usage of Terms.........................................................................4 Section 1.04. Section References.....................................................................4 Section 1.05. Accounting Terms.......................................................................5 ARTICLE TWO ORGANIZATION.............................................................................5 Section 2.01. Name...................................................................................5 Section 2.02. Office.................................................................................5 Section 2.03. Purposes and Powers....................................................................5 Section 2.04. Appointment of Owner Trustee...........................................................6 Section 2.05. Initial Capital Contribution of Owner Trust Estate.....................................6 Section 2.06. Declaration of Trust...................................................................6 Section 2.07. Liability of Trust Depositor...........................................................7 Section 2.08. Title to Trust Property................................................................7 Section 2.09. Situs of Trust.........................................................................7 Section 2.10. Representations and Warranties of the Trust Depositor..................................7 Section 2.11. Federal Income Tax Allocations.........................................................9 ARTICLE THREE TRUST CERTIFICATES AND TRANSFER OF INTERESTS............................................10 Section 3.01. Initial Ownership.....................................................................10 Section 3.02. The Trust Certificates................................................................10 Section 3.03. Authentication and Delivery of Trust Certificates.....................................10 Section 3.04. Registration of Transfer and Exchange of Trust Certificates...........................11 Section 3.05. Mutilated, Destroyed, Lost or Stolen Trust Certificates...............................12 Section 3.06. Persons Deemed Owners.................................................................12 Section 3.07. Access to List of Certificateholders' Names and Addresses.............................12 Section 3.08. Maintenance of Office or Agency.......................................................13 Section 3.09. Temporary Trust Certificates..........................................................13 Section 3.10. Appointment of Paying Agent...........................................................13 Section 3.11. Ownership by Trust Depositor of Trust Certificates....................................14 Section 3.12. Book-Entry Certificates...............................................................14 Section 3.13. Notices to Clearing Agency............................................................15 Section 3.14. Definitive Trust Certificates.........................................................15 ARTICLE FOUR ACTIONS BY OWNER TRUSTEE................................................................16 Section 4.01. Prior Notice to Owners with Respect to Certain Matters................................16 Section 4.02. Action by Owners with Respect to Certain Matters......................................17 Section 4.03. Action by Owners with Respect to Bankruptcy...........................................17 Section 4.04. Restrictions on Owners' Power.........................................................17 Section 4.05. Majority Control......................................................................17 ARTICLE FIVE APPLICATION OF TRUST FUNDS; CERTAIN DUTIES..............................................17 Section 5.01. Establishment of Trust Account........................................................17 Section 5.02. Application of Trust Funds............................................................18 Section 5.03. Method of Payment.....................................................................18 Section 5.04. No Segregation of Moneys; No Interest.................................................19 Section 5.05. Accounting and Reports to the Certificateholders, Owners, the Internal Revenue Service and Others............................................................................19 Section 5.06. Signature on Returns; Tax Matters Partner.............................................19 ARTICLE SIX AUTHORITY AND DUTIES OF OWNER TRUSTEE...................................................20 - i - Section 6.01. General Authority.....................................................................20 Section 6.02. General Duties........................................................................20 Section 6.03. Action Upon Instruction...............................................................20 Section 6.04. No Duties Except as Specified in this Agreement or in Instructions....................21 Section 6.05. No Action Except Under Specified Documents or Instructions............................22 Section 6.06. Restrictions..........................................................................22 ARTICLE SEVEN CONCERNING THE OWNER TRUSTEE............................................................22 Section 7.01. Acceptance of Trusts and Duties.......................................................22 Section 7.02. Furnishing of Documents...............................................................23 Section 7.03. Representations and Warranties........................................................23 Section 7.04. Reliance; Advice of Counsel...........................................................24 Section 7.05. Not Acting in Individual Capacity.....................................................24 Section 7.06. Owner Trustee Not Liable for Trust Certificates, Notes or Contracts...................24 Section 7.07. Owner Trustee May Own Trust Certificates and Notes....................................25 ARTICLE EIGHT COMPENSATION OF OWNER TRUSTEE...........................................................25 Section 8.01. Owner Trustee's Fees and Expenses.....................................................25 Section 8.02. Indemnification.......................................................................25 Section 8.03. Payments to the Owner Trustee.........................................................26 ARTICLE NINE TERMINATION OF TRUST AGREEMENT..........................................................26 Section 9.01. Termination of Trust Agreement........................................................26 Section 9.02. Dissolution upon Bankruptcy of Trust Depositor or Withdrawal or Removal of Trust Depositor.............................................................................27 ARTICLE TEN SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES..................................28 Section 10.01. Eligibility Requirements for Owner Trustee............................................28 Section 10.02. Resignation or Removal of Owner Trustee...............................................28 Section 10.03. Successor Owner Trustee...............................................................29 Section 10.04. Merger or Consolidation of Owner Trustee..............................................29 Section 10.05. Appointment of Co-Trustee or Separate Trustee.........................................30 ARTICLE ELEVEN MISCELLANEOUS...........................................................................31 Section 11.01. Supplements and Amendments............................................................31 Section 11.02. No Legal Title to Trust Estate in Owners..............................................32 Section 11.03. Limitations on Rights of Others.......................................................32 Section 11.04. Notices...............................................................................33 Section 11.05. Severability of Provisions............................................................34 Section 11.06. Counterparts..........................................................................35 Section 11.07. Successors and Assigns................................................................35 Section 11.08. Covenants of the Trust Depositor......................................................35 Section 11.09. No Petition...........................................................................35 Section 11.10. No Recourse...........................................................................35 Section 11.11. Headings..............................................................................35 Section 11.12. Governing Law.........................................................................35 Section 11.13. Trust Certificate Transfer Restrictions...............................................36 Section 11.14. Trust Depositor Payment Obligation....................................................36 EXHIBITS Exhibit A - Form of Certificate of Trust......................................................................A-1 Exhibit B - Form of Trust Certificate.........................................................................B-1
- ii - TRUST AGREEMENT dated as of [___________], between HARLEY-DAVIDSON CUSTOMER FUNDING CORP., a Nevada corporation, as Trust Depositor (the "TRUST DEPOSITOR"), and [____________], a Delaware banking corporation, as owner trustee (the "OWNER TRUSTEE"). WHEREAS, in connection herewith, the Trust Depositor is willing to assume certain obligations pursuant hereto; and WHEREAS, in connection herewith, the Trust Depositor is willing to purchase the Trust Depositor Certificate (as defined herein) to be issued pursuant to this Agreement and to assume certain obligations pursuant hereto; NOW, THEREFORE, the parties hereto hereby agree as follows: ARTICLE ONE DEFINITIONS SECTION 1.01. CAPITALIZED TERMS. Except as otherwise provided in this Agreement, whenever used in this Agreement the following words and phrases, unless the context otherwise requires, shall have the following meanings: "ADMINISTRATION AGREEMENT" means the administration agreement, dated as of the date hereof, among the Trust, the Trust Depositor, the Indenture Trustee and Harley-Davidson Credit, as administrator. "AGREEMENT" means this Trust Agreement, as the same may be amended and supplemented from time to time. "APPLICANT" shall have the meaning set forth in Section 3.07. "BENEFIT PLAN" means (i) an employee benefit plan (as such term is defined in Section 3(3) of ERISA) that is subject to the provisions of Title I of ERISA, (ii) a plan described in Section 4975(e)(1) of the Code or (iii) any entity whose underlying assets include plan assets by reason of a plan's investment in the entity. "BOOK-ENTRY TRUST CERTIFICATE" means a beneficial interest in the Trust Certificates, the ownership of which shall be evidenced by, and transfers of which shall be made through book entries by a Clearing Agency as described in Section 3.12. "BUSINESS TRUST STATUTE" means Chapter 38 of Title 12 of the Delaware Code, 12 DEL. CODE Section 3801 ET SEQ., as the same may be amended from time to time. - 1 - "CERTIFICATE DEPOSITORY AGREEMENT" means the agreement dated as of the Closing Date, by and among the Trust, the Owner Trustee, the Administrator and DTC, as the initial Clearing Agency, substituting, in the form attached hereto as EXHIBIT A, relating to the Trust Certificates, other than the Trust Depositor Certificate, as the same may be amended and supplemented from time to time. "CERTIFICATE DISTRIBUTION ACCOUNT" means the account established and maintained as such pursuant to Section 5.01. "CERTIFICATE OF TRUST" means the Certificate of Trust filed for the Trust pursuant to Section 3810(a) of the Business Trust Statute, substantially in the form of EXHIBIT A hereto. "CERTIFICATE REGISTER" and "CERTIFICATE REGISTRAR" mean the register maintained and the registrar (or any successor thereto) appointed pursuant to Section 3.04(a). "CERTIFICATEHOLDER" or "HOLDER" means with respect to Definitive Trust Certificates the Person in whose name a Trust Certificate is registered in the Certificate Register and with respect to a Book-Entry Trust Certificate, the Person who is the owner of such Book-Entry Trust Certificate, as reflected on the books of the Clearing Agency, or on the books of a Person maintaining an account with such Clearing Agency (directly or as an indirect participant, in either case, in accordance with the rules of such Clearing Agency), except that, solely for the purposes of giving any consent, waiver, request or demand pursuant to this Agreement, the interest evidenced by any Trust Certificate registered in the name of the Trust Depositor, Harley-Davidson Credit or any of their respective Affiliates shall not be taken into account in determining whether the requisite percentage necessary to effect any such consent, waiver, request or demand in respect of the Trust Certificate shall have been obtained. "CLEARING AGENCY" means an organization registered as a "Clearing Agency" pursuant to Section 17A of the Exchange Act. "CLEARING AGENCY PARTICIPANT" means a broker, dealer, bank, other financial institution or other Person for whom from time to time a Clearing Agency effects book-entry transfers and pledges of securities deposited with the Clearing Agency. "CLOSING DATE" means on or about [______________]. "CODE" means the Internal Revenue Code of 1986, as amended. "DEFINITIVE TRUST CERTIFICATES" shall have the meaning set forth in Section 3.12. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "EXPENSES" shall have the meaning assigned to such term in Section 8.02. - 2 - "HARLEY-DAVIDSON CREDIT" means Harley-Davidson Credit Corp., a Nevada corporation. "INDEMNIFIED PARTIES" shall have the meaning assigned to such term in Section 8.02. "INDENTURE" means the Indenture dated as of the date hereof between the Trust and [_____________], as Indenture Trustee. "INITIAL CERTIFICATE BALANCE" means $____________. "NOTE DEPOSITORY AGREEMENT" means the Agreement dated as of the Closing Date among the Trust, the Indenture Trustee, the Administrator and DTC, as the initial Clearing Agency, relating to the Notes, as the same may be amended and supplemented from time to time. "NOTES" means the Class A-1 Notes, the Class A-2 Notes and the Class B Notes, in each case issued pursuant to the Indenture. "OWNER" means each Holder of a Trust Certificate. "OWNER TRUSTEE" means [_____________], a _________ corporation, not in its individual capacity but solely as owner trustee under this Agreement, and any successor Owner Trustee hereunder. "OWNER TRUSTEE CORPORATE TRUST OFFICE" means the office of the Owner Trustee at which its corporate trust business shall be administered, which initially shall be [_________________________] Attn: [_________], or such other office at such other address as the Owner Trustee may designate from time to time by notice to the Certificateholders, the Servicer, the Trust Depositor and Harley-Davidson Credit. "PAYING AGENT" means any paying agent or co-paying agent appointed pursuant to Section 3.10. "PERSON" means any individual, corporation, estate, partnership, joint venture, association, joint stock company, trust (including any beneficiary thereof) unincorporated organization or government or any agency or political subdivision thereof. "RECORD DATE" means, with respect to any Distribution Date, the last Business Day of the preceding calendar month. "SALE AND SERVICING AGREEMENT" means the sale and servicing agreement, dated as of the date hereof, among the Trust, as Issuer, the Trust Depositor, Harley-Davidson Credit, as servicer, and [_____________], as Indenture Trustee as the same may be amended or supplemented from time to time. "SECRETARY OF STATE" means the Secretary of State of the State of Delaware. - 3 - "TAX MATTERS PARTNER" shall have the meaning provided in Section 5.06(b) hereof. "TREASURY REGULATIONS" means regulations, including proposed or temporary regulations, promulgated under the Code. References herein to specific provisions of proposed or temporary regulations shall include analogous provisions of final Treasury Regulations or other successor Treasury Regulations. "TRUST" means the trust established by this Agreement. "TRUST CERTIFICATES" means the trust certificates evidencing the beneficial equity interest of an Owner in the Trust, substantially in the form of EXHIBIT B hereto. "TRUST DEPOSITOR" means Harley-Davidson Customer Funding Corp. in its capacity as Trust Depositor hereunder, and its successors. "TRUST DEPOSITOR CERTIFICATE" means the Trust Certificate purchased by the Trust Depositor on the Closing Date pursuant to Section 3.11, having an initial principal balance equal to $171,000. "TRUST ESTATE" means all right, title and interest of the Trust in and to the property and rights assigned to the Trust pursuant to Article Two of the Sale and Servicing Agreement, all funds on deposit from time to time in the Trust Accounts and the Certificate Distribution Account and all other property of the Trust from time to time, including any rights of the Owner Trustee and the Trust pursuant to the Sale and Servicing Agreement and the Administration Agreement. "UNDERWRITERS" means [_______________] and [_________________]. SECTION 1.02. OTHER DEFINITIONAL PROVISIONS. Capitalized terms used that are not otherwise defined herein shall have the meanings ascribed thereto in the Sale and Servicing Agreement or, if not defined therein, in the Indenture. SECTION 1.03. USAGE OF TERMS. With respect to all terms in this Agreement, the singular includes the plural and the plural the singular; words importing any gender include the other genders; references to "WRITING" include printing, typing, lithography and other means of reproducing words in a visible form; references to agreements and other contractual instruments include all amendments, modifications and supplements thereto or any changes therein entered into in accordance with their respective terms and not prohibited by this Agreement; references to Persons include their permitted successors and assigns; and the term "INCLUDING" means "INCLUDING WITHOUT LIMITATION". SECTION 1.04. SECTION REFERENCES. All section references, unless otherwise indicated, shall be to Sections in this Agreement. - 4 - SECTION 1.05. ACCOUNTING TERMS. All accounting terms used but not specifically defined herein shall be construed in accordance with generally accepted accounting principles in the United States. ARTICLE TWO ORGANIZATION SECTION 2.01. NAME. The Trust created hereby shall be known as "HARLEY-DAVIDSON MOTORCYCLE TRUST [_______]", in which name the Owner Trustee may conduct the activities of the Trust, make and execute contracts and other instruments on behalf of the Trust and sue and be sued. SECTION 2.02. OFFICE. The office of the Trust shall be in care of the Owner Trustee at the Owner Trustee Corporate Trust Office or at such other address in Delaware as the Owner Trustee may designate by written notice to the Owners and the Trust Depositor. SECTION 2.03. PURPOSES AND POWERS. (a) The sole purpose of the Trust is to manage the Trust Estate and collect and disburse the periodic income therefrom for the use and benefit of the Owners, and in furtherance of such purpose to engage in the following ministerial activities: (i) to issue the Notes pursuant to the Indenture and the Trust Certificates pursuant to this Agreement and to sell the Notes and the Trust Certificates; (ii) with the proceeds of the sale of the Notes and the Trust Certificates, to purchase the Contracts, to fund the Pre-Funding Account and to pay the organizational, start-up and transactional expenses of the Trust and to pay the balance to the Trust Depositor pursuant to the Sale and Servicing Agreement; (iii) to assign, grant, transfer, pledge, mortgage and convey the Trust Estate pursuant to the Indenture and to hold, manage and distribute to the Owners pursuant to the Sale and Servicing Agreement any portion of the Trust Estate released from the Lien of, and remitted to the Trust pursuant to, the Indenture; (iv) to enter into and perform its obligations under the Transaction Documents to which it is to be a party; (v) to engage in those activities, including entering into agreements, that are necessary, suitable or convenient to accomplish the foregoing or are incidental thereto or connected therewith; and - 5 - (vi) subject to compliance with the Transaction Documents, to engage in such other activities as may be required in connection with conservation of the Trust Estate and the making of distributions to the Owners and the Noteholders. The Trust shall not engage in any activities other than in connection with the foregoing. Nothing contained herein shall be deemed to authorize the Owner Trustee to engage in any business operations or any activities other than those set forth in the introductory sentence of this Section. Specifically, the Owner Trustee shall have no authority to engage in any business operations, or acquire any assets other than those specifically included in the Trust Estate under Section 1.01, or otherwise vary the assets held by the Trust. Similarly, the Owner Trustee shall have no discretionary duties other than performing those ministerial acts set forth above necessary to accomplish the purpose of this Trust as set forth in the introductory sentence of this Section. SECTION 2.04. APPOINTMENT OF OWNER TRUSTEE. The Trust Depositor hereby appoints the Owner Trustee as trustee of the Trust effective as of the date hereof, to have all the rights, powers and duties set forth herein, and the Owner Trustee hereby accepts such appointment. SECTION 2.05. INITIAL CAPITAL CONTRIBUTION OF OWNER TRUST ESTATE. The Trust Depositor hereby sells, assigns, transfers, conveys and sets over to the Owner Trustee, as of the date hereof, the sum of $1. The Owner Trustee hereby acknowledges receipt in trust from the Trust Depositor, as of the date hereof, of the foregoing contribution, which shall constitute the initial Trust Estate and shall be deposited in the Reserve Account pursuant to Section 7.04 of the Sale and Servicing Agreement. The Trust Depositor shall pay organizational expenses of the Trust as they may arise or shall, upon the request of the Owner Trustee, promptly reimburse the Owner Trustee for any such expenses paid by the Owner Trustee. SECTION 2.06. DECLARATION OF TRUST. The Owner Trustee hereby declares that it will hold the Trust Estate in trust upon and subject to the conditions set forth herein for the sole purpose of conserving the Trust Estate and collecting and disbursing the periodic income therefrom for the use and benefit of the Owners, subject to the obligations of the Trust under the Transaction Documents. It is the intention of the parties hereto that the Trust constitute a business trust under the Business Trust Statute and that this Agreement constitute the governing instrument of such business trust. It is the intention of the parties hereto that, solely for income and franchise tax purposes, the Trust shall be treated as a partnership, with the assets of the partnership being the Contracts and other assets held by the Trust, the partners of the partnership being the Certificateholders (including the Trust Depositor) and the Notes being debt of the partnership. The parties agree that, unless otherwise required by a final determination to the contrary, the Trust will file or cause to be filed annual or other necessary returns, reports and other forms consistent with the characterization of the Trust as a partnership, the partners of the partnership being the Certificateholders (including the Trust Depositor) and the Notes being debt of the partnership, for such tax purposes. The Tax Matters Partner shall prepare and the Owner Trustee shall file, on behalf of the Trust and Certificateholders, IRS Form 8832 making the protective election for the Trust to be treated as a partnership for federal income tax purposes as of the Closing Date. Effective as of the date hereof, the Owner Trustee shall have all rights, - 6 - powers and duties set forth herein and in the Business Trust Statute for the sole purpose and to the extent necessary to accomplish the purpose of this Trust as set forth in the introductory sentence of Section 2.03. SECTION 2.07. [LIABILITY OF TRUST DEPOSITOR. (a) Pursuant to Section 3803(a) of the Business Trust Statute, the Trust Depositor shall be liable directly to and will indemnify any injured party or any other creditor of the Trust for all losses, claims, damages, liabilities and expenses of the Trust to the extent that the Trust Depositor would be liable if the Trust were a partnership under the Delaware Revised Uniform Limited Partnership Act in which Trust Depositor were a general partner (including any Illinois personal property replacement tax that is imposed on the Trust as a partnership); PROVIDED, HOWEVER, that Trust Depositor shall not be liable for any losses incurred by a Certificateholder in the capacity of an investor in the Trust Certificates or a Noteholder in the capacity of an investor in the Notes. In addition, any third party creditors of the Trust (other than in connection with the obligations described in the immediately preceding sentence for which the Trust Depositor shall not be liable) shall be deemed third party beneficiaries of this paragraph. The obligations of the Trust Depositor under this paragraph shall be evidenced by the Trust Certificates described in Section 3.11, which for purposes of the Business Trust Statute shall be deemed to be a separate class of Trust Certificates from all other Trust Certificates issued by the Trust; provided that the rights and obligations evidenced by all Trust Certificates, regardless of class, shall, except as provided in this Section, be identical. (b) Other than to the extent set forth in Section 2.07(a), no Owner, solely by virtue of its being the Holder of a Trust Certificate, shall have any personal liability for any liability or obligation of the Trust.] SECTION 2.08. TITLE TO TRUST PROPERTY. Legal title to the Trust Estate shall be vested at all times in the Trust as a separate legal entity except where applicable law in any jurisdiction requires title to any part of the Trust Estate to be vested in a trustee or trustees, in which case title shall be deemed to be vested in the Owner Trustee, a co-trustee and/or a separate trustee, as the case may be. SECTION 2.09. SITUS OF TRUST. The Trust will be located and administered in the State of Delaware. All bank accounts maintained by the Owner Trustee on behalf of the Trust shall be located in the State of Illinois or the State of Delaware. The Trust shall not have any employees in any state other than Delaware; PROVIDED, HOWEVER, that nothing herein shall restrict or prohibit the Owner Trustee from having employees within or without the State of Delaware. Payments will be received by the Trust only in Delaware and payments will be made by the Trust only from Delaware. The only office of the Trust will be at the Owner Trustee Corporate Trust Office. SECTION 2.10. REPRESENTATIONS AND WARRANTIES OF THE TRUST DEPOSITOR. - 7 - The Trust Depositor hereby represents and warrants to the Owner Trustee that: (i) The Trust Depositor is duly organized and validly existing as a corporation organized and existing and in good standing under the laws of the State of Nevada, with power and authority to own its properties and to conduct its business and had at all relevant times, and has, power, authority and legal right to acquire and own the Contracts. (ii) The Trust Depositor is duly qualified to do business as a foreign corporation in good standing and has obtained all necessary licenses and approvals in all jurisdictions in which the ownership or lease of property or the conduct of its business requires such qualifications. (iii) The Trust Depositor has the power and authority to execute and deliver this Agreement and to carry out its terms; the Trust Depositor has full power and authority to sell and assign the property to be sold and assigned to and deposited with the Trust as part of the Trust Estate and has duly authorized such sale and assignment and deposit with the Trust by all necessary corporate action; and the execution, delivery and performance of this Agreement have been duly authorized by the Trust Depositor by all necessary corporate action. (iv) The consummation of the transactions contemplated by this Agreement and the fulfillment of the terms hereof do not conflict with, result in any breach of any of the terms and provisions of, nor constitute (with or without notice or lapse of time) a default under, the articles of incorporation or bylaws of the Trust Depositor, or any indenture, agreement or other instrument to which the Trust Depositor is a party or by which it is bound; nor result in the creation or imposition of any Lien upon any of the properties of the Trust Depositor pursuant to the terms of any such indenture, agreement or other instrument (other than pursuant to the Transaction Documents); nor violate any law or any order, rule or regulation applicable to the Trust Depositor of any court or of any federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Trust Depositor or its properties. (v) There are no proceedings or investigations pending, or to the Trust Depositor's best knowledge threatened, before any court, regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Trust Depositor or its properties: (A) asserting the invalidity of this Agreement, any of the other Transaction Documents or the Trust Certificates, (B) seeking to prevent the issuance of the Trust Certificates or the consummation of any of the transactions contemplated by this Agreement or any of the other Transaction Documents, (C) seeking any determination or ruling that might materially and adversely affect the performance by the Trust Depositor of its obligations under, or the validity or enforceability of, this - 8 - Agreement, any of the other Transaction Documents or the Trust Certificates or (D) involving the Trust Depositor and which might adversely affect the federal income tax or other federal, state or local tax attributes of the Trust Certificates. SECTION 2.11. FEDERAL INCOME TAX ALLOCATIONS. (a) Trust items of income, gain, loss and deduction for any month as determined for federal income tax purposes shall be allocated as follows: (i) The Certificateholders, as of the first Record Date following the end of such month, shall be allocated the following items in proportion to their ownership of the principal amount of Trust Certificates on such date: (A) interest equal to the Certificate Interest Distributable Amount for such month, (B) accrued interest on the excess, if any, of the Certificate Interest Distributable Amount for the preceding Distribution Date over the amount in respect of interest that is actually deposited in the Certificate Distribution Account on such preceding Distribution Date, to the extent permitted by law, at the Pass-Through Rate from such preceding Distribution Date through the current Distribution Date, (C) the portion of the market discount on the Contracts accrued during such quarter that is allocable to the excess, if any, of the initial aggregate principal amount of the Trust Certificates over their initial aggregate issue price and (D) any other items of income and gain payable to the Certificateholders for such month; such sum to be reduced by any amortization deduction by the Trust of premium on Contracts that corresponds to any excess of the issue price of Trust Certificates over their principal amount; and (ii) to the Trust Depositor to the extent of any remaining items of income, gain, loss and deduction. If the items of income or gain of the Trust for any calendar quarter are insufficient for the allocations described in Section 2.11(a)(i), subsequent items of income or gain shall first be allocated to make up such shortfall before being allocated as provided in Section 2.11(a)(ii). (b) To the extent that the Trust Depositor would be allocated cumulative items of loss and deduction in excess of the sum of (A) the cumulative items of income and gain, if any, allocated to the Trust Depositor, PLUS (B) the cumulative contributions made by the Trust Depositor to the Trust, PLUS (C) the amount of Trust liabilities or claims, if any, for which the Trust Depositor is liable pursuant to Section 2.07 or otherwise allocated under Section 752 of the Code, LESS (D) the cumulative distributions made to the Trust Depositor pursuant to Section 5.02 hereof, then such excess items of loss and deduction shall instead be allocated among the Certificateholders (other than the Trust Depositor) as of the first Record Date following the end of such quarter in proportion to their ownership of the principal amount of Trust Certificates on such Record Date until the cumulative items of loss and deduction allocated to such Certificateholders equal the sum of (I) the cumulative items of income and gain allocated to such Certificateholders, PLUS (II) the cumulative contributions made by such Certificateholders to the - 9 - Trust, PLUS (III) the amount of Trust liabilities allocated to such Certificateholders under Section 752 of the Code, LESS (IV) the cumulative distributions made to the Trust Depositor pursuant to Section 5.02 hereof. Thereafter, any such excess items of loss and deduction shall be allocated among the Trust Depositor and the other Certificateholders in accordance with how such Persons are reasonably expected to bear the economic burden of such items. (c) The provisions of this Agreement relating to the allocations are intended to comply with Treasury Regulation Sections 1.704-1 and 1.704-2. The Trust Depositor and Harley-Davidson Credit are authorized to modify the allocations in this paragraph if necessary or appropriate, in its sole discretion, for the allocations to fairly reflect the economic income, gain or loss to the Trust Depositor or to the Certificateholders, or as otherwise to cause such allocations to have substantial economic effect within the meaning of Regulations Section 1.704-1(b)(2) or to be deemed to be in accordance with the interests in the Trust under such Treasury Regulations. ARTICLE THREE TRUST CERTIFICATES AND TRANSFER OF INTERESTS SECTION 3.01. INITIAL OWNERSHIP. Upon the formation of the Trust by the contribution by the Trust Depositor pursuant to Section 2.05 and until the issuance of the Trust Certificates, the Trust Depositor shall be the sole beneficiary of the Trust. SECTION 3.02. THE TRUST CERTIFICATES. The Trust Certificates shall be substantially in the form of EXHIBIT B hereto. The Trust Certificates shall be issuable in minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof; PROVIDED, HOWEVER, that the Trust Certificates issued to the Trust Depositor pursuant to Section 3.11 may be issued in such denomination as required to include any residual amount. The Trust Certificates shall be executed by the Owner Trustee on behalf of the Trust by manual or facsimile signature of an authorized officer of the Owner Trustee and shall be deemed to have been validly issued when so executed. Trust Certificates bearing the manual or facsimile signature of individuals who were, at the time when such signatures were affixed, authorized to sign on behalf of the Owner Trustee shall be valid and binding obligations of the Trust, notwithstanding that such individuals or any of them have ceased to be so authorized prior to the authentication and delivery of such Trust Certificates or did not hold such offices at the date of such Trust Certificates. All Trust Certificates shall be dated the date of their authentication. SECTION 3.03. AUTHENTICATION AND DELIVERY OF TRUST CERTIFICATES. The Owner Trustee shall cause to be authenticated and delivered upon the order of the Trust Depositor, in exchange for the Contracts and the other assets of the Trust, simultaneously with the sale, assignment and transfer to the Trust of the Contracts, and the constructive delivery to the Owner Trustee of the Contract Files and the other assets of the Trust, Trust Certificates duly authenticated by the Owner Trustee, in authorized denominations equaling in the aggregate the Initial Certificate - 10 - Balance evidencing the entire ownership of the Trust and Notes issued by the Owner Trustee and authenticated by the Indenture Trustee in aggregate principal amount of, in the case of (i) Class A-1 Notes, $[___________], (ii) Class A-2 Notes, $[__________] and (iii) Class B Notes, $[__________]. No Trust Certificate shall be entitled to any benefit under this Agreement, or be valid for any purpose, unless there appears on such Trust Certificate a certificate of authentication substantially in the form set forth in the form of Trust Certificate attached hereto as EXHIBIT B, executed by the Owner Trustee or its authenticating agent, by manual signature, and such certificate upon any Trust Certificate shall be conclusive evidence, and the only evidence, that such Trust Certificate has been duly authenticated and delivered hereunder. Upon issuance, authorization and delivery pursuant to the terms hereof, the Trust Certificates will be entitled to the benefits of this Agreement. SECTION 3.04. REGISTRATION OF TRANSFER AND EXCHANGE OF TRUST CERTIFICATES. (a) The Owner Trustee shall cause to be kept at the office or agency to be maintained pursuant to SECTION 3.8 by a certificate registrar (the "CERTIFICATE REGISTRAR"), a register (the "CERTIFICATE REGISTER") in which, subject to such reasonable regulations as it may prescribe, the Certificate Registrar shall provide for the registration of Trust Certificates and of transfers and exchanges of Trust Certificates as herein provided. The Owner Trustee is hereby initially appointed Certificate Registrar for the purpose of registering Trust Certificates and transfers and exchanges of Trust Certificates as herein provided. In the event that, subsequent to the Closing Date, the Owner Trustee notifies the Servicer that it is unable to act as Certificate Registrar, the Servicer shall appoint another bank or trust company, having an office or agency located in the City of Chicago, Illinois, agreeing to act in accordance with the provisions of this Agreement applicable to it, and otherwise acceptable to the Owner Trustee, to act as successor Certificate Registrar hereunder. (b) Upon surrender for registration of transfer of any Trust Certificate at the Owner Trustee Corporate Trust Office, the Owner Trustee shall execute, authenticate and deliver (or shall cause its authenticating agent to authenticate and deliver), in the name of the designated transferee or transferees, one or more new Trust Certificates in authorized denominations of a like aggregate principal amount. (c) At the option of a Certificateholder, Trust Certificates may be exchanged for other Trust Certificates in authorized denominations of a like aggregate principal amount, upon surrender of the Trust Certificates to be exchanged at any such office or agency. Whenever any Trust Certificates are so surrendered for exchange, the Owner Trustee on behalf of the Trust shall execute, authenticate and deliver (or shall cause its authenticating agent to authenticate and deliver) the Trust Certificates that the Certificateholder making the exchange is entitled to receive. Every Trust Certificate presented or surrendered for registration of transfer or exchange shall be accompanied by a written instrument of transfer in form satisfactory to the Owner Trustee and the Certificate Registrar duly executed by the Holder thereof or his attorney duly authorized in writing. - 11 - (d) No service charge shall be made for any registration of transfer or exchange of Trust Certificates, but the Owner Trustee may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Trust Certificates. (e) All Trust Certificates surrendered for registration of transfer or exchange shall be canceled and subsequently destroyed by the Owner Trustee. SECTION 3.05. MUTILATED, DESTROYED, LOST OR STOLEN TRUST CERTIFICATES. If (i) any mutilated Trust Certificate is surrendered to the Certificate Registrar, or the Certificate Registrar receives evidence to its satisfaction of the destruction, loss or theft of any Trust Certificate, and (ii) there is delivered to the Certificate Registrar and the Owner Trustee such security or indemnity as may be required by them to save each of them harmless, then, in the absence of notice that such Trust Certificate has been acquired by a bona fide purchaser, the Owner Trustee on behalf of the Trust shall execute and the Owner Trustee or its authenticating agent shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Trust Certificate, a new Trust Certificate of like tenor and fractional undivided interest. In connection with the issuance of any new Trust Certificate under this Section, the Owner Trustee may require the payment by the Holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto. Any duplicate Trust Certificate issued pursuant to this Section shall constitute complete and indefeasible evidence of ownership in the Trust, as if originally issued, whether or not the lost, stolen or destroyed Trust Certificate shall be found at any time. SECTION 3.06. PERSONS DEEMED OWNERS. Prior to due presentation of a Trust Certificate for registration of transfer, the Owner Trustee, the Certificate Registrar and any of their respective agents may treat the Person in whose name any Trust Certificate is registered as the owner of such Trust Certificate for the purpose of receiving distributions pursuant to Section 5.02 and for all other purposes whatsoever, and none of the Owner Trustee, the Certificate Registrar, any Paying Agent or any of their respective agents shall be bound by any notice of the contrary. SECTION 3.07. ACCESS TO LIST OF CERTIFICATEHOLDERS' NAMES AND ADDRESSES. The Certificate Registrar shall furnish or cause to be furnished to the Servicer and the Trust Depositor, within 15 days after receipt by the Certificate Registrar of a written request therefor from the Servicer or the Trust Depositor, a list, in such form as the Servicer or the Trust Depositor may reasonably require, of the names and addresses of the Certificateholders as of the most recent Record Date. If three or more Certificateholders, or one or more Certificateholders of Trust Certificates evidencing not less than 25% of the percentage interests of the Trust Certificates (hereinafter referred to as "APPLICANTS"), apply in writing to the Owner Trustee, and such application states that the Applicants desire to communicate with other Certificateholders with respect to their rights hereunder or under the Trust Certificates and such application is accompanied by a copy of the communication that such Applicants propose to transmit, then the Owner Trustee shall, within five Business Days after the receipt of such application, afford such - 12 - Applicants access, during normal business hours, to the current list of Certificateholders. Every Certificateholder, by receiving and holding a Trust Certificate, agrees with the Servicer, the Trust Depositor and the Owner Trustee that none of the Servicer, the Trust Depositor or the Owner Trustee shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Certificateholders hereunder, regardless of the source from which such information was derived. SECTION 3.08. MAINTENANCE OF OFFICE OR AGENCY. The Owner Trustee shall maintain in [_________], Delaware, an office or offices or agency or agencies where Trust Certificates may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Owner Trustee in respect of the Trust Certificates and this Agreement may be served. The Owner Trustee hereby designates the Owner Trustee Corporate Trust Office as its office for such purposes. The Owner Trustee shall give prompt written notice to the Trust Depositor, the Servicer and to Certificateholders of any change in the location of the Certificate Register or any such office or agency. SECTION 3.09. TEMPORARY TRUST CERTIFICATES. Pending the preparation of Definitive Trust Certificates, the Owner Trustee, on behalf of the Trust, may execute, authenticate and deliver, temporary Trust Certificates that are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Trust Certificates in lieu of which they are issued. If temporary Trust Certificates are issued, the Trust Depositor will cause definitive Trust Certificates to be prepared without unreasonable delay. After the preparation of definitive Trust Certificates, the temporary Trust Certificates shall be exchangeable for definitive Trust Certificates upon surrender of the temporary Trust Certificates at the office or agency to be maintained as provided in Section 3.08, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Trust Certificates, the Owner Trustee shall execute and authenticate and deliver in exchange therefor a like principal amount of definitive Trust Certificates in authorized denominations. Until so exchanged, the temporary Trust Certificates shall in all respects be entitled to the same benefits hereunder as definitive Trust Certificates. SECTION 3.10. APPOINTMENT OF PAYING AGENT. The Paying Agent shall make distributions to Certificateholders from the Certificate Distribution Account pursuant to Section 5.02(a) and shall report the amounts of such distributions to the Owner Trustee. Any Paying Agent shall have the revocable power to withdraw funds from the Certificate Distribution Account for the purpose of making the distributions referred to above. The Owner Trustee may revoke such power and remove the Paying Agent if the Owner Trustee determines in its sole discretion that the Paying Agent shall have failed to perform its obligations under this Agreement in any material respect. The Paying Agent initially shall be [_____________], and any co-paying agent chosen by the Paying Agent that is acceptable to the Owner Trustee. Each Paying Agent shall be permitted to resign as Paying Agent upon 30 days' written notice to the Owner Trustee. In the event that [_____________] shall no longer be the Paying Agent, the Owner Trustee shall appoint a successor to act as Paying Agent (which shall be a bank or trust company). The Owner Trustee shall cause such successor Paying Agent or any additional Paying Agent appointed by - 13 - the Owner Trustee to execute and deliver to the Owner Trustee an instrument in which such successor Paying Agent or additional Paying Agent shall agree with the Owner Trustee that, as Paying Agent, such successor Paying Agent or additional Paying Agent will hold all sums, if any, held by it for payment to the Certificateholders in trust for the benefit of the Certificateholders entitled thereto until such sums shall be paid to such Certificateholders. The Paying Agent shall return all unclaimed funds to the Owner Trustee and upon removal of a Paying Agent such Paying Agent shall also return all funds in its possession to the Owner Trustee. The provisions of Sections 7.01, 7.03, 7.04 and 8.01 shall apply to the Owner Trustee also in its role as Paying Agent, for so long as the Owner Trustee shall act as Paying Agent and, to the extent applicable, to any other paying agent appointed hereunder. Any reference in this Agreement to the Paying Agent shall include any co-paying agent unless the context requires otherwise. SECTION 3.11. [OWNERSHIP BY TRUST DEPOSITOR OF TRUST CERTIFICATES. The Trust Depositor shall on the Closing Date purchase from the Underwriters Trust Certificates representing at least 1% of the Initial Certificate Balance and shall thereafter retain beneficial and record ownership of Trust Certificates representing at least 1% of the Certificate Balance. Any attempted transfer of any Trust Certificate that would reduce such interest of the Trust Depositor below 1% of the Certificate Balance shall be void. The Owner Trustee shall cause any Trust Certificate issued to the Trust Depositor on the Closing Date (and any Trust Certificate issued in exchange therefor) to contain a legend stating "THIS CERTIFICATE IS NON-TRANSFERABLE".] SECTION 3.12. BOOK-ENTRY CERTIFICATES. The Trust Certificates upon original issuance will be issued in the form of one or more typewritten certificates representing the Book-Entry Trust Certificates, to be delivered to DTC, the initial Clearing Agency, by, or on behalf of, the Trust; [provided, however, that one Definitive Trust Certificate (as defined below) may be issued to the Trust Depositor pursuant to Section 3.11]. The certificate or certificates delivered to DTC evidencing such Trust Certificates shall initially be registered on the Certificate Register in the name of Cede & Co., the nominee of the initial Clearing Agency, and no Certificateholder (other than the Company) will receive a definitive certificate representing such Certificateholders' interest in the Trust Certificates, except as provided in Section 3.14. Unless and until definitive, fully registered Trust Certificates (the "DEFINITIVE TRUST CERTIFICATES") have been issued to Certificateholders pursuant to Section 3.14: (i) the provisions of this Section shall be in full force and effect; (ii) the Trust Depositor, the Servicer, the Certificate Registrar and the Owner Trustee, subject to the provisions and limitations of Sections 2.03 and 2.06, may deal with the Clearing Agency for all purposes (including the making of distributions on the Trust Certificates) as the authorized representative of the Certificateholders; (iii) to the extent that the provisions of this section conflict with any other provisions of this agreement, the provisions of this Section shall control; - 14 - (iv) the rights of Certificateholder shall be exercised only through the Clearing Agency (or through procedures established by the Clearing agency) and shall be limited to those established by law and agreements between the Holder and the Clearing Agency and/or the Clearing Agency Participants; pursuant to the Certificate Depository Agreement, unless and until Definitive Trust Certificates are issued pursuant to Section 3.14, the Clearing Agency will make book-entry transfers among the Clearing Agency Participants and receive and transmit distributions of principal and interest on the Trust Certificates to such Clearing Agency Participants; and (v) whenever this Agreement requires or permits actions to be taken based upon instructions or directions of Certificateholders evidencing a specified percentage of the percentage interests thereof, the Clearing Agency shall be deemed to represent such percentage only to the extent that it has received instructions to such effect from Certificateholders and/or Clearing Agency Participants owning or representing, respectively, such required percentage of the beneficial interest in Trust Certificates and has delivered such instructions to the Owner Trustee. SECTION 3.13. NOTICES TO CLEARING AGENCY. Whenever notice or other communication to the Certificateholders is required hereunder, unless and until Definitive Trust Certificates shall have been issued to Certificateholders pursuant to Section 3.14, the Owner Trustee shall give all such notices and communications specified herein to be given to Certificateholders to the Clearing Agency. SECTION 3.14. DEFINITIVE TRUST CERTIFICATES. If (i)(A) the Administrator advises the Owner Trustee in writing that the Clearing Agency is no longer willing or able to properly discharge its responsibilities as described in the Certificate Depository Agreement and (B) the Owner Trustee or the Administrator is unable to locate a qualified successor, (ii) the Administrator, at its option, advises the Owner Trustee in writing that it elects to terminate the book-entry system through the Clearing Agency, or (iii) after the occurrence of an Event of Default or a Servicer Default, Certificateholders representing beneficial interests aggregating more than 50% of the Certificate Balance advise the Owner Trustee and the Clearing Agency through the Clearing Agency Participants in writing that the continuation of a book-entry system through the Clearing Agency is no longer in the best interests of the Certificateholders, then the Clearing Agency shall notify all Certificateholders and the Owner Trustee of the occurrence of any such event and of the availability of Definitive Trust Certificates to Certificateholders requesting the same. Upon surrender to the Owner Trustee by the Clearing Agency of the certificates evidencing the Book-Entry Trust Certificates, accompanied by registration instructions from the Clearing Agency for registration, the Owner Trustee shall issue the Definitive Trust Certificates and deliver such Definitive Trust Certificates in accordance with the instructions of the Clearing Agency. Neither the Trust Depositor, the Certificate Registrar nor the Owner Trustee shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions. Upon the issuance of Definitive Trust Certificates, the Owner Trustee shall recognize the Certificateholders of the Definitive Trust Certificates as Certificateholders hereunder. The Owner Trustee shall not be - 15 - liable if the Owner Trustee or the Administrator is unable to locate a qualified successor Clearing Agency. The Definitive Trust Certificates shall be printed, lithographed or engraved or may be produced in any manner as is reasonably acceptable to the Owner Trustee, as evidenced by its execution thereof. ARTICLE FOUR ACTIONS BY OWNER TRUSTEE SECTION 4.01. PRIOR NOTICE TO OWNERS WITH RESPECT TO CERTAIN MATTERS. Subject to the provisions and limitations of SECTION 4.04, with respect to the following matters, the Owner Trustee shall not take action unless at least 30 days before the taking of such action, the Owner Trustee shall have notified the Certificateholders in writing of the proposed action, the Indenture Trustee shall have consented to such action in the event any Notes are outstanding and the Owners shall not have notified the Owner Trustee in writing prior to the 30th day after such notice is given that such Owners have withheld consent or provided alternative direction: (a) the initiation of any claim or lawsuit by the Trust (except claims or lawsuits brought in connection with the collection of the Contracts) and the compromise of any action, claim or lawsuit brought by or against the Trust (except with respect to the aforementioned claims or lawsuits for collection of the Contracts); (b) the election by the Trust to file an amendment to the Certificate of Trust (unless such amendment is required to be filed under the Business Trust Statute); (c) the amendment of the Indenture by a supplemental indenture in circumstances where the consent of any Noteholder is required; (d) the amendment of the Indenture by a supplemental indenture in circumstances where the consent of any Noteholder is not required and such amendment materially and adversely affects the interest of the Owners; (e) the amendment, change or modification of the Administration Agreement, except to cure any ambiguity or to amend or supplement any provision in a manner or add any provision that would not materially and adversely affect the interests of the Owners; (f) the amendment, change or modification of the Sale and Servicing Agreement, except any amendment where the consent of any Certificateholder is not required under the terms of the Sale and Servicing Agreement; or (g) the appointment pursuant to the Indenture of a successor Note Registrar, Paying Agent or Indenture Trustee or pursuant to this Agreement of a successor Certificate Registrar, or the consent to the assignment by the Note Registrar, Paying Agent, Indenture - 16 - Trustee or Certificate Registrar of its obligations under the Indenture or the Agreement, as applicable. SECTION 4.02. ACTION BY OWNERS WITH RESPECT TO CERTAIN MATTERS. Subject to the provisions and limitations of Section 4.04, the Owner Trustee shall not have the power, except upon the direction of the Owners, to (a) remove the Administrator pursuant to Section 8 of the Administration Agreement, (b) appoint a successor Administrator pursuant to Section 8 of the Administration Agreement, (c) remove the Servicer pursuant to Section 8.03 of the Sale and Servicing Agreement, (d) except as expressly provided in the Transaction Documents, sell the Contracts after the termination of the Indenture, (e) initiate any claim, suit or proceeding by the Trust or compromise any claim, suit or proceeding brought by or against the Trust, (f) authorize the merger or consolidation of the Trust with or into any other business trust or entity (other than in accordance with Section 3.10 of the Indenture) or (g) amend the Certificate of Trust. The Owner Trustee shall take the actions referred to in the preceding sentence only upon written instructions signed by the Owners. SECTION 4.03. ACTION BY OWNERS WITH RESPECT TO BANKRUPTCY. The Owner Trustee shall not have the power to commence a voluntary proceeding in a bankruptcy relating to the Trust without the unanimous prior approval of all Owners and the delivery to the Owner Trustee by each such Owner of a certificate certifying that such Owner reasonably believes that the Trust is insolvent. SECTION 4.04. RESTRICTIONS ON OWNERS' POWER. The Owners shall not direct the Owner Trustee to take or to refrain from taking any action if such action or inaction would be contrary to any obligation of the Trust or the Owner Trustee under this Agreement or any of the Transaction Documents or would be contrary to the purpose of this Trust as set forth in Section 2.03, nor shall the Owner Trustee be obligated to follow any such direction, if given. SECTION 4.05. MAJORITY CONTROL. Except as expressly provided herein, any action that may be taken by the Owners under this Agreement may be taken by the Holder of Trust Certificates evidencing not less than a majority of the Certificate Balance. Except as expressly provided herein, any written notice of the Owners delivered pursuant to this Agreement shall be effective if signed by Holder of Trust Certificates evidencing not less than a majority of the Certificate Balance at the time of the delivery of such notice. ARTICLE FIVE APPLICATION OF TRUST FUNDS; CERTAIN DUTIES SECTION 5.01. ESTABLISHMENT OF TRUST ACCOUNT. The Owner Trustee, for the benefit of the Certificateholders, shall establish and maintain in the name of the Trust an Eligible Account (the - 17 - "CERTIFICATE DISTRIBUTION ACCOUNT"), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Certificateholders. The Owner Trustee shall possess all right, title and interest in all funds on deposit from time to time in the Certificate Distribution Account and in all proceeds thereof. Except as otherwise expressly provided herein, the Certificate Distribution Account shall be under the sole dominion and control of the Owner Trustee for the benefit of the Certificateholders. If, at any time, the Certificate Distribution Account ceases to be an Eligible Account, the Owner Trustee (or the Trust Depositor on behalf of the Owner Trustee, if the Certificate Distribution Account is not then held by the Owner Trustee or an Affiliate thereof) shall within ten Business Days (or such longer period, not to exceed 30 calendar days, as to which each Rating Agency may consent) establish a new Certificate Distribution Account as an Eligible Account and shall transfer any cash and/or any investments to such new Certificate Distribution Account. SECTION 5.02. APPLICATION OF TRUST FUNDS. (a) On each Distribution Date, the Owner Trustee will distribute to Certificateholders, on a pro rata basis, amounts deposited in the Certificate Distribution Account pursuant to Section 7.05 of the Sale and Servicing Agreement with respect to such Distribution Date. (b) On each Distribution Date, the Owner Trustee shall send to each Certificateholder the statement or statements provided to the Owner Trustee by the Servicer pursuant to Section 9.06 of the Sale and Servicing Agreement with respect to such Distribution Date. (c) In the event that any withholding tax is imposed on the Trust's payment (or allocation of income) to a Certificateholder, such tax shall reduce the amount otherwise distributable to the Certificateholder in accordance with this Section. The Owner Trustee is hereby authorized and directed to retain from amounts otherwise distributable to the Owners sufficient funds for the payment of any tax that is legally owed by the Trust (but such authorization shall not prevent the Owner Trustee from contesting any such tax in appropriate proceedings, and withholding payment of such tax, if permitted by law, pending the outcome of such proceedings). The amount of any withholding tax imposed with respect to a Certificateholder shall be treated as cash distributed to such Certificateholder at the time it is withheld by the Trust and remitted to the appropriate taxing authority. If there is a possibility that withholding tax is payable with respect to a distribution, the Owner Trustee may in its sole discretion withhold such amounts in accordance with this paragraph (c). SECTION 5.03. METHOD OF PAYMENT. Subject to SECTION 9.01(c) respecting the final payment upon retirement of each Certificate, distributions required to be made to each Certificateholder of record on the related Record Date shall be made either (a) by wire transfer, in immediately available funds, to the account of such Certificateholder at a bank or other entity having appropriate facilities therefor, if such Certificateholder shall have provided to the - 18 - Certificate Registrar appropriate written instructions at least five Business Days prior to the Distribution Date and such Certificateholder's Certificates in the aggregate evidence a denomination of not less than $1,000,000 or (b) by check mailed to such Certificateholder at the address of such Holder appearing in the Certificate Register; PROVIDED that, unless Definitive Certificates have been issued pursuant to SECTION 3.14, with respect to Trust Certificates registered on the Record Date in the name of the nominee of the Clearing Agency (initially, such nominee to be Cede & Co.), distributions will made by wire transfer in immediately available funds to the account designated by such nominee. SECTION 5.04. NO SEGREGATION OF MONEYS; NO INTEREST. Subject to Sections 5.01 and 5.02, moneys received by the Owner Trustee hereunder need not be segregated in any manner except to the extent required by law or the Sale and Servicing Agreement and may be deposited under such general conditions as may be prescribed by law, and the Owner Trustee shall not be liable for any interest thereon. SECTION 5.05. ACCOUNTING AND REPORTS TO THE CERTIFICATEHOLDERS, OWNERS, THE INTERNAL REVENUE SERVICE AND OTHERS. The Owner Trustee shall (a) maintain (or cause to be maintained) the books of the Trust on a calendar year basis and the accrual method of accounting, (b) deliver to each Owner, as may be required by the Code and applicable Treasury Regulations, such information as may be required (including Schedule K-1) to enable each Owner to prepare its federal and state income tax returns, (c) file such tax returns relating to the Trust (including a partnership information return, IRS Form 1065) and make such elections as from time to time may be required or appropriate under any applicable state or federal statute or any rule or regulation thereunder so as to maintain the Trust's characterization as a partnership for federal income tax purposes, (d) cause such tax returns to be signed in the manner required by law and (e) collect or cause to be collected any withholding tax as described in and in accordance with Section 5.02(c) with respect to income or distributions to Owners. The Owner Trustee shall elect under Section 1278 of the Code to include in income currently any market discount that accrues with respect to the Contracts. The Owner Trustee shall not make the election provided under Section 754 or Section 761 of the Code. SECTION 5.06. SIGNATURE ON RETURNS; TAX MATTERS PARTNER. (a) The Trust Depositor shall sign on behalf of the Trust the tax returns of the Trust. (b) The Trust Depositor shall be designated the "TAX MATTERS PARTNER" of the Trust pursuant to Section 6231(a)(7)(A) of the Code and applicable Treasury Regulations. - 19 - ARTICLE SIX AUTHORITY AND DUTIES OF OWNER TRUSTEE SECTION 6.01. GENERAL AUTHORITY. Subject to the provisions and limitations of Sections 2.03 and 2.06, the Owner Trustee is authorized and directed to execute and deliver the Transaction Documents to which the Trust is to be a party and each certificate or other document attached as an exhibit to or contemplated by the Transaction Documents to which the Trust is to be a party and any amendment or other agreement, as evidenced conclusively by the Owner Trustee's execution thereof. In addition to the foregoing, the Owner Trustee is authorized, but shall not be obligated, to take all actions required of the Trust pursuant to the Transaction Documents. The Owner Trustee is further authorized from time to time to take such action as the Administrator recommends with respect to the Transaction Documents. SECTION 6.02. GENERAL DUTIES. Subject to the provisions and limitations of Sections 2.03 and 2.06, it shall be the duty of the Owner Trustee to discharge (or cause to be discharged through the Administrator) all of its responsibilities pursuant to the terms of this Agreement and the Transaction Documents to which the Trust is a party and to administer the Trust in the interest of the Owners, subject to the Transaction Documents and in accordance with the provisions of this Agreement. Without limiting the foregoing, the Owner Trustee shall on behalf of the Trust file and prove any claim or claims that may exist against Harley-Davidson Credit in connection with any claims paying procedure as part of an insolvency or receivership proceeding involving Harley-Davidson Credit. Notwithstanding the foregoing, the Owner Trustee shall be deemed to have discharged its duties and responsibilities hereunder and under the Transaction Documents to the extent the Administrator has agreed in the Administration Agreement to perform any act or to discharge any duty of the Owner Trustee hereunder or under any Transaction Document, and the Owner Trustee shall not be held liable for the default or failure of the Administrator to carry out its obligations under the Administration Agreement. SECTION 6.03. ACTION UPON INSTRUCTION. (a) Subject to Article Four, in accordance with the terms of the Transaction Documents the Owners may by written instruction direct the Owner Trustee in the management of the Trust. (b) The Owner Trustee shall not be required to take any action hereunder or under any other Transaction Document if the Owner Trustee shall have reasonably determined, or shall have been advised by counsel, that such action is likely to result in liability on the part of the Owner Trustee or is contrary to the terms hereof or of any other Transaction Document or is otherwise contrary to law. (c) Whenever the Owner Trustee is unable to decide between alternative courses of action permitted or required by the terms of this Agreement or under any other - 20 - Transaction Document, the Owner Trustee shall promptly give notice (in such form as shall be appropriate under the circumstances) to the Owners requesting instruction as to the course of action to be adopted, and to the extent the Owner Trustee acts in good faith in accordance with any written instruction of the Owners received, the Owner Trustee shall not be liable on account of such action to any Person. If the Owner Trustee shall not have received appropriate instruction within ten days of such notice (or within such shorter period of time as reasonably may be specified in such notice or may be necessary under the circumstances) it may, but shall be under no duty to, take or refrain from taking such action not inconsistent with this Agreement and the other Transaction Documents, as it shall deem to be in the best interests of the Owners, and shall have no liability to any Person for such action or inaction. (d) In the event that the Owner Trustee is unsure as to the applicability of any provision of this Agreement or any other Transaction Document or any such provision is ambiguous as to its application, or is, or appears to be, in conflict with any other applicable provision, or in the event that this Agreement permits any determination by the Owner Trustee or is silent or in incomplete as to the course of action that the Owner Trustee is required to take with respect to a particular set of facts, the Owner Trustee may give notice (in such form as shall be appropriate under the circumstances) to the Owners requesting instruction and, to the extent that the Owner Trustee acts or refrains from acting in good faith in accordance with any such instruction received, the Owner Trustee shall not be liable, on account of such action or inaction, to any Person. If the Owner Trustee shall not have received appropriate instruction within ten days of such notice (or within such shorter period of time as reasonably may be specified in such notice or may be necessary under the circumstances) it may, but shall be under no duty to, take or refrain from taking such action not inconsistent with this Agreement or the other Transaction Documents, as it shall deem to be in the best interests of the Owners, and shall have no liability to any Person for such action or inaction. SECTION 6.04. NO DUTIES EXCEPT AS SPECIFIED IN THIS AGREEMENT OR IN INSTRUCTIONS. The Owner Trustee shall not have any duty or obligation to manage, make any payment with respect to, register, record, sell, dispose of or otherwise deal with the Trust Estate, or to otherwise take or refrain from taking any action under, or in connection with, any document contemplated hereby to which the Owner Trustee is a party, except as expressly provided by the terms of this Agreement or any document or written instruction received by the Owner Trustee pursuant to Section 6.03; and no implied duties or obligations shall be read into this Agreement or any other Transaction Document against the Owner Trustee. The Owner Trustee shall have no responsibility for filing any financing or continuation statement in any public office at any time or to otherwise perfect or maintain the perfection of any security interest or lien granted to it hereunder or to prepare or file any Commission filing for the Trust or to record this Agreement or any other Transaction Document. The Owner Trustee nevertheless agrees that it will, at its own cost and expense, promptly take all action as may be necessary to discharge any liens on any part of the Trust Estate that result from actions by, or claims against, the Owner Trustee that are not related to the ownership or the administration of the Trust Estate. - 21 - SECTION 6.05. NO ACTION EXCEPT UNDER SPECIFIED DOCUMENTS OR INSTRUCTIONS. The Owner Trustee shall not manage, control, use, sell, dispose of or otherwise deal with any part of the Trust Estate except (i) in accordance with the powers granted to and the authority conferred upon the Owner Trustee pursuant to this Agreement, (ii) in accordance with the other Transaction Documents and (iii) in accordance with any document or instruction delivered to the Owner Trustee pursuant to Section 6.03. SECTION 6.06. RESTRICTIONS. The Owner Trustee shall not take any action (i) that is inconsistent with the purposes of the Trust set forth in Section 2.03 or (ii) that, to the actual knowledge of the Owner Trustee, would result in the Trust's becoming taxable as a corporation for federal or state income tax purposes. The Owners shall not direct the Owner Trustee to take action that would violate the provisions of this Section. ARTICLE SEVEN CONCERNING THE OWNER TRUSTEE SECTION 7.01. ACCEPTANCE OF TRUSTS AND DUTIES. The Owner Trustee accepts the trusts hereby created and agrees to perform its duties hereunder with respect to such trusts but only upon the terms of this Agreement. The Owner Trustee also agrees to disburse all moneys actually received by it constituting part of the Trust Estate upon the terms of the Transaction Documents and this Agreement. The Owner Trustee shall not be answerable or accountable hereunder or under any other Transaction Document under any circumstances, except (i) for its own willful misconduct or negligence or (ii) in the case of the inaccuracy of any representation or warranty contained in Section 7.03 expressly made by the Owner Trustee. In particular, but not by way of limitation (and subject to the exceptions set forth in the preceding sentence): (a) the Owner Trustee shall not be liable for any error of judgment made by a responsible officer of the Owner Trustee; (b) the Owner Trustee shall not be liable with respect to any action taken or omitted to be taken by it in accordance with the instructions of the Administrator or any Owner; (c) no provision of this Agreement or any other Transaction Document shall require the Owner Trustee to expend or risk funds or otherwise incur any financial liability in the performance of any of its rights or powers hereunder or under any Transaction Document if the Owner Trustee shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured or provided to it; (d) under no circumstances shall the Owner Trustee be liable for indebtedness evidenced by or arising under any of the Transaction Documents, including the principal of and interest on the Notes; - 22 - (e) the Owner Trustee shall not be responsible for or in respect of the validity or sufficiency of this Agreement or for the due execution hereof by the Trust Depositor or for the form, character, genuineness, sufficiency, value or validity of any of the Trust Estate, or for or in respect of the validity or sufficiency of the Transaction Documents, other than the certificate of authentication on the Trust Certificates, and the Owner Trustee shall in no event assume or incur any liability, duty, or obligation to any Noteholder or to any Owner, other than as expressly provided for herein or expressly agreed to in the Transaction Documents; (f) the Owner Trustee shall not be liable for the default or misconduct of the Administrator, the Trust Depositor, the Indenture Trustee or the Servicer under any of the Transaction Documents or otherwise and the Owner Trustee shall have no obligation or liability to perform the obligations of the Trust under this Agreement or the other Transaction Documents that are required to be performed by the Administrator under the Administration Agreement, the Indenture Trustee under the Indenture or the Servicer, or the Trust Depositor under the Sale and Servicing Agreement; and (g) the Owner Trustee shall be under no obligation to exercise any of the rights or powers vested in it by the Agreement, or to institute, conduct or defend any litigation under this Agreement or otherwise or in relation to this Agreement or any other Transaction Document, at the request, order or direction of the Owners, unless such Owners have offered to the Owner Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities that may be incurred by the Owner Trustee therein or thereby. The right of the Owner Trustee to perform any discretionary act enumerated in this Agreement or in any other Transaction Document shall not be construed as a duty, and the Owner Trustee shall not be answerable for other than its negligence or willful misconduct in the performance of any such act. SECTION 7.02. FURNISHING OF DOCUMENTS. The Owner Trustee shall furnish to the Owner promptly upon receipt of a written request therefor, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and any other instruments furnished to the Owner Trustee under the Transaction Documents. SECTION 7.03. REPRESENTATIONS AND WARRANTIES. The Owner Trustee hereby represents and warrants to the Trust Depositor and the Owners that: (a) It is a banking corporation duly organized and validly existing in good standing under the laws of the State of Delaware. It has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement. (b) It has taken all corporate action necessary to authorize the execution an delivery by it of this Agreement, and this Agreement will be executed and delivered by one of its officers who is duly authorized to execute and deliver this Agreement on its behalf. - 23 - (c) Neither the execution nor the delivery by it of this Agreement, nor the consummation by it of the transactions contemplated hereby nor compliance by it with any of the terms or provisions hereof will contravene any federal or Delaware law, governmental rule or regulation governing the banking or trust powers of the Owner Trustee or any judgment or order binding on it, or constitute any default under its charter documents or bylaws or any indenture, mortgage, contract, agreement or instrument to which it is a party or by which any of its properties may be bound or result in the creation or imposition of any lien, charge or encumbrance on the Trust Estate resulting from actions by or claims against the Owner Trustee individually which are unrelated to this Agreement or the other Transaction Documents. SECTION 7.04. RELIANCE; ADVICE OF COUNSEL. (a) The Owner Trustee shall incur no liability to anyone in acting upon any signature, instrument, notice, resolution, request, consent, order, certificate, report, opinion, bond or other document or paper believed by it to be genuine and believed by it to be signed by the proper party or parties. The Owner Trustee may accept a certified copy of a resolution of the board of directors or other governing body of any corporate party as conclusive evidence that such resolution has been duly adopted by such body and that the same is in full force and effect. As to any fact or matter the method of determination of which is not specifically prescribed herein, the Owner Trustee may for all purposes hereof rely on a certificate, signed by the president or any vice president or by the treasurer or other authorized officers of the relevant party, as to such fact or matter and such certificate shall constitute full protection to the Owner Trustee for any action taken or omitted to be taken by it in good faith in reliance thereon. (b) In the exercise or administration of the trusts hereunder and in the performance of its duties and obligations under this Agreement or the other Transaction Documents, the Owner Trustee (i) may act directly or through its agents or attorneys pursuant to agreements entered into by any of them, and the Owner Trustee shall not be liable for the conduct or misconduct of such agents or attorneys shall have been selected by the Owner Trustee with reasonable care, and (ii) may consult with counsel, accountants and other skilled persons to be selected with reasonable care and employed by it. The Owner Trustee shall not be liable for anything done, suffered or omitted in good faith by it in accordance with the written opinion or advice of any such counsel, accountants or other such persons. SECTION 7.05. NOT ACTING IN INDIVIDUAL CAPACITY. Except as provided in this Article Seven, in accepting the trusts hereby created, [_____________] acts solely as Owner Trustee hereunder and not in its individual capacity, and all Persons having any claim against the Owner Trustee by reason of the transactions contemplated by this Agreement or any other Transaction Document shall look only to the Trust Estate for payment or satisfaction thereof. SECTION 7.06. OWNER TRUSTEE NOT LIABLE FOR TRUST CERTIFICATES, NOTES OR CONTRACTS. The recitals contained herein and in the Trust Certificates (other than the signature and countersignature of the Owner Trustee and the certificate of authentication on the Trust Certificates) shall be taken as the statements of the Trust Depositor, and the Owner Trustee - 24 - assumes no responsibility for the correctness thereof. The Owner Trustee makes no representations as to the validity or sufficiency of this Agreement, any other Transaction Document or the Trust Certificates (other than the signature and countersignature of the Owner Trustee and the certificate of authentication on the Trust Certificates) or the Notes, or of any Contract or related documents. The Owner Trustee shall at no time have any responsibility or liability for or with respect to the legality, validity and enforceability of any Contract, or the perfection and priority of any security interest created by any Contract in any Motorcycle or the maintenance of any such perfection and priority, or for or with respect to the sufficiency of the Trust Estate or its ability to generate the payments to be distributed to Certificateholders under this Agreement or the Noteholders under the Indenture, including, without limitation, the existence, condition and ownership of any Motorcycle; the existence and enforceability of any insurance thereon; the existence and contents of any Contract on any computer or other record thereof; the validity of the assignment of any Contract to the Trust or of any intervening assignment; the completeness of any Contract; the performance or enforcement of any Contract; the compliance by the Trust Depositor or the Servicer with any warranty or representation made under any Transaction Document or in any related document or the accuracy of any such warranty or representation; or any action of the Administrator, the Indenture Trustee or the Servicer or any subservicer taken in the name of the Owner Trustee. SECTION 7.07. OWNER TRUSTEE MAY OWN TRUST CERTIFICATES AND NOTES. The Owner Trustee in its individual or any other capacity may become the owner or pledgee of Trust Certificates or Notes and may deal with the Trust Depositor, the Administrator, the Indenture Trustee and the Servicer in banking transactions with the same rights as it would have if it were not Owner Trustee. ARTICLE EIGHT COMPENSATION OF OWNER TRUSTEE SECTION 8.01. OWNER TRUSTEE'S FEES AND EXPENSES. The Owner Trustee shall receive as compensation for its services hereunder such fees as have been separately agreed upon and which shall be paid consistent with Section 7.05(a) of the Sale and Servicing Agreement. Additionally, the Owner Trustee shall be entitled to be reimbursed by the Servicer for its other reasonable expenses hereunder, including the reasonable compensation, expenses and disbursements of such agents, representatives, experts and counsel as the Owner Trustee may employ in connection with the exercise and performance of its rights and its duties hereunder. SECTION 8.02. INDEMNIFICATION. The Trust Depositor shall be liable as primary obligor for, and shall indemnify the Owner Trustee and its successors, assigns and servants (collectively, the "INDEMNIFIED PARTIES") from and against, any and all liabilities, obligations, losses, damages, taxes, claims, actions and suits, and any and all reasonable costs, expenses and disbursements (including reasonable legal fees and expenses) of any kind and nature whatsoever (collectively, "EXPENSES") which may at any time be imposed on, incurred by or asserted against the Owner - 25 - Trustee or any Indemnified Party in any way relating to or arising out of this Agreement, the other Transaction Documents, the Trust Estate, the administration of the Trust Estate or the action or inaction of the Owner Trustee hereunder, except only that the Trust Depositor shall not be liable for or required to indemnify an Indemnified Party from and against Expenses arising or resulting from any of the matters described in the third sentence of Section 7.01. The indemnities contained in this Section shall survive the resignation or termination of the Owner Trustee or the termination of this Agreement. In the event of any claim, action or proceeding for which indemnity will be sought pursuant to this Section, the Owner Trustee's choice of legal counsel shall be subject to the approval of the Trust Depositor, which approval shall not be unreasonably withheld. SECTION 8.03. PAYMENTS TO THE OWNER TRUSTEE. Any amounts paid to the Owner Trustee pursuant to this Article shall be deemed not to be a part of the Trust Estate immediately after such payment. ARTICLE NINE TERMINATION OF TRUST AGREEMENT SECTION 9.01. TERMINATION OF TRUST AGREEMENT. (a) This Agreement (other than Article Eight) and the Trust shall terminate and be of no further force or effect upon the earlier of (i) final distribution by the Owner Trustee of all moneys or other property or proceeds of the Trust Estate in accordance with terms of the Indenture, the Sale and Servicing Agreement and Article Five, (ii) the expiration of 21 years from the death of the survivor of the descendants of Joseph P. Kennedy, the late Ambassador of the United States to the Court of St. James's, living on the date hereof and (iii) the time provided in Section 9.02. The bankruptcy, liquidation, dissolution, death or incapacity of any Owner, other than the Trust Depositor as described in Section 9.02, shall not (i) operate to terminate this Agreement or the Trust, (ii) entitle such Owner's legal representatives or heirs to claim an accounting or to take any action or proceeding in any court for a partition or winding up of all or any part of the Trust or Trust Estate or (iii) otherwise affect the rights, obligations and liabilities of the parties hereto. (b) Except as provided in Section 9.01(a), neither the Trust Depositor nor any Holder shall be entitled to revoke or terminate the Trust. (c) Notice of any termination of the Trust, specifying the Distribution Date upon which Certificateholders shall surrender their Trust Certificates to the Paying Agent for payment of the final distribution and cancellation, shall be given by the Owner Trustee by letter to Certificateholders mailed within five Business Days of receipt of notice of such termination from the Servicer given pursuant to Section 10.01 of the Sale and Servicing Agreement, stating (i) the Distribution Date upon or with respect to which final payment of the Trust Certificates - 26 - shall be made upon presentation and surrender of the Trust Certificates at the office of the Paying Agent therein designated, (ii) the amount of any such final payment and (iii) that the Record Date otherwise applicable to such Distribution Date is not applicable, payments being made only upon presentation and surrender of the Trust Certificates at the office of the Paying Agent therein specified. The Owner Trustee shall give such notice to the Certificate Registrar (if other than the Owner Trustee) and the Paying Agent at the time such notice is given to Certificateholders. Upon presentation and surrender of the Trust Certificates, the Paying Agent shall cause to be distributed to Certificateholders amounts distributable on such Distribution Date pursuant to Section 5.02. (d) In the event that all of the Certificateholders shall not surrender their Trust Certificates for cancellation within six months after the date specified in the above mentioned written notice, the Owner Trustee shall give a second written notice to the remaining Certificateholders to surrender their Trust Certificates for cancellation and receive the final distribution with respect thereto. If within one year after the second notice all the Trust Certificates shall not have been surrendered for cancellation, the Owner Trustee may take appropriate steps, or may appoint an agent to take appropriate steps, to contact the remaining Certificateholders concerning surrender of their Trust Certificates, and the cost thereof shall be paid out of the funds and other assets that shall remain subject to this Agreement. Any funds remaining in the Trust after exhaustion of such remedies shall be distributed by the Owner Trustee to the Trust Depositor. (e) Upon the winding up of the Trust and its termination, the Owner Trustee shall cause the Certificate of Trust to be canceled by filing a certificate of cancellation with the Secretary of State in accordance with the provisions of Section 3810 of the Business Trust Statute. SECTION 9.02. [DISSOLUTION UPON BANKRUPTCY OF TRUST DEPOSITOR OR WITHDRAWAL OR REMOVAL OF TRUST DEPOSITOR. In the event that an Insolvency Event shall occur with respect to the Trust Depositor or the Trust Depositor shall withdraw, liquidate or be removed from the Trust, this Agreement shall be terminated in accordance with Section 9.01 90 days after the date of such event, unless before the end of such 90-day period, the Owner Trustee shall have received written instructions from (a) each of the (i) Holders (as defined in the Indenture) of Class A-1 Notes representing more than 50% of the Outstanding Amount of the Class A-1 Notes, (ii) Holders of Class A-2 Notes representing more than 50% of the Outstanding Amount of the Class A-2 Notes, and (iii) Holders of Class B Notes representing more than 50% of the Outstanding Amount of the Class B Notes or (b) if there are no Notes outstanding, Certificateholders (other than the Depositor) representing more than 50% of the Certificate Balance (not including the Certificate Balance of the Trust Certificate held by the Depositor), to the effect that each such party disapproves of the liquidation of the Collateral and termination of the Trust. Promptly after the occurrence of any Insolvency Event with respect to the Trust Depositor, (A) the Trust Depositor shall give the Indenture Trustee and the Owner Trustee written notice of such Insolvency Event, (B) the Owner Trustee shall, upon the receipt of such written notice from the Trust Depositor, give prompt written notice to the Certificateholders and the Indenture Trustee, - 27 - of the occurrence of such event and (C) the Indenture Trustee shall, upon receipt of written notice of such Insolvency Event from the Owner Trustee or the Trust Depositor, give prompt written notice to the Noteholders of the occurrence of such event; PROVIDED, HOWEVER, that any failure to give a notice required by this sentence shall not prevent or delay, in any manner, a termination of the Trust pursuant to the first sentence of this SECTION 9.02. Upon a termination pursuant to this Section, the Owner Trustee shall direct the Indenture Trustee promptly to sell the assets of the Trust (other than the Trust Accounts and the Certificate Distribution Account) in a commercially reasonable manner and on commercially reasonable terms. The proceeds of such a sale of the assets of the Trust shall be treated as collections under the Sale and Servicing Agreement.] ARTICLE TEN SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES SECTION 10.01. ELIGIBILITY REQUIREMENTS FOR OWNER TRUSTEE. The Owner Trustee shall at all times be a corporation satisfying the provisions of Section 3807(a) of the Business Trust Statute; authorized to exercise corporate trust powers; having a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by federal or state authorities; and having (or having a parent that has) a rating of at least Baa3 by Moody's. If such corporation shall publish reports of condition at least annually pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purpose of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Owner Trustee shall cease to be eligible in accordance with the provisions of this Section, the Owner Trustee shall resign immediately in the manner and with the effect specified in Section 10.02. SECTION 10.02. RESIGNATION OR REMOVAL OF OWNER TRUSTEE. The Owner Trustee may at any time resign and be discharged from the trusts hereby created by giving written notice thereof to the Administrator. Upon receiving such notice of resignation, the Administrator shall promptly appoint a successor Owner Trustee by written instrument, in duplicate, one copy of which instrument shall be delivered to the resigning Owner Trustee and one copy to the successor Owner Trustee. If no successor Owner Trustee shall have been so appointed and have accepted appointment within 30 days after the giving of such notice of resignation, the resigning Owner Trustee may petition any court of competent jurisdiction for the appointment of a successor Owner Trustee. If at any time the Owner Trustee shall cease to be eligible in accordance with the provisions of Section 10.01 and shall fail to resign after written request therefor by the Administrator, or if at any time the Owner Trustee shall be legally unable to act, or shall be adjudged bankrupt or insolvent, or a receiver of the Owner Trustee or of its property shall be appointed or any public officer shall take charge or control of the Owner Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then the - 28 - Administrator, may remove the Owner Trustee. If the Administrator shall remove the Owner Trustee under the authority of the immediately preceding sentence, the Administrator shall promptly appoint a successor Owner Trustee by written instrument, in duplicate, one copy of which instrument shall be delivered to the outgoing Owner Trustee so removed and one copy to the successor Owner Trustee, and shall pay all fees owed to the outgoing Owner Trustee. Any resignation or removal of the Owner Trustee and appointment of a successor Owner Trustee pursuant to any of the provisions of this Section shall not become effective until acceptance of appointment by the successor Owner Trustee pursuant to Section 10.03 and payment of all fees and expenses owed to the outgoing Owner Trustee. The Administrator shall provide notice of such resignation or removal of the Owner Trustee to each Rating Agency. SECTION 10.03. SUCCESSOR OWNER TRUSTEE. Any successor Owner Trustee appointed pursuant to Section 10.02 shall execute, acknowledge and deliver to the Administrator, and to its predecessor Owner Trustee an instrument accepting such appointment under this Agreement, and thereupon the resignation or removal of the predecessor Owner Trustee shall become effective, and such successor Owner Trustee, without any further act, deed or conveyance, shall become fully vested with all the rights, powers, duties and obligations of its predecessor under this Agreement, with like effect as if originally named as Owner Trustee. The predecessor Owner Trustee shall upon payment of its fees and expenses deliver to the successor Owner Trustee all documents and statements and monies held by it under this Agreement; and the Administrator and the predecessor Owner Trustee shall execute and deliver such instruments and do such other things as may reasonably be required for fully and certainly vesting and confirming in the successor Owner Trustee all such rights, powers, duties and obligations. No successor Owner Trustee shall accept appointment as provided in this Section unless at the time of such acceptance such successor Owner Trustee shall be eligible pursuant to Section 10.01. Upon acceptance of appointment by a successor Owner Trustee pursuant to this Section, the Administrator shall mail notice thereof to all Certificateholders, the Indenture Trustee, the Noteholders and each Rating Agency. If the Administrator shall fail to mail such notice within ten days after acceptance of such appointment by the successor Owner Trustee, the successor Owner Trustee shall cause such notice to be mailed at the expense of the Administrator. SECTION 10.04. MERGER OR CONSOLIDATION OF OWNER TRUSTEE. Any corporation into which the Owner Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Owner Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Owner Trustee, shall be the successor of the Owner Trustee hereunder, without the execution or filing of any instrument or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding; PROVIDED, that such corporation shall be - 29 - eligible pursuant to Section 10.01 and, PROVIDED, FURTHER, that the Owner Trustee shall mail notice of such merger or consolidation to each Rating Agency. SECTION 10.05. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE. Notwithstanding any other provisions of this Agreement, at any time, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Trust Estate or any financed Motorcycle may at the time be located, the Administrator and the Owner Trustee acting jointly shall have the power and shall execute and deliver all instruments to appoint one or more Persons approved by the Administrator and Owner Trustee to act as co-trustee, jointly with the Owner Trustee, or as separate trustee or separate trustees, of all or any part of the Trust Estate, and to vest in such Person, in such capacity, such title to the Trust or any part thereof and, subject to the other provisions of this Section, such powers, duties, obligations, rights and trusts as the Administrator and the Owner Trustee may consider necessary or desirable. If the Administrator shall not have joined in such appointment within 15 days after the receipt by it of a request so to do, the Owner Trustee alone shall have the power to make such appointment. No co-trustee or separate trustee under this Agreement shall be required to meet the terms of eligibility as a successor Owner Trustee pursuant to Section 10.01 and no notice of the appointment of any co-trustee or separate trustee shall be required pursuant to Section 10.03. Each separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions: (a) all rights, powers, duties and obligations conferred or imposed upon the Owner Trustee shall be conferred upon and exercised or performed by the Owner Trustee and such separate trustee or co-trustee jointly (it being understood that such separate trustee or co-trustee is not authorized to act separately without the Owner Trustee joining in such act), except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed, the Owner Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Trust Estate or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate trustee or co-trustee, but solely at the direction of the Owner Trustee; (b) no trustee under this Agreement shall be personally liable by reason of any act or omission of any other trustee under this Agreement; and (c) the Administrator and the Owner Trustee acting jointly may at any time accept the resignation of or remove any separate trustee or co-trustee. Any notice, request or other writing given to the Owner Trustee shall be deemed to have been given to each of the then separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee or co-trustee shall refer to this Agreement and the conditions of this Article. Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its - 30 - instrument of appointment, either jointly with the Owner Trustee or separately, as may be provided therein, subject to all the provisions of this Agreement, specifically including every provision of this Agreement relating to the conduct of, affecting the liability of or affording protection to, the Owner Trustee. Each such instrument shall be filed with the Owner Trustee and a copy thereof given to the Administrator. Any separate trustee or co-trustee may at any time appoint the Owner Trustee as its agent or attorney-in-fact with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect of this Agreement on its behalf and in its name. If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Owner Trustee, to the extent permitted by law, without the appointment of a new or successor co-trustee or separate trustee. ARTICLE ELEVEN MISCELLANEOUS SECTION 11.01. SUPPLEMENTS AND AMENDMENTS. (a) This Agreement may be amended from time to time by the Depositor and the Owner Trustee, with notice to the Rating Agencies, but without the consent of the Trustees or any of the Securityholders, to correct manifest error, to cure any ambiguity, to correct or supplement any provisions herein which may be ambiguous or inconsistent with any other provisions herein or in any other Transaction Document, as the case may be, or to add any other provisions with respect to matters or questions arising under this Agreement that shall not be inconsistent with the provisions of this Agreement; PROVIDED, HOWEVER, that such action shall not, as evidenced by an Opinion of Counsel, materially and adversely affect the interests of any Securityholder. (b) This Agreement may also be amended from time to time by the Depositor and the Owner Trustee, with the consent of Noteholders of more than 50% of the aggregate principal amount of the Class A-1 Notes or Class A-2 Notes, or, if there are no Class A-1 Notes or Class A-2 Notes outstanding, with the consent of Noteholders of more than 50% of the aggregate principal amount of the Class B Notes, or, if there are no Notes outstanding, with the consent of Certificateholders of more than 50% of the Certificate Balance, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of the Noteholders or Certificateholders; PROVIDED, HOWEVER, that no such amendment or waiver shall (x) increase or reduce in any manner the amount of, or accelerate or delay the timing of, collections of payments on the Contracts or distributions which are required to be made on any Note or Certificate, (y) change the interest rate on any Notes or Certificates which such change adversely affects the priority of payment of - 31 - principal or interest made to the Noteholders or Certificateholders or (z) reduce the aforesaid percentage required to consent to any such amendment, without the consent of the Noteholders and Certificateholders then outstanding; and PROVIDED, FURTHER, that no such amendment or consent shall be effective unless each Rating Agency delivers written confirmation that such amendment or consent will not cause its then-current rating on any class of Notes or the Certificates to be qualified, reduced or withdrawn. (c) The consent of any Holder of a Note or Trust Certificate given pursuant to this Section or pursuant to any other provision of this Agreement shall be conclusive and binding on such Holders and on all future Holder of such Note or Trust Certificate, as the case may be, issued upon the transfer thereof or in exchange thereof or in lieu thereof whether or not notation of such consent is made thereon (d) Promptly after the execution of any such amendment or consent, the Owner Trustee shall furnish written notification of the substance of such amendment or consent, together with a copy thereof, to the Indenture Trustee, the Administrator and each Rating Agency. (e) Promptly after the execution of any amendment to the Certificate of Trust, the Owner Trustee shall cause the filing of such amendment with the Secretary of State. (f) Prior to the execution of any amendment to this Agreement or the Certificate of Trust, the Owner Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by this Agreement. The Owner Trustee may, but shall not be obligated to, enter into any such amendment that affects the Owner Trustee's own rights, duties or immunities under this Agreement or otherwise. SECTION 11.02. NO LEGAL TITLE TO TRUST ESTATE IN OWNERS. The Owners shall not have legal title to any part of the Trust Estate. The Owners shall be entitled to receive distributions with respect to their undivided ownership interest herein only in accordance with Articles Five and Nine. No transfer, by operation of law or otherwise, of any right, title or interest of the Owners to and in their ownership interest in the Trust Estate shall operate to terminate this Agreement or the trusts hereunder or entitle any transferee to an accounting or to the transfer to it of legal title to any part of the Trust Estate. SECTION 11.03. LIMITATIONS ON RIGHTS OF OTHERS. Except for Section 2.07, the provisions of this Agreement are solely for the benefit of the Owner Trustee, the Trust Depositor, the Owners, the Administrator and, to the extent expressly provided herein, the Indenture Trustee and the Noteholders, and nothing in this Agreement (other than Section 2.07), whether express or implied, shall be construed to give to any other Person any legal or equitable right, remedy or claim in the Trust Estate or under or in respect of this Agreement or any covenants, conditions or provisions contained herein. - 32 - SECTION 11.04. NOTICES. All notices, demands, certificates, requests and communications hereunder ("NOTICES") shall be in writing and shall be effective (a) upon receipt when sent through the U.S. mails, registered or certified mail, return receipt requested, postage prepaid, with such receipt to be effective the date of delivery indicated on the return receipt, or (b) one Business Day after delivery to an overnight courier, or (c) on the date personally delivered to an Authorized Officer of the party to which sent, or (d) on the date transmitted by legible telecopier transmission with a confirmation of receipt, in all cases addressed to the recipient as follows: (i) If to the Servicer or Seller: Harley-Davidson Credit Corp. 150 South Wacker Drive, Suite 3100 Chicago, Illinois 60606 Attention: Perry A. Glassgow Telecopier No.: (312) 368-4372 (ii) If to the Trust Depositor: Harley-Davidson Customer Funding Corp. 4150 Technology Way Carson City, Nevada 89706 Telecopier No.: (775) 884-4469 (iii) If to the Indenture Trustee: -------------------- -------------------- -------------------- Telecopier No.: ________________ (iv) If to the Owner Trustee: -------------------- -------------------- -------------------- Telecopier No.: ________________ - 33 - (v) If to Moody's: Moody's Investors Service, Inc. 99 Church Street New York, New York 10007 Attention: ABS Monitoring Department Telecopier No.: (212) 553-0344 (vi) If to Standard & Poor's: Standard & Poor's Ratings Services, a division of The McGraw Hill Companies 25 Broadway New York, New York 10004 Telecopier No.: (212) 208-1582 (vii) If to the Underwriters: -------------------- -------------------- -------------------- Telecopier No.: ______________ -------------------- -------------------- -------------------- Telecopier No.: ______________ Each party hereto may, by notice given in accordance herewith to each of the other parties hereto, designate any further or different address to which subsequent notices shall be sent. SECTION 11.05. SEVERABILITY OF PROVISIONS. If any one or more of the covenants, agreements, provisions, or terms of this Agreement shall be for any reason whatsoever held invalid, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement or of the Trust Certificates or the rights of the Holders thereof. - 34 - SECTION 11.06. COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 11.07. SUCCESSORS AND ASSIGNS. All covenants and agreements contained herein shall be binding upon, and inure to the benefit of, each of the Trust Depositor, and the Owner Trustee and their respective successors and permitted assigns and each Owner and its successors and permitted assigns, all as herein provided. Any request, notice, direction, consent, waiver or other instrument or action by an Owner shall bind the successors and assigns of such Owner. SECTION 11.08. NO PETITION. (a) The Trust Depositor will not at any time institute against the Trust any bankruptcy proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Trust Certificates, the Notes, this Agreement or any of the other Transaction Documents. (b) The Owner Trustee, by entering into this Agreement, each Certificateholder, by accepting a Trust Certificate, and the Indenture Trustee and each Noteholder, by accepting the benefits of this Agreement, hereby covenant and agree that they will not at any time institute against the Trust Depositor or the Trust, or join in any institution against the Trust Depositor, or the Trust of, any bankruptcy proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Trust Certificates, the Notes, this Agreement or any of the other Transaction Documents. SECTION 11.09. NO RECOURSE. Each Certificateholder by accepting a Trust Certificate acknowledges that such Certificateholder's Trust Certificates represent beneficial interests in the Trust only and do not represent interests in or obligations of the Trust Depositor, the Servicer, the Seller, the Administrator, the Owner Trustee, the Indenture Trustee or any of the respective Affiliates and no recourse may be had against such parties or their assets, except as my be expressly set forth or contemplated in this Agreement, the Trust Certificates or the other Transaction Documents. SECTION 11.10. HEADINGS. The headings of the various Articles and Sections herein are for convenience of reference only and shall not define or limit any of the terms or provisions hereof. SECTION 11.11. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. - 35 - SECTION 11.12. TRUST CERTIFICATE TRANSFER RESTRICTIONS. The Trust Certificates may not be acquired by or for the account of a Benefit Plan. By accepting and holding a Trust Certificate, the Holder thereof shall be deemed to have represented and warranted that it is not a Benefit Plan nor will it hold such Trust Certificate for the account of a Benefit Plan. By accepting and holding a Trust Certificate, the Holder thereof shall be deemed to have represented and warranted that it is not a Benefit Plan. SECTION 11.13. SERVICER PAYMENT OBLIGATION. The Servicer shall be responsible for payment of the Administrator's compensation pursuant to Section 3 of the Administration Agreement and shall reimburse the Administrator for all expenses and liabilities of the Administrator incurred thereunder. [signature page follows] - 36 - IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective officers hereunto duly authorized, as of the day and year first above written. HARLEY-DAVIDSON CUSTOMER FUNDING CORP., as Trust Depositor By:________________________________________ Printed Name: Perry A. Glassgow Title: Treasurer [__________________], as Owner Trustee By:________________________________________ Printed Name:_____________________________ Title:_____________________________________ EXHIBIT A FORM OF CERTIFICATE OF TRUST OF Harley-Davidson Motorcycle Trust [_______] This Certificate of Trust of Harley-Davidson Motorcycle Trust [_______] (the "TRUST"), dated __________, ______, is being duly executed and filed by [_____________], a Delaware banking corporation, as Owner Trustee, to form a business trust under the Delaware Business Trust Act (12 DEL. CODE, Section 3801 ET SEQ.). 1. NAME. The name of the business trust formed hereby is Harley-Davidson Motorcycle Trust [__________]. 2. DELAWARE TRUSTEE. The name and business address of the Owner Trustee of the Trust in the State of Delaware is [_______________],[____________________]. IN WITNESS WHEREOF, the undersigned, being the sole Owner Trustee of the Trust, has executed this Certificate of Trust as of the date first above written. [_______________], not in its individual capacity but solely as Owner Trustee By:_____________________________________ Printed Name:___________________________ Title:__________________________________ EXHIBIT B FORM OF TRUST CERTIFICATE [TO BE INSERTED ON CEDE & CO. CERTIFICATE - UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUST OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] THIS TRUST CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE NOTES TO THE EXTENT DESCRIBED IN THE SALE AND SERVICING AGREEMENT AND INDENTURE REFERRED TO HEREIN. THIS TRUST CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR AN INTEREST IN HARLEY-DAVIDSON CUSTOMER FUNDING CORP., HARLEY-DAVIDSON CREDIT CORP. OR ANY AFFILIATE THEREOF, EXCEPT TO THE EXTENT SET FORTH IN THE TRUST AGREEMENT. THIS TRUST CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR PLEDGED IN UNLESS THE CONDITIONS SET FORTH IN SECTION 3.04 OF THE TRUST AGREEMENT HAVE BEEN COMPLIED WITH. [TO BE INSERTED ON COMPANY CERTIFICATE-- THIS CERTIFICATE IS NON-TRANSFERABLE] HARLEY-DAVIDSON MOTORCYCLE TRUST [_______] CERTIFICATE NO. ___________ Initial Trust Certificate Principal Balance $______________ Fractional Interest _________% THIS CERTIFIES THAT _______________ is the registered owner of equity $ nonassessable, fully-paid, fractional undivided interest in the Harley-Davidson Motorcycle Trust [_______] (the "TRUST") formed by Harley-Davidson Customer Funding Corp., a Nevada corporation (the "TRUST DEPOSITOR"). The Trust was created pursuant to a Trust Agreement, dated as of [___________] (as amended and supplemented from time to time, the "TRUST AGREEMENT"), among Harley-Davidson Customer Funding Corp., as Trust Depositor (the "TRUST DEPOSITOR"), Harley-Davidson Credit Corp. (the "SELLER") and [_____________], as owner trustee (the "OWNER TRUSTEE"), a summary of certain of the pertinent provisions of which is set forth below. To the extent not otherwise defined herein, the capitalized terms used herein have the meanings assigned to them in (i) the Trust Agreement, (ii) the Sale and Servicing Agreement, dated as of [___________] (the "SALE AND SERVICING AGREEMENT"), among the Trust, Harley-Davidson Customer Funding Corp., as depositor (the "TRUST DEPOSITOR"), Harley-Davidson Credit Corp. ("HARLEY-DAVIDSON CREDIT"), as Servicer (in such capacity, the "SERVICER") and [_____________], as Indenture Trustee (the "Indenture Trustee") or (iii) the Indenture, dated as of [___________] (the "INDENTURE"), between the Trust and the Indenture Trustee. This Trust Certificate is one of the duly authorized Trust Certificates designated as "___% HARLEY-DAVIDSON MOTORCYCLE CONTRACT BACKED CERTIFICATES" (the "TRUST CERTIFICATES"). Also issued under the Indenture are two classes of notes designated as "___% HARLEY-DAVIDSON MOTORCYCLE CONTRACT BACKED NOTES, CLASS A-1", "___% HARLEY-DAVIDSON MOTORCYCLE CONTRACT BACKED NOTES, CLASS A-2" and "___% HARLEY-DAVIDSON MOTORCYCLE CONTRACT BACKED NOTES, CLASS B" (collectively, the "NOTES"). This Trust Certificate is issued under and is subject to the terms, provisions and conditions of the Trust Agreement, to which Trust Agreement the Holder of this Trust Certificate by virtue of its acceptance hereof assents and by which such Holder is bound. The property of the Trust includes, among other things, (i) all the right, title and interest of the Trust Depositor in and to the Initial Contracts listed on the initial List of Contracts delivered on the Closing Date (including, without limitation, all security interests and all rights to receive payments which are collected pursuant thereto on or after the Initial Cutoff Date, including any liquidation proceeds therefrom, but excluding any rights to receive payments which were collected pursuant thereto prior to the Initial Cutoff Date), (ii) all rights of the Trust Depositor under any physical damage or other individual insurance policy (and rights under a "FORCED PLACED" policy, if any) relating to any such Contract, an Obligor or a Motorcycle securing such Contract, (iii) all security interests in each such Motorcycle, (iv) all documents contained in the related Contract Files, (v) all rights (but not the obligations) of the Trust Depositor under any related motorcycle dealer agreements between dealers (i.e., the originators of such Contracts) and the Trust Depositor, (vi) all rights of the Trust Depositor in the Lockbox, the Lockbox Account and related Lockbox Agreement to the extent they relate to such Contracts, (vii) all rights (but not the obligations) of the Trust Depositor under the Transfer and Sale Agreement, including but not limited to the Trust Depositor's rights under Article V thereof, (viii) the remittances, deposits and payments made into the Trust Accounts from time to time and amounts in the Trust Accounts (other than the Reserve Fund) from time to time (and any investments of such amounts), and (ix) all proceeds and products of the foregoing (the property in clauses (i)-(viii) above. Under the Trust Agreement, there will be distributed on the fifteenth day of each month or if such day is not a Business Day the next succeeding Business Day commencing [ ], [____] (each, a "DISTRIBUTION DATE") and ending no later than the Distribution Date in ___ to the person in whose name this Trust Certificate is registered as of the last Business Day immediately preceding the calendar month in which such Distribution Date occurs (each, a "RECORD DATE"), such Certificateholder's fractional undivided interest in the amount to be distributed to Certificateholders on such Distribution Date. The holder of this Trust Certificate acknowledges and agrees that its rights to receive distributions in respect of this Trust Certificate are subordinated to the rights of the Noteholders to the extent described in the Sale and Servicing Agreement and the Indenture. It is the intent of the Seller, the Servicer, the Trust Depositor, Owner Trustee, Indenture Trustee and the Certificateholders that, for purposes of federal income, state and local income and single business tax and any other income taxes, the Trust will be treated as a partnership and the Certificateholders (including the Trust Depositor) will be treated as partners in that partnership. The Trust Depositor and the other Certificateholders, by acceptance of a Trust Certificate, agree to treat, and to take no action inconsistent with the treatment of, the Trust Certificates for such tax purposes as partnership interests in the Trust and the Certificateholders (including the Trust Depositor) as partners in that partnership. Each Certificateholder, by its acceptance of a Trust Certificate or beneficial interest in a Trust Certificate, covenants and agrees that such Certificateholder will not at any time institute against the Trust or the Trust Depositor, or join in any institution against the Trust or the Trust Depositor, Harley-Davidson Credit or the Servicer any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Trust Certificates, the Notes, the Trust Agreement or any of the other Transaction Documents. Distributions on this Trust Certificate will be made as provided in the Trust Agreement by the Owner Trustee or its Agent by wire transfer or check mailed to the Certificateholder of record in the Certificate Register without the presentation or surrender of this Trust Certificate or the making of any notation hereon, except that with respect to Trust Certificates registered on the Record Date in the name of the nominee of the Clearing Agency (initially, such nominee to be Cede & Co.), payments will be made by wire transfer in immediately available funds to the account designated by such nominee. Except as otherwise provided in the Trust Agreement and notwithstanding the above, the final distribution on this Trust Certificate will be made after due notice by the Owner Trustee of the pendency of such distribution and only upon presentation and surrender of this Trust Certificate at the office or agency maintained for that purpose by the Owner Trustee in the City of [__________], Delaware. Reference is hereby made to the further provisions of this Trust Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon shall have been executed by an authorized officer of the Owner Trustee, by manual signature, this Trust Certificate shall not entitle the holder hereof to any benefit under the Trust Agreement or any other Transaction Document or be valid for any purpose. THIS TRUST CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. [REVERSE OF CERTIFICATE] The Trust Certificate does not represent an obligation of, or an interest in the Trust Depositor, Harley-Davidson Credit, as the Seller or Servicer, the Owner Trustee, the Indenture Trustee or any of their respective Affiliates and no recourse may be had against such parties or their assets, except as expressly set forth or contemplated herein or in the Trust Agreement or the other Transaction Documents. In addition, this Trust Certificate is not guaranteed by any governmental agency or instrumentality and is limited in right of payment to certain collections and recoveries with respect to the Contracts and certain other amounts, in each case as more specifically set forth herein and in the Sale and Servicing Agreement. A copy of each of the Sale and Servicing Agreement and the Trust Agreement may be examined by any Certificateholder upon written request during normal business hours at the principal office of the Trust Depositor and at such other places, if any, designated by the Trust Depositor. The Trust Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Trust Depositor and the rights of the Certificateholders under the Trust Agreement at any time by the Trust Depositor and the Owner Trustee with the consent of Noteholders of more than 50% of the aggregate principal amount of the Class A-1 Notes and Class A-2 Notes, or, if there are no Class A-1 Notes or Class A-2 Notes outstanding, with the consent of Noteholders of more than 50% of the aggregate principal amount of the Class B Notes, or, if there are no Notes outstanding, with the consent of Certificateholders of more than 50% of the Certificate Balance. Any such consent by the Holder of this Trust Certificate shall be conclusive and binding on such Holder and on all future Holders of this Trust Certificate and of any Trust Certificate issued upon the transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent is made upon this Trust Certificate. The Trust Agreement also permits the amendment thereof, in certain limited circumstances, without the consent of the Holders of any of the Trust Certificates. As provided in the Trust Agreement and subject to certain limitations therein set forth, the transfer of this Trust Certificate is registerable in the Certificate Register upon surrender of this Trust Certificate for registration of transfer at the offices or agencies of the Certificate Registrar maintained by the Owner Trustee in [___________], Delaware, accompanied by a written instrument of transfer in form satisfactory to the Owner Trustee and the Certificate Registrar in Chicago, Illinois executed by the Holder hereof or such Holder's attorney duly authorized in writing, and thereupon one or more new Trust Certificates of authorized denominations evidencing the same aggregate interest in the Trust will be issued to the designated transferee. The initial Certificate Registrar appointed under the Trust Agreement is [_____________]. Except as provided in the Trust Agreement, the Trust Certificates are issuable only as registered Trust Certificates without coupons in denominations of $1,000 and in integral multiples of $1,000 in excess thereof. As provided in the Trust Agreement and subject to certain limitations therein set forth, Trust Certificates are exchangeable for new Trust Certificates of authorized denominations evidencing the same aggregate denomination, as requested by the Holder surrendering the same. No service charge will be made for any such registration of transfer or exchange, but the Owner Trustee or the Certificate Registrar may require payment of a sum sufficient to cover any tax or governmental charge payable in connection therewith. The Owner Trustee, the Certificate Registrar and any of their respective agents may treat the Person in whose name this Trust Certificate is registered as the owner hereof for all purposes, and none of the Owner Trustee, the Certificate Registrar or any such agent shall be affected by any notice to the contrary. The obligations and responsibilities created by the Trust Agreement and the Trust created thereby shall terminate upon the payment to Certificateholders of all amounts required to be paid to them pursuant to the Trust Agreement and the Sale and Servicing Agreement and the deposition of all property held as part of the Trust Estate. The Trust Depositor may at its option purchase the Trust Estate at a price specified in the Sale and Servicing Agreement, and such purchase of the Contracts and other property of the Trust will affect early retirement of the Trust Certificates; however, such right of purchase is exercisable only as of any Distribution Date on which the on which the unpaid Aggregate Principal Balance is less than 10% of the sum of (i) the Aggregate Principal Balance as of the Cutoff Date and (ii) the Pre-Funded Amount on the Closing Date. The Trust Certificates may not be acquired by a Benefit Plan. By accepting and holding this Trust Certificate, the Holder hereof or, in the case of Book-Entry Trust Certificate, by accepting a beneficial interest in this Trust Certificate, the related Certificate Owner, shall be deemed to have represented and warranted that it is not a Benefit Plan and is not acquiring this Trust Certificate or an interest therein for the account of such an entity. IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not in its individual capacity, has caused this Trust Certificate to be duly executed. Dated: Harley-Davidson Motorcycle Trust [_______] By: [_____________], not in its individual capacity but solely as Owner Trustee By:____________________________________________ Authorized Signatory OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Trust Certificates referred to in the within-mentioned Trust Agreement. [_______________], not in its individual capacity but solely as Owner Trustee By:_________________________________________ Authorized Signatory ASSIGNMENT FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE (Please print or type name and address, including postal zip code, of assignee) ________________________________________________________________________________ the within Trust Certificate, and all rights thereunder, hereby irrevocably constituting and appointing ________________________________________________________________________________ to transfer said Trust Certificate on the books of the Certificate Registrar, with full power of substitution in the premises. Dated:_______________ Signature Guaranteed: ____________________________ _________________________________________ NOTICE: Signature(s) must be NOTICE: The signature to this assignment guaranteed by an eligible must correspond with the name of the guarantor institution. registered owner as it appears on the face of the within Trust Certificate in every particular, without alteration or enlargement or any change whatever. EX-4.2 6 EXHIBIT 4.2 EXHIBIT 4.2 ================================================================================ FORM OF INDENTURE HARLEY-DAVIDSON MOTORCYCLE TRUST [________], as Issuer, and [_________________], not in its individual capacity but solely in its capacity as Indenture Trustee ----------------------------------- Dated as of [________] ----------------------------------- $[___________] [_____]% Harley-Davidson Motorcycle Contract Backed Notes, Class A-1 $[__________] [_____]% Harley-Davidson Motorcycle Contract Backed Notes, Class A-2 $[__________] [_____]% Harley-Davidson Motorcycle Contract Backed Notes, Class B ================================================================================ CROSS-REFERENCE TABLE
TIA Indenture Section Section - ------- --------- 310(a)(1)................................................................................................6.11 (a)(2)..............................................................................................6.11 (a)(3)..............................................................................................6.10 (a)(4)..............................................................................................N.A. (a)(5)..............................................................................................6.11 (b) ...................................................................................6.08; 6.11; 11.04 (c) ................................................................................................N.A. 311(a) ................................................................................................6.13 (b) ................................................................................................6.13 (c) ................................................................................................N.A. 312(a) ..........................................................................................7.01; 7.02 (b) ................................................................................................7.02 (c) ................................................................................................7.02 313(a) ................................................................................................7.04 (b) ................................................................................................7.04 (c) ................................................................................................7.04 (d) ................................................................................................7.04 314(a) ................................................................................................7.03 (b) ................................................................................................3.06 (c)(1).................................................................................2.02; 6.02; 11.01 (c)(2).............................................................................................11.01 (c)(3).............................................................................................11.01 (d) ...............................................................................................11.01 (e) ...............................................................................................11.01 (f) ................................................................................................N.A. 315(a) ................................................................................................6.01 (b) ................................................................................................6.05 (c) ................................................................................................6.01 (d) ..........................................................................................5.12; 6.01 (e) ................................................................................................5.14 316(a)(1)(A)...........................................................................................5.12 (a)(1)(B)...........................................................................................5.02 (a)(2)..............................................................................................N.A. (b) ................................................................................................5.08 (c) ................................................................................................N.A. 317(a) ..........................................................................................5.03; 5.04 (b) ................................................................................................3.03 318(a) ...............................................................................................11.18
- -------------------- * N.A. means Not Applicable * This Cross-Reference Table shall not, for any purpose, be deemed to be a part of the Indenture. TABLE OF CONTENTS
Page ---- ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE...........................................................2 SECTION 1.01. DEFINITIONS.................................................................................2 SECTION 1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT...........................................9 SECTION 1.03. RULES OF CONSTRUCTION.......................................................................9 ARTICLE TWO THE NOTES...........................................................................................10 SECTION 2.01. FORM.......................................................................................10 SECTION 2.02. EXECUTION, AUTHENTICATION AND DELIVERY.....................................................10 SECTION 2.03. TEMPORARY NOTES............................................................................11 SECTION 2.04. REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE........................................11 SECTION 2.05. MUTILATED, DESTROYED, LOST OR STOLEN NOTES.................................................12 SECTION 2.06. PERSONS DEEMED OWNER.......................................................................13 SECTION 2.07. PAYMENT OF PRINCIPAL AND INTEREST; DEFAULTED INTEREST......................................13 SECTION 2.08. CANCELLATION...............................................................................14 SECTION 2.09. BOOK-ENTRY NOTES...........................................................................14 SECTION 2.10. NOTICES TO CLEARING AGENCY.................................................................15 SECTION 2.11. DEFINITIVE NOTES...........................................................................15 SECTION 2.12. RELEASE OF COLLATERAL......................................................................16 SECTION 2.13. TAX TREATMENT..............................................................................16 ARTICLE THREE COVENANTS.........................................................................................16 SECTION 3.01. PAYMENT OF PRINCIPAL AND INTEREST..........................................................16 SECTION 3.02. MAINTENANCE OF OFFICE OR AGENCY............................................................17 SECTION 3.03. MONEY FOR PAYMENTS TO BE HELD IN TRUST.....................................................17 SECTION 3.04. EXISTENCE..................................................................................18 SECTION 3.05. PROTECTION OF COLLATERAL...................................................................19 SECTION 3.06. OPINIONS AS TO COLLATERAL..................................................................19 SECTION 3.07. PERFORMANCE OF OBLIGATIONS; SERVICING OF CONTRACTS.........................................20 SECTION 3.08. NEGATIVE COVENANTS.........................................................................20 SECTION 3.09. ANNUAL STATEMENT AS TO COMPLIANCE..........................................................21 SECTION 3.10. ISSUER MAY CONSOLIDATE, ETC. ONLY ON CERTAIN TERMS.........................................21 SECTION 3.11. SUCCESSOR OR TRANSFEREE....................................................................23 SECTION 3.12. NO OTHER BUSINESS..........................................................................23 SECTION 3.13. NO BORROWING...............................................................................23 SECTION 3.14. SERVICER'S OBLIGATIONS.....................................................................23 SECTION 3.15. GUARANTEES, LOANS ADVANCES AND OTHER LIABILITIES...........................................24 SECTION 3.16. CAPITAL EXPENDITURES.......................................................................24 SECTION 3.17. RESTRICTED PAYMENTS........................................................................24 SECTION 3.18. NOTICE OF EVENTS OF DEFAULT................................................................24 SECTION 3.19. FURTHER INSTRUMENTS AND ACTS...............................................................24 SECTION 3.20. COMPLIANCE WITH LAWS.......................................................................24 SECTION 3.21. AMENDMENTS OF SALE AND SERVICING AGREEMENT AND TRUST AGREEMENT.............................24 i SECTION 3.22. REMOVAL OF ADMINISTRATOR...................................................................25 ARTICLE FOUR SATISFACTION AND DISCHARGE.........................................................................25 SECTION 4.01. SATISFACTION AND DISCHARGE OF INDENTURE....................................................25 SECTION 4.02. APPLICATION OF TRUST MONEY.................................................................26 SECTION 4.03. REPAYMENT OF MONEYS HELD BY PAYING AGENT...................................................26 SECTION 4.04. RELEASE OF COLLATERAL......................................................................26 ARTICLE FIVE REMEDIES...........................................................................................27 SECTION 5.01. EVENTS OF DEFAULT..........................................................................27 SECTION 5.02. RIGHTS UPON EVENT OF DEFAULT...............................................................28 SECTION 5.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY INDENTURE TRUSTEE; AUTHORITY OF INDENTURE TRUSTEE. ...........................................................................................28 SECTION 5.04. REMEDIES...................................................................................30 SECTION 5.05. OPTIONAL PRESERVATION OF THE CONTRACTS.....................................................31 SECTION 5.06. PRIORITIES.................................................................................31 SECTION 5.07. LIMITATION OF SUITS........................................................................32 SECTION 5.08. UNCONDITIONAL RIGHTS OF NOTEHOLDERS TO RECEIVE PRINCIPAL AND INTEREST......................33 SECTION 5.09. RESTORATION OF RIGHTS AND REMEDIES.........................................................33 SECTION 5.10. RIGHTS AND REMEDIES CUMULATIVE.............................................................33 SECTION 5.11. DELAY OR OMISSION NOT A WAIVER.............................................................33 SECTION 5.12. CONTROL BY NOTEHOLDERS.....................................................................33 SECTION 5.13. WAIVER OF PAST DEFAULTS....................................................................34 SECTION 5.14. UNDERTAKING FOR COSTS......................................................................34 SECTION 5.15. WAIVER OF STAY OR EXTENSION LAWS...........................................................34 SECTION 5.16. ACTION ON NOTES............................................................................35 SECTION 5.17. PERFORMANCE AND ENFORCEMENT OF CERTAIN OBLIGATIONS.........................................35 ARTICLE SIX THE INDENTURE TRUSTEE...............................................................................35 SECTION 6.01. DUTIES OF INDENTURE TRUSTEE................................................................35 SECTION 6.02. RIGHTS OF INDENTURE TRUSTEE................................................................37 SECTION 6.03. INDIVIDUAL RIGHTS OF INDENTURE TRUSTEE.....................................................38 SECTION 6.04. INDENTURE TRUSTEE'S DISCLAIMER.............................................................38 SECTION 6.05. NOTICE OF DEFAULTS.........................................................................38 SECTION 6.06. REPORTS BY INDENTURE TRUSTEE TO HOLDERS....................................................38 SECTION 6.07. COMPENSATION AND INDEMNITY.................................................................38 SECTION 6.08. REPLACEMENT OF INDENTURE TRUSTEE...........................................................39 SECTION 6.09. SUCCESSOR INDENTURE TRUSTEE BY MERGER......................................................40 SECTION 6.10. APPOINTMENT OF CO-INDENTURE TRUSTEE OR SEPARATE INDENTURE TRUSTEE..........................40 SECTION 6.11. ELIGIBILITY................................................................................42 SECTION 6.12. PENNSYLVANIA MOTOR VEHICLE SALES FINANCE ACT LICENSES......................................43 SECTION 6.13. PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER...........................................43 ARTICLE SEVEN NOTEHOLDERS' LISTS AND REPORTS....................................................................43 SECTION 7.01. ISSUER TO FURNISH INDENTURE TRUSTEE NAMES AND ADDRESSES OF NOTEHOLDERS.....................43 ii SECTION 7.02. PRESERVATION OF INFORMATION: COMMUNICATION TO NOTEHOLDERS..................................43 SECTION 7.03. REPORTS BY ISSUER..........................................................................44 SECTION 7.04. REPORTS BY INDENTURE TRUSTEE...............................................................44 ARTICLE EIGHT ACCOUNTS, DISBURSEMENTS AND RELEASES..............................................................45 SECTION 8.01. COLLECTION OF MONEY........................................................................45 SECTION 8.02. TRUST ACCOUNTS.............................................................................45 SECTION 8.03. GENERAL PROVISIONS REGARDING ACCOUNTS......................................................47 SECTION 8.04. RELEASE OF COLLATERAL......................................................................47 SECTION 8.05. OPINION OF COUNSEL.........................................................................48 ARTICLE NINE SUPPLEMENTAL INDENTURES............................................................................48 SECTION 9.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF NOTEHOLDERS.....................................48 SECTION 9.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF NOTEHOLDERS........................................50 SECTION 9.03. EXECUTION OF SUPPLEMENTAL INDENTURES.......................................................51 SECTION 9.04. EFFECT OF SUPPLEMENTAL INDENTURE...........................................................51 SECTION 9.05. CONFORMITY WITH TRUST INDENTURE ACT........................................................51 SECTION 9.06. REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES..............................................51 ARTICLE TEN REDEMPTION OF NOTES.................................................................................52 SECTION 10.01. REDEMPTION.................................................................................52 SECTION 10.02. FORM OF REDEMPTION NOTICE..................................................................52 SECTION 10.03. NOTES PAYABLE ON REDEMPTION DATE...........................................................53 ARTICLE ELEVEN MISCELLANEOUS....................................................................................53 SECTION 11.01. COMPLIANCE CERTIFICATES AND OPINIONS, ETC..................................................53 SECTION 11.02. FORM OF DOCUMENTS DELIVERED TO INDENTURE TRUSTEE...........................................55 SECTION 11.03. ACTS OF NOTEHOLDERS........................................................................56 SECTION 11.04. NOTICES....................................................................................56 SECTION 11.05. NOTICES TO NOTEHOLDERS; WAIVER.............................................................58 SECTION 11.06. ALTERNATE PAYMENT AND NOTICE PROVISIONS....................................................58 SECTION 11.07. EFFECT OF HEADINGS AND TABLE OF CONTENTS...................................................58 SECTION 11.08. SUCCESSORS AND ASSIGNS.....................................................................58 SECTION 11.09. SEPARABILITY...............................................................................59 SECTION 11.10. BENEFITS OF INDENTURE......................................................................59 SECTION 11.11. LEGAL HOLIDAYS.............................................................................59 SECTION 11.12. GOVERNING LAW..............................................................................59 SECTION 11.13. COUNTERPARTS...............................................................................59 SECTION 11.14. RECORDING OF INDENTURE.....................................................................59 SECTION 11.15. TRUST OBLIGATION...........................................................................59 SECTION 11.16. NO PETITION................................................................................60 SECTION 11.17. INSPECTION.................................................................................60 SECTION 11.18. CONFLICT WITH TRUST INDENTURE ACT..........................................................60
iii EXHIBITS
PAGE ---- Exhibit A - Form of Sale and Servicing Agreement A-1 Exhibit B - Form of Class A-1 Note B-1 Exhibit C - Form of Class A-2 Note C-1 Exhibit D - Form of Class B Note D-1 Exhibit E - Form of Assignment E-1 Exhibit F - Form of Note Depository Agreement F-1
iv INDENTURE Indenture, dated as of [________] (this "Indenture"), between Harley-Davidson Motorcycle Trust [________], a Delaware business trust (the "Issuer") and [________________], in its capacity as indenture trustee (the "Indenture Trustee") and not in its individual capacity. Each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders of the Issuer's [_____]% Harley-Davidson Motorcycle Contract Backed Notes, Class A-1 (the "Class A-1 Notes"), [_____]% Harley-Davidson Motorcycle Contract Backed Notes, Class A-2 (the "Class A-2 Notes") and [_____]% Harley-Davidson Motorcycle Contract Backed Notes, Class B (the "Class B Notes" and, together with the Class A-1 Notes and the Class A-2 Notes, the "Notes"): GRANTING CLAUSE The Issuer hereby grants, transfers, assigns and otherwise conveys to the Indenture Trustee on the Closing Date, on behalf of and for the benefit of the Holders of the Notes, without recourse, all of the Issuer's right, title and interest (exclusive of the amount, if any, allocable to any rebatable insurance premium financed by any Contract) in, to and under: (i) the Initial Contracts and Subsequent Contracts secured by the Motorcycles (which Contracts shall be listed in the List of Contracts and Subsequent List of Contracts); (ii) certain monies due under the Initial Contracts and Subsequent Contracts on and after the Initial Cutoff Date and Subsequent Cutoff Date, respectively, including, without limitation, all payments of principal and interest with respect to any Motorcycles to which a Contract relates received on or after the Initial Cutoff Date or Subsequent Cutoff Date and all other proceeds received on or in respect of such Contracts (other than payments of principal and interest due prior to the Initial Cutoff Date or Subsequent Cutoff Date); (iii) security interests in the Motorcycles; (iv) amounts on deposit in the Collection Account, the Note Distribution Account, the Reserve Fund, the Pre-Funding Account and the Interest Reserve Account, including all Eligible Investments therein and all income from the investment of funds therein and all proceeds therefrom; (v) proceeds from claims under certain insurance policies in respect of individual Motorcycles or obligors under the Contracts; (vi) certain rights under the Sale and Servicing Agreement; (vii) the protective security interest in certain of the above-described property granted by the Trust Depositor in favor of the Issuer; (viii) all present and future claims, demands, causes of and choses in action in respect of any or all of the foregoing; and (ix) all payments on or under and all proceeds of every kind and nature whatsoever in respect of any or all of the foregoing, including all proceeds of the conversion, voluntary or involuntary, into cash of other liquid property, all cash proceeds, accounts, accounts receivable, notes, drafts, acceptances, chattel paper, checks, deposit accounts, insurance proceeds, condemnation awards, rights to payment of any and every kind and other forms of obligations and receivables, instruments and other property which at any time constitute all or part of or are included in the proceeds of any of the foregoing (as each such defined term is defined in Section 1.01) (collectively, the "Collateral"). The foregoing Grant is made in trust to secure the payment of principal of and interest on, and any other amounts owing in respect of, the Notes, equally and ratably without prejudice, priority or distinction, except for the subordination of the Class B Notes provided herein, and all 1 other sums owing by the Issuer hereunder or under any other Transaction Document, and to secure compliance with the provisions of this Indenture, all as provided in this Indenture. The Indenture Trustee, as Indenture Trustee on behalf of the Holders of the Notes, acknowledges such Grant, accepts the trust under this Indenture in accordance with the provisions of this Indenture and agrees to perform its duties required in this Indenture in accordance with its terms and the terms of the other Transaction Documents to which it is a party. ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. DEFINITIONS. (a) Except as otherwise specified herein or as the context may otherwise require, the following terms have the respective meanings set forth below for all purposes of this Indenture. "ACT" shall have the meaning specified in Section 11.03(a). "ADMINISTRATION AGREEMENT" means the Administration Agreement, dated as of the date hereof, among the Administrator, the Issuer, the Trust Depositor and the Indenture Trustee. "ADMINISTRATOR" means Harley-Davidson Credit Corp. or any successor Administrator under the Administration Agreement. "AFFILIATE" means, with respect to any specified Person, any other Person controlling or controlled by or under common control with such specified Person. For the purposes of this definition, "CONTROL" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "CONTROLLING" and "CONTROLLED" have meanings correlative to the foregoing. "AUTHORIZED OFFICER" means, with respect to the Issuer, any officer of the Owner Trustee who is authorized to act for the Owner Trustee in matters relating to the Issuer and who is identified on the list of Authorized Officers delivered by the Owner Trustee to the Indenture Trustee on the Closing Date (as such list may be modified or supplemented from time to time thereafter) and, so long as the Administration Agreement is in effect, any Vice President or more senior officer of the Administrator who is authorized to act for the Administrator in matters relating to the Issuer and to be acted upon by the Administrator pursuant to the Administration Agreement and who is identified on the list of Authorized Officers delivered by the Administrator to the Indenture Trustee on the Closing Date (as such list may be modified or supplemented from time to time thereafter). "BOOK ENTRY NOTES" means a beneficial interest in the Notes, ownership and transfers of which shall be made through book entries by a Clearing Agency as described in Section 2.09. 2 "BUSINESS DAY" means any day other than a Saturday, Sunday or other day on which banking institutions in the city of Chicago, Illinois, [Wilmington, Delaware] or New York, New York are authorized or obligated by law, executive order or governmental decree to be closed. "CERTIFICATE FINAL DISTRIBUTION DATE" means the [__________] Distribution Date. "CERTIFICATE OF TRUST" means the Certificate of Trust of the Issuer substantially in the form of EXHIBIT B to the Trust Agreement. "CLASS" means all Notes whose form is identical except for variation in denomination, principal amount or owner. "CLASS A-1 FINAL DISTRIBUTION DATE" means the [___________] Distribution Date. "CLASS A-1 RATE" means [____]% per annum (computed on the basis of a 360-day year of twelve 30-day months). "CLASS A-1 NOTES" means the Class A-1 Notes, substantially in the form of EXHIBIT B. "CLASS A-2 FINAL DISTRIBUTION DATE" means the [_________] Distribution Date. "CLASS A-2 RATE" means [____]% per annum (computed on the basis of a 360-day year of twelve 30-day months). "CLASS A-2 NOTES" means the Class A-2 Notes, substantially in the form of EXHIBIT C. "CLASS B FINAL DISTRIBUTION DATE" means the [_________] Distribution Date. "CLASS B RATE" means [____]% per annum (computed on the basis of a 360-day year of twelve 30-day months). "CLASS B NOTES" means the Class B Notes, substantially in the form of EXHIBIT D. "CLEARING AGENCY" means an organization registered as a "clearing agency" pursuant to Section 17A of the Exchange Act. "CLEARING AGENCY PARTICIPANT" means a broker, dealer, bank, other financial institution or other Person for whom from time to time a Clearing Agency effects book-entry transfers and pledges of securities deposited with the Clearing Agency. "CLOSING DATE" means [____________]. "CODE" means the Internal Revenue Code of 1986, as amended. "COLLATERAL" means the Collateral Granted to the Indenture Trustee under this Indenture, including all proceeds thereof. "COMMISSION" means the Securities and Exchange Commission. 3 "CORPORATE TRUST OFFICE" means the principal office of the Indenture Trustee at which at any particular time its corporate trusts business shall be administered which office at date of the execution of this Agreement is located at [_______________], Attention: [______________]; or at such other address as the Indenture Trustee may designate from time to time by notice to the Noteholders and the Issuer, or the principal corporate trust office of any successor Indenture Trustee (the address of which the successor Indenture Trustee will notify the Noteholders and the Issuer). "DEFAULT" means any occurrence that is, or with notice or the lapse of time or both would become, an Event of Default. "DEFINITIVE NOTES" shall have the meaning specified in Section 2.09. "DISTRIBUTION DATE" means the fifteenth day of each month or, if such date shall not be a Business Day, the next succeeding Business Day, commencing [_________]. "DTC" means The Depository Trust Company, and its successors and assigns. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "EVENT OF DEFAULT" shall have the meaning specified in Section 5.01. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "EXECUTIVE OFFICER" means, with respect to any corporation, the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, President, Executive Vice President, any Vice President, the Secretary or the Treasurer of such corporation; and with respect to any partnership, any general partner thereof. "GENERAL PARTNER" means each Certificateholder obligated to pay the expenses of the Issuer pursuant to Section 2.07 of the Trust Agreement. "GRANT" means mortgage, pledge, bargain, sell, warrant, alienate, remise, release, convey, assign, transfer, create and grant a lien upon and a security interest in and right of set-off against, deposit, set over and confirm pursuant to this Indenture. A Grant of the Collateral or of any other agreement or instrument shall include all rights, powers and options (but none of the obligations) of the granting party thereunder, including the immediate and continuing right to claim for, collect, receive and give receipt for principal and interest payments in respect of the Collateral and all other moneys payable thereunder, to give and receive notices and other communications, to make waivers or other agreements, to exercise all rights and options, to bring Proceedings in the name of the granting party or otherwise and generally to do and receive anything that the granting party is or may be entitled to do or receive thereunder or with respect thereto. "HARLEY-DAVIDSON CREDIT" means Harley-Davidson Credit Corp., and its successors and assigns. 4 "HOLDER" or "NOTEHOLDER" OR "NOTE OWNER" means, with respect to a Book-Entry Note, the Person who is the owner of such Book-Entry Note, as reflected on the books of the Clearing Agency, or on the books of a Person maintaining an account with such Clearing Agency (directly as a Clearing Agency participant or as an indirect participant, in each case in accordance with the rules of such Clearing Agency) and with respect to a Definitive Note the Person in whose name a Note is registered on the Note Register. "INDEBTEDNESS" means, with respect to any Person at any time, (i) indebtedness or liability of such Person for borrowed money whether or not evidenced by bonds, debentures, notes or other instruments, or for the deferred purchase price of property or services (including trade obligations); (ii) obligations of such Person as lessee under leases which should have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases; (iii) current liabilities of such Person in respect of unfunded vested benefits under plans covered by Title IV of ERISA; (iv) obligations issued for or liabilities incurred on the account of such Person; (v) obligations or liabilities of such Person arising under acceptance facilities; (vi) obligations of such Person under any guaranties, endorsements (other than for collection or deposit in the ordinary course of business) and other contingent obligations to purchase, to provide funds for payment, to supply funds to invest in any Person or otherwise to assure a creditor against loss; (vii) obligations of such Person secured by any lien on property or assets of such Person, whether or not the obligations have been assumed by such Person; or (viii) obligations of such Person under any interest rate or currency exchange agreement. "INDENTURE" means this Indenture, as amended or supplemented from time to time. "INDENTURE SECURITIES" means the Notes. "INDENTURE SECURITY HOLDER" means a Noteholder. "INDENTURE TRUSTEE" means [______________], as Indenture Trustee under this Indenture, or any successor Indenture Trustee under this Indenture. "INDEPENDENT" means, when used with respect to any specified Person, that the Person (i) is in fact independent of the Issuer, any other obligor upon the Notes, the Trust Depositor, the Seller and any of their respective Affiliates, (ii) does not have any direct financial interest or any material indirect financial interest in the Issuer, any such other obligor, the Seller or any of their respective Affiliates, and (iii) is not connected with the Issuer, any such other obligor, the Seller or any Affiliate of any of the foregoing Persons as an officer, employee, promoter, underwriters, trustee, partner, director or person performing similar functions. "INDEPENDENT CERTIFICATE" means a certificate or opinion to be delivered to the Indenture Trustee under the circumstances described in, and otherwise complying with, the applicable requirements of Section 11.01, made by an Independent appraiser or other expert appointed by an Issuer Order and approved by the Indenture Trustee in the exercise of reasonable care, and such opinion or certificate shall state that the signer has read the definition of "INDEPENDENT" in this Indenture and that the signer is Independent within the meaning thereof. "INTEREST PERIOD" means, with respect to any Distribution Date and any Class of Notes, the period from and including the fifteenth day of the month of the Distribution Date 5 immediately preceding such Distribution Date (or, in the case of the first Distribution Date, the Closing Date) to but excluding the fifteenth day of the month of such Distribution Date. "INTEREST RATE" means the Class A-1 Rate, the Class A-2 Rate and the Class B Rate, as applicable. "ISSUER" means Harley-Davidson Motorcycle Trust [________] until a successor replaces it and, thereafter, means the successor and, for purposes of any provision contained herein and required by the TIA, each other obligor on the Notes. "ISSUER ORDER" and "ISSUER REQUEST" means a written order or request signed in the name of the Issuer by any one of its Authorized Officers and delivered to the Indenture Trustee. "NOTE" means a Class A-1 Note, a Class A-2 Note or a Class B Note. "NOTE DEPOSITORY AGREEMENT" means the agreement dated as of the Closing Date, among the Issuer, the Administrator, the Indenture Trustee and DTC, as the initial Clearing Agency, relating to the Notes, substantially in the form of EXHIBIT E hereto. "NOTE REGISTER" and "NOTE REGISTRAR" have the respective meanings specified in Section 2.04. "OFFICER'S CERTIFICATE" means a certificate signed by any Authorized Officer of the Issuer, under the circumstances described in, and otherwise complying with, the applicable requirements of Section 11.01, and delivered to, the Indenture Trustee. Unless otherwise specified, any reference in this Indenture to an Officer's Certificate shall be to an Officer's Certificate of any Authorized Officer of the Issuer. "OPINION OF COUNSEL" means one or more written opinions of counsel who may, except as otherwise expressly provided in this Indenture, be employees of or counsel to the Issuer and who shall be satisfactory to the Indenture Trustee and which shall comply with any applicable requirements of Section 11.01, and shall be in form and substance satisfactory to the Indenture Trustee. "OUTSTANDING" means, as of the date of determination, all Notes theretofore authenticated and delivered under this Indenture except: (i) Notes theretofore cancelled by the Note Registrar or delivered to the Note Registrar for cancellation; (ii) Notes or portions thereof the payment for which money in the necessary amount has been theretofore deposited with the Indenture Trustee or any Paying Agent in trust for the Holders of such Notes (PROVIDED, HOWEVER, that if such Notes are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision for such notice has been made, satisfactory to the Indenture Trustee, has been made); and 6 (iii) Notes in exchange for or in lieu of other Notes which have been authenticated and delivered pursuant to this Indenture unless proof satisfactory to the Indenture Trustee is presented that any such Notes are held by a bona fide purchaser; PROVIDED, HOWEVER, that in determining whether the Holders of the requisite Outstanding Amount have given any request, demand, authorization, direction, notice, consent or waiver hereunder or under any other Transaction Document, Notes owned by the Issuer, any other obligor upon the Notes, the Trust Depositor, Harley-Davidson Credit or any of their respective Affiliates shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Indenture Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes that the Indenture Trustee knows to be so owned shall be so disregarded. Notes so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Indenture Trustee the pledgee's right so to act with respect to such Notes and that the pledgee is not the Issuer, any other obligor upon the Notes, the Trust Depositor, Harley-Davidson Credit or any of their respective Affiliates. "OUTSTANDING AMOUNT" means the aggregate principal amount of all Notes of one Class or of all Classes, as the case may be, Outstanding at the date of determination. "OWNER TRUSTEE" means [_____________], not in its individual capacity but solely as Owner Trustee under the Trust Agreement, or any successor trustee under the Trust Agreement. "PAYING AGENT" means the Indenture Trustee or any other Person that meets the eligibility standards for the Indenture Trustee specified in Section 6.11 and is authorized by the Issuer to make the distributions from the Note Distribution Account, including payment of principal of or interest on the Notes on behalf of the Issuer. "PERSON" means any individual, corporation, limited liability company, state, partnership, joint venture, association, joint stock company, trust (including any beneficiary thereof), unincorporated organization or government or any agency or political subdivision thereof. "PREDECESSOR NOTE" means, with respect to any particular Note, every previous Note evidencing all or a portion of the same debt as that evidenced by such particular Note; and for the purpose of this definition, any Note authenticated and delivered under Section 2.05 in lieu of a mutilated, lost, destroyed or stolen Note shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Note. "PROCEEDING" means any suit in equity, action at law or other judicial or administrative proceeding. "RATING AGENCY" means each of Moody's and Standard & Poor's. "RATING AGENCY CONDITION" means, with respect to any action, that each Rating Agency shall have been given ten days (or such shorter period as is acceptable to each Rating Agency) prior notice thereof and that each Rating Agency shall have notified the Trust Depositor, the Indenture Trustee, the Servicer and the Issuer in writing that such action will not result in a qualification, reduction or withdrawal of its then-current rating of any Class of Notes. 7 "RATING EVENT" means the qualification, reduction or withdrawal by either Rating Agency of its then-current rating of any Class of Notes. "RECORD DATE" means, with respect to a Distribution Date or Redemption Date, the close of business on the last Business Day of the immediately preceding month. "REDEMPTION DATE" means (a) in the case of a redemption of the Notes pursuant to Section 10.01(a) or a payment to Noteholders pursuant to Section 10.01(b), the Distribution Date specified by the Servicer or the Issuer pursuant to Section 10.01(a) or 10.01(b), as the case may be and (b) in the case of a redemption of Notes pursuant to Section 10.01, the Distribution Date specified in Section 7.07 of the Sale and Servicing Agreement on which the Indenture Trustee shall withdraw any amount remaining in the Pre-Funding Account and deposit the applicable amount in the Note Distribution Account. "REDEMPTION DATE AMOUNT" means (i) in the case of a redemption of the Notes pursuant to Section 10.01(a), an amount equal to the unpaid principal amount of the Notes redeemed plus accrued and unpaid interest thereon at the weighted average of the Interest Rate for each Class of Notes being so redeemed to but excluding the Redemption Date, or (ii) in the case of a payment made to Noteholders pursuant to Section 10.01(b), the amount on deposit in the Note Distribution Account, but not in excess of the amount specified in clause (i) above. "REGISTERED HOLDER" means the Person in whose name a Note is registered on the Note Register on the applicable Record Date. "RESPONSIBLE OFFICER" means, with respect to the Indenture Trustee, any officer within the Corporate Trust Office (or any successor group of the Indenture Trustee), including any Vice President, assistant secretary or other officer or assistant officer of the Indenture Trustee customarily performing functions similar to those performed by the people who at such time shall be officers, respectively, or to whom any corporate trust matter is referred at the Corporate Trust Office of the Indenture Trustee because of his knowledge of and familiarity with the particular subject. "SALE AND SERVICING AGREEMENT" means the Sale and Servicing Agreement, dated as of the date hereof, among the Issuer, the Trust Depositor, the Indenture Trustee and the Servicer, substantially in the form of EXHIBIT A hereto. "SELLER" means Harley-Davidson Credit Corp., in its capacity as Seller under the Transfer and Sale Agreement, and any successors and assigns. "SERVICER" means Harley-Davidson Credit Corp., in its capacity as Servicer under the Sale and Servicing Agreement, and any Successor Servicer thereunder. "STATE" means any one of the 50 states of the United States or any of its territories, or the District of Columbia. "TERMINATION DATE" means the date on which the Indenture Trustee shall have received payment and performance of all amounts and obligations which the Issuer may owe to or on 8 behalf of the Indenture Trustee for the benefit of the Noteholders under this Indenture or the Notes. "TRUST AGREEMENT" means the Trust Agreement, dated as of the date hereof, between the Trust Depositor and the Owner Trustee. "TRUST DEPOSITOR" shall mean Harley-Davidson Customer Funding Corp., in its capacity as trust depositor under the Sale and Servicing Agreement. "TRUST INDENTURE ACT" or "TIA" means the Trust Indenture Act of 1939, as amended. "UCC" means, unless the context otherwise requires, the Uniform Commercial Code, as in effect in the relevant jurisdiction, as amended from time to time. "UNITED STATES" means the United States of America. (b) Except as otherwise specified herein or as the context may otherwise require, capitalized terms used herein that are not otherwise defined shall have the meanings ascribed thereto in the Sale and Servicing Agreement. SECTION 1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "COMMISSION" means the Securities and Exchange Commission. "INDENTURE SECURITIES" means the Notes. "INDENTURE SECURITY HOLDER" means a Noteholder. "INDENTURE TO BE QUALIFIED" means this Indenture. "indenture trustee" or "institutional trustee" means the Indenture Trustee. "OBLIGOR" on the indenture securities means the Issuer and any other obligor on the indenture securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by Commission rule have the meaning assigned to them by such definitions. SECTION 1.03. RULES OF CONSTRUCTION. Unless the context otherwise requires: (i) a term has the meaning assigned to it; (ii) an accounting term not otherwise defined has the meaning assigned to it in accordance with generally accepted accounting principles as in effect from time to time; 9 (iii) "OR" is not exclusive; (iv) "INCLUDING" means including without limitation; (v) words in the singular include the plural and words in the plural include the singular. (vi) any agreement, instrument or statute defined or referred to herein or in any instrument or certificate delivered in connection herewith means such agreement, instrument or statute as from time to time amended, modified or supplemented and includes (in the case of agreements or instruments) references to all attachments thereto and instruments incorporated therein; references to a Person are also to its permitted successors and assigns; and (vii) the words "HEREOF," "HEREIN" and "HEREUNDER" and words of similar import when used in this Indenture shall refer to this Indenture as a whole and not to any particular provision of this Indenture; Section, subsection and Schedule references contained in this Indenture are references to Sections, subsections and Schedules in or to this Indenture unless otherwise specified. ARTICLE TWO THE NOTES SECTION 2.01. FORM. The Class A-1 Notes, the Class A-2 Notes and the Class B Notes, in each case together with the Indenture Trustee's certificate of authentication, shall be in substantially the forms set forth as Exhibits to this Indenture with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may, consistently herewith, be determined by the officers executing such Notes, as evidenced by their execution of the Notes. Any portion of the text of any Note may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Note. Each Note shall be dated the date of its authentication. The terms of the Notes set forth in Exhibits hereto are part of the terms of this Indenture. SECTION 2.02. EXECUTION, AUTHENTICATION AND DELIVERY. The Notes shall be executed on behalf of the Issuer by any of its Authorized Officers. The signature of any such Authorized Officer on the Notes may be manual or facsimile. Notes bearing the manual or facsimile signature of individuals who were at any time Authorized Officers of the Issuer shall bind the Issuer, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Notes or did not hold such offices at the date of such Notes. The Indenture Trustee shall, upon receipt of an Issuer Order, authenticate and deliver for original issue (i) Class A-1 Notes in an aggregate principal amount of $[__________], (ii) Class 10 A-2 Notes in an aggregate principal amount of $[__________] and (iii) Class B Notes in an aggregate principal amount of $[__________]. The aggregate principal amount of the Class A-1 Notes, Class A-2 Notes and Class B Notes Outstanding at any time may not exceed such respective amounts, except as otherwise provided in Section 2.05. Each Note shall be dated the date of its authentication. The Notes shall be issuable as registered Notes in the minimum denomination of $1,000 and in integral multiples of $1,000 in excess thereof. No Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose, unless there appears on such Note a certificate of authentication substantially in the form provided for herein by the Indenture Trustee by the manual signature of one of its authorized signatories, and such certificate upon any Note shall be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder. SECTION 2.03. TEMPORARY NOTES. Pending the preparation of Book-Entry Notes or Definitive Notes, the Issuer may execute, and upon receipt of an Issuer Order the Indenture Trustee shall authenticate and deliver, temporary Notes that are printed, lithographed, typewritten, mimeographed or otherwise produced, of the tenor of the definitive Notes in lieu of which they are issued and with such variations not inconsistent with the terms of this Indenture as the officers executing such Notes may determine, as evidenced by their execution of such Notes. If temporary Notes are issued, the Issuer will cause Book-Entry Notes or Definitive Notes to be prepared without unreasonable delay. After the preparation of Book-Entry Notes or Definitive Notes, the temporary Notes shall be exchangeable for Book-Entry Notes or Definitive Notes upon surrender of the temporary Notes at the office or agency of the Issuer to be maintained as provided in Section 3.02, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Notes, the Issuer shall execute and the Indenture Trustee shall authenticate and deliver in exchange therefor a like tenor and principal amount of definitive Notes of authorized denominations. Until so exchanged, the temporary Notes shall in all respects be entitled to the same benefits under this Indenture as Book-Entry Notes or Definitive Notes. SECTION 2.04. REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE. The Issuer shall cause to be kept a register (the "Note Register") in which, subject to such reasonable regulations as it may prescribe, the Note Registrar shall provide for the registration of Notes and the registration of transfers of Notes. The Indenture Trustee shall be "Note Registrar" for the purpose of registering Notes and transfers of Notes as herein provided. Upon any resignation of any Note Registrar, the Issuer shall promptly appoint a successor or, if it elects not to make such an appointment, assume the duties of Note Registrar. If a Person other than the Indenture Trustee is appointed by the Issuer as Note Registrar, the Issuer will give the Indenture Trustee prompt written notice of the appointment of such Note Registrar and of the location, and any change in the location, of the Note Register, and the Indenture Trustee shall have the right to inspect the Note Register at all reasonable times and to obtain copies thereof, and the Indenture Trustee shall have the right to rely upon a certificate 11 executed on behalf of the Note Registrar by an Executive Officer thereof as to the names and addresses of the Holders of the Notes and the principal amounts and the amounts and number of such Notes. Upon surrender for registration of transfer of any Note at the office or agency of the Issuer to be maintained as provided in Section 3.02, the Issuer shall execute, and the Indenture Trustee shall authenticate and the Noteholder shall obtain from the Indenture Trustee, in the name of the designated transferee or transferees, one or more new Notes of the same Class in any authorized denominations, of a like aggregate principal amount. At the option of the Holder, Notes may be exchanged for other Notes of the same Class in any authorized denominations, of a like aggregate principal amount, upon surrender of the Notes to be exchanged at such office or agency. Whenever any Notes are so surrendered for exchange, the Issuer shall execute, and the Indenture Trustee shall authenticate and the Noteholder shall obtain from the Indenture Trustee, the Notes which the Noteholder making the exchange is entitled to receive. All Notes issued upon any registration of transfer or exchange of Notes shall be the valid obligations of the Issuer, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Notes surrendered upon such registration of transfer or exchange. Every Note presented or surrendered for registration of transfer or exchange shall be duly endorsed by, or be accompanied by a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing, with such signature guaranteed by a commercial bank or trust company located, or having a correspondent located in the city in which the Corporate Trust Office is located, or by a member firm of a national securities exchange, and such other documents as the Indenture Trustee may require. No service charge shall be made to a Holder for any registration of transfer or exchange of Notes, but the Issuer or the Indenture Trustee may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Notes, other than exchanges pursuant to Section 2.03 not involving any transfer. The preceding provisions of this Section notwithstanding, the Issuer shall not be required to make, and the Note Registrar need not register, transfers or exchanges of Notes selected for redemption or of any Note for a period of 15 days preceding the due date for any payment with respect to the Notes of that Class. SECTION 2.05. MUTILATED, DESTROYED, LOST OR STOLEN NOTES. If (i) any mutilated Note is surrendered to the Indenture Trustee, or the Indenture Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, and (ii) there is delivered to the Indenture Trustee such security or indemnity as may be required by them to hold the Issuer and the Indenture Trustee harmless, then, in the absence of notice to the Issuer, the Note Registrar or the Indenture Trustee that such Note has been acquired by a bona fide purchaser, the Issuer shall execute and upon its request the Indenture Trustee shall authenticate and deliver, in exchange for 12 or in lieu of any such mutilated, destroyed, lost or stolen Note, a replacement Note of the same Class and denomination; PROVIDED, HOWEVER, that if any such destroyed, lost or stolen Note, but not a mutilated Note, shall have become or within seven days shall be due and payable, or shall have been called for redemption, instead of issuing a replacement Note, the Issuer may pay such destroyed, lost or stolen Note when so due or payable or upon the Redemption Date without surrender thereof. If, after the delivery of such replacement Note or payment of a destroyed, lost or stolen Note pursuant to the proviso to the preceding sentence, a bona fide purchaser of the original Note in lieu of which such replacement Note was issued presents for payment such original Note, the Issuer, and the Indenture Trustee shall be entitled to recover such replacement Note (or such payment) from the Person to whom it was delivered or any Person taking such replacement Note from such Person to whom such replacement Note was delivered or any assignee of such Person, except a bona fide purchaser, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the Issuer or the Indenture Trustee in connection therewith. Upon the issuance of any replacement Note under this Section, the Issuer or the Indenture Trustee may require the payment by the Holder of such Note of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses (including the fees and expenses of the Indenture Trustee or the Note Registrar) connected therewith. Every replacement Note issued pursuant to this Section in replacement of any mutilated, destroyed, lost of stolen Note shall constitute an original additional contractual obligation of the Issuer, whether or not the mutilated, destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes. SECTION 2.06. PERSONS DEEMED OWNER. Prior to due presentment for registration of transfer of any Note, the Issuer, the Indenture Trustee, and any of their respective agents may treat the Person in whose name any Note is registered (as of the day of determination) as the owner of such Note for the purpose of receiving payments of principal of and interest, if any, on such Note and for all other purposes whatsoever, whether or not such Note be overdue, and none of the Issuer, the Indenture Trustee nor any of their respective agents shall be affected by notice to the contrary. SECTION 2.07. PAYMENT OF PRINCIPAL AND INTEREST. (a) Each Class of Notes shall accrue interest at the related Interest Rate, and such interest shall be payable on each Distribution Date as specified therein, subject to Section 3.01. Any installment of interest or principal, if any, payable on any Note which is punctually paid or duly provided for by the Issuer on the applicable Distribution Date shall be paid to the Person in whose name such Note (or one or more Predecessor Notes) is registered on the Record Date, by check mailed first-class, postage prepaid, to such Person's address as it appears on the Note 13 Register on such Record Date, except that, unless Definitive Notes have been issued pursuant to SECTION 2.11, with respect to the Notes registered on the Record Date in the name of the nominee of the Clearing Agency (initially, such nominee to be Cede & Co.), payment will be made by wire transfer in immediately available funds to the account designated by such nominee and except for the final installment of principal payable with respect to such Note on a Distribution Date or on the related Final Distribution Date, as the case may be (and except for the Redemption Price for any Note called for redemption pursuant to Section 10.01(a)), which shall be payable as provided below. The funds represented by any such checks returned undelivered shall be held in accordance with Section 3.03. (b) The principal of each Note shall be payable on each Distribution Date to the extent provided in the form of the related Note set forth as an Exhibit hereto. Notwithstanding the foregoing, the entire unpaid principal amount of the Notes shall be due and payable, if not previously paid, on the date on which the maturity of the Notes has been accelerated in the manner provided in SECTION 5.02. All principal payments on each Class of Notes shall be made pro rata to the Noteholders of such Class entitled thereto. The Indenture Trustee shall notify the Person in whose name a Note is registered at the close of business on the Record Date preceding the Distribution Date on which the Issuer expects that the final installment of principal of and interest on such Note will be paid. Such notice shall be (i) transmitted by facsimile on such Record Date if Book-Entry Notes are outstanding or (ii) mailed as provided in SECTION 10.02 not later than three Business Days after such Record Date if Definitive Notes are outstanding and shall specify that such final installment will be payable only upon presentation and surrender of such Note and shall specify the place where such Note may be presented and surrendered for payment of such installment. Notices in connection with redemptions of Notes shall be mailed to Noteholders as provided in SECTION 10.02. SECTION 2.08. CANCELLATION. All Notes surrendered for payment, registration of transfer, exchange or redemption shall, if surrendered to any Person other than the Indenture Trustee, be delivered to the Indenture Trustee and shall be promptly cancelled by the Indenture Trustee. The Issuer may at any time deliver to the Indenture Trustee for cancellation any Notes previously authenticated and delivered hereunder which the Issuer may have acquired in any manner whatsoever, and all Notes so delivered shall be promptly cancelled by the Indenture Trustee. No Notes shall be authenticated in lieu of or in exchange for any Notes cancelled as provided in this Section, except as expressly permitted by this Indenture. All cancelled Notes may be held or disposed of by the Indenture Trustee in accordance with its standard retention or disposal policy as in effect at the time unless the Issuer shall direct by an Issuer Order that they be destroyed or returned to it; provided that such Issuer Order is timely and the Notes have not been previously disposed of by the Indenture Trustee. SECTION 2.09. BOOK-ENTRY NOTES. The Notes, upon original issuance, will be issued in the form of a typewritten Note or Notes representing the Book-Entry Notes, to be delivered to DTC, the initial Depository, by, or on behalf of, the Issuer. Such Notes shall initially be registered on the Note Register in the name of Cede & Co., the nominee of the initial Clearing Agency, and no Noteholder will receive a Definitive Note representing such Noteholder's interest in such Note, except as provided in Section 2.11. Unless and until definitive, fully registered Notes (the "Definitive Notes") have been issued to Noteholders pursuant to Section 2.11: 14 (i) the provisions of this Section shall be in full force and effect; (ii) the Note Registrar and the Indenture Trustee shall be entitled to deal with the Clearing Agency for all purposes of this Indenture (including the payment of principal of and interest on the Notes and the giving of instructions or directions hereunder) as the sole holder of the Notes, and shall have no obligation to the Noteholders; (iii) to the extent that the provisions of this Section conflict with any other provisions of this Indenture, the provisions of this Section shall control; (iv) the rights of Noteholders shall be exercised only through the Clearing Agency and shall be limited to those established by law and agreements between such Noteholders and the Clearing Agency and/or the Clearing Agency Participants, and all references in this Indenture to actions by the Noteholders shall refer to actions taken by the Clearing Agency upon instructions from the Clearing Agency Participants, and all references in this Indenture to distributions, notices, reports and statements to the Noteholders shall refer to distributions, notices, reports and statements to the Clearing Agency, as registered holder of the Notes, as the case may be, for distribution to the Noteholders in accordance with the procedures of the Clearing Agency. Pursuant to the Note Depository Agreement, unless and until Definitive Notes are issued pursuant to SECTION 2.11, the Clearing Agency will make book-entry transfers among the Clearing Agency Participants and receive and transmit payments of principal of and interest on the Notes to such Clearing Agency Participants; (v) whenever this Indenture requires or permits actions to be taken based upon instructions or directions of Noteholders evidencing a specified percentage of the Outstanding Amount, the Clearing Agency shall be deemed to represent such percentage only to the extent that it has received instructions to such effect from Noteholders and/or Clearing Agency Participants owning or representing, respectively, such required percentage of the beneficial interest in the Notes and has delivered such instructions to the Indenture Trustee; and (vi) without the consent of the Issuer and the Indenture Trustee, no such Note may be transferred by the Clearing Agency except to a successor Clearing Agency that agrees to hold such Note for the account of the Owners or except upon the election of the Owner thereof or a subsequent transferee to hold such Note in physical form. Neither the Indenture Trustee nor the Note Registrar shall have any responsibility to monitor or restrict the transfer of beneficial ownership in any Note an interest in which is transferable through the facilities of the Clearing Agency. SECTION 2.10. NOTICES TO CLEARING AGENCY. Whenever a notice or other communication to the Noteholders is required under this Indenture, unless and until Definitive Notes shall have been issued to Noteholders pursuant to Section 2.11, the Indenture Trustee shall give all such notices and communications specified herein to be given to Noteholders of the Notes to the Clearing Agency, and shall have no obligation to the Noteholders. SECTION 2.11. DEFINITIVE NOTES. If (i)(A) the Administrator advises the Indenture Trustee in writing that the Clearing Agency is no longer willing or able to properly discharge its 15 responsibilities as described in the Note Depository Agreement, and (B) Indenture Trustee or the Administrator is unable to locate a qualified successor, (ii) the Administrator at its option advises the Indenture Trustee in writing that it elects to terminate the book-entry system through the Clearing Agency, or (iii) after the occurrence of an Event of Default, the Noteholders representing not less than 66 2/3% of the Outstanding Amount of such Class of Notes advises the Indenture Trustee and the Clearing Agency through the Clearing Agency Participants in writing that the continuation of a book-entry system through the Clearing Agency is no longer in the best interests of the related Noteholders, then the Indenture Trustee shall notify all Noteholders of the related Class of Notes, through the Clearing Agency, of the occurrence of any such event and of the availability of Definitive Notes of the related Class of Notes to Noteholders requesting the same. Upon surrender to the Indenture Trustee of the Note or Notes representing the Book-Entry Notes by the Clearing Agency, accompanied by registration instructions, the Issuer shall execute and the Indenture Trustee shall authenticate the Definitive Notes in accordance with the instructions of the Clearing Agency. None of the Issuer, the Note Registrar or the Indenture Trustee shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions. Upon the issuance of Definitive Notes of a Class, the Indenture Trustee shall recognize the Noteholders of the Definitive Notes as Noteholders hereunder. The Indenture Trustee shall not be liable if the Indenture Trustee or the Administrator is unable to locate a qualified successor Clearing Agency. The Definitive Notes shall be typewritten, printed, lithographed or engraved or produced by any combination of these methods (with or without steel engraved borders), all as determined by the officers executing such Notes, as evidenced by their execution of such Notes. SECTION 2.12. RELEASE OF COLLATERAL. Subject to Sections 4.04, 8.04 and 11.01 and the terms of the Transaction Documents, the Indenture Trustee shall release property from the lien of this Indenture only upon receipt of an Issuer Request accompanied by an Officer's Certificate. SECTION 2.13. TAX TREATMENT. The Issuer has entered into this Indenture, and the Notes will be issued, with the intention that, for federal, state and local income, single business and franchise tax purposes, the Notes will qualify as indebtedness of the Issuer secured by the Collateral. The Issuer, by entering into this Indenture, and each Noteholder, by its acceptance of its Note agree to treat the Notes for federal, state and local income, single business and franchise tax purposes as indebtedness of the Issuer. ARTICLE THREE COVENANTS SECTION 3.01. PAYMENT OF PRINCIPAL AND INTEREST. The Issuer will duly and punctually pay the principal of and interest, if any, on the Notes in accordance with the terms of the Notes and this Indenture. Without limiting the foregoing, subject to Section 8.02(c), the Issuer will cause to be distributed all amounts on deposit in the Note Distribution Account on a Distribution Date deposited therein pursuant to the Sale and Servicing Agreement (i) for the benefit of the Class A-1 Notes, to the Class A-1 Noteholders, (ii) for the benefit of the Class A-2 Notes, to the 16 Class A-2 Noteholders and (iii) for the benefit of the Class B Notes, to the Class B Noteholders. Amounts properly withheld under the Code by any Person from a payment to any Noteholder of interest and/or principal shall be considered as having been paid by the Issuer to such Noteholder for all purposes of this Indenture. SECTION 3.02. MAINTENANCE OF OFFICE OR AGENCY. The Issuer will maintain in [_________________], an office or agency where Notes may be surrendered for registration of transfer or exchange, and where notices and demands to or upon the Issuer in respect of the Notes and this Indenture may be served. The Issuer hereby initially appoints the Indenture Trustee to serve as its agent for the foregoing purposes. The Issuer will give prompt written notice to the Indenture Trustee of the location, and of any change in the location, of any such office or agency. If at any time the Issuer shall fail to maintain any such office or agency or shall fail to furnish the Indenture Trustee with the address thereof, such surrenders, notices and demands may be made or served at the Corporate Trust Office, and the Issuer hereby appoints the Indenture Trustee as its agent to receive all such surrenders, notices and demands. SECTION 3.03. MONEY FOR PAYMENTS TO BE HELD IN TRUST. As provided in Section 8.02, all payments of amounts due and payable with respect to any Notes that are to be made from amounts withdrawn from the Collection Account and the Note Distribution Account pursuant to Section 8.02(b) shall be made on behalf of the Issuer by the Indenture Trustee or by another Paying Agent, and no amounts so withdrawn from the Collection Account and the Note Distribution Account for payments of Notes shall be paid over to the Issuer except as provided in this Section. On or before the Business Day immediately preceding each Distribution Date and Redemption Date, the Issuer shall deposit or cause to be deposited in the Note Distribution Account an aggregate sum sufficient to pay the amounts then becoming due, such sum to be held in trust for the benefit of the Persons entitled thereto and (unless the Paying Agent is the Indenture Trustee) shall promptly notify the Indenture Trustee of its action or failure so to act. The Issuer will cause each Paying Agent other than the Indenture Trustee to execute and deliver to the Indenture Trustee an instrument in which such Paying Agent shall agree with the Indenture Trustee (and if the Indenture Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions of this Section, that such Paying Agent will: (i) hold all sums held by it for the payment of amounts due with respect to the Notes in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided and pay such sums to such Persons as herein provided; (ii) give the Indenture Trustee notice of any default by the Issuer (or any other obligor upon the Notes) in the making of any payment required to be made with respect to the Notes; (iii) at any time during the continuance of any such default, upon the written request of the Indenture Trustee, forthwith pay to the Indenture Trustee all sums so held in trust by such Paying Agent; 17 (iv) immediately resign as a Paying Agent and forthwith pay to the Indenture Trustee all sums held by it in trust for the payment of Notes if at any time it ceases to meet the standards required to be met by a Paying Agent at the time of its appointment; and (v) comply with all requirements of the Code with respect to the withholding from any payments made by it on any Notes of any applicable withholding taxes imposed thereon and with respect to any applicable reporting requirements in connection therewith. The Issuer may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, by Issuer Order direct any Paying Agent to pay to the Indenture Trustee all sums held in trust by such Paying Agent, such sums to be held by the Indenture Trustee upon the same trusts as those upon which the sums were held by such Paying Agent; and upon such payment by any Paying Agent to the Indenture Trustee, such Paying Agent shall be released from all further liability with respect to such money. Subject to applicable laws with respect to escheat of funds, any money held by the Indenture Trustee or any Paying Agent in trust for the payment of any amount due with respect to any Note and remaining unclaimed for two years after such amount has become due and payable shall be discharged from such trust and upon receipt of an Issuer Request shall be paid to the Issuer; and the Holder of such Note shall thereafter, as an unsecured general creditor, look only to the Issuer for payment thereof, and all liability of the Indenture Trustee or such Paying Agent with respect to such trust money shall thereupon cease; PROVIDED, HOWEVER, that if such money or any portion thereof had been previously deposited by the Issuer with the Indenture Trustee for the payment of principal or interest on the Notes; and PROVIDED, FURTHER, that the Indenture Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Issuer cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in The City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to or for the account of the Issuer. The Indenture Trustee may also adopt and employ, at the expense of the Issuer, any other reasonable means of notification of such repayment (including, but not limited to, mailing notice of such repayment to Holders whose Notes have been called but not have not been surrendered for redemption or whose right to or interest in moneys due and payable but not claimed is determinable from the records of the Indenture Trustee or of any Paying Agent, at the last address of record for each such Holder). SECTION 3.04. EXISTENCE. The Issuer will keep in full effect its existence, rights and franchises as a business trust under the laws of the State of Delaware (unless it becomes, or any successor Issuer hereunder is or becomes, organized under the laws of any other state or of the United States, in which case the Issuer will keep in full effect its existence, rights and franchises under the laws of such other jurisdiction) and will obtain and preserve its qualification to do business in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Indenture, the Notes, the Collateral and each other instrument or agreement included in the Collateral. 18 SECTION 3.05. PROTECTION OF COLLATERAL. The Issuer intends the security interest Granted pursuant to this Indenture in favor of the Indenture Trustee on behalf of the Noteholders to be prior to all other liens in respect of the Collateral, and the Issuer shall take all actions necessary to obtain and maintain, for the benefit of the Indenture Trustee on behalf of the Noteholders, a first lien on and a first priority, perfected security interest in the Collateral. The Issuer will from time to time execute and deliver all such supplements and amendments hereto and all such financing statements, continuation statements, instruments of further assurance and other instruments, all as prepared by the Servicer and delivered to the Issuer, and will take such other action necessary or advisable to: (i) grant more effectively all or any portion of the Collateral; (ii) maintain or preserve the lien and security interest (and the priority thereof) created by this Indenture or carry out more effectively the purposes hereof; (iii) perfect, publish notice of or protect the validity of any Grant made or to be made by this Indenture; (iv) enforce any of the Collateral; (v) preserve and defend title to the Collateral and the rights of the Indenture Trustee and the Noteholders in such Collateral against the claims of all persons and parties; and (vi) pay all taxes or assessments levied or assessed upon the Collateral when due. The Issuer hereby designates the Indenture Trustee its agent and attorney-in-fact to execute all financing statements, continuation statements or other instruments required to be executed pursuant to this Section. SECTION 3.06. OPINIONS AS TO COLLATERAL. (a) Promptly after the execution and delivery of this Indenture, the Issuer shall furnish to the Indenture Trustee an Opinion of Counsel to the effect that, in the opinion of such counsel, either (i) all financing statements and continuation statements have been executed and filed that are necessary to create and continue the Indenture Trustee's first priority perfected security interest in the Collateral for the benefit of the Noteholders, and reciting the details of such filings or referring to prior Opinions of Counsel in which such details are given, or (ii) no such action shall be necessary to perfect such security interest; and (b) Within 90 days after the beginning of each calendar year beginning with the first calendar year beginning more than three months after the Cutoff Date, the Issuer shall furnish to the Indenture Trustee an Opinion of Counsel, dated as of a date during such 90-day period, to the effect that, in the opinion of such counsel, either (i) all financing statements and continuation statements have been executed and filed that are necessary to create and continue the Indenture Trustee's first priority perfected security interest in the Collateral for the benefit of the Noteholders, and reciting the details of such filings or referring to prior Opinions of Counsel in 19 which such details are given, or (ii) no such action shall be necessary to perfect such security interest. SECTION 3.07. PERFORMANCE OF OBLIGATIONS; SERVICING OF CONTRACTS. (a) The Issuer will not take any action and will use its best efforts not to permit any action to be taken by others that would release any Person from any such Person's material covenants or obligations under any instrument or agreement included in the Collateral or that would result in the amendment, hypothecation, subordination, termination or discharge of, or impair the validity or effectiveness of, any such instrument or agreement, except as expressly provided in the Transaction Documents or such other instrument or agreement. (b) The Issuer may contract with other Persons to assist it in performing its duties and obligations under this Indenture, and any performance of such duties by a Person identified to the Indenture Trustee in an Officer's Certificate shall be deemed to be action taken by the Issuer. The Indenture Trustee shall not be responsible for the action or inaction of the Servicer or the Administrator. Initially, the Issuer has contracted with the Servicer and the Administrator to assist the Issuer in performing its duties under this Indenture. (c) The Issuer will punctually perform and observe all of its obligations and agreements contained in this Indenture, the other Transaction Documents and in the instruments and agreements included in the Collateral, including but not limited to filing or causing to be filed all UCC financing statements and continuation statements required to be filed by the terms of this Indenture and the Sale and Servicing Agreement in accordance with and within the time periods provided for herein and therein. Except as otherwise expressly provided therein, the Issuer shall not waive, amend, modify, supplement or terminate any Transaction Document or any provision thereof without the consent of the Indenture Trustee or the Holders of at least a majority of the Outstanding Amount of the Class A-1 Notes and the Class A-2 Notes, voting as a single class, or if there are no Class A-1 Notes or Class A-2 Notes outstanding, the Holders of at least a majority of the Outstanding Amount of the Class B Notes; PROVIDED that no such amendment shall (i) increase or reduce in any manner the amount of, or accelerate or delay the timing of, distributions that are required to be made for the benefit of the Noteholders, or (ii) reduce the aforesaid percentage of the Notes which are required to consent to any such amendment, without the consent of the Holders of all the Outstanding Notes. (d) If the Issuer shall have knowledge of the occurrence of a Servicer Default, the Issuer shall promptly notify the Indenture Trustee and each Rating Agency thereof. Upon any termination of the Servicer's rights and powers pursuant to the Sale and Servicing Agreement, the Issuer shall promptly notify the Indenture Trustee. As soon as a successor Servicer is appointed, the Issuer shall notify the Indenture Trustee and the Rating Agencies of such appointment, specifying in such notice the name and address of such successor Servicer. SECTION 3.08. NEGATIVE COVENANTS. Until the Termination Date, the Issuer shall not: (i) except as expressly permitted by the Transaction Documents, sell, transfer, exchange or otherwise dispose of any of the properties or assets of the Issuer, including those included in the Collateral, unless directed to do so by the Indenture Trustee; 20 (ii) claim any credit on, or make any deduction from the principal or interest payable in respect of, the Notes (other than amounts properly withheld from such payments under the Code or applicable state law) or assert any claim against any present or former Noteholder by reason of the payment of the taxes levied or assessed upon any part of the Collateral; or (iii) (A) permit the validity or effectiveness of this Indenture to be impaired, or permit the lien created by this Indenture to be amended, hypothecated, subordinated, terminated or discharged, or permit any Person to be released from any covenant; or obligations with respect to the Notes under this Indenture except as may be expressly permitted hereby, (B) permit any lien, charge, excise, claim, security interest, mortgage or other encumbrance (other than the lien of this Indenture) to be created on or extend to or otherwise arise upon or burden the Collateral or any part 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 Motorcycle and arising solely as a result of an action or omission of the related Obligor), (C) permit the lien created by this Indenture not to constitute a valid first priority (other than with respect to any such tax, mechanics' or other lien) security interest in the Collateral, or (D) amend, modify or fail to comply with the provisions of the Transaction Documents without the prior written consent of the Indenture Trustee, except where the Transaction Documents allow for amendment or modification without the consent or approval of the Indenture Trustee; or (iv) dissolve or liquidate in whole or in part. SECTION 3.09. ANNUAL STATEMENT AS TO COMPLIANCE. The Issuer will deliver to the Indenture Trustee, on or before 120 days after the end of each fiscal year of the Issuer (commencing with the fiscal year ended [____________]), an Officer's Certificate stating, as to the Authorized Officer signing such Officer's Certificate, that: (i) a review of the activities of the Issuer during such year and of performance under this Indenture has been made under such Authorized Officer's supervision; and (ii) to the best of such Authorized Officer's knowledge, based on such review, the Issuer has complied with all conditions and covenants under this Indenture throughout such year, or, if there has been a default in the compliance of any such condition or covenant, specifying each such default known to such Authorized Officer and the nature and status thereof. SECTION 3.10. ISSUER MAY CONSOLIDATE, ETC. ONLY ON CERTAIN TERMS. (a) The Issuer shall not consolidate or merge with or into any other Person, unless: (i) the Person (if other than the Issuer) formed by or surviving such consolidation or merger shall be a Person organized and existing under the laws of the United States or any State and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Indenture Trustee, in form and substance satisfactory to the Indenture Trustee, the due and punctual payment of the principal of and interest on all Notes and the performance or observance of every agreement and covenant of this Indenture and each other Transaction Document on the part of the Issuer to be performed or observed, all as provided herein; 21 (ii) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; (iii) the Rating Agency Condition shall have been satisfied with respect to such transaction; (iv) the Issuer shall have received an Opinion of Counsel which shall be delivered to and shall be satisfactory to the Indenture Trustee to the effect that such transaction will not have any material adverse tax consequence to the Issuer, any Noteholder or any Certificateholder; (v) any action as is necessary to maintain the lien and security interest created by this Indenture shall have been taken; (vi) the Issuer shall have delivered to the Indenture Trustee an Officer's Certificate and an Opinion of Counsel (which shall describe the actions taken as required by clause (v) above or that no such actions will be taken) each stating that such consolidation or merger and such supplemental indenture comply with this Article Three and that all conditions precedent herein provided for relating to such transaction have been compiled with; and (vii) the Person (if other than the Issuer) formed by or surviving such consolidation or merger has a net worth, immediately after such consolidation or merger, that is (A) greater than zero and (B) not less than the net worth of the Issuer immediately prior to giving effect to such consolidation or merger. (b) The Issuer shall not convey or transfer all or substantially all of its properties or assets, including those included in the Collateral, to any Person (except as expressly permitted by the Transaction Documents), unless: (i) the Person that acquires by conveyance to transfer the properties and assets of the Issuer shall (A) be a United States citizen or a Person organized and existing under the laws of the United States or any State, (B) expressly assume, by an indenture supplemental hereto, executed and delivered to the Indenture Trustee, in form and substance satisfactory to the Indenture Trustee, the due and punctual payment of the principal of and interest on all Notes and the performance or observance of every agreement and covenant of this Indenture and each other Transaction Document on the part of the Issuer to be performed or observed, all as provided herein, (C) expressly agree by means of such supplemental indenture that all right, title and interest so conveyed or transferred shall be subject and subordinate to the rights of Holders of the Notes and (D) unless otherwise provided in such supplemental indenture, expressly agree to indemnify, defend and hold harmless the Issuer against and from any loss, liability or expense arising under or related to this Indenture and the Notes. (ii) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; (iii) the Rating Agency Condition shall have been satisfied with respect to such transaction; 22 (iv) the Issuer shall have received an Opinion of Counsel which shall be delivered to and shall be satisfactory to the Indenture Trustee to the effect that such transaction will not have any material adverse tax consequence to the Trust, any Noteholder or any Certificateholder; (v) any action as is necessary to maintain the lien and security interest created by this Indenture shall have been taken; (vi) the Issuer shall have delivered to the Indenture Trustee an Officer's Certificate and an Opinion of Counsel (which shall describe the actions taken as required by clause (v) above or that no such actions will be taken) each stating that such conveyance or transfer and such supplemental indenture comply with this Article Three and that all conditions precedent herein provided for relating to such transaction have been complied with (including any filings required by Exchange Act); and (vii) the Issuer has a net worth, immediately after such conveyance or transfer, that is (A) greater than zero and (B) not less than the net worth of the Issuer immediately prior to giving effect to such conveyance or transfer. SECTION 3.11. SUCCESSOR OR TRANSFEREE. (a) Upon any consolidation or merger of the Issuer in accordance with Section 3.10(a), the Person formed by or surviving such consolidation or merger (if other than the Issuer) shall succeed to, and be substituted for, and may exercise every right and power of, the Issuer under this Indenture with same effect as if such Person has been named as the Issuer herein. (b) Upon a conveyance or transfer of all or substantially all the assets or properties of the Issuer pursuant to Section 3.10(b), the Issuer will be released from every covenant and agreement of this Indenture to be observed or performed on the part of the Issuer with respect to the Notes immediately upon the delivery of written notice to the Indenture Trustee stating that the Issuer is to be so released. SECTION 3.12. NO OTHER BUSINESS. The Issuer shall not engage in any business other than financing, purchasing, owning, selling and managing the Contracts in the manner contemplated by this Indenture and the other Transaction Documents and activities incidental thereto. SECTION 3.13. NO BORROWING. The Issuer shall not issue, incur, assume, guarantee or otherwise become liable, directly or indirectly, for any Indebtedness except for (i) the Notes and (ii) any other Indebtedness permitted by or arising under the other Transaction Documents. The proceeds of the Notes and the Certificates shall be used exclusively to fund the Issuer's purchase of the Contracts and the other assets specified in the Sale and Servicing Agreement, to fund the Reserve Fund and to pay the transactional expenses of the Issuer. SECTION 3.14. SERVICER'S OBLIGATIONS. The Issuer shall cause the Servicer to comply with Sections 4.09, 4.10, 4.11, as well as Article Five and Article Nine of the Sale and Servicing Agreement. 23 SECTION 3.15. GUARANTEES, LOANS ADVANCES AND OTHER LIABILITIES. Except as otherwise contemplated by the Transaction Documents, the Issuer shall not make any loan or advance or credit to, or guarantee (directly or indirectly or by an instrument having the effect of assuming another's payment or performance on any obligation or capability of so doing or otherwise), endorse or otherwise become contingently liable, directly or indirectly, in connection with the obligations, stocks or dividends of, or own, purchase, repurchase or acquire (or agree contingently to do so) any stock, obligations, assets or securities of, any other interest in, or make any capital contribution to, any other Person. SECTION 3.16. CAPITAL EXPENDITURES. The Issuer shall not make any expenditure (by long-term or operating lease or otherwise) for capital assets (either realty or personalty). SECTION 3.17. RESTRICTED PAYMENTS. Except as permitted by the Transaction Documents, the Issuer shall not, directly or indirectly, (i) pay any dividend or make any distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, to the Owner Trustee or any owner of a beneficial interest in the Issuer or otherwise with respect to any ownership or equity interest or security in or of the Issuer or to the Servicer, (ii) redeem, purchase, retire or otherwise acquire for value any such ownership or equity interest or security or (iii) set aside or otherwise segregate any amounts for any such purpose; provided, however, that the Issuer may make, or cause to be made, (A) distributions to the Servicer, the Trust Depositor, the Owner Trustee and the Certificateholders as contemplated by, and to the extent funds are available for such purpose under, the Sale and Servicing Agreement or the Trust Agreement and (B) payments to the Indenture Trustee and the Owner Trustee pursuant to Section 1(a)((ii) of the Administration Agreement. The Issuer will not, directly or indirectly, make payments to or distributions from the Collection Account except in accordance with this Indenture and the other Transaction Documents. SECTION 3.18. NOTICE OF EVENTS OF DEFAULT. The Issuer agrees to give the Indenture Trustee and each Rating Agency prompt written notice of each Event of Default hereunder and a Servicer Default under the Sale and Servicing Agreement. SECTION 3.19. FURTHER INSTRUMENTS AND ACTS. Upon request of the Indenture Trustee, the Issuer will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture. SECTION 3.20. COMPLIANCE WITH LAWS. The Issuer shall comply with the requirements of all applicable laws, the non-compliance with which would, individually or in the aggregate, materially and adversely affect the ability of the Issuer to perform its obligations under the Notes, this Indenture or any other Transaction Document. SECTION 3.21. AMENDMENTS OF SALE AND SERVICING AGREEMENT AND TRUST AGREEMENT. The Issuer shall not agree to any amendment to Section 11.01 of the Trust Agreement to eliminate the requirements thereunder that the Indenture Trustee or the Holders of the Notes consent to amendments thereto as provided therein. 24 SECTION 3.22. REMOVAL OF ADMINISTRATOR. So long as any Notes are issued and outstanding, the Issuer shall not remove the Administrator without cause unless the Rating Agency Condition shall have been satisfied in connection with such removal. ARTICLE FOUR SATISFACTION AND DISCHARGE SECTION 4.01. SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture shall cease to be of further effect with respect to the Notes except as to (i) rights of registration of transfer and exchange, (ii) substitution of mutilated, destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments of principal thereof and interest thereon, (iv) Sections 3.01, 3.03, 3.04, 3.05, 3.07, 3.08, 3.10, 3.12, 3.13, 3.20 and 3.21, (v) the rights, obligations and immunities of the Indenture Trustee hereunder (including the rights of the Indenture Trustee under Section 6.07 and the obligations of the Indenture Trustee under Section 4.02) and (vi) the rights of Noteholders as beneficiaries hereof with respect to the property so deposited with the Indenture Trustee payable to all or any of them, and the Indenture Trustee, on demand of and at the expense of the Issuer, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture with respect to the Notes, when (A) either (1) all Notes therefore authenticated and delivered (other than (i) Notes that have been destroyed, lost or stolen and that have been replaced or paid as provided in Section 2.05 and (ii) Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Issuer and thereafter repaid to the Issuer or discharged from such trust, as provided in Section 3.03) have been delivered to the Indenture Trustee for cancellation; (2) all Notes not theretofore delivered to the Indenture Trustee for cancellation (i) have become due and payable, or (ii) will become due and payable at their respective final Distribution Dates within one year, or (iii) are to be called for redemption within one year under arrangements satisfactory to the Indenture Trustee for the giving of notice of redemption by the Indenture Trustee in the name, and at the expense, of the Issuer, and the Issuer, in the case of (i), (ii) or (iii) above, has irrevocably deposited or caused to be irrevocably deposited with the Indenture Trustee cash or direct obligations of or obligations guaranteed by the United States (which will mature prior to the date such amounts are payable), in trust in an Eligible Account for such purpose, in an amount sufficient to pay and discharge the entire unpaid principal and accrued interest on such Note not theretofore delivered to the Indenture Trustee for cancellation when due on their respective final scheduled 25 Distribution Date (if Notes shall have been called for redemption pursuant to Section 10.01(a)), as the case maybe; (B) the Issuer has paid or performed or caused to be paid or performed all amounts and obligations which the Issuer may owe to or on behalf of the Indenture Trustee for the benefit of the Noteholders under this Indenture or the Notes; and (C) the Issuer has delivered to the Indenture Trustee an Officer's Certificate and an Opinion of Counsel and (if required by the TIA or the Indenture Trustee) an Independent Certificate from a firm of certified public accountants, each meeting the applicable requirements of Section 11.01(a) and, subject to Section 11.02, stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with and the Rating Agency Condition has been satisfied. SECTION 4.02. APPLICATION OF TRUST MONEY. All moneys deposited with the Indenture Trustee pursuant to Section 4.01 shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent, as the Indenture Trustee may determine, to the Holders of the particular Notes for the payment or redemption of which such moneys have been deposited with the Indenture Trustee, of all sums due and to become due thereon for principal and interest; but such moneys need not be segregated from other funds except to the extent required herein or in the Sale and Servicing Agreement or required by law. SECTION 4.03. REPAYMENT OF MONEYS HELD BY PAYING AGENT. In connection with the satisfaction and discharge of this Indenture with respect to the Notes, all moneys then held by any Paying Agent other than the Indenture Trustee under the provisions of this Indenture with respect to such Notes shall, upon demand of the Issuer, be paid to the Indenture Trustee to be held and applied according to Section 3.03 and thereupon such Paying Agent shall be released from all further liability with respect to such moneys. SECTION 4.04. RELEASE OF COLLATERAL. Subject to Section 11.01 and the terms of the Transaction Documents, the Indenture Trustee shall release property from the lien of this Indenture only upon receipt of an Issuer Request accompanied by an Officer's Certificate and an Opinion of Counsel and Independent Certificates in accordance with TIA Sections 314(c) and 314(d)(1) or an Opinion of Counsel in lieu of such Independent Certificates to the effect that the TIA does not require any such Independent Certificates. SECTION 4.05. DURATION OF THE POSITION OF THE INDENTURE TRUSTEE FOR THE BENEFIT OF CERTIFICATEHOLDERS. Notwithstanding (i) the earlier payment in full of all principal and interest due to the Noteholders under the terms of the Notes of each Class, (ii) the cancellation of the Notes pursuant to SECTION 2.8 and (iii) the discharge of the Indenture Trustee's duties hereunder with respect to the Notes, the Indenture Trustee shall continue to act in the capacity of the Indenture Trustee hereunder for the benefit of the Certificateholders, and the Indenture Trustee, for the benefit of the Certificateholders, shall comply with its obligations under the Sale and Servicing Agreement, as appropriate, until such time as all distributions in respect of the Certificate Balance and interest due to the Certificateholders have been paid in full. 26 ARTICLE FIVE REMEDIES SECTION 5.01. EVENTS OF DEFAULT. "Event of Default," wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (i) default in the payment of any interest on any Note when the same becomes due and payable, and such default shall continue for a period of five days; (ii) default in the payment of the unpaid amount of any Class of Notes on the final Distribution Date for such Class; (iii) default in the observance or performance of any covenant or agreement of the Issuer made in this Indenture (other than a covenant or agreement, a default in the observance or performance of which is elsewhere in this Section specifically dealt with) which default has a material adverse effect on the Noteholders, or any representation or warranty of the Issuer made in this Indenture or in any certificate or other writing delivered pursuant hereto or in connection herewith proving to have been incorrect in any material respect as of the time when the same shall have been made, and such default shall continue or not be cured, or the circumstance or condition in respect of which such misrepresentation or warranty was incorrect shall not have been eliminated or otherwise cured, for a period of 60 days after there shall have been given, by registered or certified mail, to the Indenture Trustee by the Holders of at least 25% of the Outstanding Amount of the Class A-1 Notes and the Class A-2 Notes, taken together as a single class, or, if there are no Class A-1 Notes or Class A-2 Notes Outstanding, by the Holders of at least 25% of the Outstanding Amount of the Class B Notes a written notice specifying such default or incorrect representation or warranty and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; (iv) the filing of a decree or order for relief by a court having jurisdiction in the premises in respect of the Issuer or any substantial part of the Collateral in an involuntary case under any applicable federal or state 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 Issuer or for any substantial part of the Collateral, or ordering the winding-up or liquidation of the Issuer's affairs, and such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (v) the commencement by the Issuer of a voluntary case under any applicable federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or the consent by the Issuer to the entry of an order for relief in an involuntary case under any such law, or the consent by the Issuer to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer or for any substantial part of the Collateral, or the making by the Issuer of any general assignment for the benefit of 27 creditors, or the failure by the Issuer generally to pay its debts as such debts become due, or the taking of action by the Issuer in furtherance of any of the foregoing. The Issuer shall deliver to the Indenture Trustee within five days after obtaining knowledge of the occurrence thereof, written notice in the form of an Officer's Certificate of any event which with the giving of notice and the lapse of time would become an Event of Default under clause (iii) above, its status and what action the Issuer is taking or proposes to take with respect thereto. SECTION 5.02. RIGHTS UPON EVENT OF DEFAULT. If an Event of Default shall have occurred and be continuing, other than an Event of Default described in SECTION 5.01(iv) or (v) above, the Indenture Trustee or Holders holding Class A-1 Notes or Class A-2 Notes representing not less than 50% of the aggregate Outstanding Amount of the Class A-1 Notes and the Class A-2 Notes or, if there are no Class A-1 Notes or Class A-2 Notes Outstanding, Holders holding Class B Notes representing not less than 50% of the Outstanding Amount of the Class B Notes may declare the principal amount of the Notes immediately due and payable at par. At any time after such declaration of acceleration of maturity has been made and before a judgment or decree for payment of the money due has been obtained by the Indenture Trustee as hereinafter in this ARTICLE 5, PROVIDED, Holders holding Class A-1 Notes or Class A-2 Notes representing not less than 50% of the aggregate Outstanding Amount of the Class A-1 Notes and the Class A-2 Notes or, if there are no Class A-1 Notes or Class A-2 Notes Outstanding, Holders holding Class B Notes representing not less than 50% of the Outstanding Amount of the Class B Notes may rescind such declaration if (i) the Issuer has made all payments of principal of and interest on all Notes when the same becomes due and payable and (ii) the Issuer has paid all amounts due and payable to the Indenture Trustee. If an Event of Default described in SECTION 5.01(iv) or (v) shall have occurred and be continuing, the principal amount of the Notes shall become immediately due and payable. SECTION 5.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY INDENTURE TRUSTEE; AUTHORITY OF INDENTURE TRUSTEE. (a) The Issuer covenants that if the Notes are accelerated following the occurrence of an Event of Default, the Issuer will, upon demand of the Indenture Trustee, pay to it, for the benefit of the Holders of the Notes, the whole amount then due and payable on such Notes for principal and interest, with interest upon the overdue principal, and, to the extent payment at such rate of interest shall be legally enforceable, upon overdue installments of interest, at the applicable Interest Rate and in addition thereto such further amount as shall be sufficient to cover costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee and its agents and counsel. (b) The Indenture Trustee following the occurrence of an Event of Default, shall have full right, power and authority to take, or defer from taking, any and all acts with respect to the administration, maintenance or disposition of the Collateral. (c) If an Event of Default occurs and is continuing, the Indenture Trustee may in its discretion (except as provided in Section 5.03(d)), proceed to protect and enforce its rights and the rights of the Noteholders, by such appropriate Proceedings as the Indenture Trustee shall 28 deem most effective to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy or legal or equitable right vested in the Indenture Trustee by this Indenture or by law. (d) Notwithstanding anything to the contrary contained in this Indenture, if an Event of Default shall have occurred and be continuing, if the Issuer fails to perform its obligations under SECTION 10.01(b) when and as due, the Indenture Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Noteholders by such appropriate proceedings as the Indenture Trustee shall deem most effective to protect and enforce any such rights, whether for specific performance of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy or legal or equitable right vested in the Indenture Trustee by this Indenture or by law, provided that the Indenture Trustee shall only be entitled to take any such actions to the extent such actions (i) are taken only to enforce the Issuer's obligations to redeem the principal amount of Notes, and (ii) are taken only against the Collateral any investments therein and any proceeds thereof. (e) In case there shall be pending, relative to the Issuer or any other obligor upon the Notes or any Person having or claiming an ownership interest in the Collateral, Proceedings under Title 11 of the United States Code or any other applicable federal or state bankruptcy, insolvency or other similar law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Issuer or its property or such other obligor or Person, or in case of any other comparable judicial Proceedings relative to the Issuer or other obligor upon the Notes, or to the creditors or property of the Issuer or such other obligor, the Indenture Trustee, irrespective of whether the principal of any Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Indenture Trustee shall have made any demand pursuant to the provisions of this Section, shall be entitled and empowered, by intervention in such Proceedings or otherwise: (i) to file and prove a claim or claims for the whole amount of principal and interest owing and unpaid in respect of the Notes and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee (including any claim for reasonable compensation to the Indenture Trustee and each predecessor Indenture Trustee, and their respective agents, attorneys and counsel, and for reimbursement of all expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor Indenture Trustee, except as a result of negligence or bad faith) and of the Noteholders allowed in such Proceedings; (ii) unless prohibited by applicable law and regulations, to vote on behalf of the Holders of Notes in any election of a trustee, a standby trustee or Person performing similar functions in any such Proceedings; (iii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute all amounts received with respect to the claims of the Noteholders and of the Indenture Trustee on their behalf; and 29 (iv) to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee or the Holders of Notes allowed in any judicial proceedings relative to the Issuer, its creditors and its property; and any trustee, receiver, liquidator, custodian or other similar official in any such Proceeding is hereby authorized by each of such Noteholders to make payments to the Indenture Trustee, and, in the event that the Indenture Trustee shall consent to the making of payments directly to such Noteholders, to pay to the Indenture Trustee such amounts as shall be sufficient to cover reasonable compensation to the Indenture Trustee, each predecessor Indenture Trustee and their respective agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor Trustee except as a result of negligence or bad faith. (f) Nothing herein contained shall be deemed to authorize the Indenture Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Noteholder any plan of reorganization, arrangement, adjustment or compensation affecting the Notes or the rights of any Holder thereof or to authorize the Indenture Trustee to vote in respect of the claim of any Noteholder in any such proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar Person. (g) All rights of action and of asserting claims under this Indenture or under any of the Notes, may be enforced by the Indenture Trustee without the possession of any of the Notes or the production thereof in any trial or other Proceedings relative thereto, and any such action or Proceedings instituted by the Indenture Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements and compensation of the Indenture Trustee, each predecessor Indenture Trustee and their respective agents and attorneys, shall be for the ratable benefit of the Holders of the Notes. (h) In any Proceedings brought by the Indenture Trustee (including any Proceedings involving the interpretation of any provision of this Indenture), the Indenture Trustee shall be held to represent all of the Holders of the Notes, and it shall not be necessary to make any Noteholder a party to any such proceedings. SECTION 5.04. REMEDIES. If an Event of Default shall have occurred and be continuing, the Indenture Trustee (subject to Section 5.05) may do one or more of the following: (i) institute Proceedings in its own name and as or on behalf of a trustee of an express trust for the collection of all amounts then payable on the Notes or under this Indenture with respect thereto, whether by declaration or otherwise, enforce any judgment obtained, and collect from the Issuer and any other obligor upon such Notes moneys adjudged due; (ii) institute Proceedings from time to time for the complete or partial foreclosure of this Indenture with respect to the Collateral; (iii) exercise any remedies of a secured party under the UCC and any other remedy available to the Indenture Trustee and take any other appropriate action to protect and 30 enforce the rights and remedies of the Indenture Trustee on behalf of the Noteholders under this Indenture or the Notes; and (iv) sell the Collateral or any portion thereof or rights or interest therein, at one or more public or private sales called and conducted in any manner permitted by law; PROVIDED, HOWEVER, that the Indenture Trustee may not sell or otherwise liquidate the Collateral following an Event of Default, unless (A) the Holders of 100% of the Outstanding Amount of the Notes, consent thereto, (B) the proceeds of such sale or liquidation distributable to the Noteholders are sufficient to discharge in full all amounts then due and unpaid upon such Notes for principal and interest or (C) there has been an Event of Default described in Section 5.01(i) or (ii) and the Indenture Trustee determines that the Collateral will not continue to provide sufficient funds for the payment of principal of and interest on the Notes as they would have become due if the Notes had not been declared due and payable, and the Indenture Trustee provides prior written notice to each Rating Agency and obtains the consent of Holders representing not less than 66-2/3% of the Outstanding Amount of the Notes. In determining such sufficiency or insufficiency with respect to clauses (B) and (C), the Indenture Trustee may, but need not, obtain and rely upon an opinion of an Independent investment banking or accounting firm of national reputation as to the feasibility of such proposed action and as to the sufficiency of the Collateral for such purpose; provided, however, upon the occurrence of an Event of Default described in Section 5.01(iv) or (v), caused solely from an event described in such subparagraphs occurring with respect to the Trust Depositor, the related Contracts of the Trust will be liquidated by the Indenture Trustee and the Trust will be terminated 90 days after the date of such Insolvency Event, unless, before the end of such 90-day period, the related Trustee shall have received written instructions from (i) holders of each class of Certificates (excluding any Certificates held by the Trust Depositor) with respect to such Trust representing more than 50% of the aggregate unpaid principal amount of each such class (not including the principal amount of such Certificates held by the Trust Depositor) and (ii) holders of each class of Notes, if any, with respect to such Trust representing more than 50% of the aggregate unpaid principal amount of each such class, to the effect that each such party disapproves of the liquidation of such Contracts and termination of such Trust. SECTION 5.05. OPTIONAL PRESERVATION OF THE CONTRACTS. Following an Event of Default and such Event of Default has not been rescinded and annulled, the Indenture Trustee may, but need not, elect to maintain possession of the Collateral,. It is the desire of the parties hereto and the Noteholders that there be at all times sufficient funds for the payment of principal and interest on the Notes, and the Indenture Trustee shall take such desire into account when determining whether or not to maintain possession of the Collateral. In determining whether to maintain possession of the Collateral, the Indenture Trustee may, but need not, obtain and rely upon an opinion of an Independent investment banking or accounting firm of national reputation as to the feasibility of such proposed action and as to the sufficiency of the Collateral for such purpose. SECTION 5.06. PRIORITIES. (a) If the Indenture Trustee collects any money or property pursuant to this Article Five, it shall pay out the money or property in the following order and priority: 31 (i) amounts due and owing to the Indenture Trustee pursuant to SECTION 6.07; and (ii) to the Collection Account for distribution pursuant to the priorities described in SECTION 7.05(a) of the Sale and Servicing Agreement and not previously distributed, in the order of such priorities and without preference or priority of any kind within such priorities. (b) The Indenture Trustee may fix a record date and payment date for any payment to Noteholders pursuant to this Section. At least 15 days before such record date, the Issuer shall mail to each Noteholder and the Indenture Trustee a notice that states the record date, the payment date and the amount to be paid. SECTION 5.07. LIMITATION OF SUITS. No Holder of any Note shall have any right to institute any Proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless: (i) such Holder has previously given written notice to the Indenture Trustee of a continuing Event of Default; (ii) the Holders of not less than 25% of the Outstanding Amount of the Class A-1 Notes and the Class A-2 Notes or, if there are no Class A-1 Notes or Class A-2 Notes Outstanding, Holders of not less than 50% of the Outstanding Amount of the Class B Notes have made written request to the Indenture Trustee to institute such Proceeding in respect of such Event of Default in its own name as Indenture Trustee hereunder; (iii) such Holder or Holders have offered to the Indenture Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in complying with such request; (iv) the Indenture Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute such Proceedings; and (v) no direction inconsistent with such written request has been given to the Indenture Trustee during such 60-day period by the Holders of a majority of the Outstanding Amount of the Class A-1 Notes and the Class A-2 Notes, voting together as a single class, or, if there are no Class A-1 Notes or Class A-2 Notes Outstanding, Holders of a majority of the Outstanding Amount of the Class B Notes. It is understood and intended that no one or more Holders of Notes shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders of Notes or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided. In the event the Indenture Trustee shall receive conflicting or inconsistent requests and indemnity from two or more groups of Holders of Notes, each representing less than a majority of the Outstanding Amount of the Class A-1 Notes, the Class A-2 Notes or the Class B Notes, as 32 the case may be, the Indenture Trustee in its sole discretion may determine that action, if any, shall be taken, notwithstanding any other provisions of this Indenture. SECTION 5.08. UNCONDITIONAL RIGHTS OF NOTEHOLDERS TO RECEIVE PRINCIPAL AND INTEREST. Notwithstanding any other provisions in the Indenture, the Holder of any Note shall have the right, which is absolute and unconditional, to receive payment of the principal of and interest on such Note on or after the respective due dates thereof expressed in such Note or in this Indenture (or, in the case of redemption, on or after the Redemption Date) and to institute suit for the enforcement of any such payment, and such right shall not be impaired without the consent of such Holder. SECTION 5.09. RESTORATION OF RIGHTS AND REMEDIES. If the Indenture Trustee or any Noteholder has instituted any Proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason or has been determined adversely to the Indenture Trustee or to such Noteholder, then and in every such case the Indenture Trustee and the Noteholders shall, subject to any determination in such Proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Indenture Trustee and the Noteholders shall continue as though no such Proceeding had been instituted. SECTION 5.10. RIGHTS AND REMEDIES CUMULATIVE. No right or remedy herein conferred upon or reserved to the Indenture Trustee or to the Noteholders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 5.11. DELAY OR OMISSION NOT A WAIVER. No delay or omission of the Indenture Trustee or any Holder of any Note to exercise any right or remedy accruing upon any Default of Event of Default shall impair any such right or remedy or constitute a waiver of any such Default or Event of Default or an acquiescence therein. Every right and remedy given by this Article Five or by law to the Indenture Trustee or to the Noteholders may be exercised from time to time, and as often as may be deemed expedient, by the Indenture Trustee or by the Noteholders, as the case may be. SECTION 5.12. CONTROL BY NOTEHOLDERS. The Holders representing more than 50% of the Outstanding Amount of the Class A-1 Notes and the Class A-2 Notes, or, if there are no Class A-1 Notes or Class A-2 Notes Outstanding, Holders representing more than 50% of the Outstanding Amount of the Class B Notes shall have the right to direct the time, method and place of conducting any Proceeding for any remedy available to the Indenture Trustee with respect to the Notes or exercising any trust or power conferred on the Indenture Trustee; provided that: (i) such direction shall not be in conflict with any rule of law or with this Indenture; 33 (ii) subject to the terms of Section 5.04, any direction to the Indenture Trustee to sell or liquidate the Collateral shall be by the Holders of Notes representing not less than 100% of the Outstanding Amount of the Notes; (iii) if the conditions set forth in Section 5.05 have been satisfied and the Indenture Trustee elects to retain the Collateral pursuant to such Section, then any direction to the Indenture Trustee by Holders of Notes representing less than 100% of the Outstanding Amount of the Notes to sell or liquidate the Collateral shall be of no force and effect; and (iv) the Indenture Trustee may take any other action deemed proper by the Indenture Trustee that is not inconsistent with such direction. Notwithstanding the rights of Noteholders set forth in this Section, subject to Section 6.01, the Indenture Trustee need not take any action that it determines might involve it in liability or might materially and adversely affect the rights of any Noteholders not consenting to such action. SECTION 5.13. WAIVER OF PAST DEFAULTS. In the case of any waiver of an Event of Default, the Issuer, the Indenture Trustee and the Holders of the Notes shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereto. Upon any such waiver, such Default shall cease to exist and be deemed to have been cured and not to have occurred, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereto. SECTION 5.14. UNDERTAKING FOR COSTS. All parties to this Indenture agree, and each Holder of any Note by such Holder's acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Indenture Trustee for any action taken, suffered or omitted by it as Indenture Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to (i) any suit instituted by the Indenture Trustee, (ii) any suit instituted by any Noteholder, or group of Noteholders, in each case holding in the aggregate more than 10% of the Outstanding Amount of the Class A-1 Notes and the Class A-2 Notes, or, if there are no Class A-1 Notes or Class A-2 Notes Outstanding, any Noteholder or group of Noteholders holding in the aggregate 10% of the Outstanding Amount of the Class B Notes or (iii) any suit instituted by any Noteholder for the enforcement of the payment of principal of or interest on any Note on or after the respective due dates expressed in such Note and in this Indenture (or, in the case of redemption, on or after the Redemption Date). SECTION 5.15. WAIVER OF STAY OR EXTENSION LAWS. The Issuer covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead or in any manner whatsoever, claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Issuer (to the extent that it may lawfully do so) hereby expressly 34 waives all benefit or advantages of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Indenture Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. SECTION 5.16. ACTION ON NOTES. The Indenture Trustee's right to seek and recover judgment on the Notes or under this Indenture shall not be affected by the seeking, obtaining or application of any other relief under or with respect to this Indenture. Neither the lien of this Indenture nor any rights or remedies of the Indenture Trustee or the Noteholders shall be impaired by the recovery of any judgment by the Indenture Trustee against the Issuer or by the levy of any execution under such judgment upon any portion of the Collateral or upon any of the assets of the Issuer. Any money or property collected by the Indenture Trustee shall be applied in accordance with Section 5.06. SECTION 5.17. PERFORMANCE AND ENFORCEMENT OF CERTAIN OBLIGATIONS. (a) Promptly following a request from the Indenture Trustee to do so and at the Administrator's expense, the Issuer shall take all such lawful action as the Indenture Trustee may request to compel or secure the performance and observance by the Trust Depositor and the Servicer, as applicable, of each of their respective obligations to the Issuer under or in connection with the Sale and Servicing Agreement in accordance with the terms thereof, and to exercise any and all rights, remedies, powers and privileges lawfully available to the Issuer under or in connection with the Sale and Servicing Agreement to the extent and in the manner directed by the Indenture Trustee, including the transmission of notices of default on the part of the Trust Depositor or the Servicer thereunder and the institution of legal of administrative actions or proceedings to compel or secure performance by the Trust Depositor or the Servicer of each of their respective obligations under the Sale and Servicing Agreement. (b) If an Event of Default has occurred and is continuing, the Indenture Trustee may, and at the direction (which direction shall be in writing, including facsimile) of the Holders representing not less than 66-2/3% of the Outstanding Amount of the Class A-1 Notes and the Class A-2 Notes, voting together as a single class, or, if there are no Class A-1 Notes or Class A-2 Notes Outstanding, Holders representing not less than 66 2/3% of the Outstanding Amount of the Class B Notes shall, foreclose upon its security interest in the Issuer's rights under the Sale and Servicing Agreement and exercise all rights, remedies, powers, privileges and claims of the Issuer against the Trust Depositor or the Servicer under or in connection with the Sale and Servicing Agreement, including the right or power to take any action to compel or secure performance or observance by the Trust Depositor or the Servicer of each of their obligations to the Issuer thereunder and to give any consent, request, notice, direction, approval, extension or waiver under the Sale and Servicing Agreement, and any right of the Issuer to take such action shall be suspended. ARTICLE SIX THE INDENTURE TRUSTEE SECTION 6.01. DUTIES OF INDENTURE TRUSTEE. 35 (a) If an Event of Default has occurred and is continuing, the Indenture Trustee shall exercise the rights and powers vested in it by this Indenture and the Sale and Servicing Agreement and in the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. (b) Except during the continuance of an Event of Default: (i) the Indenture Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture or the Sale and Servicing Agreement and no implied covenants or obligations shall be read into this Indenture or the Sale and Servicing Agreement against the Indenture Trustee; and (ii) in the absence of bad faith on its part, the Indenture Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Indenture Trustee and conforming to the requirements of this Indenture; however, the Indenture Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture and the other Transaction Documents to which the Indenture Trustee is a party. (c) The Indenture Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (i) this paragraph does not limit the effect of Section 6.01(b); (ii) the Indenture Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer unless it is proved that the Indenture Trustee was negligent in ascertaining the pertinent facts; and (iii) the Indenture Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 5.12. (d) Every provision of this Indenture that in any way relates to the Indenture Trustee is subject to paragraphs (a), (b) and (c) of this Section. (e) The Indenture Trustee shall not be liable for interest on any money received by it except as the Indenture Trustee may agree in writing with the Issuer. (f) Money held in trust by the Indenture Trustee need not be segregated from other funds except to the extent required by law or the terms of this Indenture or the Sale and Servicing Agreement. (g) No provision of this Indenture shall require the Indenture Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayments of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. 36 (h) The Indenture Trustee shall have no discretionary duties other than performing those ministerial acts set forth above necessary to accomplish the purpose of this Trust as set forth in this Indenture. (i) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Indenture Trustee shall be subject to the provisions of this section and to the provisions of the TIA. SECTION 6.02. RIGHTS OF INDENTURE TRUSTEE. (a) The Indenture Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Indenture Trustee need not investigate any fact or matter stated in the document. (b) Before the Indenture Trustee acts or refrains from acting, it may require an Officer's Certificate (with respect to factual matters) or an Opinion of Counsel, as applicable. The Indenture Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Officer's Certificate or Opinion of Counsel. (c) The Indenture Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through Affiliates, agents or attorneys or a custodian or nominee, and the Indenture Trustee shall not be responsible for any misconduct or negligence on the part of, or for the supervision of, any such agent, attorney, custodian or nominee appointed with due care by it hereunder. (d) The Indenture Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; provided, however, that the Indenture Trustee's conduct does not constitute willful misconduct, negligence or bad faith. (e) The Indenture Trustee may consult with counsel, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Notes shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. (f) The Indenture Trustee shall be under no obligation to institute, conduct or defend any litigation under this Indenture or in relation to this Indenture or exercise any remedy under SECTION 5.05(i) through (iv) at the request, order or direction of any of the Holders of Notes, pursuant to the provisions of this Indenture, unless such Holders of Notes shall have offered to the Indenture Trustee reasonable security or indemnity against the costs, expenses and liabilities that may be incurred therein or thereby; PROVIDED, HOWEVER, that the Indenture Trustee shall, upon the occurrence of an Event of Default (that has not been cured), exercise the rights and powers vested in it by this Indenture in a manner consistent with SECTION 6.01. (g) The Indenture Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond or other paper or document, unless so requested by the 37 Holders of Notes evidencing not less than 25% of the Outstanding Amount of the Notes; provided, however, that if the payment within a reasonable time to the Indenture Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Indenture Trustee, not reasonably assured to the Indenture Trustee by the security afforded to it by the terms of this Indenture or the Sale and Servicing Agreement, the Indenture Trustee may require reasonable indemnity against such cost, expense or liability as a condition to so proceeding; the reasonable expense of every such examination shall be paid by the Person making such request, or, if paid by the Indenture Trustee, shall be reimbursed by the Person making such request upon demand. SECTION 6.03. INDIVIDUAL RIGHTS OF INDENTURE TRUSTEE. The Indenture Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Issuer or its Affiliates with the same rights it would have if it were not Indenture Trustee. Any Paying Agent, Note Registrar, co-registrar or co-paying agent may do the same with like rights. However, the Indenture Trustee is required to comply with Section 6.11. SECTION 6.04. INDENTURE TRUSTEE'S DISCLAIMER. The Indenture Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture, the Collateral or the Notes, it shall not be accountable for the Issuer's use of the proceeds from the Notes, and it shall not be responsible for any statement of the Issuer in this Indenture or in any document issued in connection with the sale of the Notes or in the Notes other than the Indenture Trustee's certificate of authentication. SECTION 6.05. NOTICE OF DEFAULTS. If a Default occurs and is continuing and if it is known to a Responsible Officer of the Indenture Trustee, the Indenture Trustee shall mail to each Noteholder notice of the Default within 90 days after it occurs. Except in the case of a Default in payment of principal of or interest on any Note (including payments pursuant to the redemption of such Notes), the Indenture Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of Noteholders. SECTION 6.06. REPORTS BY INDENTURE TRUSTEE TO HOLDERS. The Indenture Trustee shall deliver to each Noteholder such information, including without limitation, IRS Form 1099, as may be required by applicable law to enable such holder to prepare its federal and state income tax returns. SECTION 6.07. COMPENSATION AND INDEMNITY. The Issuer shall pay or shall cause the Administrator to pay to the Indenture Trustee from time to time reasonable compensation for its services. The Indenture Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Issuer shall or shall cause the Administrator to reimburse the Indenture Trustee for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Indenture Trustee's agents, counsel, accountants and experts. The Issuer shall indemnify or shall cause the Administrator to indemnify the Indenture Trustee against any and all loss, liability or expense (including attorneys' fees) incurred by it in connection with the administration of this trust and the performance of its duties hereunder. The Indenture Trustee shall notify the Issuer 38 and the Administrator promptly of any claim for which it may seek indemnity. Failure by the Indenture Trustee to so notify the Issuer and the Administrator shall not relieve the Issuer or the Administrator of its obligations hereunder. The Issuer shall defend or shall cause the Administrator to defend any such claim, and the Indenture Trustee may have separate counsel and the Issuer shall pay or shall cause the Administrator to pay the fees and expenses of such counsel. Neither the Issuer nor the Administrator need reimburse any expense or indemnify against any loss, liability or expense incurred by the Indenture Trustee through the Indenture Trustee's own willful misconduct, negligence or bad faith. The Issuer's payment obligations to the Indenture Trustee pursuant to this Section shall survive the resignation or removal of the Indenture Trustee and the discharge of this Indenture; provided that the Indenture Trustee shall be entitled only to compensation for its services for the period prior to the date of such resignation or removal of the Indenture Trustee. When the Indenture Trustee incurs expenses after the occurrence of an Event of Default specified in Section 5.01(iv) or (v) with respect to the Issuer, the expenses are intended to constitute expenses of administration under Title 11 of the United States Code or any other applicable federal or state bankruptcy, insolvency or similar law. SECTION 6.08. REPLACEMENT OF INDENTURE TRUSTEE. The Indenture Trustee may resign at any time by so notifying the Issuer and the Servicer. The Holders of a majority of the Outstanding Amount of the Class A-1 Notes and the Class A-2 Notes, voting as a single class, or, if there are no Class A-1 Notes or Class A-2 Notes Outstanding, Holders of a majority of the Outstanding Amount of the Class B Notes may remove the Indenture Trustee by so notifying the Indenture Trustee and may appoint a successor Indenture Trustee. The Issuer shall remove the Indenture Trustee if: (i) the Indenture Trustee fails to comply with Section 6.11; (ii) a court having jurisdiction in the premises in respect of the Indenture Trustee in an involuntary case or proceeding under federal or state banking or bankruptcy laws, as now or hereafter constituted, or any other applicable federal or state bankruptcy, insolvency or other similar law, shall have entered a decree or order granting relief or appointing a receiver, liquidator, assignee, custodian, trustee, conservator, sequestrator (or similar official) for the Indenture Trustee or for any substantial part of the Indenture Trustee's property, or ordering the winding-up or liquidation of the Indenture Trustee's affairs, provided any such decree or order shall have continued unstayed and in effect for a period of 30 consecutive days; (iii) the Indenture Trustee commences a voluntary case under any federal or state banking or bankruptcy laws, as now or hereafter constituted, or any other applicable federal or state bankruptcy, insolvency or other similar law, or consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, conservator, sequestrator or other similar official for the Indenture Trustee or for any substantial part of the Indenture Trustee's property, or makes any assignment for the benefit of creditors or fails generally to pay its debts as such debts become due or takes any corporate action in furtherance of any of the foregoing; or (iv) the Indenture Trustee otherwise becomes incapable of acting. 39 If the Indenture Trustee resigns or is removed, the Issuer shall promptly appoint a successor Indenture Trustee. A successor Indenture Trustee shall deliver a written acceptance of its appointment to the retiring Indenture Trustee and to the Issuer. Thereupon the resignation or removal of the retiring Indenture Trustee shall become effective, and the successor Indenture Trustee shall have all the rights, powers and duties of the Indenture Trustee under this Indenture. The Issuer or the successor Indenture Trustee shall mail a notice of its succession to Noteholders. The retiring Indenture Trustee shall promptly transfer all property held by it as Indenture Trustee to the successor Indenture Trustee. If a successor Indenture Trustee does not take office within 60 days after the retiring Indenture Trustee resigns or is removed, the retiring Indenture Trustee, the Issuer or the Holders of a majority in Outstanding Amount of the Notes may appoint or petition any court of competent jurisdiction for the appointment of a successor Indenture Trustee. If the Indenture Trustee fails to comply with Section 6.11, any Noteholder may petition any court of competent jurisdiction for the removal of the Indenture Trustee and the appointment of a successor Indenture Trustee. Any resignation or removal of the Indenture Trustee and appointment of a successor Indenture Trustee pursuant to any of the provisions of this Section shall not become effective until acceptance of appointment by the successor Indenture Trustee pursuant to this Section and payment of all fees and expenses owed to the outgoing Indenture Trustee. Notwithstanding the replacement of the Indenture Trustee pursuant to this Section, the retiring Indenture Trustee shall be entitled to payment or reimbursement of such amounts as such Person is entitled pursuant to Section 6.07. SECTION 6.09. SUCCESSOR INDENTURE TRUSTEE BY MERGER. If the Indenture Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Indenture Trustee; provided, that such corporation or banking association shall be otherwise qualified and eligible under Section 6.11. The Indenture Trustee shall provide each Rating Agency prompt notice of any such transaction. In case at the time such successor or successors by merger, conversion or consolidation to the Indenture Trustee shall succeed to the trusts created by this Indenture, any of the Notes shall have been authenticated but not delivered, any such successor to the Indenture Trustee may adopt the certificate of authentication of any predecessor Indenture Trustee, and deliver such Notes so authenticated; and in case at that time any of the Notes shall not have been authenticated, any successor to the Indenture Trustee may authenticate such Notes either in the name of any predecessor hereunder or in the name of the successor to the Indenture Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Notes or in this Indenture provided that the certificate of the Indenture Trustee shall have. SECTION 6.10. APPOINTMENT OF CO-INDENTURE TRUSTEE OR SEPARATE INDENTURE TRUSTEE. 40 (a) Notwithstanding any other provision of this Indenture, at any time, for the purpose of meeting any legal requirement of any jurisdiction in which any part of the Collateral may at the time be located, the Indenture Trustee and the Administrator acting jointly shall have the power and may execute and deliver all instruments to appoint one or more Persons to act as a co-Indenture Trustee or co-Indenture Trustees, jointly with the Indenture Trustee, or separate Indenture Trustee or separate Indenture Trustees, of all or any part of the Trust, and to vest in such Person or Persons, in such capacity and for the benefit of the Noteholders, such title to the Collateral, or any part hereof, and, subject to the other provisions of this Section, such powers, duties, obligations, rights and trusts as the Indenture Trustee and the Administrator may consider necessary or desirable. If the Administrator shall not have joined in such appointment within 15 days after the receipt by it of a request so to do, the Indenture Trustee alone shall have the power to make such appointment. No co-Indenture Trustee or separate Indenture Trustee hereunder shall be required to meet the terms of eligibility of a successor Indenture Trustee under Section 6.11 and no notice to Noteholders of the appointment of any co-Indenture Trustee or separate Indenture Trustee shall be required under Section 6.08. (b) Every separate Indenture Trustee and co-Indenture Trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions: (i) all rights, powers, duties and obligations conferred or imposed upon the Indenture Trustee shall be conferred or imposed upon and exercised or performed by the Indenture Trustee and such separate Indenture Trustee or co-Indenture Trustee jointly (it being understood that such separate Indenture Trustee or co-Indenture Trustee is not authorized to act separately without the Indenture Trustee joining in such act), except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Trust or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate Indenture Trustee or co-Indenture Trustee, but solely at the direction of the Indenture Trustee; (ii) no Indenture Trustee hereunder shall be personally liable by reason of any act or omission of any other Indenture Trustee hereunder; and (iii) the Indenture Trustee and the Administrator may at any time accept the resignation of or remove any separate Indenture Trustee or co-Indenture Trustee. (c) Any notice, request or other writing given to the Indenture Trustee shall be deemed to have been given to each of the then separate Indenture Trustees and co-Indenture Trustees, as effectively as if given to each of them. Every instrument appointing any separate Indenture Trustee or co-Indenture Trustee shall refer to this Agreement and the conditions of this Article. Each separate Indenture Trustee and co-Indenture Trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of co-appointment, either jointly with the Indenture Trustee or separately, as may be provided therein, subject to all the provisions of this Indenture, specifically including every provision of this Indenture relating to the conduct of, affecting the liability of or affording protection to, the 41 Indenture Trustee. Every such instrument shall be filed with the Indenture Trustee and a copy thereof given to the Administrator. (d) Any separate Indenture Trustee or co-Indenture Trustee may at any time constitute the Indenture Trustee, its agent or attorney-in-fact with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect of this Agreement on its behalf and in its name. If any separate Indenture Trustee or co-Indenture Trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Indenture Trustee, to the extent permitted by law, without the appointment of a new or successor Indenture Trustee. Notwithstanding anything to the contrary in this Indenture, the appointment of any separate Indenture Trustee or co-Indenture Trustee shall not relieve the Indenture Trustee of its obligations and duties under this Indenture. SECTION 6.11. ELIGIBILITY. (a) The Indenture Trustee shall at all times satisfy the requirements of TIA Section 310(a). The Indenture Trustee hereunder shall at all times be a financial institution organized and doing business under the laws of the United States of America or any state, authorized under such laws to exercise corporate trust powers, whose long term unsecured debt is rated at least Baa3 by Moody's and shall have a combined capital and surplus of at least $50,000,000 or shall be a member of a bank holding system the aggregate combined capital and surplus of which is $50,000,000 and subject to supervision or examination by federal or state authority, provided that the Indenture Trustee's separate capital and surplus shall at all times be at least the amount required by Section 310(a)(2) of the TIA. If such Person publishes reports of condition at least annually, pursuant to law or to the requirements of a supervising or examining authority, then for the purposes of this Section 6.11, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b) If a Default occurs and is continuing and the Indenture Trustee is deemed to have a conflicting interest as a result of acting as trustee for both the Class A-1 Notes and the Class A-2 Notes and the Class B Notes, the Issuer shall appoint a successor Indenture Trustee for the Class A-1 Notes and the Class A-2 Notes or a successor for the Class A-1 Notes and the Class A-2 Notes and a successor for the Class B Notes so that there will be separate Indenture Trustees for the Class A-1 Notes and the Class A-2 Notes and for the Class B Notes. No such event shall alter the voting rights of the Noteholders under this Indenture or under any of the other Transaction Documents. (c) In the case of an appointment hereunder of a successor Indenture Trustee with respect to any Class of Notes, the retiring Indenture Trustee and the successor Indenture Trustee with respect to such Class of Notes shall execute and deliver an indenture supplement hereto wherein the successor Indenture Trustee shall accept such appointment and which (i) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, the successor Indenture Trustee all rights, powers, trusts and duties of the retiring Indenture Trustee with respect to the Notes of such Class as to which the appointment of such Indenture Trustee relates, (ii) if the retiring Indenture Trustee is not retiring with respect to all Classes of Notes, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Indenture Trustee with respect to the Notes of each Class as to which the retiring Indenture Trustee is not retiring shall continue to be vested in 42 the retiring Indenture Trustee and (iii) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Indenture Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Indenture Trustees co-trustees of the same trust and that each such Indenture Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Indenture Trustee; and upon execution and delivery of such supplemental indenture the resignation or removal of the retiring Indenture Trustee shall become effective to the extent provided therein. In case at any time the Indenture Trustee shall cease to be eligible in accordance with the provisions of this SECTION 6.11, the Indenture Trustee shall resign immediately in the manner and with the effect specified in SECTION 6.08. The Indenture Trustee shall comply with TIA Section 310(b); provided, however, that there shall be excluded from the operation of TIA Section 310(b)(1) any indenture or indentures under which other securities of the Issuer are outstanding if the requirements for such exclusion set forth in TIA Section 310(b)(1) are met. SECTION 6.12. PENNSYLVANIA MOTOR VEHICLE SALES FINANCE ACT LICENSES. The Indenture Trustee shall use its best efforts to maintain the effectiveness of all licenses required under the Pennsylvania Motor Vehicle Sales Finance Act in connection with this Indenture and the transactions contemplated hereby until the lien and security interest of this Indenture shall no longer be in effect in accordance with the terms hereof. SECTION 6.13. PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER. The Indenture Trustee shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). An Indenture Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated. ARTICLE SEVEN NOTEHOLDERS' LISTS AND REPORTS SECTION 7.01. ISSUER TO FURNISH INDENTURE TRUSTEE NAMES AND ADDRESSES OF NOTEHOLDERS. The Issuer will furnish or cause to be furnished to the Indenture Trustee (i) not more than five days after the earlier of (a) each Record Date and (b) three months after the last Record Date, a list, in such form as the Indenture Trustee may reasonably require, of the names and addresses of the Noteholders as of such Record Date and (ii) at such other times as the Indenture Trustee may request in writing, within 30 days after receipt by the Issuer of any such request, a list of similar form and content as of a date not more than ten days prior to the time such list is furnished; provided, however, that so long as the Indenture Trustee is the Note Registrar, no such list shall be required to be furnished. SECTION 7.02. PRESERVATION OF INFORMATION: COMMUNICATION TO NOTEHOLDERS. (a) The Indenture Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of the Noteholders contained in the most recent list furnished to the Indenture Trustee as provided in Section 7.01 and the names and addresses of 43 Noteholders received by the Indenture Trustee in its capacity as Note Registrar and shall otherwise comply with TIA Section 312(a). The Indenture Trustee may destroy any list furnished to it as provided in such Section 7.01 upon receipt of a new list so furnished. (b) Noteholders may communicate pursuant to TIA Section 312(b) with other Noteholders with respect to their rights under this Indenture or under the Notes. (c) The Issuer, the Indenture Trustee and the Note Registrar shall have the protection of TIA Section 312(c). SECTION 7.03. REPORTS BY ISSUER. (a) The Issuer shall: (i) file with the Indenture Trustee, within 15 days after the Issuer is required (if at all) to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) that the Issuer may be required to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act; (ii) file with the Indenture Trustee and the Commission in accordance with rules and regulations prescribed from time to time by the Commission such additional information, documents and reports with respect to compliance by the Issuer with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; (iii) supply to the Indenture Trustee (and the Indenture Trustee shall transmit by mail to all Noteholders described in TIA Section 313(c)) such summaries of any information, documents and reports required to be filed by the issuer pursuant to clauses (i) and (ii) of this Section 7.03(a) and by rules and regulations prescribed from time to time by the Commission. (b) Unless the Issuer otherwise determines, the fiscal year of the Issuer shall end on December 31 of each year. SECTION 7.04. REPORTS BY INDENTURE TRUSTEE. If required by TIA Section 313(a), within 60 days after each January 31 beginning with January 31, [______], the Indenture Trustee shall mail to each Noteholder as required by TIA Section 313(c) a brief report dated as of such date that complies with TIA Section 313(a). The Indenture Trustee also shall comply with TIA Section 313(b). A copy of each report at the time of its mailing to Noteholders shall be filed by the Indenture Trustee with the Commission and each stock exchange, if any, on which the Notes are listed. The Issuer shall notify the Indenture Trustee if and when the Notes are listed on any stock exchange. 44 ARTICLE EIGHT ACCOUNTS, DISBURSEMENTS AND RELEASES SECTION 8.01. COLLECTION OF MONEY. Except as otherwise expressly provided herein, the Indenture Trustee may demand payment or delivery of, and shall receive and collect, directly and without intervention or assistance of any fiscal agent or other intermediary, all money and other property payable to or receivable by the Indenture Trustee pursuant to this Indenture. The Indenture Trustee shall apply all such money received by it as provided in this Indenture and the Sale and Servicing Agreement. Except as otherwise expressly provided in this Indenture, if any default occurs in the making of any payment or performance under any agreement or instrument that is part of the Collateral, the Indenture Trustee may take such action as may be appropriate to enforce such payment or performance, including the institution and prosecution of appropriate Proceedings. Any such action shall be without prejudice to any right to claim a Default or Event of Default under this Indenture and any right to proceed thereafter as provided in Article Five. SECTION 8.02. TRUST ACCOUNTS. (a) On or prior to the Closing Date, the Issuer shall cause the Servicer to establish and maintain, in the name of the Indenture Trustee, for the benefit of the Noteholders and the Certificateholders, the Trust Accounts as provided in Section 5.05 of the Sale and Servicing Agreement. (b) All Available Monies with respect to each Due Period will be deposited in the Collection Account as provided in Section 5.05 of the Sale and Servicing Agreement. On or before each Distribution Date, all amounts required to be deposited in the Note Distribution Account with respect to the preceding Due Period pursuant to Section 7.05 of the Sale and Servicing Agreement will be transferred from the Collection Account and/or the Reserve Account to the Note Distribution Account. (c) On each Distribution Date, the Indenture Trustee shall distribute all amounts on deposit in the Note Distribution Account to Noteholders in respect of the Notes to the extent of amounts due and unpaid on the Notes for principal and interest in the following order of priority: (i) to the Class A-1 Noteholders, accrued and unpaid interest on the outstanding principal amount of the Class A-1 Notes and to the Class A-2 Noteholders, accrued and unpaid interest on the outstanding principal amount of the Class A-2 Notes; PROVIDED, HOWEVER, that if there are insufficient funds on deposit in the Note Distribution Account to pay the entire amount of accrued and unpaid interest then due on the Class A-1 Notes and Class A-2 Notes, the amount in the Note Distribution Account shall be applied to the payment of interest on the Class A-1 Notes and the Class A-2 Notes pro rata on the basis of the respective aggregate amounts of interest due and unpaid on the Class A-1 Notes and Class A-2 Notes, respectively; (ii) only to the extent of funds withdrawn from the Pre-Funding Account and deposited in the Note Distribution Account by the Indenture Trustee pursuant to Section 7.07 of the Sale and Servicing Agreement: 45 (A) if the amount of such funds is equal to or less than $150,000, to the Holders of the Class A-1 Notes on account of principal up to the Outstanding Amount thereof; and (B) if the amount of such funds is greater than $150,000, pro rata, calculated on the then current principal balance of the Class A-1 and Class A-2 Notes, to the Holders of the Class A-1 Notes and the Holders of the Class A-2 Notes; (iii) unless otherwise provided in clause (v) below, to the Class B Noteholders, accrued and unpaid interest on the outstanding principal amount of the Class B Notes; (iv) unless otherwise provided in clause (v) or (vi) below, the Note Principal Distributable Amount with respect to such Distribution Date shall be applied as follows: (A) to the Class A-1 Noteholders in reduction of the Outstanding Amount of the Class A-1 Notes until the Outstanding Amount of the Class A-1 Notes is reduced to zero; (B) to the Class A-2 Noteholders in reduction of the Outstanding Amount of the Class A-2 Notes until the Outstanding Amount of the Class A-2 Notes is reduced to zero; and (C) to the Class B Noteholders in reduction of the Outstanding Amount of the Class B Notes until the Outstanding Amount of the Class B Notes is reduced to zero. (v) if the Notes have been declared immediately due and payable as provided in SECTION 5.02 following the occurrence of an Event of Default in Section 5.01(i) or (ii) until such time as the Notes have been paid in full, any funds remaining in the Note Distribution Account after the application described in SECTION 8.02(c)(i) shall be applied in the following order of priority: (A) to the Class A-1 Noteholders and the Class A-2 Noteholders in reduction of the Outstanding Amounts of the Class A-1 Notes and the Class A-3 Notes pro rata on the basis of the Outstanding Amounts of the Class A-1 Notes and the Class A-2 Notes; (B) to the Class B Noteholders, accrued and unpaid interest on the outstanding principal amount of the Class B Notes; and (C) to the Class B Noteholders in reduction of the Outstanding Amount of the Class B Notes; (vi) if the Notes have been declared immediately due and payable as provided in Section 5.02 following the occurrence of an Event of Default in Section 46 5.01(iii), (iv) or (v) until such time as the Notes have been paid in full, any funds remaining in the Note Distribution Account after the applications described in Sections 8.02(c)(i) and (ii) shall be applied in the following order of priority: (A) to the Class A-1 Noteholders and the Class A-2 Noteholders in reduction of the Outstanding Amounts of the Class A-1 Notes and the Class A-2 Notes pro rata on the basis of the Outstanding Amounts of the Class A-1 Notes and the Class A-2 Notes; and (B) to the Class B Noteholders in reduction of the Outstanding Amount of the Class B Notes. SECTION 8.03. GENERAL PROVISIONS REGARDING ACCOUNTS. (a) So long as no Default or Event of Default shall have occurred and be continuing, all or a portion of the funds in the Trust Accounts shall be invested in Eligible Investments and reinvested by the Indenture Trustee upon receipt of an Issuer Order, subject to the provisions of Section 5.05 of the Sale and Servicing Agreement. Except as otherwise provided in Section 5.05 of the Sale and Servicing Agreement, all income or other gain from investments of moneys deposited in such Trust Accounts shall be deposited by the Indenture Trustee in the Collection Account, and any loss resulting from such investments shall be charged to the related Trust Account. The Issuer will not direct the Indenture Trustee to make any investment of any funds or to sell any investment held in any of the Trust Accounts unless the security interest granted and perfected in such account will continue to be perfected in such investment or the proceeds of such sale, in either case without any further action by any Person, and, in connection with any direction to the Indenture Trustee to make any such investment or sale, if requested by the Indenture Trustee, the Issuer shall deliver to the Indenture Trustee an Opinion of Counsel, acceptable to the Indenture Trustee, to such effect. (b) Subject to Section 6.01(c), the Indenture Trustee shall not in any way be held liable by reason of any insufficiency in any of the Trust Accounts resulting from any loss on any Eligible Investment included therein except for losses attributable to the Indenture Trustee's failure to make payments on such Eligible Investments issued by the Indenture Trustee, in its commercial capacity as principal obligor and not as Indenture Trustee, in accordance with their terms. (c) If (i) the Issuer shall have failed to give investment directions for any funds on deposit in the Trust Accounts to the Indenture Trustee by 11:00 a.m., New York City time (or such other time as may be agreed by the Issuer and Indenture Trustee), on any Business Day or (ii) a Default or Event of Default shall have occurred and be continuing with respect to the Notes but the Notes shall not have been declared due and payable pursuant to Section 5.02 or (iii) if such Notes shall have been declared due and payable following an Event of Default, amounts collected or receivable from the Collateral are being applied in accordance with Section 5.05 as if there had not been such a declaration, then the Indenture Trustee shall, to the fullest extent practicable, invest and reinvest funds in the Trust Accounts in one or more Eligible Investments. SECTION 8.04. RELEASE OF COLLATERAL. 47 (a) Subject to the payment of its fees and expenses pursuant to Section 6.07, the Indenture Trustee may, and when required by the provisions of this Indenture shall, execute instruments to release property from the lien of this Indenture, or convey the Indenture Trustee's interest in the same, in a manner and under circumstances that are not inconsistent with the provisions of this Indenture. No party relying upon an instrument executed by the Indenture Trustee as provided in this Article shall be bound to ascertain the Indenture Trustee's authority, inquire into the satisfaction of any conditions precedent or see to the application of any moneys. (b) The Indenture Trustee shall, at such time as there are no Notes Outstanding and all sums due the Indenture Trustee pursuant to Section 6.07 have been paid, release any remaining portion of the Collateral that secured the Notes from the lien of this Indenture and release to the Issuer or any other Person entitled thereto any funds then on deposit in the Trust Accounts. The Indenture Trustee shall release property from the lien of this Indenture pursuant to this Section 8.04(b) only upon receipt of an Issuer Request accompanied by an Officer's Certificate, an Opinion of Counsel and (if required by the TIA as so stated in the Opinion of Counsel) Independent Certificates in accordance with TIA Sections 314(c) and 314(d)(1) meeting the applicable requirements of Section 11.01. SECTION 8.05. OPINION OF COUNSEL. The Indenture Trustee shall receive at least seven days notice when requested by the Issuer to take any action pursuant to Section 8.04(a), accompanied by copies of any instruments involved, and the Indenture Trustee shall also require, as a condition to such action, an Opinion of Counsel, in form and substance satisfactory to the Indenture Trustee, stating the legal effect of any such action, outlining the steps required to complete the same, and concluding that all conditions precedent to the taking of such action have been complied with and such action will not materially and adversely impair the security for the Notes or the rights of the Noteholders in contravention of the provisions for this Indenture; provided, however, that such Opinion of Counsel shall not be required to express an opinion as to the fair value of the Collateral. Counsel rendering any such opinion may rely, without independent investigation, on the accuracy and validity of any certificate or other instrument delivered to the Indenture Trustee in connection with any such action. ARTICLE NINE SUPPLEMENTAL INDENTURES SECTION 9.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF NOTEHOLDERS. (a) Without the consent of the Holders of any Notes and with prior notice to each Rating Agency, the Issuer and the Indenture Trustee, when authorized by an Issuer Order, and the other parties hereto at any time from time to time, may enter into one or more indentures supplemental hereto (which shall conform to the provisions of the TIA as in force at the date of the execution thereof), in form satisfactory to the Indenture Trustee, for any of the following purposes: (i) to correct or amplify the description of any property at any time subject to the lien of this Indenture, or better to assure, convey and confirm unto the 48 Indenture Trustee any property subject or required to be subjected to the lien created by this Indenture, or to subject additional property to the lien created by this Indenture; (ii) to evidence the succession, in compliance with the applicable provisions hereof, of another Person to the Issuer, and the assumption by any such successor of the covenants of the Issuer herein and in the Notes contained; (iii) to add to the covenants of the Issuer, for the benefit of the Holders of the Notes, or to surrender any right or power herein conferred upon the Issuer; (iv) to convey, transfer, assign, mortgage or pledge any property to or with the Indenture Trustee; (v) to cure any ambiguity, to correct or supplement any provision herein or in any supplemental indenture which may be inconsistent with any other provision herein or in any supplemental indenture or the Transaction Documents or to make any other provisions with respect to matters or questions arising under this Indenture or in any supplemental indenture; provided that such action shall not adversely affect the interests of the Holders of the Notes; (vi) to evidence and provide for the acceptance of the appointment hereunder by a successor Indenture Trustee with respect to the Notes and to add to or change any of the provisions of this Indenture as shall be necessary to facilitate the administration of the trusts hereunder by more than one Indenture Trustee, pursuant to the requirements of Article Six; (vii) to modify, eliminate or add to the provisions of this Indenture to such extent as shall be necessary to effect the qualification of this Indenture under the TIA or under any similar federal statute hereafter enacted and to add to this Indenture such other provisions as may be expressly required by the TIA; and (viii) to elect into the FASIT provisions of the Code, provided an Opinion of Counsel to the effect that such election will not adversely affect the Noteholders, is delivered to the Issuer and Indenture Trustee. The Indenture Trustee is hereby authorized to join in the execution of any such supplemental indenture and to make any further appropriate agreements and stipulations that may be therein contained. (b) The Issuer and the Indenture Trustee, when authorized by an Issuer Order, may, also without the consent of any of the Holders of the Notes and with prior notice to each Rating Agency, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Indenture or of modifying in any manner the rights of the Holders of the Notes under this Indenture; provided, however, that such action shall not, as evidenced by an Opinion of Counsel, adversely affect in any material respect the interests of any Noteholder. 49 SECTION 9.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF NOTEHOLDERS. The Issuer and the Indenture Trustee, when authorized by an Issuer Order, also may, with prior notice to each Rating Agency, and with the consent of the Holders of not less than 50% of the Outstanding Amount of the Class A-1 Notes and the Class A-2 Notes, voting together as a single class, or, if there are no Class A-1 Notes or Class A-2 Notes Outstanding, with the consent of the Holders of not less than 50% of the Outstanding Amount of the Class B Notes, by Act of such Holders delivered to the Issuer and the Indenture Trustee, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Indenture or of modifying in any manner the rights of the Holders of the Notes under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Note affected thereby: (i) change the date of payment of any installment of principal of or interest on any Note, or reduce the principal amount thereof, the interest rate thereon or the Redemption Date Amount with respect thereto, change the provisions of this Indenture relating to the application of collections on, or the proceeds of the sale of, the Collateral to payment of principal of or interest on the Notes, or change any place of payment where, or the coin or currency in which, any Note or the interest thereon is payable, or impair the right to institute suit for the enforcement of the provisions of this Indenture requiring the application of funds available therefor, as provided in Article Five, to the payment of any such amount due on the Notes on or after the respective due dates thereof (or, in the case of redemption, on or after the Redemption Date); (ii) reduce the percentage of the Outstanding Amount of the Notes, the consent of the Holders of which is required for any such supplemental indenture, or the consent of the Holders of which is required for any waiver of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences provided for in this Indenture; (iii) modify or alter the provisions of the second proviso to the definition of the term "Outstanding"; (iv) reduce the percentage of the Outstanding Amount of the Notes required to direct the Indenture Trustee to sell or liquidate the Collateral pursuant to Section 5.04 or amend the provisions of this Article which specify the percentage of the Outstanding Amount of the Notes required to amend this Indenture or the other Transaction Documents; (v) modify any provision of this Section except to increase any percentage specified herein or to provide that certain additional provisions of this Indenture or the other Transaction Documents cannot be modified or waived without the consent of the Holder of each Outstanding Note affected thereby; (vi) modify any of the provisions of this Indenture in such 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 50 (vii) permit the creation of any lien ranking prior to or on a parity with the lien created by this Indenture with respect to any part of the Collateral or, except as otherwise permitted or contemplated herein, terminate the lien created by this Indenture on any property at any time subject hereto or deprive the Holder of any Note of the security provided by the lien created by this Indenture. The Indenture Trustee may in its discretion determine whether or not any Notes would be affected by any supplemental indenture and any such determination shall be conclusive upon the Holders of the Notes, whether theretofore or thereafter authenticated and delivered hereunder. The Indenture Trustee shall not be liable for any such determination made in good faith. It shall not be necessary for any Act of Noteholders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. Promptly after the execution by the parties hereto of any supplemental indenture pursuant to this Section, the Indenture Trustee shall mail to the Holders of the Notes to which such amendment or supplemental indenture relates a notice setting forth in general terms the substance of such supplemental indenture. Any failure of the Indenture Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. SECTION 9.03. EXECUTION OF SUPPLEMENTAL INDENTURES. In executing, or permitting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Indenture Trustee shall be entitled to receive, and subject to Sections 6.01 and 6.02 shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Indenture Trustee may, but shall not be obligated to, enter into any such supplemental indenture that affects the Indenture Trustee's own rights, duties, liabilities or immunities under this Indenture or otherwise. SECTION 9.04. EFFECT OF SUPPLEMENTAL INDENTURE. Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and be deemed to be modified and amended in accordance therewith with respect to the Notes affected thereby, and the respective rights, limitations of rights, obligations, duties, liabilities and immunities under this Indenture of the parties hereto and the Holders of the Notes shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. SECTION 9.05. CONFORMITY WITH TRUST INDENTURE ACT. Every amendment of this Indenture and every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect so long as this Indenture shall then be qualified under the Trust Indenture Act. SECTION 9.06. REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES. Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and if 51 required by the Indenture Trustee shall, bear a notation in form approved by the Indenture Trustee as to any matter provided for in such supplemental indenture. If the Issuer or the Indenture Trustee shall so determine, new notes so modified as to conform, in the opinion of the Indenture Trustee and the Issuer, to any such supplemental indenture. If the Issuer or the Indenture Trustee shall so determine, new notes so modified as to conform, in the opinion of the Indenture Trustee and the Issuer, to any such supplemental indenture may be prepared and executed by the Issuer and authenticated and delivered by the Indenture Trustee in exchange for Outstanding Notes. ARTICLE TEN REDEMPTION OF NOTES SECTION 10.01. REDEMPTION. (a) In the event that the Seller pursuant to Section 7.10 of the Sale and Servicing Agreement purchases the corpus of the Trust, the Notes are subject to redemption in whole, but not in part, on the Distribution Date on which such repurchase occurs, in an amount equal to the outstanding principal amount thereof, and accrued interest on the Notes; provided, however, that the Issuer has available funds sufficient to pay such amounts. Seller, the Servicer or the Issuer shall furnish each Rating Agency notice of such redemption. If the Notes are to be redeemed pursuant to this Section 10.01(a), the Servicer or the Issuer shall furnish notice of such election to the Indenture Trustee not later than 20 days prior to the Redemption Date and the Issuer shall deposit with the Indenture Trustee in the Note Distribution Account the Redemption Price of the Notes to be redeemed whereupon all such Notes shall be due and payable on the Redemption Date upon the furnishing of a notice complying with Section 10.02 to each Holder of the Notes. (b) In the event that the assets of the Trust are sold pursuant to Section 9.02 of the Trust Agreement or Section 5.03(b) of this Indenture, the proceeds of such sale shall be distributed as provided in Section 5.06. If amounts are to be paid to Noteholders pursuant to this Section 10.01(b), the Servicer or the Issuer shall, to the extent practicable, furnish notice of such event to the Indenture Trustee not later than 20 days prior to the Redemption Date whereupon all such amounts shall be payable on the Redemption Date. (c) If (x) the Pre-Funded Amount has not been reduced to zero on the Distribution Date on which the Funding Period ends (or, if the funding Period does not end on a Distribution Date, on the first Distribution Date following the end of the Funding Period) or (y) the Pre-Funded Amount has been reduced to $150,000 or less on any Distribution Date, in either case after giving effect to any reductions in the Pre-Funded Amount on such Distribution Date pursuant to Section 7.07 of the Sale and Servicing Agreement, one or more classes of Notes then outstanding will be redeemed, in whole or in part, as described in Section 8.02(c) in a principal amount described therein. SECTION 10.02. FORM OF REDEMPTION NOTICE. (a) Notice of redemption under Section 10.01(a) shall be given by the Indenture Trustee by first-class mail, postage prepaid, mailed not less than five days prior to the applicable 52 Redemption Date to each Holder of Notes, as of the close of business on the Record Date preceding the applicable Redemption Date, at such Holder's address appearing in the Note Register. All notices of redemption shall state: (i) the Redemption Date; (ii) the Redemption Date Amount; and (iii) the place where such Notes are to be surrendered for payment of the Redemption Date Amount (which shall be the office or agency of the Issuer to be maintained as provided in Section 3.02). Notice of redemption of the Notes shall be given by the Indenture Trustee in the name and at the expense of the Issuer. Failure to give notice of redemption, or any defect therein, to any Holder of any Note shall not impair or affect the validity of the redemption of any other Note. (b) Prior notice of redemption under Section 10.01(b) is not required to be given to Noteholders. SECTION 10.03. NOTES PAYABLE ON REDEMPTION DATE. The Notes or portions thereof to be redeemed shall, following notice of redemption (if any) as required by Section 10.02, on the Redemption Date become due and payable at the Redemption Date Amount and (unless the Issuer shall default in the payment of the Redemption Date Amount) no interest shall accrue on the Redemption Date Amount for any period after the date to which accrued interest is calculated for purposes of calculating the Redemption Date Amount. ARTICLE ELEVEN MISCELLANEOUS SECTION 11.01. COMPLIANCE CERTIFICATES AND OPINIONS, ETC. (a) Upon any application or request by the Issuer to the Indenture Trustee to take any action under any provision of this Indenture, the Issuer shall furnish to the Indenture Trustee (i) an Officer's Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with, (ii) an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, and (iii) (if required by the TIA as so stated in the Opinion of Counsel) an Independent Certificate from a firm of certified public accountants meeting the applicable requirements of this Section and TIA Section 314(c), except that, in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture, no additional certificate or opinion need be furnished. 53 Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (i) a statement that each signatory of such certificate or opinion has read or has caused to be read such covenant or condition and the definitions herein relating thereto; (ii) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (iii) a statement that, in the opinion of each such signatory, such signatory has made such examination or investigation as is necessary to enable such signatory to express an informed opinion as to whether or not such covenant or condition has been complied with; and (iv) a statement as to whether, in the opinion of each such signatory, such condition or covenant has been complied with. (b) (i) Prior to the deposit of any Collateral or other property or securities with the Indenture Trustee that is to be made the basis for authentication and delivery of the Notes or the release of any property subject to the lien created by this Indenture, the Issuer shall, in addition to any obligation imposed in Section 11.01(a) or elsewhere in this Indenture, furnish to the Indenture Trustee an Officer's Certificate certifying or stating the opinion of the signer thereof such certificate as to the fair value (within 90 days of such deposit) to the Issuer of the Collateral or other property or securities to be so deposited. (ii) Whenever the Issuer is required to furnish to the Indenture Trustee an Officer's Certificate certifying or stating the opinion of any signer thereof as to the matters described in clause (i) above, the Issuer shall also deliver to the Indenture Trustee an Independent Certificate as to the named matters, if the fair value to the Issuer of the property to be so deposited and of all other such property made the basis of any such withdrawal or release since the commencement of the then-current fiscal year of the Issuer, as set forth in the certificates delivered pursuant to clause (i) above and this clause (ii), is 10% or more of the Outstanding Amount of the Notes, but such a certificate need not be furnished with respect to any property so deposited, if the fair value thereof to the Issuer as set forth in the related Officer's Certificate is less than $25,000 or less than one percent of the Outstanding Amount of the Notes. (iii) Other than with respect to any release described in clause (A) or (B) of Section 11.01(b)(v), whenever any property or securities are to be released from the lien created by this Indenture, the Issuer shall also furnish to the Indenture Trustee an Officer's Certificate certifying or stating the opinion of each person signing such certificate as to the fair value (within 90 days of such release) of the property or securities proposed to be released and stating that in the opinion of such person the proposed release will not impair the security created by this Indenture in contravention of the provisions hereof. 54 (iv) Whenever the Issuer is required to furnish to the Indenture Trustee an Officer's Certificate certifying or stating the opinion of any signer thereof as to the matters described in clause (iii) above, the Issuer shall also furnish to the Indenture Trustee an Independent Certificate as to the same matters if the fair value of the property or securities and of all other property or securities (other than property described in clauses (A) or (B) of Section 11.01(b)(v)) released from the lien created by this Indenture since the commencement of the then current fiscal year, as set forth in the certificates required by clause (iii) above and this clause (iv), equals 10% or more of the Outstanding Amount of the Notes, but such certificate need not be furnished in the case of any release of property or securities if the fair value thereof as set forth in the related Officer's Certificate is less than $25,000 or less than one percent of the then Outstanding Amount of the Notes. (v) Notwithstanding any other provision of this Section, the Issuer may, without compliance with the other provisions of this Section, (A) collect, liquidate, sell or otherwise dispose of the Contracts and the Motorcycles as and to the extent permitted or required by the Transaction Documents, (B) make cash payments out of the Trust Accounts as and to the extent permitted or required by the Transaction Documents, so long as the Issuer shall deliver to the Indenture Trustee every six months, commencing [_________], an Officer's Certificate stating that all the dispositions of Collateral described in clauses (A) or (B) that occurred during the preceding six calendar months were in the ordinary course of the Issuer's business and that the proceeds thereof were applied in accordance with the Transaction Documents. SECTION 11.02. FORM OF DOCUMENTS DELIVERED TO INDENTURE TRUSTEE. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Person as to other matters, and any such Person may certify or given an opinion as to such matters in one or several documents. Any certificate or opinion of an Authorized Officer of the Issuer may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate of an Authorized Officer or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Servicer, the Seller or the Issuer, stating that the information with respect to such factual matters is in the possession of the Servicer, the Seller or the Issuer, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. Whenever in this Indenture, in connection with any application or certificate or report to the Indenture Trustee, it is provided that the Issuer shall deliver any document as a condition of 55 the granting of such application, or as evidence of the Issuer's compliance with any term hereof, it is intended that the truth and accuracy, at the time of the granting of such application or at the effective date of such certificate or report (as the case may be), of the facts and opinions stated in such document shall in such case be conditions precedent to the right of the Issuer to have such application granted or to the sufficiency of such certificate or report. The foregoing shall not, however, be construed to affect the Indenture Trustee's right to rely upon the truth and accuracy of any statement or opinion contained in any such document as provided in Article Six. SECTION 11.03. ACTS OF NOTEHOLDERS. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Noteholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Noteholders in person or by agents duly appointed in writing; and except as herein otherwise expressly provided such action shall become effective when such instrument or instruments are delivered to the Indenture Trustee, and, where it is hereby expressly required, to the Issuer. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Noteholders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 6.01) conclusive in favor of the Indenture Trustee and the Issuer, if made in the manner provided in this Section. (b) The fact and date of the execution by any person of any such instrument or writing may be proved in any manner that the Indenture Trustee deems sufficient. (c) The ownership of Notes shall be proved by the Note Register. (d) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Notes shall bind the Holder of every Note issued upon the registration or transfer thereof or in exchange therefor or in lieu thereof, in respect of anything done, omitted or suffered to be done by the Indenture Trustee or the Issuer in reliance thereon, whether or not notation of such action is made upon such Note. SECTION 11.04. NOTICES. All notices, demands, certificates, requests and communications hereunder ("notices") shall be in writing and shall be effective (a) upon receipt when sent through the U.S. mails, registered or certified mail, return receipt requested, postage prepaid, with such receipt to be effective the date of delivery indicated on the return receipt, or (b) one Business Day after delivery to an overnight courier, or (c) on the date personally delivered to an Authorized Officer of the party to which sent, or (d) on the date transmitted by legible telecopier transmission with a confirmation of receipt, in all cases addressed to the recipient as follows: (i) If to the Servicer or Seller: Harley-Davidson Credit Corp. 150 South Wacker Drive, Suite 3100 Chicago, Illinois 60606 Attention: Perry A. Glassgow 56 Telecopier No.: (312) 368-4372 (ii) If to the Trust Depositor: Harley-Davidson Customer Funding Corp. 4150 Technology Way Carson City, Nevada 89706 Telecopier No.: (775) 884-4469 (iii) If to the Indenture Trustee: -------------------- -------------------- -------------------- Telecopier No.: ________________ (iv) If to the Owner Trustee or the Issuer: -------------------- -------------------- -------------------- Telecopier No.: ________________ (v) If to Moody's: Moody's Investors Service, Inc. 99 Church Street New York, New York 10007 Attention: ABS Monitoring Department Telecopier No.: (212) 553-1350 (vi) If to Standard & Poor's: Standard & Poor's Ratings Services, A Division of The McGraw Hill Companies 55 Water Street New York, New York 10041 Telecopier No.: (212) 428-2657 (vii) If to the Underwriters: -------------------- -------------------- -------------------- Telecopier No.: ________________ -------------------- 57 -------------------- -------------------- Telecopier No.: ________________ Each party hereto may, by notice given in accordance herewith to each of the other parties hereto, designate any further or different address to which subsequent notices shall be sent. SECTION 11.05. NOTICES TO NOTEHOLDERS; WAIVER. Where this Indenture provides for notice to Noteholders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class, postage prepaid to each Noteholder affected by such event, at his address as it appears on the Note Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Noteholders is given by mail, neither the failure to mail such notice nor any defect in any notice so mailed to any particular Noteholder shall affect the sufficiency of such notice with respect to other Noteholders, and any notice that is mailed in the manner herein provided shall conclusively be presumed to have been duly given. Where this Indenture provides for notice in any manner, such notice may be waived in writing by any Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Noteholders shall be filed with the Indenture Trustee but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such a waiver. In case, by reason of the suspension of regular mail service as a result of a strike, work stoppage or similar activity, it shall be impractical to mail notice of any event of Noteholders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a sufficient giving of such notice. Where this Indenture provides for notice to the Rating Agencies, failure to give such notice shall not affect any other rights or obligations created hereunder, and shall not under any circumstance constitute a Default or Event of Default. SECTION 11.06. ALTERNATE PAYMENT AND NOTICE PROVISIONS. Notwithstanding any provisions of this Indenture or any of the Notes to the contrary, the Issuer may enter into any agreement with any Holder of a Note providing for a method of payment, or notice by the Indenture Trustee or any Paying Agent to such Holder, that is different from the methods provided for in this Indenture for such payments or notices. The Issuer will furnish to the Indenture Trustee a copy of each such agreement and the Indenture Trustee will cause payments to be made and notices to be given in accordance with such agreements. SECTION 11.07. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 11.08. SUCCESSORS AND ASSIGNS. All covenants and agreements in this Indenture and the Notes by the Issuer shall bind its successors and assigns, whether so expressed or not. 58 All agreements of the Indenture Trustee in this Indenture shall bind its successors, co-Indenture Trustees and agents. SECTION 11.09. SEPARABILITY. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 11.10. BENEFITS OF INDENTURE. Nothing in this Indenture or in the Notes, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, and the Noteholders, and any other party secured hereunder, and any other Person with an ownership interest in any part of the Collateral, any benefit or any legal or equitable right, remedy or claim under this Indenture. SECTION 11.11. LEGAL HOLIDAYS. In any case where the date on which any payment is due shall not be a Business Day, then (notwithstanding any other provision of the Notes or this Indenture) payment need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the date on which nominally due, and no interest shall accrue for the period from and after any such nominal date. SECTION 11.12. GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS AND THE OBLIGATIONS, RIGHTS, AND REMEDIES OF THE PARTIES UNDER THE AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. SECTION 11.13. COUNTERPARTS. This Indenture may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 11.14. RECORDING OF INDENTURE. If this Indenture is subject to recording in any appropriate public recording offices, such recording is to be effected by the Issuer and at its expense accompanied by an Opinion of Counsel (which may be counsel to the Indenture Trustee or any other counsel reasonably acceptable to the Indenture Trustee) to the effect that such recording is necessary either for the protection of the Noteholders or any other Person secured hereunder or for the enforcement of any right or remedy granted to the Indenture Trustee under this Indenture. SECTION 11.15. TRUST OBLIGATION. No recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under Indenture or any certificate or other writing delivered in connection herewith or therewith, against (i) the Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any owner of a beneficiary interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director, employee or agent of the Indenture Trustee or the Owner Trustee in its individual capacity, any holder of a beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee or of any successor or assign of the Indenture Trustee or the Owner Trustee in its individual capacity, except as any such Person may have expressly agreed (it being understood that the Indenture Trustee and the Owner Trustee have no such obligations in their individual capacity) and except that any such partner, owner or beneficiary shall be fully liable, 59 to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity. For all purposes of this Indenture, in the performance of any duties or obligations of the Issuer hereunder, the Owner Trustee shall be subject to, and entitled to the benefits of, the terms and provisions of Article Six, Seven and Eight of the Trust Agreement. SECTION 11.16. NO PETITION. The parties hereto, by entering into this Indenture, and each Noteholder, by accepting a Note or a beneficial interest in a Note, hereby covenant and agree that they will not at any time institute against the Trust Depositor or the Issuer or join in any institution against the Trust Depositor or the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Notes, this Indenture or any of the other Transaction Documents. SECTION 11.17. INSPECTION. The Issuer agrees that, on reasonable prior notice, it will permit any representative of the Indenture Trustee, during the Issuer's normal business hours, to examine all the books of account, records, reports and other papers of the Issuer, to make copies and extracts therefrom, to cause such books to be audited by independent certified public accountants, and to discuss the Issuer's affairs, finances and accounts with the Issuer's officers, employees and independent certified public accountants, all at such reasonable times and as often as may be reasonably requested, the Indenture Trustee shall and shall cause its representatives to hold in confidence all such information except to the extent disclosure may be required by law (and all reasonable applications for confidential treatment are unavailing) and except to the extent that the Indenture Trustee may reasonably determine that such disclosure is consistent with its obligations hereunder. SECTION 11.18. CONFLICT WITH TRUST INDENTURE ACT. If any provision hereof limits, qualifies or conflicts with another provision hereof that is required to be included in this Indenture by any of the provisions of the Trust Indenture Act, such required provision shall control. The provisions of TIA Sections 310 through 317 that impose duties on any person (including the provisions automatically deemed included herein unless expressly excluded by this Indenture) are a part of and govern this Indenture, whether or not physically contained herein. [signature page follows] 60 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed and delivered as of the day and year first above written. HARLEY-DAVIDSON MOTORCYCLE TRUST [________] By: [____________], not in its individual capacity but solely on behalf of the Issuer as Owner Trustee under the Trust Agreement By:______________________________________________ Printed Name:____________________________________ Title:___________________________________________ [____________________], not in its individual capacity but solely as Indenture Trustee By:______________________________________________ Printed Name:____________________________________ Title:___________________________________________ Signature Page to Indenture STATE OF ILLINOIS ) ) SS COUNTY OF COOK ) On ------------------------------------------------------------------- [insert date] before me, -------------------------------------------------------------------- [Insert name and title of notary] personally appeared , --------------------------------------------------- / / personally known to me, or / / proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument, and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ties), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which such person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature [Seal] ---------------------------------------------------- STATE OF DELAWARE ) ) SS COUNTY OF NEW CASTLE ) On ------------------------------------------------------------------- [insert date] before me, -------------------------------------------------------------------- [Insert name and title of notary] personally appeared , ----------------------------------------------------------- / / personally known to me, or / / proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument, and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ties), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which such person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature [Seal] ------------------------------------------- EXHIBIT A FORM OF SALE AND SERVICING AGREEMENT A-1 EXHIBIT B FORM OF CLASS A-1 NOTE UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUST OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OF FUND OF THE UNITED STATES. THE PRINCIPAL OF THIS NOTE IS PAYABLE IN FULL ON THE DATE SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. HARLEY-DAVIDSON MOTORCYCLE TRUST [________] ___% HARLEY-DAVIDSON MOTORCYCLE CONTRACT, CLASS A-1 REGISTERED $ No. R- CUSIP No. ___________________ Harley-Davidson Motorcycle Trust [________], a business trust organized and existing under the laws of the State of Delaware (herein referred to as the "Issuer"), for value received, hereby promises to pay to [________], or registered assigns, the principal sum of ___________ ($_____) payable on the earlier of _______, ____ (the "Class A-1 Final Distribution Date") and the Redemption Date, if any, pursuant to Section 10.01 of the Indenture referred to on the reverse hereof. The Issuer will pay interest on this Note at the rate per annum shown above on each Distribution Date until the principal of this Note is paid or made available for payment, on the principal amount of this Note outstanding on the preceding Distribution Date (after giving effect to all payments of principal made on the preceding Distribution Date), subject to certain limitations contained on Section 3.01 of the Indenture. Interest on this Note will accrue for each Distribution Date from the most recent Distribution Date on which interest has been paid to but excluding such Distribution Date or, if no interest has yet been paid, from the Closing Date. Interest will be computed on the basis of a 360-day year of twelve B-1 30-day months. Such principal of and interest on this Note shall be paid the manner specified on the reverse hereof. The principal of and interest on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Issuer with respect to this Note shall be applied first to interest due and payable on this Note as provided above and then to the unpaid principal of this Note. Reference is made to the further provisions of this Note set forth on the reverse hereof, which shall have the same effect as though fully set forth on the face of this Note. Unless the certificate of authentication hereon has been executed by the Indenture Trustee whose name appears below by manual signature, this Note shall not be entitled to any benefit under the indenture referred to on the reverse hereof, or be valid or obligatory for any purpose. B-2 IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually or in facsimile, by an Authorized Officer, as of the date set forth below. Date: ____________ HARLEY-DAVIDSON MOTORCYCLE TRUST [________] By: [____________], not in its individual capacity but solely on behalf of the Issuer as Owner Trustee, under the Trust Agreement By: __________________________________ Printed Name:_________________________ Title:________________________________ B-3 INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes designated above and referred to in the within-mentioned Indenture. [_______________________] not in its individual capacity but solely as Indenture Trustee By: _____________________________ Authorized Signatory B-4 [REVERSE OF CLASS A-1 NOTE] This Note is one of a duly authorized issue of Notes of the Issuer, designated as its ___% Harley-Davidson Motorcycle Contract Backed Notes, Class A-1 (the "Class A-1 Notes"), all issued under an Indenture, dated as of [________] (the "Indenture"), among the Issuer and [_____________], as Indenture Trustee (the "Indenture Trustee"), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuer, the Indenture Trustee and the Holders of the Notes. The Class A-1 Notes are subject to all terms of the Indenture. All terms used in this Note that are defined in the Indenture, as supplemented or amended, shall have the meanings assigned to them in or pursuant to the Indenture, as so supplemented or amended. The Class A-1 Notes, the Class A-2 Notes and Class B Notes (collectively, the "Notes") are and will be equally and ratably secured by the collateral pledged as security therefor as provided in the Indenture subject to the subordination of the Class B Notes under certain circumstances. Principal of the Class A-1 Notes will be payable on the earlier of the Class A-1 Final Distribution Date. Notwithstanding the foregoing, the entire unpaid principal amount of the Class A-1 Notes shall be due and payable on the date following the occurrence of an Event of Default on which the maturity of the Notes shall have been accelerated in the manner provided in the Indenture. All principal payments on the Class A-1 Notes shall be made pro rata to the Class A-1 Noteholders entitled thereto. Payments of interest on this Note due and payable on each Distribution Date shall be made by check to the Person whose name appears as the Registered Holder of this Note (or one or more Predecessor Notes) on the Note Register as of the close of business on each Record Date except that with respect to Notes registered on the Record Date in the name of the nominee of the Clearing Agency (initially, such nominee to be Cede & Co.), payments will be made by wire transfer in immediately available funds to the account designated by such nominee. Such checks shall be mailed to the Person entitled thereto at the address of such Person as it appears on the Note Register as of the applicable Record Date without requiring that this Note be submitted for notation of payment. Any reduction in the principal amount of this Note (or any one or more Predecessor Notes) affected by any payments made on any Distribution Date shall be binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the then remaining unpaid principal amount of this Note on a Distribution Date, then the Indenture Trustee, in the name of and on behalf of the Issuer, will notify the Person who was the Registered Holder hereof as of the Record Date preceding such Distribution Date by notice mailed transmitted by facsimile on such Record Date if Book-Entry Notes are outstanding or mailed not later than three Business Days after such Record Date if Definitive Notes are outstanding and the amount then due and payable shall be payable only upon presentation and surrender of this Note at the Corporate Trust Office of the Indenture Trustee or at the office of the Indenture Trustee's agent appointed for such purposes located in the City of Chicago, Illinois. B-5 The Issuer shall pay interest on overdue installments of interest on this Note at the Class A-1 Rate to the extent lawful. As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by, the Holder hereof or his attorney duly authorized in writing, with such signature guaranteed by an eligible guarantor institution which is a participant in the Securities Transfer Agent's Medallion Program (STAMP) or similar signature guarantee program, and such other documents as the Indenture Trustee may require, and thereupon one or more new program, and such other documents as the Indenture Trustee may require, and thereupon one or more new Notes of authorized denominations and in the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be charged for any registration of transfer or exchange of this Note, but the transferor may be required to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such registration of transfer or exchange. Each Noteholder by acceptance of a Note or a beneficial interest in a Note covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or employee of the Indenture Trustee or the Owner Trustee in its individual capacity, any holder of a beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee or of any successor or assign of the Indenture Trustee or the Owner Trustee in its individual capacity, except as any such Person may have expressly agreed and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity. Each Noteholder, by acceptance of a Note or a beneficial interest in a Note covenants and agrees that by accepting the benefits of the Indenture and such Note that such Noteholder will not at any time institute against the Trust Depositor or the Issuer, or join in any institution against the Trust Depositor or the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Notes, the Indenture or the Transaction Documents. The Issuer has entered into the Indenture, and this Note is issued with the intention that, for federal, state and local income, single business and franchise tax purposes, the Notes will qualify as indebtedness of the Issuer secured by the Collateral. Each Noteholder, by acceptance of a Note (and each Noteholder by acceptance of a beneficial interest in a Note), agrees to treat the Notes for the federal, state and local income, single business and franchise tax purposes as indebtedness of the Issuer. B-6 Prior to the due presentment for registration of transfer of this Note, the Issuer and the Indenture Trustee and any agent of the Issuer and the Indenture Trustee may treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Issuer, the Indenture Trustee nor any such agent shall be affected by notice to the contrary. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Noteholders under the Indenture at any time by the Issuer with the consent of the Noteholders representing not less than 50% of the Outstanding Amount of the Class A-1 Notes and the Class A-2 Notes, voting together as a single class, or, if there are no Class A-1 Notes or Class A-2 Notes Outstanding, with the consent of the Noteholders representing not less than 50% of the Outstanding Amount of the Class B Notes. The Indenture also contains provisions permitting the Noteholders representing specified percentages of the Outstanding Amount of the Notes, on behalf of the Noteholders, to waive compliance by the Issuer with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Noteholder (or any one of more Predecessor Notes) shall be conclusive and binding upon such Holders and upon all future Noteholders and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. The Indenture also permits the Indenture Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of Noteholders issued thereunder. The Notes are issuable only in registered form in denominations as provided in the Indenture, subject to certain limitations therein set forth. This Note and the Indenture shall be construed in accordance with the laws of the State of Illinois, and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place, and rate, and in the coin or currency herein prescribed. B-7 EXHIBIT C FORM OF CLASS A-2 NOTE UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUST OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OF FUND OF THE UNITED STATES. THE PRINCIPAL OF THIS NOTE IS PAYABLE IN FULL ON THE DATE SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. HARLEY-DAVIDSON MOTORCYCLE TRUST [________] ___% HARLEY-DAVIDSON MOTORCYCLE CONTRACT, CLASS A-2 REGISTERED $ No. R- CUSIP No. ____________ Harley-Davidson Motorcycle Trust [________], a business trust organized and existing under the laws of the State of Delaware (herein referred to as the "Issuer"), for value received, hereby promises to pay to [___________], or registered assigns, the principal sum of ___________ ($__________) payable on the earlier of _______, ____ (the "Class A-2 Final Distribution Date") and the Redemption Date, if any, pursuant to Section 10.01 of the Indenture referred to on the reverse hereof. No payments of principal of the Class A-2 Notes shall be made until the principal on the Class A-1 Notes have been paid in full. The Issuer will pay interest on this Note at the rate per annum shown above on each Distribution Date until the principal of this Note is paid or made available for payment, on the principal amount of this Note outstanding on the preceding Distribution Date (after giving effect to all payments of principal made on the preceding Distribution Date), subject to certain limitations contained in the Indenture. Interest on this Note will accrue for each Distribution Date from the most recent Distribution Date on which interest has been paid to C-1 but excluding such Distribution Date or, if no interest has yet been paid, from the Closing Date. Interest will be computed on the basis of a 360-day year of twelve 30-day months. Such principal of and interest on this Note shall be paid in the manner specified on the reverse hereof. The principal of and interest on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Issuer with respect to this Note shall be applied first to interest due and payable on this Note as provided above and then to the unpaid principal of this Note. Reference is made to the further provisions of this Note set forth on the reverse hereof, which shall have the same effect as though fully set forth on the face of this Note. Unless the certificate of authentication hereon has been executed by the Indenture Trustee whose name appears below by manual signature, this Note shall not be entitled to any benefit under the indenture referred to on the reverse hereof, or be valid or obligatory for any purpose. C-2 IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually or in facsimile, by an Authorized Officer, as of the date set forth below. Date: ____________ HARLEY-DAVIDSON MOTORCYCLE TRUST [________] By: [____________], not in its individual capacity but solely on behalf of the Issuer as Owner Trustee, under the Trust Agreement By: __________________________________ Printed Name:_________________________ Title:________________________________ C-3 INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes designated above and referred to in the within-mentioned Indenture. [____________________] not in its individual capacity but solely as Indenture Trustee By: _____________________________ Authorized Signatory C-4 [REVERSE OF CLASS A-2 NOTE] This Note is one of a duly authorized issue of Notes of the Issuer, designated as its ___% Harley-Davidson Motorcycle Contract, Class A-2 (the "Class A-2 Notes"), all issued under an Indenture, dated as of [________] (the "Indenture"), among the Issuer and [______________], as Indenture Trustee (the "Indenture Trustee"), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuer, the Indenture Trustee and the Holders of the Notes. The Notes are subject to all terms of the Indenture. All terms used in this Note that are defined in the Indenture, as supplemented or amended, shall have the meanings assigned to them in or pursuant to the Indenture, as so supplemented or amended. The Class A-1 Notes, the Class A-2 Notes and the Class B Notes (collectively, the "Notes") are and will be equally and ratably secured by the collateral pledged as security therefor as provided in the Indenture subject to no payment of principal on the Class A-2 Notes until all principal has been paid on the Class A-1 Notes and the subordination of the Class B Notes. Principal of the Class A-2 Notes will be payable on the Class A-2 Final Distribution Date. Notwithstanding the foregoing, the entire unpaid principal amount of the Class A-2 Notes shall be due and payable on the date following the occurrence of an Event of Default on which the maturity of the Notes shall have been accelerated in the manner provided in the Indenture. All principal payments on the Class A-2 Notes shall be made pro rata to the Class A-2 Noteholders entitled thereto. Payments of interest on this Note due and payable on each Distribution Date shall be made by check mailed to the Person whose name appears as the Registered Holder of this Note (or one or more Predecessor Notes) on the Note Register as of the close of business on each Record Date, except that with respect to Notes registered on the Record Date in the name of nominee of the Clearing Agency (initially, such nominee to be Cede & Co.), payments will be made by wire transfer in immediately available funds to the account designated by such nominee. Such checks shall be mailed to the Person entitled thereto at the address of such Person as it appears on the Note Register as of the applicable Record Date without requiring that this Note be submitted for notation of payment. Any reduction in the principal amount of this Note (or any one or more Predecessor Notes) affected by any payments made on any Distribution Date shall be binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the then remaining unpaid principal amount of this Note on a Distribution Date, then the Indenture Trustee, in the name of and on behalf of the Issuer, will notify the Person who was the Registered Holder hereof as of the Record Date preceding such Distribution Date by notice transmitted by facsimile on such Record Date if Book-Entry Notes are outstanding or mailed not later than three Business Days after such Record Date if Definitive Notes are outstanding and the amount then due and payable shall be payable only upon presentation and surrender of this Note at the Indenture Trustee's principal Corporate Trust Office or at the office of the Indenture Trustee's agent appointed for such purposes located in the City of Chicago, Illinois. C-5 The Issuer shall pay interest on overdue installments of interest on this Note at the Class A-2 Rate to the extent lawful. As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by, the Holder hereof or his attorney duly authorized in writing, with such signature guaranteed by an eligible guarantor institution which is a participant in the Securities Transfer Agent's Medallion Program (STAMP) or similar signature guarantee program, and such other documents as the Indenture Trustee may require, and thereupon one or more new program, and such other documents as the Indenture Trustee may require, and thereupon one or more new Class A-2 Notes of authorized denomination and in the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be charged for any registration of transfer or exchange of this Note, but the transferor may be required to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such registration of transfer or exchange. Each Noteholder, by acceptance of a Note or a beneficial interest in a Note covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Indenture Trustee or the Owner Trustee in their individual capacities, (ii) any owner of a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or employee of the Indenture Trustee or the Owner Trustee in their individual capacities, any holder of a beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee or of any successor or assign of the Indenture Trustee or the Owner Trustee in their individual capacities, except as any such Person may have expressly agreed and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity. Each Noteholder, by acceptance of a Note or a beneficial interest in a Note covenants and agrees that by accepting the benefits of the Indenture and such Note that such Noteholder will not at any time institute against the Trust Depositor or the Issuer, or join in any institution against the Trust Depositor or the Issuer of any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Notes, the Indenture or the Transaction Documents. The Issuer has entered into the Indenture, and this Note is issued with the intention that, for federal, state and local income, single business and franchise tax purposes, the Notes will qualify as indebtedness of the Issuer secured by the Collateral. Each Noteholder, by acceptance of a Note or of a beneficial interest in a Note, agrees to treat the Notes for the C-6 federal, state and local income, single business and franchise tax purposes as indebtedness of the Issuer. Prior to the due presentment for registration of transfer of this Note, the Issuer and the Indenture Trustee and any agent of the Issuer, the Indenture Trustee may treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Issuer, the Indenture Trustee nor any such agent shall be affected by notice to the contrary. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Noteholders under the Indenture at any time by the Issuer with the consent of the Noteholders representing not less than 50% of the Outstanding Amount of the Class A-1 Notes and the Class A-2 Notes, voting together as a single class, or, if there are no Class A-1 Notes or Class A-2 Notes Outstanding, with the consent of the Noteholders representing not less than 50% of the Outstanding Amount of the Class B Notes. The Indenture also contains provisions permitting the Noteholders representing specified percentages of the Outstanding Amount of the Notes, on behalf of the Noteholders, to waive compliance by the Issuer with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Noteholder (or any one of more Predecessor Notes) shall be conclusive and binding upon such Holders and upon all future Noteholders and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. The Indenture also permits the Indenture Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of Noteholders issued thereunder. The Notes are issuable only in registered form in denominations as provided in the Indenture, subject to certain limitations therein set forth. This Note and the Indenture shall be construed in accordance with the laws of the State of Illinois, and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place, and rate, and in the coin or currency herein prescribed. C-7 EXHIBIT D FORM OF CLASS B NOTE UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUST OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OF FUND OF THE UNITED STATES. THE PRINCIPAL OF THIS NOTE IS PAYABLE IN FULL ON THE DATE SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. HARLEY-DAVIDSON MOTORCYCLE TRUST [________] ___% HARLEY-DAVIDSON MOTORCYCLE CONTRACT, CLASS B REGISTERED $ No. R- CUSIP No. ____________ Harley-Davidson Motorcycle Trust [________], a business trust organized and existing under the laws of the State of Delaware (herein referred to as the "Issuer"), for value received, hereby promises to pay to [___________], or registered assigns, the principal sum of ___________ ($__________) payable on the earlier of _______, ____ (the "Class B Final Distribution Date") and the Redemption Date, if any, pursuant to Section 10.01 of the Indenture referred to on the reverse hereof. No payments of principal of the Class B Notes shall be made until the principal on the Class A-1 Notes and the Class A-2 Notes have been paid in full. The Issuer will pay interest on this Note at the rate per annum shown above on each Distribution Date until the principal of this Note is paid or made available for payment, on the principal amount of this Note outstanding on the preceding Distribution Date (after giving effect to all payments of principal made on the preceding Distribution Date), subject to certain limitations contained in the Indenture. Interest on this Note will accrue for each Distribution Date from the most recent Distribution Date on which interest has been paid to D-1 but excluding such Distribution Date or, if no interest has yet been paid, from the Closing Date. Interest will be computed on the basis of a 360-day year of twelve 30-day months. Such principal of and interest on this Note shall be paid in the manner specified on the reverse hereof. The principal of and interest on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Issuer with respect to this Note shall be applied first to interest due and payable on this Note as provided above and then to the unpaid principal of this Note. Reference is made to the further provisions of this Note set forth on the reverse hereof, which shall have the same effect as though fully set forth on the face of this Note. Unless the certificate of authentication hereon has been executed by the Indenture Trustee whose name appears below by manual signature, this Note shall not be entitled to any benefit under the indenture referred to on the reverse hereof, or be valid or obligatory for any purpose. D-2 IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually or in facsimile, by an Authorized Officer, as of the date set forth below. Date: ____________ HARLEY-DAVIDSON MOTORCYCLE TRUST [________] By: [____________], not in its individual capacity but solely on behalf of the Issuer as Owner Trustee, under the Trust Agreement By: __________________________________ Printed Name:_________________________ Title:________________________________ D-3 INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes designated above and referred to in the within-mentioned Indenture. [_______________________] not in its individual capacity but solely as Indenture Trustee By: _____________________________ Authorized Signatory D-4 [REVERSE OF CLASS B NOTE] This Note is one of a duly authorized issue of Notes of the Issuer, designated as its ___% Harley-Davidson Motorcycle Contract, Class B (the "Class B Notes"), all issued under an Indenture, dated as of [________] (the "Indenture"), among the Issuer and [______________], as Indenture Trustee (the "Indenture Trustee"), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuer, the Indenture Trustee and the Holders of the Notes. The Notes are subject to all terms of the Indenture. All terms used in this Note that are defined in the Indenture, as supplemented or amended, shall have the meanings assigned to them in or pursuant to the Indenture, as so supplemented or amended. The Class A-1 Notes, the Class A-2 Notes and the Class B Notes (collectively, the "Notes") are and will be equally and ratably secured by the collateral pledged as security therefor as provided in the Indenture subject to no payment of principal on the Class A-2 Notes until all principal has been paid on the Class A-1 Notes and the Class A-2 Notes. Principal of the Class B Notes will be payable on the Class B Final Distribution Date. Notwithstanding the foregoing, the entire unpaid principal amount of the Class B Notes shall be due and payable on the date following the occurrence of an Event of Default on which the maturity of the Notes shall have been accelerated in the manner provided in the Indenture. All principal payments on the Class B Notes shall be made pro rata to the Class B Noteholders entitled thereto. Payments of interest on this Note due and payable on each Distribution Date shall be made by check mailed to the Person whose name appears as the Registered Holder of this Note (or one or more Predecessor Notes) on the Note Register as of the close of business on each Record Date, except that with respect to Notes registered on the Record Date in the name of nominee of the Clearing Agency (initially, such nominee to be Cede & Co.), payments will be made by wire transfer in immediately available funds to the account designated by such nominee. Such checks shall be mailed to the Person entitled thereto at the address of such Person as it appears on the Note Register as of the applicable Record Date without requiring that this Note be submitted for notation of payment. Any reduction in the principal amount of this Note (or any one or more Predecessor Notes) affected by any payments made on any Distribution Date shall be binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the then remaining unpaid principal amount of this Note on a Distribution Date, then the Indenture Trustee, in the name of and on behalf of the Issuer, will notify the Person who was the Registered Holder hereof as of the Record Date preceding such Distribution Date by notice transmitted by facsimile on such Record Date if Book-Entry Notes are outstanding or mailed not later than three Business Days after such Record Date if Definitive Notes are outstanding and the amount then due and payable shall be payable only upon presentation and surrender of this Note at the Indenture Trustee's principal Corporate Trust Office or at the office of the Indenture Trustee's agent appointed for such purposes located in the City of Chicago, Illinois. D-5 The Issuer shall pay interest on overdue installments of interest on this Note at the Class B Rate to the extent lawful. As provided in the Indenture, the Notes may be redeemed pursuant to Section 10.01(a) of the Indenture, in whole, but not in part, at the option of the Seller, on any Distribution Date on or after the date on which the unpaid Aggregate Principal Balance is less than 10% of the sum of (i) the Aggregate Principal Balance as of the Cutoff Date and (ii) the Pre-Funded Amount on the Closing Date. As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by, the Holder hereof or his attorney duly authorized in writing, with such signature guaranteed by an eligible guarantor institution which is a participant in the Securities Transfer Agent's Medallion Program (STAMP) or similar signature guarantee program, and such other documents as the Indenture Trustee may require, and thereupon one or more new program, and such other documents as the Indenture Trustee may require, and thereupon one or more new Class A-2 Notes of authorized denomination and in the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be charged for any registration of transfer or exchange of this Note, but the transferor may be required to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such registration of transfer or exchange. Each Noteholder, by acceptance of a Note or a beneficial interest in a Note covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Indenture Trustee or the Owner Trustee in their individual capacities, (ii) any owner of a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or employee of the Indenture Trustee or the Owner Trustee in their individual capacities, any holder of a beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee or of any successor or assign of the Indenture Trustee or the Owner Trustee in their individual capacities, except as any such Person may have expressly agreed and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity. Each Noteholder, by acceptance of a Note or a beneficial interest in a Note covenants and agrees that by accepting the benefits of the Indenture and such Note that such Noteholder will not at any time institute against the Trust Depositor or the Issuer, or join in any institution against the Trust Depositor or the Issuer of any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Notes, the Indenture or the Transaction Documents. D-6 The Issuer has entered into the Indenture, and this Note is issued with the intention that, for federal, state and local income, single business and franchise tax purposes, the Notes will qualify as indebtedness of the Issuer secured by the Collateral. Each Noteholder, by acceptance of a Note or of a beneficial interest in a Note, agrees to treat the Notes for the federal, state and local income, single business and franchise tax purposes as indebtedness of the Issuer. Prior to the due presentment for registration of transfer of this Note, the Issuer and the Indenture Trustee and any agent of the Issuer, the Indenture Trustee may treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Issuer, the Indenture Trustee nor any such agent shall be affected by notice to the contrary. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Noteholders under the Indenture at any time by the Issuer with the consent of the Noteholders representing not less than 50% of the Outstanding Amount of the Class A-1 Notes and the Class A-2 Notes, voting together as a single class, or, if there are no Class A-1 Notes or Class A-2 Notes Outstanding, with the consent of the Noteholders representing not less than 50% of the Outstanding Amount of the Class B Notes. The Indenture also contains provisions permitting the Noteholders representing specified percentages of the Outstanding Amount of the Notes, on behalf of the Noteholders, to waive compliance by the Issuer with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Noteholder (or any one of more Predecessor Notes) shall be conclusive and binding upon such Holders and upon all future Noteholders and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. The Indenture also permits the Indenture Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of Noteholders issued thereunder. The Notes are issuable only in registered form in denominations as provided in the Indenture, subject to certain limitations therein set forth. This Note and the Indenture shall be construed in accordance with the laws of the State of Illinois, and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place, and rate, and in the coin or currency herein prescribed. D-7 EXHIBIT E FORM OF ASSIGNMENT FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE - -------------------------------------------------------------------------- (Please print or type name and address, including postal zip code, of assignee) - -------------------------------------------------------------------------- the within Note, and all rights thereunder, hereby irrevocably constituting and appointing - -------------------------------------------------------------------------- to transfer said Note on the books kept for registration thereof, with full power of substitution in the premises. Dated: --------------------------------------- Signature Guaranteed: - --------------------------------------------- Signature must be guaranteed by an eligible guarantor institution which is a participant in the Securities Transfer Agent's Medallion Program (STAMP) or similar signature guarantee program. - --------------------------------------------- Notice: The signature(s) on this assignment must correspond with the name(s) as it appears on the face of the within Note in every particular, without alteration or enlargement or any change whatsoever. - ------------------------------------- (Authorized Officer) E-1 EXHIBIT F FORM OF NOTE DEPOSITORY AGREEMENT F-1 EX-5.1 7 EXHIBIT 5.1 EXHIBIT 5.1 Form of Opinion of Winston & Strawn with respect to Legality May 22, 2000 Harley-Davidson Customer Funding Corp., as Trust Depositor 150 South Wacker Chicago, Illinois 60606 Re: Asset-Backed Notes and Asset-Backed Certificates Registration Statement on Form S-3 (Registration No. 333- ) ----------------------------------------------------------------- Ladies and Gentlemen: We have acted as special counsel to Harley-Davidson Customer Funding Corp. (the "COMPANY"), as depositor of the trusts (each, a "TRUST") to be created to issue asset-backed notes (the "NOTES") and asset-backed certificates (the "CERTIFICATES", and together with the Notes, the "SECURITIES"), in connection with the filing of the Registration Statement on Form S-3 (Registration No. 333-___________) (such registration statement, together with the exhibits and any amendments thereto, the "REGISTRATION STATEMENT"), registering the Notes and Certificates. The Registration Statement has been filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "SECURITIES ACT"). As described in the Registration Statement, the Notes and Certificates will be issued under and pursuant to the terms of one or more Pooling and Servicing Agreements, Sale and Servicing Agreements, Trust Agreements and Indentures (collectively, the "AGREEMENTS" and each, individually, an "AGREEMENT"). Capitalized terms used but not defined herein have the meanings given to them in the Registration Statement. This opinion letter is being delivered to you pursuant to the requirements of Item 601(b)(5) of Regulation S-K under the Securities Act. We are familiar with the proceedings to date with respect to the proposed issuance and delivery of the Securities and have examined copies of the Articles of Incorporation and by-laws of the Company, the Registration Statement and the prospectus and prospectus supplements included therein, the form of each Agreement and such other documents, records and questions of law, and satisfied ourselves as to such matters of fact, as we have considered relevant and necessary as a basis for this opinion letter. In our examination, we have assumed the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies and the authenticity of the originals of such latter documents. In making our examination of documents that will be executed in connection with the issuance of the Securities, we have assumed that the parties to such documents will have at the time of execution of such documents, the power, corporate or other, to enter into and perform all obligations thereunder and have also assumed the due authorization by all requisite action, corporate or other, and execution and delivery by such parties of such documents and the validity and binding effect of such documents. As to any facts material to the opinions expressed herein which we did not independently establish or verify, we have relied upon oral and written statements and representations of officers and other representatives of the Company and others. In addition, we have also relied upon the accuracy and completeness of all certificates and other statements, representations, documents, records, financial statements and papers reviewed by us, and the accuracy and completeness of all representations, warranties, schedules and exhibits contained in such documents, with respect to the factual matters set forth therein. Based on the foregoing, we are of the opinion that when (i) the Registration Statement, as finally amended, has become effective under the Securities Act, (ii) the terms, prices and interest rates of the Securities have been duly approved by the Board of Directors, (iii) the applicable Agreements relating to such Securities have been duly executed and delivered by the parties thereto in substantially the forms filed as exhibits to the Registration Statement, (iv) with respect to each Trust which will issue the Securities, the Certificate of Trust for such Trust has been duly executed and filed by the Owner Trustee with the Secretary of State of the State of Delaware, (v) the Indenture pursuant to which the Notes will be issued has been qualified under the Trust Indenture Act of 1939, as amended, (vi) the purchasers of the Securities shall have paid the purchase price therefor and the Securities have been duly executed and authenticated in accordance with the applicable Agreements pertaining to them, the Securities will be legally issued, fully paid and non-assessable and will be legally valid and binding obligations of the issuing Trust as issuer of such Securities enforceable in accordance with their terms, and entitled to the benefits of the applicable Agreements (subject to the effect of bankruptcy, fraudulent conveyance or transfer, insolvency, reorganization, arrangement, liquidation, conservatorship and moratorium laws and subject to the limitations imposed by other laws and judicial decisions relating to or affecting the rights of creditors generally, to general principles of equity, regardless of whether enforcement is considered in proceedings in equity or at law, and to an implied covenant of good faith and fair dealing). We do not find it necessary for the purposes of this opinion letter to cover, and accordingly we express no opinion as to, the application of the securities or blue sky laws of the various states to the offering of the Securities. -2- This opinion letter is limited to the laws of the United States of America and the States of Illinois and New York, and we express no opinion with respect to the laws of any other state or jurisdiction. Our opinions set forth in this letter are based on the facts in existence and the laws in effect on the date hereof and we expressly disclaim any obligation to update our opinions herein, regardless of whether changes in such facts or laws come to our attention after the delivery hereof. We hereby consent to the filing of this opinion letter as an Exhibit to the Registration Statement and to all references to our firm included in or made a part of the Registration Statement. In giving such consent, we do not concede that we are experts within the meaning of the Securities Act or the rules and regulations thereunder or that this consent is required by Section 7 of the Securities Act. Very truly yours, /s/ Winston & Strawn -3- EX-8.1 8 EXHIBIT 8.1 EXHIBIT 8.1 Form of Opinion of Winston & Strawn with respect to Tax Matters May 22, 2000 Re: Harley-Davidson Customer Funding Corp. Registration Statement on Form S-3 (Reg. No. 333- ) -------------------------------------------------------------- Ladies and Gentlemen: We have acted as special federal tax counsel to Harley-Davidson Customer Funding Corp., a Nevada corporation (the "REGISTRANT"), in connection with the proposed issuance and sale of its Harley-Davidson Motorcycle Contract Backed Notes (collectively, the "Notes") and/or Harley-Davidson Motorcycle Contract Backed Certificates (collectively, the "Certificates") to be issued from the Harley-Davidson Motorcycle Trusts, limited purpose Delaware business trusts (each, a "TRUST"). The property of the Trust will include retail installment contracts relating to the purchase of new or used motorcycles. The Notes will be issued pursuant to an indenture (the "INDENTURE") between the applicable Trust and an indenture trustee. As special tax counsel to Registrant, we have expressed our opinion regarding the material United States federal income tax consequences of the proposed issuance of the Notes and Certificates to the holders thereof. Our opinion is contained in the sections titled "MATERIAL FEDERAL INCOME TAX CONSEQUENCES" in the prospectus and prospectus supplement relating to the Notes (the "PROSPECTUS"), which is a part of the Registration Statement on Form S-3 (the "REGISTRATION STATEMENT") filed with the Securities and Exchange Commission (the "COMMISSION") initially on May 22, 2000, under the Securities Act of 1933, as amended (the "Act"), for the registration of the Notes and Certificates under the Act. We hereby adopt and confirm as our opinion that the statements contained in the section of the Prospectus titled "MATERIAL FEDERAL INCOME TAX CONSEQUENCES", to the extent that they concern matters of United States federal income tax law, are correct in all material respects. Our opinion is based upon the current provisions of the Code, Treasury Regulations promulgated thereunder, current administrative rulings, judicial decisions, and other applicable authorities, all as in effect on the date of such opinions. All of the foregoing authorities are subject to change or new interpretation, both prospectively and retroactively, and such changes or interpretation, as well as the changes in the facts as they have been represented to us or assumed by us, could affect our opinions. Our opinion does not foreclose the possibility of a contrary determination by the Internal Revenue Service (the "IRS") or by a court of competent jurisdiction, or of a contrary position by the IRS or Treasury Department in regulations or rulings issued in the future. Furthermore, our opinion assumes that all the transactions contemplated by the Prospectus will be consummated in accordance with the terms of the Prospectus, including without limitation, that holders of Notes will treat such Notes as indebtedness. We hereby consent to the filing of this letter as an exhibit to the Registration Statement and to a reference to this firm (as counsel to the Registrant) under the heading "Material Federal Income Tax Consequences" and "Legal Matters" in the Prospectus forming a part of the Registration Statement, without implying or admitting that we are "experts" within the meaning of the Act or the rules and regulations of the Commission issued thereunder, with respect to any part of the Registration Statement, including this exhibit. Very truly yours, /s/ Winston & Strawn -2- EX-10.1 9 EXHIBIT 10.1 EXHIBIT 10.1 =============================================================================== FORM OF TRANSFER AND SALE AGREEMENT by and between HARLEY-DAVIDSON CREDIT CORP., as Seller and HARLEY-DAVIDSON CUSTOMER FUNDING CORP., as Purchaser Dated as of [____________] ===============================================================================
TABLE OF CONTENTS ARTICLE I DEFINITION.............................................................................................1 SECTION 1.01. GENERAL.......................................................................................1 ARTICLE II TRANSFER OF CONTRACTS; ASSIGNMENT OF AGREEMENT.........................................................1 SECTION 2.01. CLOSING.......................................................................................1 SECTION 2.02. CONDITIONS TO THE CLOSING.....................................................................2 SECTION 2.03. ASSIGNMENT OF AGREEMENT.......................................................................3 SECTION 2.04. SUBSEQUENT CONTRACTS..........................................................................4 ARTICLE III REPRESENTATIONS AND WARRANTIES........................................................................5 SECTION 3.01. REPRESENTATIONS AND WARRANTIES REGARDING SELLER...............................................6 SECTION 3.02. REPRESENTATIONS AND WARRANTIES REGARDING EACH CONTRACT........................................7 SECTION 3.03. REPRESENTATIONS AND WARRANTIES REGARDING THE CONTRACTS IN THE AGGREGATE......................11 SECTION 3.04. REPRESENTATIONS AND WARRANTIES REGARDING THE CONTRACT FILES..................................12 ARTICLE IV PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS...........................................12 SECTION 4.01. CUSTODY OF CONTRACTS.........................................................................12 SECTION 4.02. FILING.......................................................................................13 SECTION 4.03. NAME CHANGE OR RELOCATION....................................................................13 SECTION 4.04. CHIEF EXECUTIVE OFFICE.......................................................................13 SECTION 4.05. COSTS AND EXPENSES...........................................................................13 SECTION 4.06. SALE TREATMENT...............................................................................13 ARTICLE V REMEDIES UPON MISREPRESENTATION........................................................................14 SECTION 5.01. REPURCHASES OF CONTRACTS FOR BREACH OF REPRESENTATIONS AND WARRANTIES........................14 SECTION 5.02. SELLER'S REPURCHASE OPTION...................................................................14 ARTICLE VI INDEMNITIES...........................................................................................15 SECTION 6.01. SELLER INDEMNIFICATION.......................................................................15 SECTION 6.02. LIABILITIES TO OBLIGORS......................................................................15 SECTION 6.03. TAX INDEMNIFICATION..........................................................................15 SECTION 6.04. OPERATION OF INDEMNITIES.....................................................................16 ARTICLE VII MISCELLANEOUS........................................................................................16 SECTION 7.01. PROHIBITED TRANSACTIONS WITH RESPECT TO THE TRUST............................................16 SECTION 7.02. MERGER OR CONSOLIDATION......................................................................16 SECTION 7.03. TERMINATION..................................................................................16 SECTION 7.04. ASSIGNMENT OR DELEGATION BY SELLER...........................................................17 SECTION 7.05. AMENDMENT....................................................................................17 SECTION 7.06. NOTICES......................................................................................18 SECTION 7.07. MERGER AND INTEGRATION.......................................................................19 SECTION 7.08. HEADINGS.....................................................................................19 SECTION 7.09. GOVERNING LAW................................................................................19
-i-
EXHIBITS Exhibit A Form of Assignment Exhibit B Form of Officer's Certificate Exhibit C Form of Subsequent Purchase Agreement
-ii- THIS AGREEMENT, dated as of [____________], is made by and between Harley-Davidson Credit Corp., a Nevada corporation, as seller hereunder (together with its successors and assigns "HARLEY-DAVIDSON CREDIT" or "SELLER"), and Harley-Davidson Customer Funding Corp., a Nevada corporation and wholly-owned subsidiary of Seller (together with its successors and assigns "TRUST DEPOSITOR"), as purchaser hereunder. WHEREAS, in the regular course of its business, Seller purchases and services motorcycle conditional sales contracts from Harley-Davidson motorcycle retailers, each of which contracts provides for installment payment obligations by or on behalf of the retailer's customer/purchaser and grants a security interest in a motorcycle in order to secure such obligations; WHEREAS, Seller and Trust Depositor wish to set forth the terms and conditions pursuant to which Trust Depositor will acquire from time to time the "CONTRACT ASSETS," as hereinafter defined; and WHEREAS, Trust Depositor intends concurrently with its purchases from time to time of Contract Assets hereunder to convey all right, title and interest in such Contract Assets to Harley-Davidson Motorcycle Trust [_____] (the "TRUST") pursuant to the Sale and Servicing Agreement dated as of [____________] by and among Trust Depositor, Harley-Davidson Credit, as Servicer, and Harley-Davidson Motorcycle Trust [_____], as issuer (the "ISSUER") (as amended, supplemented or otherwise modified from time to time, the "SALE AND SERVICING AGREEMENT"), executed concurrently herewith; NOW, THEREFORE, in consideration of the premises and the mutual agreements hereinafter set forth, Seller and Trust Depositor agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. GENERAL. Unless otherwise defined in this Agreement, capitalized terms used herein (including in the preamble above) shall have the meanings assigned to them in the Sale and Servicing Agreement. ARTICLE II TRANSFER OF CONTRACTS; ASSIGNMENT OF AGREEMENT SECTION 2.01. CLOSING. Subject to and upon the terms and conditions set forth in this Agreement, Seller hereby sells, transfers, assigns, sets over and otherwise conveys to Trust Depositor, in consideration of Trust Depositor's payment of [$____________] in cash as the purchase price therefor, (i) all the right, title and interest of Seller in and to the Initial Contracts listed on the initial List of Contracts in effect on the Closing Date (including, without limitation, all security interests and all rights to receive payments which are collected pursuant thereto on or after the Initial Cutoff Date, including any liquidation proceeds therefrom, but excluding any rights to receive payments which were collected pursuant thereto prior to the Initial Cutoff Date), (ii) all rights of Seller under any physical damage or other individual insurance policy (including a "FORCED PLACED" policy, if any) relating to any such Contract, an Obligor or a Motorcycle securing such Contract, (iii) all security interests in each such Motorcycle, (iv) all documents contained in the related Contract Files, (v) all rights of Seller in the Lockbox, Lockbox Account and related Lockbox Agreement to the extent they relate to the Contracts, (vi) all rights (but not the obligations) of the Seller under any motorcycle dealer agreements between the dealers (i.e. the originators of the Contracts) and the Seller, and (vii) all proceeds and products of the foregoing (items (i) - (vii), together with the additional assets referred to in Section 2.04 below which may be transferred from time to time in respect of Subsequent Contracts, being collectively referred to herein as the "CONTRACT ASSETS"). Although Seller and Trust Depositor agree that any such transfer is intended to be a sale of ownership in the Contract Assets, rather than the mere granting of a security interest to secure a borrowing, in the event such transfer is deemed to be of a mere security interest to secure indebtedness, Seller shall be deemed to have granted Trust Depositor a perfected first priority security interest in such Contract Assets and this Agreement shall constitute a security agreement under applicable law. If such transfer is deemed to be the mere granting of a security interest to secure a borrowing, Trust Depositor may, to secure Trust Depositor's own borrowing under the Sale and Servicing Agreement (to the extent that the transfer of the Contract Assets thereunder is deemed to be a mere granting of a security interest to secure a borrowing) repledge and reassign (i) all or a portion of the Contract Assets pledged to Trust Depositor and not released from the security interest of this Agreement at the time of such pledge and assignment, and (ii) all proceeds thereof. Such repledge and reassignment may be made by Trust Depositor with or without a repledge and reassignment by Trust Depositor of its rights under this Agreement, and without further notice to or acknowledgment from Seller. Seller waives, to the extent permitted by applicable law, all claims, causes of action and remedies, whether legal or equitable (including any right of setoff), against Trust Depositor or any assignee of Trust Depositor relating to such action by Trust Depositor in connection with the transactions contemplated by the Sale and Servicing Agreement. SECTION 2.02. CONDITIONS TO THE CLOSING. On or before the Closing Date, Seller shall deliver or cause to be delivered to Trust Depositor each of the documents, certificates and other items as follows: (a) The initial List of Contracts, certified by the Chairman of the Board, President or any Vice President of Seller together with an Assignment substantially in the form attached as EXHIBIT A hereto. (b) A certificate of an officer of Seller substantially in the form of EXHIBIT B hereto. (c) An opinion of counsel for Seller substantially in the form of EXHIBIT D to the Sale and Servicing Agreement. 2 (d) A letter or letters from Arthur Andersen LLP, or another nationally recognized accounting firm, addressed to Trust Depositor and the Issuer and the Trustees and stating that such firm has reviewed a sample of the Initial Contracts and performed specific procedures for such sample with respect to certain contract terms and identifying those Initial Contracts which do not so conform. (e) Copies of resolutions of the Board of Directors of Seller or of the Executive Committee of the Board of Directors of Seller approving the execution, delivery and performance of this Agreement and the transactions contemplated hereunder, certified in each case by the Secretary or an Assistant Secretary of Seller. (f) Officially certified recent evidence of due incorporation and good standing of Seller under the laws of Nevada. (g) Evidence of proper filing with the appropriate offices in Nevada and Illinois of UCC financing statements executed by Seller as debtor/seller, naming Trust Depositor as secured party/purchaser and the Owner Trust as assignee, and listing the Contract Assets as collateral as well as evidence of proper filing with the appropriate offices in Delaware of UCC Financing statements executed by the Issuer as debtor, naming the Indenture Trustee, as assignee, and listing the Contract Assets as collateral. (h) An Officer's Certificate from Seller confirming that Seller's compliance officer has reviewed the original of each Initial Contract and each related Contract File, that each Initial Contract and related Contract File conforms in all material respects with the initial List of Contracts and each such Contract File is complete, that each document required be an original, and that the face of each original Initial Contract has been stamped with the following notation: "This Contract/Note is subject to a security interest granted to Harley-Davidson Motorcycle Trust [_____]. UCC-1 financing statements covering this Contract/Note have been filed with the Secretary of State of the State of Nevada and the Secretary of State of the State of Illinois. Such lien will be released only in connection with appropriate filings in such offices. Consequently, potential purchasers of this Contract/Note must refer to such filings to determine whether such lien has been released." (i) The documents, certificates and other items described in Section 2.02 of the Sale and Servicing Agreement, to the extent not already described above. SECTION 2.03. ASSIGNMENT OF AGREEMENT. Trust Depositor has the right to assign its interest under this Agreement to the Issuer and Owner Trustee as may be required to effect the purposes of the Sale and Servicing Agreement, without further notice to, or consent of, Seller, and the Issuer and the Trustees shall succeed to such of the rights of Trust Depositor hereunder 3 as shall be so assigned. Seller acknowledges that, pursuant to the Sale and Servicing Agreement, the Trust Depositor will assign all of its right, title and interest in and to the Contract Assets and all of its rights hereunder to the Issuer and that the Issuer will pledge the Contract Assets and all of the Depositor's rights hereunder to the Indenture Trustee for the benefit of the Noteholders and Certificateholders. The Seller agrees that, upon such assignment to the Issuer and the Indenture Trustee, such rights will run to and be for the benefit of the Issuer and the Indenture Trustee and the Issuer and the Indenture Trustee may enforce directly without joinder of the Depositor, the obligations of the Seller set forth herein. SECTION 2.04. SUBSEQUENT CONTRACTS. (a) Subject to and upon the terms and conditions set forth in paragraph (b) below and in the related Subsequent Purchase Agreement, Seller hereby agrees to sell, transfer, assign, set over and otherwise convey to Trust Depositor, in consideration of Trust Depositor's payment on the related Subsequent Transfer Date of the purchase price therefor (as set forth in the related Subsequent Purchase Agreement), and Trust Depositor hereby agrees to purchase, (i) all the right, title and interest of Seller in and to the Subsequent Contracts listed on the related Subsequent List of Contracts (including, without limitation, all security interests and all rights to receive payments which are collected pursuant thereto on or after the applicable Subsequent Cutoff Date, including any liquidation proceeds therefrom, but excluding any rights to receive payments which were collected pursuant thereto prior to such Subsequent Cutoff Date), (ii) all rights of Seller under any physical damage or other individual insurance policy (including a "FORCED PLACED" policy, if any) relating to any such Contract, an Obligor or a Motorcycle securing such Contract, (iii) all security interests in each such Motorcycle, (iv) all documents contained in the related Contract Files, (v) all rights of Seller in the Lockbox, Lockbox Account and related Lockbox Agreement to the extent they relate to the Contracts, (vi) all rights (but not the obligations) of the Seller under any motorcycle dealer agreements between the dealers (I.E. the originators of such Subsequent Contracts) and the Seller, and (vii) all proceeds and products of the foregoing (items (i) - (vii), upon consummation of any above-described purchase, becoming part of the "CONTRACT ASSETS"). Seller agrees, subject to the terms and conditions herein applicable to transfers of Subsequent Contracts, to sell an aggregate Principal Balance of Subsequent Contracts at or prior to the end of the Funding Period equal to the Pre-Funded Amount on the Closing Date. (b) Seller shall transfer to Trust Depositor, and Trust Depositor shall purchase, the Subsequent Contracts and related assets to be transferred on any Subsequent Transfer Date only upon the satisfaction of each of the following conditions on or prior to the Subsequent Transfer Date: (i) The Seller shall have provided the Trustees, the Underwriters and the Rating Agencies with a timely Addition Notice and shall have provided any information reasonably requested by any of the foregoing with respect to the Subsequent Contracts; (ii) the Funding Period shall not have terminated; 4 (iii) the Seller shall have delivered to the Trust Depositor a duly executed Purchase Agreement and Assignment in substantially the form of EXHIBIT C hereto (the "SUBSEQUENT PURCHASE AGREEMENT"), which shall include a Subsequent List of Contracts listing the Subsequent Contracts being purchased; (iv) as of each Subsequent Transfer Date, neither the Seller nor the Trust Depositor was insolvent nor will either of them have been made insolvent by such transfer nor is either of them aware of any pending insolvency; (v) each Rating Agency shall have notified the Trust Depositor and the Trustees in writing that following such transfer, and the transfer immediately thereafter of the Subsequent Contracts to the Trust, the Class A-1 Notes and the Class A-2 Notes will be rated in the highest rating category by such Rating Agency and the Class B Notes will be rated at least "BBB" by Standard & Poor's and "BAA1" by Moody's; (vi) such addition will not result in a material adverse tax consequence to the Issuer, the Noteholders as evidenced by an Opinion of Counsel to be delivered by the Seller to the Issuer, the Trustees, and the Underwriters; (vii) the Seller shall have delivered to the Rating Agencies and to the Underwriters one or more opinions of counsel with respect to the transfer of the Subsequent Contracts substantially in the form of the opinions of counsel delivered to such Persons on the Closing Date; (viii) the Seller shall have taken any action necessary to maintain the first perfected ownership interest of the Trust in the Trust Corpus and the first perfected security interest of the Trust Depositor in the Contract Assets, the Trust in the Trust Corpus and the Indenture Trustee in the Reserve Fund Deposits; and (ix) no selection procedures believed by the Seller to be adverse to the interests of the Noteholders shall have been utilized in selecting the Subsequent Contracts. (c) Seller agrees to pay all reasonable out-of-pocket expenses in connection with any request for the conveyance of Subsequent Contracts, whether or not such conveyance is actually consummated. ARTICLE III REPRESENTATIONS AND WARRANTIES Seller makes the following representations and warranties, on which Trust Depositor will rely in purchasing the initial Contract Assets on the Closing Date (and any Subsequent Contracts on the related Subsequent Transfer Date) and concurrently reconveying the same to the Trust, and on which the Trust, the Noteholders will rely under the Sale and Servicing Agreement. Such 5 representations speak as of the execution and delivery of this Agreement and as of the Closing Date in the case of the Initial Contracts, and as of the applicable Subsequent Transfer Date in the case of Subsequent Contracts, but shall survive the sale, transfer and assignment of the Contracts to the Trust and the pledge of the Contracts to the Indenture Trustee. The repurchase obligation of Seller set forth in Section 5.01 below and in Section 7.08 of the Sale and Servicing Agreement constitutes the sole remedy available for a breach of a representation or warranty of Seller set forth in Section 3.02, 3.03 or 3.04 of this Agreement. SECTION 3.01. REPRESENTATIONS AND WARRANTIES REGARDING SELLER. Seller represents and warrants, as of the execution and delivery of this Agreement and as of the Closing Date, in the case of the Initial Contracts, and as of the applicable Subsequent Transfer Date, in the case of Subsequent Contracts, that: (a) ORGANIZATION AND GOOD STANDING. Seller is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has the corporate power to own its assets and to transact the business in which it is currently engaged. Seller is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which the character of the business transacted by it or properties owned or leased by it requires such qualification and in which the failure so to qualify would have a material adverse effect on the business, properties, assets, or condition (financial or otherwise) of Seller or Trust Depositor. Seller is properly licensed in each jurisdiction to the extent required by the laws of such jurisdiction to service the Contracts in accordance with the terms of the Sale and Servicing Agreement. (b) AUTHORIZATION; BINDING OBLIGATION. Seller has the power and authority to make, execute, deliver and perform this Agreement and the other Transaction Documents to which the Seller is a party and all of the transactions contemplated under this Agreement and the other Transaction Documents to which the Seller is a party, and has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement and the other Transaction Documents to which the Seller is a party. This Agreement and the other Transaction Documents to which the Seller is a party constitute the legal, valid and binding obligation of Seller enforceable in accordance with their terms, except as enforcement of such terms may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and by the availability of equitable remedies. (c) NO CONSENT REQUIRED. Seller is not required to obtain the consent of any other party or any consent, license, approval or authorization from, or registration or declaration with, any governmental authority, bureau or agency in connection with the execution, delivery, performance, validity or enforceability of this Agreement and the other Transaction Documents to which the Seller is a party. (d) NO VIOLATIONS. Seller's execution, delivery and performance of this Agreement and the other Transaction Documents to which the Seller is a party will not 6 violate any provision of any existing law or regulation or any order or decree of any court or the Articles of Incorporation or Bylaws of Seller, or constitute a material breach of any mortgage, indenture, contract or other agreement to which Seller is a party or by which Seller or any of Seller's properties may be bound. (e) LITIGATION. No litigation or administrative proceeding of or before any court, tribunal or governmental body is currently pending, or to the knowledge of Seller threatened, against Seller or any of its properties or with respect to this Agreement or any other Transaction Document to which the Seller is a party which, if adversely determined, would in the opinion of Seller have a material adverse effect on the business, properties, assets or condition (financial or other) of Seller or the transactions contemplated by this Agreement or any other Transaction Document to which the Seller is a party. (f) PLACE OF BUSINESS; NO CHANGES. Seller's sole place of business (within the meaning of Article 9 of the UCC) is as set forth in Section 7.06 below. Seller has not changed its name whether by amendment of its Articles of Incorporation, by reorganization or otherwise, and has not changed the location of its place of business, within the four months preceding the Closing Date. (g) OPERATIONS. Approximately [_____]% of the aggregate principal balance of contracts financed from time to time by the Seller are secured by motorcycles manufactured by Buell. SECTION 3.02. REPRESENTATIONS AND WARRANTIES REGARDING EACH CONTRACT. Seller represents and warrants as to each Contract as of the execution and delivery of this Agreement and as of the Closing Date, in the case of the Initial Contracts, and as of the applicable Subsequent Transfer Date, in the case of Subsequent Contracts, that: (a) LIST OF CONTRACTS. The information set forth in the List of Contracts (or Subsequent List of Contracts, in the case of Subsequent Contracts) is true, complete and correct in all material respects as of the Initial Cutoff Date or applicable Subsequent Cutoff Date, as the case may be. (b) PAYMENTS. As of the Initial Cutoff Date or applicable Subsequent Cutoff Date, as the case may be, the most recent scheduled payment with respect to any Contract either had been made or was not delinquent for more than 30 days. To the best of Seller's knowledge, all payments made on each Contract were made by the respective Obligor. (c) NO WAIVERS. As of the Closing Date (or the applicable Subsequent Transfer Date, in the case of Subsequent Contracts), the terms of the Contracts have not been waived, altered or modified in any respect, except by instruments or documents included in the related Contract File. 7 (d) BINDING OBLIGATION. Each Contract is the genuine, legal, valid and binding obligation of the Obligor thereunder and is enforceable in accordance with its terms, except as such enforceability may be limited by insolvency, bankruptcy, moratorium, reorganization or other similar laws affecting the enforcement of creditors' rights generally. (e) NO DEFENSES. No Contract is subject to any right of rescission, setoff, counterclaim or defense, including the defense of usury, and the operation of any of the terms of such Contract or the exercise of any right thereunder will not render the Contract unenforceable in whole or in part or subject to any right of rescission, setoff, counterclaim or defense, including the defense of usury, and no such right of rescission, setoff, counterclaim or defense has been asserted with respect thereto. (f) INSURANCE. As of the time of origination of the Contract, the related Motorcycle securing each Contract is covered by physical damage insurance (i) in an amount not less than the value of the Motorcycle at the time of origination of the Contract, (ii) naming Seller as a loss payee and (iii) insuring against loss and damage due to fire, theft, transportation, collision and other risks covered by comprehensive coverage, and all premiums due on such insurance have been paid in full from the date of the Contract's origination. (g) ORIGINATION. Each Contract was originated by a Harley-Davidson motorcycle dealer in the regular course of its business which dealer had all necessary licenses and permits to originate the Contracts in the state where such dealer was located, was fully and properly executed by the parties thereto, and has been purchased by Seller in the regular course of its business. Each Contract was sold by such motorcycle dealer to the Seller without any fraud or misrepresentation on the part of such motorcycle dealer. (h) LAWFUL ASSIGNMENT. No Contract was originated in or is subject to the laws of any jurisdiction whose laws would make the sale, transfer and assignment of the Contract under this Agreement or under the Sale and Servicing Agreement or the pledge of the Contract under the Indenture unlawful, void or voidable. (i) COMPLIANCE WITH LAW. None of the Contracts, the origination of the Contracts by the dealers, the purchase of the Contracts by the Seller, the sale of the Contracts by the Seller to the Trust Depositor or by the Trust Depositor to the Trust, or any combination of the foregoing, violated as of the Closing Date or as of any Subsequent Transfer Date, as applicable, any requirement of any federal, state or local law and regulations thereunder, including, without limitation, usury, truth in lending, motor vehicle installment loan and equal credit opportunity laws, applicable to the Contracts and the sale of Motorcycles. Seller shall, for at least the period of this Agreement, maintain in its possession, available for the Trust Depositor's and the 8 Trustees' inspection, and shall deliver to Trust Depositor or the Trustee upon demand, evidence of compliance with all such requirements. (j) CONTRACT IN FORCE. As of the Closing Date (or the applicable Subsequent Transfer Date in the case of Subsequent Contracts), no Contract has been satisfied or subordinated in whole or in part or rescinded, and the related Motorcycle securing any Contract has not been released from the lien of the Contract in whole or in part. (k) VALID SECURITY INTEREST. Each Contract creates a valid, subsisting and enforceable first priority perfected security interest in favor of Seller in the Motorcycle covered thereby, and such security interest has been assigned by Seller to the Trust Depositor. The original certificate of title, certificate of lien or other notification (the "LIEN CERTIFICATE") issued by the body responsible for the registration of, and the issuance of certificates of title relating to, motor vehicles and liens thereon (the "REGISTRAR OF TITLES") of the applicable state to a secured party which indicates the lien of the secured party on the Motorcycle is recorded on the original certificate of title, and the original certificate of title for each Motorcycle, show, or if a new or replacement Lien Certificate is being applied for with respect to such Motorcycle the Lien Certificate will be received within 180 days of the Closing Date (or the applicable Subsequent Transfer Date in the case of Subsequent Contracts) and will show, the Seller as original secured party under each Contract as the holder of a first priority security interest in such Motorcycle. With respect to each Contract for which the Lien Certificate has not yet been returned from the Registrar of Titles, the Seller has received written evidence from the related dealer that such Lien Certificate showing the Seller as lienholder has been applied for. The Seller's security interest has been validly assigned by the Seller to the Trust Depositor and by the Trust Depositor to the Issuer and Owner Trustee pursuant to this Agreement. Immediately after the sale, each Contract will be secured by an enforceable and perfected first priority security interest in the Motorcycle in favor of the Trust as secured party, which security interest is prior to all other liens upon and security interests in such Motorcycle which now exist or may hereafter arise or be created (except, as to priority, for any lien for taxes, labor, materials or of any state law enforcement agency affecting a Motorcycle). (l) CAPACITY OF PARTIES. All parties to any Contract had capacity to execute such Contract and all other documents related thereto and to grant the security interest purported to be granted thereby. (m) GOOD TITLE. Each Contract was purchased by Seller for value and taken into possession prior to the Cutoff Date (or the applicable Subsequent Cutoff Date in the case of Subsequent Contracts) in the ordinary course of its business, without knowledge that the Contract was subject to a security interest. No Contract has been sold, assigned or pledged to any person other than Trust Depositor and the Trustee as the transferee of Trust Depositor, and prior to the transfer of the Contract to Trust Depositor, Seller had good and marketable title to each Contract free and clear of any encumbrance, equity, 9 loan, pledge, charge, claim or security interest and was the sole owner thereof and had full right to transfer the Contract to Trust Depositor and to permit Trust Depositor to transfer the same to the Issuer and the Owner Trustee, and, as of the Closing Date (or the applicable Subsequent Transfer Date in the case of Subsequent Contracts), the Issuer and the Owner Trustee will have a first priority perfected security interest therein. (n) NO DEFAULTS. As of the Initial Cutoff Date (or the applicable Subsequent Cutoff Date in the case of Subsequent Contracts), no default, breach, violation or event permitting acceleration existed with respect to any Contract and no event had occurred which, with notice and the expiration of any grace or cure period, would constitute such a default, breach, violation or event permitting acceleration under such Contract. Seller has not waived any such default, breach, violation or event permitting acceleration. As of the Initial Cutoff Date (or the applicable Subsequent Cutoff Date in the case of Subsequent Contracts), no Motorcycle had been repossessed. (o) NO LIENS. As of the Closing Date (or the applicable Subsequent Transfer Date in the case of Subsequent Contracts) there are, to the best of Seller's knowledge, no liens or claims which have been filed for work, labor or materials affecting the Motorcycle securing any Contract which are or may be liens prior to, or equal with, the lien of such Contract. (p) INSTALLMENTS. Each Contract has a fixed Contract Rate and provides for monthly payments of principal and interest which, if timely made, would fully amortize the loan on a simple-interest basis over its term. (q) ENFORCEABILITY. Each Contract contains customary and enforceable provisions such as to render the rights and remedies of the holder thereof adequate for the realization against the collateral of the benefits of the security. (r) ONE ORIGINAL. Each Contract is evidenced by only one original executed Contract, which original is being held by the Servicer as custodian. (s) NO GOVERNMENT CONTRACTS. No Obligor is the United States government or an agency, authority, instrumentality or other political subdivision of the United States government. (t) LOCKBOX BANK. The Lockbox Bank is the only institution holding any Lockbox Account for receipt of payments from Obligors, and all Obligors, and only such Obligors, have been instructed to make payments to the Lockbox Account, and no person claiming through or under Seller has any claim or interest in the Lockbox Account other than the Lockbox Bank; PROVIDED, HOWEVER, that other "Trusts" (as defined in the Lockbox Agreement) shall have an interest in certain other collections therein not related to the Contracts. 10 (u) OBLIGOR BANKRUPTCY. At the Cutoff Date (or the applicable Subsequent Cutoff Date in the case of Subsequent Contracts), no Obligor was subject to a bankruptcy proceeding. (v) CHATTEL PAPER. The Contracts constitute chattel paper within the meaning of the UCC as in effect in the States of Nevada and Illinois. (w) NO IMPAIRMENT. Neither the Seller nor the Trust Depositor has done anything to convey any right to any Person that would result in such Person having a right to payments due under the Contract or otherwise to impair the rights of the Trust in any Contract or the proceeds thereof. (x) CONTRACT NOT ASSUMABLE. No Contract is assumable by another Person in a manner which would release the Obligor thereof from such Obligor's obligations to the Trust Depositor with respect to such Contract. SECTION 3.03. REPRESENTATIONS AND WARRANTIES REGARDING THE CONTRACTS IN THE AGGREGATE. Seller represents and warrants, as of the execution and delivery of this Agreement and as of the Closing Date, in the case of the Initial Contracts, and as of the applicable Subsequent Transfer Date, in the case of Subsequent Contracts, that: (a) AMOUNTS. The sum of the aggregate Principal Balances payable by Obligors under the Contracts as of the Initial Cutoff Date (or the applicable Subsequent Cutoff Date in the case of Subsequent Contracts), plus the Pre-Funded Amount as of such date, equals the sum of the principal balance of the Notes [and Certificates] on the Closing Date or the related Subsequent Transfer Date, as applicable. (b) CHARACTERISTICS. The Initial Contracts have the following characteristics: (i) all the Contracts are secured by Motorcycles; (ii) no Initial Contract has a remaining maturity of more than [____] months; and (iii) the final scheduled payment on the Initial Contract with the latest maturity is due no later than [_________]. Approximately [____]% of the Principal Balance of the Initial Contracts as of the Initial Cutoff Date is attributable to loans for purchases of new Motorcycles and approximately [______]% is attributable to loans for purchases of used Motorcycles. No Initial Contract was originated after the Initial Cutoff Date. No Initial Contract has a Contract Rate less than [______]%. The first scheduled payment date of the Contracts (including any Subsequent Contracts) is due no later than [____________]. (c) MARKING RECORDS. As of the Closing Date (or the applicable Subsequent Transfer Date in the case of Subsequent Contracts), Seller has caused the Computer Disk relating to the Contracts sold hereunder and concurrently reconveyed by Trust Depositor to the Trust and pledged by the Trust to the Indenture Trustee to be clearly and unambiguously marked to indicate that such Contracts constitute part of the Trust Corpus, are owned by the Trust and constitute security for the Notes. 11 (d) NO ADVERSE SELECTION. No selection procedures adverse to Noteholders have been employed in selecting the Contracts. (e) TRUE SALE. The transaction contemplated by this Agreement constitutes a valid sale, transfer and assignment from Seller to Trust Depositor and from Trust Depositor to the Trust of all of Seller's right, title and interest in the Contract Assets as of the Closing Date and any Subsequent Transfer Date, as applicable. (f) ALL FILINGS MADE. All filings (including, without limitation, UCC filings) required to be made by any Person and actions required to be taken or performed by any Person in any jurisdiction to give the Trustee a first priority perfected lien on, or ownership interest in, the Contracts and the proceeds thereof and the rest of the Trust Corpus have been made, taken or performed. (g) DELTA LOANS. No more than [______]% of the Principal Balance of the Contracts as of the end of the Funding Period is attributable to Delta Loans. SECTION 3.04. REPRESENTATIONS AND WARRANTIES REGARDING THE CONTRACT FILES. Seller represents and warrants as of the execution and delivery of this Agreement and as of the Closing Date, in the case of the Initial Contracts, and as of the applicable Subsequent Transfer Date, in the case of Subsequent Contracts, that: (a) POSSESSION. Immediately prior to the Closing Date or any Subsequent Transfer Date, the Servicer will have possession of each original Contract and the related complete Contract File, and there are and there will be no custodial agreements relating to the same in effect. Each of such documents which is required to be signed by the Obligor has been signed by the Obligor in the appropriate spaces. All blanks on any form have been properly filled in and each form has otherwise been correctly prepared. The complete Contract File for each Contract currently is in the possession of the Servicer. (b) BULK TRANSFER LAWS. The transfer, assignment and conveyance of the Contracts and the Contract Files by Seller pursuant to this Agreement or any Subsequent Purchase Agreement and by Trust Depositor pursuant to the Sale and Servicing Agreement is not subject to the bulk transfer or any similar statutory provisions in effect in any applicable jurisdiction. ARTICLE IV PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS SECTION 4.01. CUSTODY OF CONTRACTS. Subject to the terms and conditions of this Section 4.01, the contents of each Contract File shall be held in the custody of Seller in its capacity as Servicer for the benefit of the Owner Trustee as the owner thereof. Seller agrees to comply with all its obligations under the Sale and Servicing Agreement in respect of the Contract Assets, 12 which agreement it is executing concurrently herewith in its capacity as Servicer thereunder, and acknowledges and consents to the transactions contemplated therein. SECTION 4.02. FILING. On or prior to the Closing Date and each Subsequent Transfer Date, Seller shall cause the UCC financing statement(s) referred to in Section 2.02(g) hereof and in Section 2.02(g) of the Sale and Servicing Agreement to be filed and from time to time Seller shall take and cause to be taken such actions and execute such documents as are necessary or desirable or as Trust Depositor or the Owner Trustee may reasonably request to perfect and protect the Owner Trustee's ownership interest in the Contract Assets against all other persons, including, without limitation, the filing of financing statements, amendments thereto and continuation statements, the execution of transfer instruments and the making of notations on or taking possession of all records or documents of title. SECTION 4.03. NAME CHANGE OR RELOCATION. (a) During the term of this Agreement, Seller shall not change its name, identity or structure or relocate its chief executive office without first giving at least 30 days' prior written notice to Trust Depositor and to the Trustees. (b) If any change in Seller's name, identity or structure or other action would make any financing or continuation statement or notice of ownership interest or lien filed under this Agreement seriously misleading within the meaning of applicable provisions of the UCC or any title statute, Seller, no later than five (5) days after the effective date of such change, shall file such amendments as may be required to preserve and protect the Trustees' interests in the Contract Assets and proceeds thereof. In addition, Seller shall not change its place of business or its chief executive office (within the meaning of Article 9 of the UCC) from the location specified in Section 7.06 below unless it has first taken such action as is advisable or necessary to preserve and protect the Issuer's and Trustees' interest in the Contract Assets. Promptly after taking any of the foregoing actions, Seller shall deliver to Trust Depositor and the Trustees an opinion of counsel stating that, in the opinion of such counsel, all financing statements or amendments necessary to preserve and protect the interests of the Trustees in the Contract Assets have been filed, and reciting the details of such filing. SECTION 4.04. CHIEF EXECUTIVE OFFICE. During the term of this Agreement, Seller will maintain its chief executive office in one of the States of the United States, except Louisiana, Tennessee, Colorado, Kansas, New Mexico, Oklahoma, Utah or Wyoming. SECTION 4.05. COSTS AND EXPENSES. Seller agrees to pay all reasonable costs and disbursements in connection with the perfection and the maintenance of perfection, as against all third parties, of (i) Trust Depositor's and the Trustees' right, title and interest in and to the Contract Assets (including, without limitation, the security interest in the Motorcycles related thereto) and (ii) the security interests provided for in the Indenture. SECTION 4.06. SALE TREATMENT. Each of Seller and Trust Depositor shall treat the transfer of Contract Assets made hereunder (including in respect of Subsequent Contracts) for all 13 purposes (including tax and financial accounting purposes) as a sale and purchase on all of its relevant books, records, financial statements and other applicable documents. ARTICLE V REMEDIES UPON MISREPRESENTATION SECTION 5.01. REPURCHASES OF CONTRACTS FOR BREACH OF REPRESENTATIONS AND WARRANTIES. Seller hereby agrees, for the benefit of the Trustees and the Trust Depositor, that it shall repurchase a Contract including any Subsequent Contracts (together with all related Contract Assets), at its Repurchase Price, not later than two Business Days prior to the first Determination Date after Seller becomes aware, or should have become aware, or receives written notice from Trust Depositor, either of the Trustees or the Servicer of any breach of a representation or warranty of Seller set forth in Article III of this Agreement that materially adversely affects Trust Depositor's or the Trust's interest in such Contract (without regard to the benefits of the Reserve Fund) and which breach has not been cured; PROVIDED, HOWEVER, that with respect to any Contract incorrectly described on the List of Contracts with respect to unpaid Principal Balance which Seller would otherwise be required to repurchase pursuant to this Section 5.01 and Section 7.08 of the Sale and Servicing Agreement, Seller may, in lieu of repurchasing such Contract, deposit in the Collection Account not later than two Business Days prior to such Determination Date cash in an amount sufficient to cure such deficiency or discrepancy; and PROVIDED FURTHER that with respect to a breach of a representation or warranty relating to the Contracts in the aggregate and not to any particular Contract, Seller may select Contracts (without adverse selection) to repurchase such that had such Contracts not been reconveyed by Trust Depositor and included as part of the Trust there would have been no breach of such representation or warranty; PROVIDED FURTHER that (a) the failure of a Contract File to be complete or of the original certificate of title and evidence of recordation of such certificate to be included in the Contract File as of 180 days after the Closing Date (or Subsequent Transfer Date, in the case of Subsequent Contracts), or (b) the failure to maintain perfection of the security interest in the Motorcycle securing a Contract in accordance with the Sale and Servicing Agreement, shall be deemed to be a breach materially and adversely affecting the Trust's interest in the Contracts or in the related Contract Assets. Notwithstanding any other provision of this Agreement, the obligation of Seller under this Section 5.01 and under Section 7.08 of the Sale and Servicing Agreement shall not terminate upon a Service Transfer pursuant to Article VIII of the Sale and Servicing Agreement. SECTION 5.02. SELLER'S REPURCHASE OPTION. On written notice to the Owner Trustee and the Indenture Trustee at least twenty (20) days prior to a Distribution Date, provided the sum of (i) the aggregate unpaid principal balances of the Class A-1 Notes, the Class A-2 Notes and the Class B Notes and (ii) the Certificate Balance on such Distribution Date is less than 10% of the Aggregate Principal Balance as of the Cutoff Date, the Seller may (but is not required to) repurchase from the Issuer on that Distribution Date all outstanding Contracts (and related Contract Assets) at a price equal to the sum of (i) the aggregate unpaid principal balances of the Class A-1 Notes, the Class A-2 Notes and the Class B Notes and (ii) the Certificate Balance as of that Distribution Date plus the aggregate of the Note Interest Distributable Amount and the 14 Certificate Interest Distributable Amount for the current Distribution Date as well as any unreimbursed Servicer Advances and the accrued and unpaid Monthly Servicing Fee and Indenture Trustee Fees to the date of such repurchase; provided the Seller is in receipt of a valuation letter by the Seller's financial advisor that the Seller's repurchase is for fair and adequate consideration. Such price will be deposited in the Collection Account not later than one Business Day before such Distribution Date, against the Trustees' release of the Contracts and Contract Files as described in Section 7.10 of the Sale and Servicing Agreement. ARTICLE VI INDEMNITIES SECTION 6.01. SELLER INDEMNIFICATION. Seller will defend and indemnify Trust Depositor, the Trust, the Trustees, any agents of the Trustees and the Securityholders against any and all costs, expenses, losses, damages, claims and liabilities, joint or several, including reasonable fees and expenses of counsel and expenses of litigation arising out of or resulting from (i) this Agreement or the use, ownership or operation of any Motorcycle by Seller or the Servicer or any Affiliate of either and (ii) any representation or warranty or covenant made by Seller in this Agreement being untrue or incorrect (subject to the second sentence of the preamble to Article III of this Agreement above). Notwithstanding any other provision of this Agreement, the obligation of Seller under this Section 6.01 shall not terminate upon a Service Transfer pursuant to Article VIII of the Sale and Servicing Agreement and shall survive any termination of that agreement or this Agreement. SECTION 6.02. LIABILITIES TO OBLIGORS. No obligation or liability to any Obligor under any of the Contracts is intended to be assumed by the Trustees, the Trust, the Securityholders under or as a result of this Agreement and the transactions contemplated hereby. SECTION 6.03. TAX INDEMNIFICATION. Seller agrees to pay, and to indemnify, defend and hold harmless the Trust Depositor, the Trust, the Trustees, the Securityholders from, any taxes which may at any time be asserted with respect to, and as of the date of, the transfer of the Contracts to Trust Depositor hereunder and the concurrent reconveyance to the Trust and the further pledge by the Trust to the Indenture Trustee, including, without limitation, any sales, gross receipts, general corporation, personal property, privilege or license taxes (but not including any federal, state or other taxes arising out of the creation of the Trust and the issuance of the Notes and Certificates) and costs, expenses and reasonable counsel fees in defending against the same, whether arising by reason of the acts to be performed by Seller under this Agreement or the Servicer under the Sale and Servicing Agreement or imposed against the Trust, a Noteholder, a Certificateholder or otherwise. Notwithstanding any other provision of this Agreement, the obligation of Seller under this Section 6.03 shall not terminate upon a Service Transfer pursuant to Article VIII of the Sale and Servicing Agreement and shall survive any termination of this Agreement. 15 SECTION 6.04. OPERATION OF INDEMNITIES. Indemnification under this Article VI shall include, without limitation, reasonable fees and expenses of counsel and expenses of litigation. If Seller has made any indemnity payments to Trust Depositor or the Trustees pursuant to this Article VI and Trust Depositor or the Trustees thereafter collects any of such amounts from others, Trust Depositor or the Trustees will repay such amounts collected to Seller, except that any payments received by Trust Depositor or the Trustees from an insurance provider as a result of the events under which the Seller's indemnity payments arose shall be repaid prior to any repayment of the Seller's indemnity payment. ARTICLE VII MISCELLANEOUS SECTION 7.01. PROHIBITED TRANSACTIONS WITH RESPECT TO THE TRUST. Seller shall not: (a) Provide credit to any Noteholder or Certificateholder for the purpose of enabling such Noteholder or Certificateholder to purchase Notes or Certificates, respectibely; (b) Purchase any Notes or Certificates in an agency or trustee capacity; or (c) Except in its capacity as Servicer as provided in the Sale and Servicing Agreement, lend any money to the Trust. SECTION 7.02. MERGER OR CONSOLIDATION. (a) Except as otherwise provided in this Section 7.02, Seller will keep in full force and effect its existence, rights and franchises as a Nevada corporation, and will obtain and preserve its qualification to do business as a foreign corporation in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Agreement and of any of the Contracts and to perform its duties under this Agreement. (b) Any person into which Seller may be merged or consolidated, or any corporation or other entity resulting from such merger or consolidation to which Seller is a party, or any person succeeding to the business of Seller, shall be the successor to Seller hereunder, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. (c) Upon the merger or consolidation of the Seller as described in this Section 7.02, the Seller shall provide Standard & Poor's and Moody's notice of such merger or consolidation within thirty (30) days after completion of the same. SECTION 7.03. TERMINATION. This Agreement shall terminate (after distribution of any Note Distributable Amount and Certificate Distributable Amount due pursuant to Section 7.05 of the Sale and Servicing Agreement) on the Distribution Date on which the principal balance of 16 the Notes and the Certificate Balance is reduced to zero; PROVIDED, that Seller's representations and warranties and indemnities by Seller shall survive termination. SECTION 7.04. ASSIGNMENT OR DELEGATION BY SELLER. Except as specifically authorized hereunder, Seller may not convey and assign or delegate any of its rights or obligations hereunder absent the prior written consent of Trust Depositor and the Trustees, and any attempt to do so without such consent shall be void. SECTION 7.05. AMENDMENT. (a) This Agreement may be amended from time to time by Seller and Trust Depositor, with notice to the Rating Agencies, but without the consent of the Trustees or any of the Securityholders, to correct manifest error, to cure any ambiguity, to correct or supplement any provisions herein or therein which may be ambiguous or inconsistent with any other provisions herein or therein, as the case may be, or to add any other provisions with respect to matters or questions arising under this Agreement which shall not be inconsistent with the provisions of this Agreement; PROVIDED, HOWEVER, that such action shall not, as evidenced by an Opinion of Counsel, materially and adversely affect the interests of any Securityholder. (b) This Agreement may also be amended from time to time by the Seller and the Depositor, with the consent of Noteholders of more than 50% of the aggregate principal amount of the Class A-1 Notes and Class A-2 Notes, or if there are no Class A-1 Notes or Class A-2 Notes outstanding, with the consent of Noteholders of more than 50% of the aggregate principal amount of the Class B Notes [or, if there are no Notes outstanding, the consent of Certificateholders of more than 50% of the Certificate Balance,] for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of the Noteholders or Certificateholders; PROVIDED, HOWEVER, that no such amendment or waiver shall (x) reduce in any manner the amount of, or accelerate or delay the timing of, collections of payments on the Contracts or distributions which are required to be made on any Note or Certificate, (y) change the interest rate on any Notes or Certificates which such change adversely affects the priority of payment of principal or interest made to the Noteholders or Certificateholders or (z) increase or reduce the aforesaid percentage required to consent to any such amendment, without the consent of the Noteholders and Certificateholders then outstanding; and PROVIDED, FURTHER, that no such amendment or consent shall be effective unless each Rating Agency delivers written confirmation that such amendment or consent will not cause its then-current rating on any Class of Notes or the Certificates to be qualified, reduced or withdrawn. (c) Promptly after the execution of any amendment or consent pursuant to this Section 7.05, Trust Depositor shall furnish written notification of the substance of such amendment and a copy of such amendment to each Trustee and each Rating Agency. (d) It shall not be necessary for the consent of Noteholders or Certificateholders under this Section 7.05 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent shall approve the substance thereof. The manner of obtaining such consents and of evidencing the authorization of the execution thereof by Noteholders and 17 Certificateholders shall be subject to such reasonable requirements as the Trustees may prescribe. (e) Upon the execution of any amendment or consent pursuant to this Section 7.05, this Agreement shall be modified in accordance therewith, and such amendment or consent shall form a part of this Agreement for all purposes, and every holder of Notes and or Certificates theretofore or thereafter issued hereunder shall be bound thereby. SECTION 7.06. NOTICES. All notices, demands, certificates, requests and communications hereunder ("notices") shall be in writing and shall be effective (a) upon receipt when sent through the U.S. mails, registered or certified mail, return receipt requested, postage prepaid, with such receipt to be effective the date of delivery indicated on the return receipt, or (b) one Business Day after delivery to an overnight courier, or (c) on the date personally delivered to an Authorized Officer of the party to which sent, or (d) on the date transmitted by legible telecopier transmission with a confirmation of receipt, in all cases addressed to the recipient as follows: (i) If to the Seller: Harley-Davidson Credit Corp. 150 South Wacker Drive, Suite 3100 Chicago, Illinois 60606 Attention: Perry A. Glassgow Telecopier No.: (312) 368-4372 (ii) If to the Trust Depositor: Harley-Davidson Customer Funding Corp. 4150 Technology Way Carson City, Nevada 89706 Telecopier No.: (775) 884-4469 (iii) If to the Indenture Trustee: -------------------------- -------------------------- -------------------------- Telecopier No.: ______________ (iv) If to the Owner Trustee: 18 -------------------------- -------------------------- -------------------------- Telecopier No.: ______________ (v) If to Moody's: Moody's Investors Service, Inc. 99 Church Street New York, New York 10007 Attention: ABS Monitoring Department Telecopier No.: (212) 553-1350 (vi) If to Standard & Poor's: Standard & Poor's Ratings Services, a division of The McGraw Hill Companies 55 Water Street New York, New York 10041 Telecopier No.: (212) 438-2657 Each party hereto may, by notice given in accordance herewith to each of the other parties hereto, designate any further or different address to which subsequent notices shall be sent. All communications and notices pursuant hereto to a Noteholder or Certificateholder shall be in writing and delivered or mailed at the address shown in the Note Register or Certificate Register, respectively. SECTION 7.07. MERGER AND INTEGRATION. Except as specifically stated otherwise herein, this Agreement sets forth the entire understanding of the parties relating to the subject matter hereof, and all prior understandings, written or oral, are superseded by this Agreement. This Agreement may not be modified, amended, waived, or supplemented except as provided herein. SECTION 7.08. HEADINGS. The headings herein are for purposes of reference only and shall not otherwise affect the meaning or interpretation of any provision hereof. SECTION 7.09. GOVERNING LAW. This Agreement shall be governed by, and construed and enforced in accordance with, the internal laws of the State of Illinois. [signature page follows] 19 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the date first written above. HARLEY-DAVIDSON CUSTOMER FUNDING CORP. By: __________________________________________ Printed Name: Perry A. Glassgow Title: Treasurer HARLEY-DAVIDSON CREDIT CORP. By:___________________________________________ Printed Name: Perry A. Glassgow Title: Treasurer Signature Page to Transfer and Sale Agreement Exhibit A Transfer and Sale Agreement FORM OF ASSIGNMENT In accordance with the Transfer and Sale Agreement (the "AGREEMENT") dated as of [____________] made by and between the undersigned, as seller thereunder ("SELLER"), and Harley-Davidson Customer Funding Corp., a Nevada corporation and wholly-owned subsidiary of Seller ("TRUST DEPOSITOR"), as purchaser thereunder, the undersigned does hereby sell, transfer, convey and assign, set over and otherwise convey to Trust Depositor (i) all right, title and interest in and to the Initial Contracts (including, without limitation, all security interests and any and all rights to receive payments which are collected pursuant thereto on or after the Initial Cutoff Date (including liquidation proceeds therefrom) but excluding any rights to receive payments which were collected pursuant thereto prior to the Initial Cutoff Date) identified in the initial List of Contracts delivered pursuant to Section 2.02(a) of the Agreement, (ii) all rights of Seller under any physical damage or other individual insurance policy (including a "FORCED PLACED" policy, if any) relating to any such Contract, an Obligor or a Motorcycle securing a Contract, (iii) all security interests in each such Motorcycle, (iv) all documents contained in the related Contract Files, (v) all rights of the Seller in the Lockbox, Lockbox Account and related Lockbox Agreement to the extent they relate to the Contracts, (vi) all rights (but not the obligations) of the Seller under any motorcycle dealer agreements between the dealers originating the Contracts and the Seller, and (vii) all proceeds and products of the foregoing. This Assignment is made pursuant to and in reliance upon the representation and warranties on the part of the undersigned contained in Article III of the Agreement and no others. Capitalized terms used herein but not otherwise defined shall have the meanings assigned to such terms in the Sale and Servicing Agreement dated as of [____________] made by and among the undersigned, as servicer, the Trust Depositor, Harley-Davidson Motorcycle Trust [_____], as issuer, and [_____________], as indenture trustee. IN WITNESS WHEREOF, the undersigned has caused this Assignment to be duly executed this ___ day of [_____________]. HARLEY-DAVIDSON CREDIT CORP. By:___________________________________________ Printed Name: Perry A. Glassgow Title: Treasurer A-1 Exhibit B Transfer of Sale Agreement FORM OF OFFICER'S CERTIFICATE (See Exhibit C to the Sale and Servicing Agreement) B-1 Exhibit C Transfer of Sale Agreement FORM OF SUBSEQUENT PURCHASE AGREEMENT SUBSEQUENT PURCHASE AGREEMENT (the "AGREEMENT"), dated as of ____________, _______, by and among Harley-Davidson Customer Funding Corp., a Nevada corporation (the "TRUST DEPOSITOR"), and Harley-Davidson Credit Corp., a Nevada corporation (the "SELLER"), pursuant to the Transfer and Sale Agreement referred to below. WITNESSETH: WHEREAS, the Trust Depositor and the Seller are parties to the Transfer and Sale Agreement, dated as of [____________] (the "TRANSFER AND SALE AGREEMENT"); WHEREAS, pursuant to the Transfer and Sale Agreement, the Seller wishes to sell the Subsequent Contracts to the Trust Depositor, and the Trust Depositor wishes to purchase the same, for the purchase price set forth in SECTION 3 below; and WHEREAS, the Seller has timely delivered an Addition Notice related to such conveyance as required in the Sale and Servicing Agreement dated as of [____________] among the Seller (in the capacity of Servicer thereunder), the Trust Depositor and the Trustee as defined therein (the "SALE AND SERVICING AGREEMENT"). NOW, THEREFORE, the Trust Depositor and the Seller hereby agree as follows: SECTION 1. Capitalized terms used herein shall have the meanings ascribed to them in the Sale and Servicing Agreement unless otherwise defined herein. "SUBSEQUENT CUTOFF DATE" shall mean, with respect to the Subsequent Contracts transferred hereby, [_________]. "SUBSEQUENT CONTRACTS" shall mean, for purposes of this Agreement, the Subsequent Contracts listed in the Subsequent List of Contracts attached hereto as Exhibit A. "SUBSEQUENT TRANSFER DATE" shall mean, with respect to the Subsequent Contracts transferred hereby, [__________]. SECTION 2. SUBSEQUENT LIST OF CONTRACTS. The Subsequent List of Contracts attached hereto as Exhibit A is a supplement to the initial List of Contracts attached as EXHIBIT H to the Sale and Servicing Agreement. The Contracts listed in the Subsequent List of Contracts C-1 constitute the Subsequent Contracts to be transferred pursuant to this Agreement on the subsequent Transfer Date. SECTION 3. TRANSFER OF SUBSEQUENT CONTRACTS. Subject to and upon the terms and conditions set forth in Section 2.04(b) of the Transfer and Sale Agreement and this Agreement, Seller hereby sells, transfers, assigns, sets over and otherwise conveys to Trust Depositor, in consideration of Trust Depositor's payment of $[_______] as the purchase price therefor, (i) all the right, title and interest of Seller in and to the Subsequent Contracts listed on the Subsequent List of Contracts (including, without limitation, all security interests and all rights to receive payments which are collected pursuant thereto on or after the Subsequent Cutoff Date, including any liquidation proceeds therefrom, but excluding any rights to receive payments which were collected pursuant thereto prior to the Subsequent Cutoff Date), (ii) all rights of Seller under any physical damage or other individual insurance policy (and rights under a "FORCED PLACED" policy, if any) relating to any such Contract, an Obligor or a Motorcycle securing such Contract, (ii) all security interests in each such Motorcycle, (iv) all documents contained in the related Contract Files, (v) all rights of the Seller in the Lockbox, the Lockbox Account and the related Lockbox Agreement to the extent they relate to such Contracts, (vi) all rights (but not the obligations) of Seller under any related motorcycle dealer agreements between dealers (i.e., the originators of such Contracts) and the Seller, and (vii) all proceeds and products of the foregoing. It is the intention of the Seller and the Trust Depositor that the transfer contemplated by this Agreement shall constitute a sale of the Subsequent Contracts from the Seller to the Trust Depositor, conveying good title thereto free and clear of any Liens, and that the Subsequent Contracts shall not be part of the Seller's estate in the event of the filing of a bankruptcy petition by or against Seller under any bankruptcy or similar law. SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE SELLER. (a) Seller hereby represents and warrants to the Trust Depositor that the representations and warranties of Seller in Section 3.01 of the Transfer and Sale Agreement are true and correct as of the Subsequent Transfer Date. (b) Seller hereby repeats and remakes with respect to the Subsequent Contracts as of the Subsequent Transfer Date (i) the representations and warranties of Seller in Sections 3.02, 3.03 and 3.04 of the Transfer and Sale Agreement, except that, with respect to subsection (b) of Section 3.03, (A) approximately _____% of the Principal Balance of the Contracts as of the Subsequent Cutoff Date is attributable to loans for purchases of new Motorcycles and approximately ___% is attributable to loans for purchases of used Motorcycles, and (B) no Contract was originated after the Subsequent Cutoff Date, as well as (ii) covenants to provide the certificate required by Section 2.02(h) (solely with respect to the Subsequent Contracts). (c) Seller hereby represents and warrants that (a) the aggregate Principal Balance of the Subsequent Contracts listed on the Subsequent List of Contracts and conveyed to the Trust Depositor pursuant to this Agreement is $[ ] as of the Subsequent Cutoff Date, and (b) the conditions set forth in Section 2.04(b) of the Transfer and Sale Agreement have been satisfied as of the Subsequent Transfer Date. C-2 SECTION 5. RATIFICATION OF AGREEMENT. As supplemented by this Agreement, the Transfer and Sale Agreement is in all respects ratified and confirmed and, as so supplemented by this Agreement, shall be read, taken and construed as one and the same instrument. SECTION 6. COUNTERPARTS. This Agreement may be executed in two or more counterparts (and by different parties in separate counterparts), each of which shall be an original but all of which together shall constitute one and the same instrument. SECTION 7. GOVERNING LAW. This Agreement shall be construed in accordance with the laws of the State of Illinois, without reference to its conflict of law provisions, and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws. C-3 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the date first written above. HARLEY-DAVIDSON CUSTOMER FUNDING CORP. By:____________________________________________ Printed Name: Perry A. Glassgow Title: Treasurer HARLEY-DAVIDSON CREDIT CORP. By:________________________________________________ Printed Name: Perry A. Glassgow Title: Treasurer EX-10.2 10 EXHIBIT 10.2 EXHIBIT 10.2 ================================================================================ FORM OF SALE AND SERVICING AGREEMENT among HARLEY-DAVIDSON MOTORCYCLE TRUST [________], as Issuer, HARLEY-DAVIDSON CUSTOMER FUNDING CORP., as Trust Depositor, HARLEY-DAVIDSON CREDIT CORP., as Servicer and [______________], as Indenture Trustee Dated as of [________] ================================================================================
PAGE TABLE OF CONTENTS ARTICLE ONE DEFINITIONS...............................................................................1 SECTION 1.01. DEFINITIONS...............................................................................1 SECTION 1.02. USAGE OF TERMS...........................................................................20 SECTION 1.03. SECTION REFERENCES.......................................................................20 SECTION 1.04. CALCULATIONS.............................................................................20 SECTION 1.05. ACCOUNTING TERMS.........................................................................20 ARTICLE TWO ESTABLISHMENT OF TRUST; TRANSFER OF CONTRACTS............................................20 SECTION 2.01. CLOSING..................................................................................20 SECTION 2.02. CONDITIONS TO THE CLOSING................................................................22 SECTION 2.03. ACCEPTANCE BY OWNER TRUSTEE..............................................................23 SECTION 2.04. CONVEYANCE OF SUBSEQUENT CONTRACTS.......................................................23 ARTICLE THREE REPRESENTATIONS AND WARRANTIES...........................................................26 SECTION 3.01. REPRESENTATIONS AND WARRANTIES REGARDING THE TRUST DEPOSITOR.............................27 SECTION 3.02. REPRESENTATIONS AND WARRANTIES REGARDING THE SERVICER....................................28 ARTICLE FOUR PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS..............................30 SECTION 4.01. CUSTODY OF CONTRACTS.....................................................................30 SECTION 4.02. FILING...................................................................................31 SECTION 4.03. NAME CHANGE OR RELOCATION................................................................32 SECTION 4.04. CHIEF EXECUTIVE OFFICE...................................................................32 SECTION 4.05. COSTS AND EXPENSES.......................................................................32 ARTICLE FIVE SERVICING OF CONTRACTS...................................................................32 SECTION 5.01. RESPONSIBILITY FOR CONTRACT ADMINISTRATION...............................................32 SECTION 5.02. STANDARD OF CARE.........................................................................33 SECTION 5.03. RECORDS..................................................................................33 SECTION 5.04. INSPECTION...............................................................................33 SECTION 5.05. TRUST ACCOUNTS...........................................................................33 SECTION 5.06. ENFORCEMENT..............................................................................35 SECTION 5.07. TRUSTEES TO COOPERATE....................................................................37 SECTION 5.08. COSTS AND EXPENSES.......................................................................37 SECTION 5.09. MAINTENANCE OF SECURITY INTERESTS IN MOTORCYCLES.........................................37 SECTION 5.10. SUCCESSOR SERVICER/LOCKBOX AGREEMENTS....................................................38 ARTICLE SIX THE TRUST DEPOSITOR......................................................................38 SECTION 6.01. CORPORATE EXISTENCE......................................................................38 SECTION 6.02. LIABILITY OF TRUST DEPOSITOR; INDEMNITIES................................................39 SECTION 6.03. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF, TRUST DEPOSITOR; CERTAIN LIMITATIONS......................................................................41 SECTION 6.04. LIMITATION ON LIABILITY OF TRUST DEPOSITOR AND OTHERS....................................42 SECTION 6.05. TRUST DEPOSITOR NOT TO RESIGN............................................................42 SECTION 6.06. TRUST DEPOSITOR WILL OWN CERTIFICATES....................................................42 ARTICLE SEVEN DISTRIBUTIONS; RESERVE FUND..............................................................42 SECTION 7.01. MONTHLY DISTRIBUTIONS....................................................................42 SECTION 7.02. FEES.....................................................................................42 SECTION 7.03. ADVANCES; REALIZATION OF CARRYING CHARGE.................................................43 SECTION 7.04. INTEREST RESERVE ACCOUNT.................................................................43 SECTION 7.05. DISTRIBUTIONS............................................................................44 SECTION 7.06. RESERVE FUND.............................................................................45 SECTION 7.07. ESTABLISHMENT OF PRE-FUNDING ACCOUNT.....................................................46 SECTION 7.08. REPURCHASES OF CONTRACTS FOR BREACH OF REPRESENTATIONS AND WARRANTIES....................47 SECTION 7.09. REASSIGNMENT OF REPURCHASED CONTRACTS....................................................48 SECTION 7.10. SELLER'S REPURCHASE OPTION...............................................................48 i ARTICLE EIGHT EVENTS OF TERMINATION; SERVICE TRANSFER..................................................48 SECTION 8.01. EVENTS OF TERMINATION....................................................................48 SECTION 8.02. SERVICE TRANSFER.........................................................................50 SECTION 8.03. SUCCESSOR SERVICER TO ACT; APPOINTMENT OF SUCCESSOR SERVICER.............................50 SECTION 8.04. NOTIFICATION TO SECURITYHOLDERS..........................................................51 SECTION 8.05. EFFECT OF TRANSFER.......................................................................51 SECTION 8.06. DATABASE FILE............................................................................52 SECTION 8.07. SUCCESSOR SERVICER INDEMNIFICATION.......................................................52 SECTION 8.08. RESPONSIBILITIES OF THE SUCCESSOR SERVICER...............................................52 ARTICLE NINE REPORTS..................................................................................54 SECTION 9.01. MONTHLY REPORTS..........................................................................54 SECTION 9.02. OFFICER'S CERTIFICATE....................................................................54 SECTION 9.03. OTHER DATA...............................................................................54 SECTION 9.04. ANNUAL REPORT OF ACCOUNTANTS.............................................................54 SECTION 9.05. ANNUAL STATEMENT OF COMPLIANCE FROM SERVICER.............................................55 SECTION 9.06. MONTHLY REPORTS TO SECURITYHOLDERS.......................................................56 ARTICLE TEN TERMINATION..............................................................................58 SECTION 10.01. SALE OF TRUST ASSETS.....................................................................58 ARTICLE ELEVEN MISCELLANEOUS............................................................................59 SECTION 11.01. AMENDMENT................................................................................59 SECTION 11.02. PROTECTION OF TITLE TO TRUST.............................................................60 SECTION 11.03. GOVERNING LAW............................................................................62 SECTION 11.04. NOTICES..................................................................................62 SECTION 11.05. SEVERABILITY OF PROVISIONS...............................................................64 SECTION 11.06. ASSIGNMENT...............................................................................64 SECTION 11.07. THIRD PARTY BENEFICIARIES................................................................64 SECTION 11.08. COUNTERPARTS.............................................................................64 SECTION 11.09. HEADINGS.................................................................................64 SECTION 11.10. LIMITATION OF LIABILITY OF OWNER TRUSTEE AND INDENTURE TRUSTEE...........................64
ii EXHIBITS Exhibit A Form of Assignment A-1 Exhibit B Form of Closing Certificate of Trust Depositor B-1 Exhibit C Form of Closing Certificate of Seller/Servicer C-1 Exhibit D Form of Opinion of Counsel for Trust Depositor regarding general corporate matters (including perfection opinion) D-1 Exhibit E Form of Opinion of Counsel for Trust Depositor regarding the "TRUE SALE" nature of the transaction E-1 Exhibit F Form of Opinion of Counsel for Trust Depositor regarding non-consolidation F-1 Exhibit G Form of Certificate Regarding Repurchased Contracts G-1 Exhibit H List of Contracts H-1 Exhibit I Form of Monthly Report to Noteholders and Certificateholders I-1 Exhibit J Seller's Representations and Warranties J-1 Exhibit K Lockbox Bank and Lockbox Account K-1 Exhibit L Form of Contract Stamp L-1 Exhibit M Form of Subsequent Transfer Agreement M-1
iii SALE AND SERVICING AGREEMENT, dated as of [________], among Harley-Davidson Motorcycle Trust [________] (together with its successors and assigns, the "ISSUER" or the "TRUST"), Harley-Davidson Customer Funding Corp. (together with its successor and assigns, the "TRUST DEPOSITOR"), [______________] (solely in its capacity as Indenture Trustee together with its successors and assigns, the "INDENTURE TRUSTEE") and Harley-Davidson Credit Corp. (solely in its capacity as Servicer together with its successor and assigns, "HARLEY-DAVIDSON CREDIT" or the "SERVICER"). WHEREAS the Issuer desires to purchase from the Trust Depositor an initial and subsequent pool of fixed-rate, simple interest motorcycle conditional sales contracts relating to Harley-Davidson motorcycles or, motorcycles manufactured by an affiliate of Harley-Davidson, Buell Motorcycle Company, (collectively, the "CONTRACTS") originated by Harley-Davidson Credit and subsequently sold by Harley-Davidson Credit to the Trust Depositor; WHEREAS the Trust Depositor is willing to sell the Contracts to the Issuer pursuant to the terms hereof; and WHEREAS the Servicer is willing to service the Contracts pursuant to the terms hereof; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows: ARTICLE ONE DEFINITIONS SECTION 1.01. DEFINITIONS. Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings: "ADDITION NOTICE" means, with respect to any transfer of Subsequent Contracts to the Issuer pursuant to Section 2.04 and the Trust Depositor's corresponding prior purchase of such Contracts from the Seller, a notice, which shall be given at least 10 days prior to the related Subsequent Transfer Date, identifying the aggregate Principal Balance of the Subsequent Contracts to be transferred. "ADMINISTRATION AGREEMENT" means the Administration Agreement dated as of the date hereof among the Issuer, Harley-Davidson Credit Corp., as administrator, the Trust Depositor and the Indenture Trustee, as amended, supplemented or otherwise modified from time to time. "ADVANCE" means, with respect to any Distribution Date, the amounts, if any, deposited by the Servicer in the Collection Account for such Distribution Date pursuant to Section 7.03. "AFFILIATE" of any specified Person means any other Person controlling or controlled by, or under common control with, such specified Person. For the purposes of this definition, 1 "CONTROL" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "CONTROLLING" or "CONTROLLED" have meanings correlative to the foregoing. "AGREEMENT" means this Sale and Servicing Agreement, as amended, supplemented or otherwise modified from time to time in accordance with the terms hereof. "AGGREGATE PRINCIPAL BALANCE" will equal the sum of the Principal Balances of each outstanding Contract and the Pre-Funded Amount, if any. At the time of initial issuance of the Securities, the initial aggregate principal amount of the Securities will equal the initial Pool Balance plus the initial Pre-Funded Amount. "AGGREGATE PRINCIPAL BALANCE DECLINE" means, with respect to any Distribution Date, the amount by which the Aggregate Principal Balance as of the Distribution Date immediately preceding such Distribution Date (or as of the Cutoff Date in the case of the first Distribution Date) exceeds the Certificate Balance and outstanding principal balance of the Class A-1 Notes, Class A-2 Notes and Class B Notes as of such Distribution Date. "AVAILABLE AMOUNT" means, with respect to any Distribution Date, the amount of funds on deposit in the Reserve Fund on such Distribution Date before giving effect to any unrealized investment earnings and any reduction thereto on such date. "AVAILABLE MONIES" means, with respect to any Distribution Date, the sum of the Available Interest and the Available Principal for such Distribution Date. "AVAILABLE INTEREST" means, with respect to any Distribution Date, the total (without duplication) of the following amounts received by the Servicer on or in respect of the Contracts during the related Due Period: (i) all amounts received in respect of interest on the Contracts, (ii) the interest component of all Net Liquidation Proceeds, (iii) the interest component of the aggregate of the Repurchase Prices for Contracts repurchased by the Trust Depositor pursuant to Section 7.08, (iv) all Advances made by the Servicer pursuant to Section 7.03, (v) the interest component of all amounts paid by the Trust Depositor in connection with an optional repurchase of the Contracts pursuant to Section 7.10, (vi) all amounts received in respect of Carrying Charges transferred from the Interest Reserve Account pursuant to Section 7.03, and (vii) all amounts received in respect of interest, dividends, gains, income and earnings on investment of funds in the Trust Accounts as contemplated in Section 5.05(d). "AVAILABLE PRINCIPAL" means, with respect to any Distribution Date, the total (without duplication) of the following amounts received by the Servicer on or in respect of the Contracts during the related Due Period: (i) all amounts received in respect of principal on the Contracts, (ii) the principal component of all Net Liquidation Proceeds, (iii) the principal component of the aggregate of the Repurchase Prices for Contracts repurchased by the Trust Depositor pursuant to Section 7.08, and (iv) the principal component of all amounts paid by the Trust Depositor in connection with an optional repurchase of the Contracts pursuant to Section 7.10. 2 "AVERAGE DELINQUENCY RATIO" means, for any Distribution Date, the arithmetic average of the Delinquency Ratios for such Distribution Date and the two immediately preceding Distribution Dates. "AVERAGE LOSS RATIO" means, for any Distribution Date, the arithmetic average of the Loss Ratios for such Distribution Date and the two immediately preceding Distribution Dates. "BASE PROSPECTUS" means the Prospectus dated [___________] relating to the Harley-Davidson Motorcycle Trusts. "BUELL" means Buell Motorcycle Company, a wholly-owned subsidiary of Harley-Davidson. "BUSINESS DAY" means any day other than a Saturday or a Sunday, or another day on which banking institutions in the city of Chicago, Illinois, Wilmington, Delaware or New York, New York are authorized or obligated by law, executive order, or governmental decree to be closed. "CALCULATION DAY" means the last day of each calendar month. "CARRYING CHARGES" means the sum of (i) the product of (x) the weighted average of the Class A-1 Rate, the Class A-2 Rate and the Pass-Through Rate and (y) the undisbursed funds (excluding investment earnings) in the Pre-Funding Account (as of the last day of the related Due Period) and (ii) the Indenture Trustee Fee for the related Distribution Date, minus (iii) the amount of any investment earnings on funds in the Pre-Funding Account which was transferred to the Interest Reserve Account, as well as interest earnings on amounts in the Interest Reserve Account. ["CERTIFICATE BALANCE" equals $[____________] on the Closing Date, and, thereafter, equals the Initial Certificate Balance, reduced by all amounts allocable to principal previously distributed to Certificateholders. "CERTIFICATE DEPOSITORY AGREEMENT" has the meaning specified in the Trust Agreement. "CERTIFICATE DISTRIBUTABLE AMOUNT" means, with respect to any Distribution Date, the sum of the Certificate Principal Distributable Amount and the Certificate Interest Distributable Amount for such Distribution Date. "CERTIFICATE DISTRIBUTION ACCOUNT" shall have the meaning specified in the Trust Agreement. "CERTIFICATE FINAL DISTRIBUTION DATE" means the February 2008 Distribution Date. "CERTIFICATE INTEREST CARRYOVER SHORTFALL" means, with respect to any Distribution Date, the excess of the sum of the Certificate Monthly Interest Distributable Amount for the immediately preceding Distribution Date and any outstanding Certificate Interest Carryover 3 Shortfall on such preceding Distribution Date, over the amount in respect of interest on the Certificates that is actually deposited in the Certificate Distribution Account on such preceding Distribution Date, plus interest on such excess, to the extent permitted by law, at the Pass-Through Rate for the related Interest Period. "CERTIFICATE INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any Distribution Date, the sum of the Certificate Monthly Interest Distributable Amount for such Distribution Date and the Certificate Interest Carryover Shortfall for such Distribution Date. "CERTIFICATE MONTHLY INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any Distribution Date, 30 days of interest (or in the case of the first Distribution Date, interest accrued from and including the Closing Date to but excluding such Distribution Date) at the Pass-Through Rate on the Certificate Balance on the immediately preceding Distribution Date, after giving effect to all payments of principal to the Certificateholders on such preceding Distribution Date (or, in the case of the first Distribution Date, on the Initial Certificate Balance). "CERTIFICATE MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT" will mean, with respect to any Distribution Date, the Certificate Percentage of the Principal Distributable Amount for such Distribution Date. "CERTIFICATE PERCENTAGE" means (i) for each Distribution Date to but excluding the Distribution Date on which the principal amount of all of the Notes is reduced to zero, 0%; (ii) on the Distribution Date on which the principal amount of all of the Notes is reduced to zero, such percentage that equals 100% minus the Note Percentage for such Distribution Date; and (iii) 100% thereafter. "CERTIFICATE POOL FACTOR" means, as of the close of business on any Distribution Date, a seven-digit decimal figure equal to the Certificate Balance (after giving effect to any reductions therein to be made on such Distribution Date) divided by the Certificate Initial Balance. The Certificate Pool Factor will be 1.0000000 as of the Closing Date; thereafter, the Certificate Pool Factor will decline to reflect reductions in the Certificate Balance. "CERTIFICATE PRINCIPAL CARRYOVER SHORTFALL" means, with respect to any Distribution Date, the excess of the Certificate Principal Distributable Amount with respect to the immediately preceding Distribution Date, over the amount in respect of principal that is actually deposited in the Certificate Distribution Account on such preceding Distribution Date. "CERTIFICATE PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any Distribution Date, the sum of the Certificate Monthly Principal Distributable Amount with respect to such Distribution Date and the Certificate Principal Carryover Shortfall; PROVIDED, HOWEVER, that the Certificate Principal Distributable Amount shall not exceed the Certificate Balance. In addition, on the Certificate Final Distribution Date, the principal required to be deposited into the Certificate Distribution Account will include the amount necessary to reduce the Certificate Balance to zero. 4 "CERTIFICATE REGISTER" shall have the meaning specified in the Trust Agreement. "CERTIFICATEHOLDERS" shall have the meaning specified in the Trust Agreement. "CERTIFICATES" means the Trust Certificates (as such term is defined in the Trust Agreement).] "CLASS" means all Notes whose form is identical except for variation in denomination, principal amount or owner. "CLASS A-1 FINAL DISTRIBUTION DATE" means the [___________] Distribution Date. "CLASS A-1 NOTEHOLDER" means the Person in whose name a Class A-1 Note is registered in the Note Register, as such term is defined in the Indenture. "CLASS A-1 RATE" means [_____]% per annum. "CLASS A-2 FINAL DISTRIBUTION DATE" means the [___________] Distribution Date. "CLASS A-2 NOTEHOLDER" means the Person in whose name a Class A-2 Note is registered in the Note Register. "CLASS A-2 RATE" means [_____]% per annum. "CLASS B SCHEDULED DISTRIBUTION DATE" means the [_______________] Distribution Date. "CLASS B NOTEHOLDER" means the Person in whose name a Class B Note is registered in the Note Register. "CLASS B RATE" means [____]% per annum. "CLEARING AGENCY" shall have the meaning specified in the Indenture. "CLOSING DATE" means [___________]. "CODE" means the Internal Revenue Code of 1986, as amended. "COLLATERAL" shall have the meaning specified in the "granting clause" of the Indenture. "COLLECTION ACCOUNT" means a trust account as described in Section 5.05 maintained in the name of the Indenture Trustee and which shall be an Eligible Account. "COMPUTER DISK" means the computer disk generated by the Servicer which provides information relating to the Contracts and which was used by the Seller in selecting the Contracts sold to the Trust Depositor pursuant to the Transfer and Sale Agreement (and any Subsequent Purchase Agreement) by the Trust Depositor in selecting the Contracts sold to the Trust pursuant 5 to this Agreement (and any Subsequent Transfer Agreement), and includes the master file and the history file as well as servicing information with respect to the Contracts. "CONTRACT ASSETS" has the meaning assigned in Section 2.01 (and 2.04, as applicable in the case of Subsequent Contracts) of the Transfer and Sale Agreement. "CONTRACT FILE" means, as to each Contract, (a) the original copy of the Contract, including the executed conditional sales contract or other evidence of the obligation of the Obligor, (b) the original title certificate to the Motorcycle and, where applicable, the certificate of lien recordation, or, if such title certificate has not yet been issued, an application for such title certificate, or other appropriate evidence of a security interest in the covered Motorcycle; (c) the assignments of the Contract; (d) the original copy of any agreement(s) modifying the Contract including, without limitation, any extension agreement(s) and (e) documents evidencing the existence of physical damage insurance covering such Motorcycle. "CONTRACT RATE" means, as to any Contract, the annual rate of interest specified in the Contract. "CONTRACTS" means the motorcycle conditional sales contracts described in the List of Contracts and constituting part of the Trust Corpus (as such list may be supplemented from time to time to reflect transfers of Subsequent Contracts), and includes, without limitation, all related security interests and any and all rights to receive payments which are collected pursuant thereto on or after the Initial Cutoff Date or, with respect to any Subsequent Contracts, any related Subsequent Cutoff Date, but excluding any rights to receive payments which are collected pursuant thereto prior to the Initial Cutoff Date, or with respect to any Subsequent Contracts, any related Subsequent Cutoff Date. "CORPORATE TRUST OFFICE" means the office of the Indenture Trustee at which at any particular time its corporate trust business shall be principally administered, which office at the date of the execution of this Agreement is located at the address set forth in Section 11.04. "CRAM DOWN LOSS" means, with respect to a Contract, if a court of appropriate jurisdiction in an insolvency proceeding shall have issued an order reducing the Principal Balance of such Contract the amount of such reduction (with a "CRAM DOWN LOSS" being deemed to have occurred on the date of issuance of such order). "CUMULATIVE LOSS RATIO" means, as of any Distribution Date, the fraction (expressed as a percentage) computed by the Servicer by dividing (i) the aggregate Net Liquidation Losses for all Contracts since the Cutoff Date through the end of the related Due Period by (ii) the sum of (A) the Principal Balance of the Contracts as of the Cutoff Date plus (B) the Principal Balance of any Subsequent Contracts as of the related Subsequent Cutoff Date. "CUTOFF DATE" means either or both (as the context may require) the Initial Cutoff Date and any Subsequent Cutoff Date. 6 "DEFAULTED CONTRACT" means a Contract with respect to which there has occurred one or more of the following: (i) all or some portion of any payment under the Contract is 120 days or more delinquent, (ii) repossession (and expiration of any redemption period) of a Motorcycle securing a Contract or (iii) the Servicer has determined in good faith that an Obligor is not likely to resume payment under a Contract. "DELINQUENCY AMOUNT" means, as of any Distribution Date, the Principal Balance of all Contracts that were delinquent 60 days or more as of the end of the related Due Period (including Contracts in respect of which the related Motorcycles have been repossessed and are still inventory). "DELINQUENT INTEREST" means, for each Contract and each Determination Date as to which the full payment due in the related Due Period has not been paid (any such payment being "DELINQUENT" for purposes of this definition), all interest accrued on such Contract from the Due Date in the Due Period one month prior to the Due Period in which the payment is delinquent. "DELINQUENCY RATIO" means, for any Distribution Date, the fraction (expressed as a percentage) computed by dividing (a) the Delinquency Amount during the immediately preceding Due Period by (b) the Principal Balance of the Contracts as of the beginning of the related Due Period. "DELTA LOAN" means a loan made by the Seller pursuant to the program designated as the Delta Program. "DETERMINATION DATE" means the fourth Business Day following the conclusion of a Due Period during the term of this Agreement. "DISTRIBUTION DATE" means the fifteenth day of each calendar month during the term of this Agreement, or if such day is not a Business Day, the next succeeding Business Day, with the first such Distribution Date hereunder being [___________]. "DUE DATE" means, with respect to any Contract, the day of the month on which each scheduled payment of principal and interest is due on such Contract, exclusive of days of grace. "DUE PERIOD" means a calendar month during the term of this Agreement, and the Due Period related to a Determination Date or Distribution Date shall be the calendar month immediately preceding such date; PROVIDED, HOWEVER, that with respect to the Initial Determination Date or Initial Distribution Date, the Due Period shall be the period from the Initial Cutoff Date to and including [____________]. "ELIGIBLE ACCOUNT" means a segregated direct deposit account maintained with the Indenture Trustee, acting in its fiduciary capacity, or a depository institution or trust company organized under the laws of the United States of America, or any of the States thereof, or the District of Columbia, having a certificate of deposit, short-term deposit or commercial paper rating of at least A-1+ by Standard & Poor's and P-1 by Moody's. 7 "ELIGIBLE INVESTMENTS" mean book-entry securities, negotiable instruments or securities represented by instruments in bearer or registered form which evidence: (a) direct obligations of, and obligations fully guaranteed as to timely payment by, the United States of America; (b) demand deposits, time deposits or certificates of deposit of any depository institution or trust company incorporated under the laws of the United States of America or any State (or any domestic branch of a foreign bank) and subject to supervision and examination by Federal or State banking or depository institution authorities; PROVIDED, HOWEVER, that at the time of the investment or contractual commitment to invest therein, the commercial paper or other short-term senior unsecured debt obligations (other than such obligations the rating of which is based on the credit of a Person other than such depository institution or trust company) thereof shall have a credit rating from the Rating Agency in the highest investment category granted thereby; (c) commercial paper having, at the time of the investment or contractual commitment to invest therein, a rating from the Rating Agency in the highest investment category granted thereby; (d) investments in money market funds having a rating from the Rating Agency in the highest investment category granted thereby (including funds for which the Indenture Trustee or the Owner Trustee or any of their respective Affiliates is investment manager or advisor); (e) bankers' acceptances issued by any depository institution or trust company referred to in CLAUSE (b); and (f) repurchase obligations with respect to any security that is a direct obligation of, or fully guaranteed as to timely payment by, the United States of America or any agency or instrumentality thereof the obligations of which are backed by the full faith and credit of the United States of America, in either case entered into with a depository institution or trust company (acting as principal) described in CLAUSE (b). "EVENT OF TERMINATION" means an event specified in Section 8.01. "EXCESS AMOUNTS" shall have the meaning specified in Section 7.05(b). "FINAL DISTRIBUTION DATE" means with respect to (i) the Notes, the Class A-1 Final Distribution Date or the Class A-2 Final Distribution Date, as the case may be or (ii) the Certificates, the Certificate Final Distribution Date. "FUNDING PERIOD" means the period beginning on the Closing Date and ending on the first to occur of (a) the Distribution Date on which the amount on deposit in the Pre-Funding Account (after giving effect to any transfers therefrom in connection with the transfer of Subsequent Contracts to the Trust on such Distribution Date) is less than $150,000, (b) the date 8 on which an Event of Termination occurs, (c) the date on which an Insolvency Event occurs with respect to the Trust Depositor and (d) the close of business on the date which is 90 days from and including the Closing Date. "HARLEY-DAVIDSON FINANCIAL" has the meaning assigned in Section 5.10 hereof. "HOLDER" means, with respect to a (i) Certificate, the Person in whose name such Certificate is registered in the Certificate Register and (ii) Note, the Person in whose name such Note is registered in the Note Register. "INDENTURE" means the Indenture, dated as of the date hereof, between the Issuer and the Indenture Trustee. "INDENTURE TRUSTEE" means the Person acting as Indenture Trustee under the Indenture, its successors in interest and any successor trustee under the Indenture. "INDENTURE TRUSTEE FEE" means, with respect to any Distribution Date, one-twelfth of the product of [____]% and the sum of (i) the Principal Balance of the Contracts as of the beginning of the related Due Period and (ii) the Pre-Funded Amount as of the beginning of such period; PROVIDED, HOWEVER, in no event shall such fee be less than $200.00 per month. "INDEPENDENT", when used with respect to any specified Person, means such a Person who (i) is in fact independent of the Issuer, the Trust Depositor or the Servicer, (ii) is not a director, officer or employee of any Affiliate of the Issuer, the Trust Depositor or the Servicer, (iii) is not a person related to any officer or director of the Issuer, the Trust Depositor or the Servicer or any of their respective Affiliates, (iv) is not a holder (directly or indirectly) of more than 10% of any voting securities of Issuer, the Trust Depositor or the Servicer or any of their respective Affiliates, and (v) is not connected with the Issuer, the Trust Depositor or the Servicer as an officer, employee, promoter, underwriter, trustee, partner, director or person performing similar functions. "INITIAL CLASS A-1 NOTE BALANCE" means $[___________]. "INITIAL CLASS A-2 NOTE BALANCE" means $[___________]. "INITIAL CLASS B NOTE BALANCE" means $[___________]. ["INITIAL CERTIFICATE BALANCE" means $[___________].] "INITIAL CONTRACTS" means those Contracts conveyed to the Trust on the Closing Date. "INITIAL CUTOFF DATE" means [___________]. "INSOLVENCY EVENT" means, with respect to a specified Person, (i) the entry of a decree or order for relief by a court or regulatory authority having jurisdiction in respect of such Person in an involuntary case under the federal bankruptcy laws, as now or hereafter in effect, or any other 9 present or future, federal or state, bankruptcy, insolvency or similar law, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or other similar official for such Person or for any substantial part of its property, or ordering the winding-up or liquidation of such Person's affairs, and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days; (ii) the commencement of an involuntary case under the federal bankruptcy laws, as now or hereinafter in effect, or another present or future federal or state bankruptcy, insolvency or similar law and such case is not dismissed within 60 days; or (iii) the commencement by such Person of a voluntary case under the federal bankruptcy laws, as now or hereinafter in effect, or any other present or future federal or state, bankruptcy, insolvency or similar law, or the consent by such Person to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or other similar official for such Person or for any substantial part of its property, or the making by such Person of an assignment for the benefit of creditors or the failure by such Person generally to pay its debts as such debts become due or the taking of corporate action by such Person in furtherance of any the foregoing. "INTEREST PERIOD" means, with respect to any Distribution Date, the period from and including the fifteenth day of the month of the Distribution Date immediately preceding such Distribution Date (or, in the case of the first Distribution Date, the Closing Date) to but excluding the fifteenth day of the month of such Distribution Date. "INTEREST RATE" means the Class A-1 Rate, the Class A-2 Rate or the Class B Rate, as applicable. "INTEREST RESERVE ACCOUNT" means the account designated as the Interest Reserve Account in, and which is established and maintained pursuant to, Section 7.04 hereof. "INTEREST RESERVE AMOUNT" means, as of any date of determination, the amount on deposit in the Interest Reserve Account on such date, and as of the Closing Date shall be $699,251.08. "INVESTMENT EARNINGS" means, with respect to any Distribution Date, the investment earnings (net of losses and investment expenses) on amounts on deposit in the Trust Accounts, other than the Pre-Funding Account, to be deposited into the Collection Account on such Distribution Date pursuant to Section 5.05(b). "ISSUER" means the Harley-Davidson Motorcycle Trust [________]. "LATE PAYMENT PENALTY FEES" means any late payment fees paid by Obligors on Contracts after all sums received have been allocated first to regular installments due or overdue and all such installments are then paid in full. "LIEN" means a security interest, lien, charge, pledge, equity or encumbrance of any kind, other than tax liens, mechanics' liens and any liens that attach to the respective Contract by operation of law. 10 "LIQUIDATED CONTRACT" means a Contract with respect to which there has occurred one or more of the following: (i) [ ] days have elapsed following the date of repossession (and expiration of any redemption period) with respect to the Motorcycle securing such Contract, (ii) such Contract is a Defaulted Contract with respect to which the Servicer has determined in good faith that all amounts expected to be recovered have been received, or (iii) all or any portion of any payment is delinquent [ ] days or more. "LIST OF CONTRACTS" means the list identifying each Contract constituting part of the Trust Corpus, which list shall consist of the initial List of Contracts reflecting the Initial Contracts transferred to the Trust on the Closing Date, together with any Subsequent List of Contracts reflecting the Subsequent Contracts transferred to the Trust on the related Subsequent Transfer Date, and which list (a) identifies each Contract and (b) sets forth as to each Contract (i) the Principal Balance as of the applicable Cutoff Date, (ii) the amount of monthly payments due from the Obligor, (iii) the Contract Rate and (iv) the maturity date, and which list (as in effect on the Closing Date) is attached to this Agreement as EXHIBIT H. "LOCKBOX" means the Lockbox maintained by the Lockbox Bank identified on EXHIBIT K hereto. "LOCKBOX ACCOUNT" means the account maintained with the Lockbox Bank and identified on EXHIBIT K hereto. ["LOCKBOX AGREEMENT" means the Fourth Amended and Restated Lockbox Administration Agreement dated as of April 1, 1998 by and among the Servicer, the Trust Depositor, Eaglemark Customer Funding Corporation-II, Eaglemark Customer Funding Corporation-III, Norwest Bank Minnesota, National Association (the "PREDECESSOR TRUSTEE"), Harris Trust and Savings Bank and Financial Security Assurance Inc. ("FSA", with respect to certain prior trusts, the "PRIOR TRUSTS"), with respect to the Lockbox Account, unless such agreement shall be terminated in accordance with its terms, in which event "LOCKBOX AGREEMENT" shall mean such other agreement, in form and substance acceptable to the above-described parties.] "LOCKBOX BANK" means the financial institution maintaining the Lockbox Account and identified on EXHIBIT K hereto or any successor thereto acceptable to a majority of the [Certificateholders]. "LOSS RATIO" means, for any Distribution Date, the fraction (expressed as a percentage) derived by dividing (x) Net Liquidation Losses for all Contracts that became Liquidated Contracts during the immediately preceding Due Period multiplied by twelve by (y) the outstanding Principal Balances of all Contracts as of the beginning of the Due Period. "MANDATORY SPECIAL REDEMPTION" means the prepayment, in part, made to the Class A-1 Noteholders and Class A-2 Noteholders without premium made on the Distribution Date on or immediately following the last day of the Funding Period in the event that any amount remains 11 on deposit in the Pre-Funding Account after giving effect to the purchase of all Subsequent Contracts, including any such purchase on such date. "MONTHLY REPORT" shall have the meaning specified in Section 9.06. "MONTHLY SERVICING FEE" means, as to any Distribution Date, the product of one-twelfth of [ ] and the Principal Balance of the Contracts as of the beginning of the related Due Period. "MOODY'S" means Moody's Investors Service, Inc. or any successor thereto. "MOTORCYCLE" means a motorcycle manufactured by Harley-Davidson, Inc. or Buell securing a Contract. "NET LIQUIDATION LOSSES" means, as of any Distribution Date, with respect to a Liquidated Contract, the amount, if any, by which (a) the outstanding Principal Balance of such Liquidated Contract plus accrued and unpaid interest thereon at the Contract Rate to the date on which such Liquidated Contract became a Liquidated Contract exceeds (b) the Net Liquidation Proceeds for such Liquidated Contract. "NET LIQUIDATION PROCEEDS" means, as to any Liquidated Contract, the proceeds realized on the sale or other disposition of the related Motorcycle, including proceeds realized on the repurchase of such Motorcycle by the originating dealer for breach of warranties, and the proceeds of any insurance relating to such Motorcycle, after payment of all reasonable expenses incurred thereby, together, in all instances, with the expected or actual proceeds of any recourse rights relating to such Contract as well as any post-disposition proceeds received by the Servicer. "NOTE DEPOSITORY AGREEMENT" shall have the meaning specified in the Indenture. "NOTE DISTRIBUTABLE AMOUNT" means, with respect to any Distribution Date, the sum of the Note Principal Distributable Amount and the Note Interest Distributable Amount for such Distribution Date. "NOTE DISTRIBUTION ACCOUNT" means the account established and maintained as such pursuant to Section 5.05. "NOTE INTEREST CARRYOVER SHORTFALL" means, (a) with respect to the Initial Distribution Date and each Class of Notes, zero and (b) with respect to any Distribution Date and a Class of Notes, the excess, if any, of the Note Interest Distributable Amount for such Class for the immediately preceding Distribution Date, over the amount in respect of interest that is actually deposited in the Note Distribution Account with respect to such Class on such preceding Distribution Date, plus, interest on such excess to the extent permitted by applicable law, at the related Interest Rate for the related Interest Period. "NOTE INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any Distribution Date and a Class of Notes, the sum of the Note Monthly Interest Distributable Amount and the Note Interest Carryover Shortfall for such Class of Notes with respect to such Distribution Date. 12 "NOTE MONTHLY INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any Distribution Date, interest accrued from and including the fifteenth day of the month of the preceding calendar month to, but excluding, the fifteenth day of the calendar month in which such Distribution Date occurs (or in the case of the first Distribution Date, interest accrued from and including the Closing Date to but excluding such Distribution Date) at the related Interest Rate for such Class of Notes on the outstanding principal amount of the Notes of such Class on the immediately preceding Distribution Date, after giving effect to all payments of principal to Noteholders of such Class on or prior to such preceding Distribution Date (or, in the case of the first Distribution Date, on the original principal amount of such Class of Notes). "NOTE MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any Distribution Date, the Note Percentage of the Principal Distributable Amount for such Distribution Date. "NOTE PERCENTAGE" means, (i) for each Distribution Date to but excluding the Distribution Date on which the principal amount of all of the Notes is reduced to zero, 100%; (ii) for the Distribution Date on which the principal amount of all of the Notes is reduced to zero, such percentage which represents the fraction of the Principal Distributable Amount necessary to reduce the principal amount of all of the Notes to zero; and (iii) for each Distribution Date thereafter, 0.0%. "NOTE POOL FACTOR" means with the respect to any Class of Notes as of the close of business on any Distribution Date, a seven-digit decimal figure equal to the outstanding principal amount of such Class of Notes (after giving effect to any reductions thereof to be made on such Distribution Date) divided by the original outstanding principal amount of such Class of Notes. "NOTE PRINCIPAL CARRYOVER SHORTFALL" means, with respect to any Distribution Date, the excess of the Note Principal Distributable Amount with respect to the immediately preceding Distribution Date over the amount in respect of principal that is actually deposited in the Note Distribution Account on such preceding Distribution Date. "NOTE PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any Distribution Date, the sum of the Note Monthly Principal Distributable Amount with respect to such Distribution Date and the Note Principal Carryover Shortfall with respect to such Distribution Date; PROVIDED, HOWEVER, that the Note Principal Distributable Amount shall not exceed the outstanding principal amount of the Notes; and PROVIDED, FURTHER, that the Note Principal Distributable Amount (i) on the Class A-1 Scheduled Distribution Date shall not be less than the amount that is 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 amount of the Class A-1 Notes to zero, (ii) on the Class A-2 Scheduled Distribution Date shall not be less than the amount that is 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 amount of the Class A-2 Notes to zero, and (iii) on the Class B Scheduled Distribution Date shall not be less than the amount that is 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 amount of the Class B Notes to zero. 13 "NOTE REGISTER" shall have the meaning specified in the Indenture. "OBLIGEE" means the Person to whom an Obligor is indebted under a Contract. "OBLIGOR" means a Motorcycle buyer or other person who owes payments under a Contract. "OFFICER'S CERTIFICATE" means a certificate signed by the Chairman, the President, a Vice President, the Treasurer, an Assistant Treasurer, the Controller, an Assistant Controller, the Secretary or an Assistant Secretary of any Person delivering such certificate and delivered to the Person to whom such certificate is required to be delivered, including any certificate delivered under any of the Transaction Documents required to be executed by a Servicing Officer. In the case of an Officer's Certificate of the Servicer, at least one of the signing officers must be a Servicing Officer. Unless otherwise specified, any reference herein to an Officer's Certificate shall be to an Officers' Certificate of the Servicer. "OPINION OF COUNSEL" means a written opinion of counsel (who may be counsel to the Trust Depositor or the Servicer) acceptable to the Indenture Trustee or the Owner Trustee, as the case may be. "OWNER TRUSTEE" means the Person acting, not in its individual capacity, but solely as Owner Trustee under the Trust Agreement, its successors in interest and any successor owner trustee under the Trust Agreement. ["PASS-THROUGH RATE" means [____]% per annum.] "PAYING AGENT" means as described in Section 6.11 of the Indenture and Section 3.10 of the Trust Agreement. "PERSON" means any individual, corporation, limited liability company, estate, partnership, joint venture, association, joint stock company, trust (including any beneficiary thereof), unincorporated organization or government or any agency or political subdivision thereof. "POOL BALANCE" means as of any date, the Principal Balance of Contracts as of the close of business on such date. "PRE-FUNDED AMOUNT" means as of any date, the amount on deposit in the Pre-Funding Account at the close of business on such date. "PRE-FUNDING ACCOUNT" means the account designated as the Pre-Funding Account in, and which is established and maintained pursuant to Section 7.07. "PRINCIPAL BALANCE" means (a) with respect to any Contract as of any date, an amount equal to the unpaid principal balance of such Contract as of the opening of business on the Initial Cutoff Date or related Subsequent Cutoff Date, as applicable, reduced by the sum of (x) all 14 payments received by the Servicer as of such date allocable to principal and (y) any Cram Down Loss in respect of such Contract; PROVIDED, HOWEVER, that (i) if (x) a Contract is repurchased by the Seller pursuant to Section 5.01 of the Transfer and Sale Agreement and Section 7.08 hereof because of a breach of representation or warranty, or if (y) the Trust Depositor gives notice of its intent to purchase the Contracts in connection with an optional termination of the Trust pursuant to Section 5.02 of the Transfer and Sale Agreement and Section 7.10 hereof, in each case the Principal Balance of such Contract or Contracts shall be deemed as of the related Determination Date to be zero for the Due Period in which such event occurs and for each Due Period thereafter, (ii) from and after the third Due Period succeeding the final Due Period in which the Obligor is required to make the final scheduled payment on a Contract, the Principal Balance, if any, of such Contract shall be deemed to be zero, and (iii) from and after the Due Period in which a Contract becomes a Liquidated Contract, the Principal Balance of such Contract shall be deemed to be zero; and (b) where the context requires, the aggregate of the Principal Balances described in clause (a) for all such Contracts. "PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any Distribution Date, the Aggregate Principal Balance Decline for such Distribution Date. "PROSPECTUS" means the Base Prospectus together with the Supplement. "QUALIFIED ELIGIBLE INVESTMENTS" means Eligible Investments acquired by the Indenture Trustee in its name and in its capacity as Indenture Trustee, which are held by the Indenture Trustee in the Pre-Funding Account, the Interest Reserve Account or the Reserve Fund and with respect to which (a) the Indenture Trustee has noted its interest therein on its books and records, and (b) the Indenture Trustee has purchased such investments for value without notice of any adverse claim thereto (and, if such investments are securities or other financial assets or interests therein, within the meaning of Section 8-102 of the UCC as enacted in Illinois, without acting in collusion with a securities intermediary in violating such securities intermediary's obligations to entitlement holders in such assets, under Section 8-504 of such UCC, to maintain a sufficient quantity of such assets in favor of such entitlement holders), and (c) either (i) such investments are in the possession, or are under the control, of the Indenture Trustee, or (ii) such investments, (A) if certificated securities and in bearer form, have been delivered to the Indenture Trustee, or in registered form, have been delivered to the Indenture Trustee and either registered by the issuer in the name of the Indenture Trustee or endorsed by effective endorsement to the Indenture Trustee or in blank; (B) if uncertificated securities, the ownership of which has been registered to the Indenture Trustee on the books of the issuer thereof (or another person, other than a securities intermediary, either becomes the registered owner of the uncertified security on behalf of the Indenture Trustee or, having previously become the registered owner, acknowledges that it holds for the Indenture Trustee); or (C) if securities entitlements (within the meaning of Section 8-102 of the UCC as enacted in Illinois) representing interests in securities or other financial assets (or interests therein) held by a securities intermediary (within the meaning of said Section 8-102), a securities intermediary indicates by book entry that a security or other financial asset has been credited to the Indenture Trustee's securities account with such securities intermediary. Any such Qualified Eligible Investment may be purchased by or through the Indenture Trustee or any of its affiliates. 15 "RATING AGENCY" means each of Moody's and Standard & Poor's, so long as such Persons maintain a rating on one or more classes of the Securities; and if either Moody's or Standard & Poor's no longer maintains a rating on any class of the Securities, such other nationally recognized statistical rating organization selected by the Trust Depositor. "RECORD DATE" means, with respect to any Distribution Date, the last Business Day of the preceding calendar month. "REIMBURSEMENT AMOUNT" has the meaning assigned in Section 7.03 hereof. "REPURCHASE PRICE" means, with respect to a Contract to be repurchased hereunder an amount equal to (a) the Principal Balance of such Contract, plus (b) accrued and unpaid interest at the Contract Rate on such Contract through the end of the immediately preceding Due Period. "RESERVE FUND" means the Reserve Fund established and maintained pursuant to Section 7.06 hereof. "RESERVE FUND INITIAL DEPOSIT" means $[_____________]. "RESERVE FUND DEPOSITS" means all moneys deposited in the Reserve Fund from time to time including, but not limited to, the Reserve Fund Initial Deposit as well as any monies deposited therein pursuant to Section 7.05(b), all investments and reinvestments thereof, earnings thereon, and proceeds of the foregoing, whether now or hereafter existing. "RESERVE FUND TRIGGER EVENT" means the occurrence with respect to any Distribution Date (i) the Average Delinquency Ratio for such Distribution Date is equal to or greater than (a) [____]% with respect to any Distribution Date which occurs within the period from the Closing Date to, and inclusive of, the first anniversary of the Closing Date, (b) [____]% with respect to any Distribution Date which occurs within the period from the day after the first anniversary of the Closing Date to, and inclusive of, the second anniversary of the Closing Date, or (c) [____]% with respect to any Distribution Date which occurs within the period from the day after the second anniversary of the Closing Date to, and inclusive of, the third anniversary of the Closing Date or (d) [____]% with respect to any Distribution Date occurring after the third anniversary of the Closing Date; (ii) the Average Loss Ratio for such Distribution Date is equal to or greater than (a) [____]% with respect to any Distribution Date which occurs within the period from the Closing Date to, and inclusive of, the eighteen months following the Closing Date or (b) [____]% with respect to any Distribution Date which occurs following the eighteen month period following the Closing Date; or (iii) the Cumulative Loss Ratio for such Distribution Date is equal to or greater than (a) [____]% with respect to any Distribution Date which occurs within the period from the Closing Date to, and inclusive of, the first anniversary of the Closing Date, (b) [____]% with respect to any Distribution Date which occurs within the period from the day after the first anniversary of the Closing Date to, and inclusive of, the second anniversary of the Closing Date, (c) [____]% with respect to any Distribution Date which occurs within the period from the day after the second anniversary of the Closing Date to, and inclusive of, the third 16 anniversary of the Closing Date, or (d) [____]% with respect to any Distribution Date occurring after the third anniversary of the Closing Date. "RESPONSIBLE OFFICER" means, with respect to the Owner Trustee, any officer in its Corporate Trust Administration Department (or any similar group of a successor Owner Trustee) and with respect to the Indenture Trustee, the chairman and any vice chairman of the board of directors, the president, the chairman and vice chairman of any executive committee of the board of directors, every vice president, assistant vice president, the secretary, every assistant secretary, cashier or any assistant cashier, controller or assistant controller, the treasurer, every assistant treasurer, every trust officer, assistant trust officer and every other officer or assistant officer of the Trustee customarily performing functions similar to those performed by persons who at the time shall be such officers, respectively, or to whom a corporate trust matter is referred because of knowledge of, familiarity with, and authority to act with respect to a particular matter. "SECURITIES" means the Notes and the Certificates. "SECURITYHOLDERS" means the Holders of the Notes or the Certificates. "SELLER" means Harley-Davidson Credit Corp., a Nevada corporation, or its successor, in its capacity as Seller of Contract Assets under the Transfer and Sale Agreement and any Subsequent Purchase Agreement. "SERVICER" means Harley-Davidson Credit Corp., a Nevada corporation, or its successor, until any Service Transfer hereunder and thereafter means the Successor Servicer appointed pursuant to Article VIII below with respect to the duties and obligations required of the Servicer under this Agreement. "SERVICER DEFAULT" means an event specified in SECTION 8.01. "SERVICE TRANSFER" has the meaning assigned in Section 8.02(a). "SERVICING FEE" means, on any Determination Date, the sum of (a) the Monthly Servicing Fee payable on the related Distribution Date, (b) Late Payment Penalty Fees received by the Servicer during the related Due Period, and (c) extension fees received by the Servicer during the related Due Period. "SERVICING OFFICER" means any officer of the Servicer involved in, or responsible for, the administration and servicing of Contracts whose name appears on a list of servicing officers appearing in an Officer's Certificate furnished to the Indenture Trustee by the Servicer, as the same may be amended from time to time. "SHORTFALL" means, with respect to a Distribution Date as determined in accordance with Section 7.05(a), the amounts described in clauses (v) through (viii) thereof over Available Monies (after the payment of amounts described in clauses (i) through (iv) of Section 7.05 on such Distribution Date) in the Collection Account with respect to the related Due Period. 17 "SPECIFIED RESERVE FUND BALANCE" means with respect to any Distribution Date will be an amount equal to the greater of (a) [ ] of the Principal Balance of the Contracts in the Trust as of the first day of the immediately preceding Due Period; PROVIDED, HOWEVER, in the event a Reserve Fund Trigger Event occurs with respect to a Distribution Date and has not terminated for three consecutive Distribution Dates (inclusive of the respective Distribution Date), the Specified Reserve Fund Balance shall be equal to [ ] of the Principal Balance of the Contracts in the Trust as of the first day of the immediately preceding Due Period and (b) [ ] of the aggregate of the Initial Class A-1 Note Balance, Initial Class A-2 Note Balance, Initial Class B Note Balance [and Initial Certificate Balance]; PROVIDED, HOWEVER, in no event shall the Specified Reserve Fund Balance be greater than the aggregate outstanding principal balance of the Securities. As of any Distribution Date, the amount of funds actually on deposit in the Reserve Fund may, in certain circumstances, be less than the Specified Reserve Fund Balance "STANDARD & POOR'S" means Standard & Poor's Ratings Services, a Division of The McGraw Hill Companies, or any successor thereto. "SUBSEQUENT CONTRACTS" means all Contracts sold and transferred to the Trust pursuant to Section 2.04. "SUBSEQUENT CUTOFF DATE" means the date specified as such for Subsequent Contracts in the related Subsequent Transfer Agreement. "SUBSEQUENT LIST OF CONTRACTS" means a list, in the form of the initial List of Contracts delivered on the Closing Date, but listing each Subsequent Contract transferred to the Trust pursuant to the related Subsequent Transfer Agreement. "SUBSEQUENT PURCHASE AGREEMENT" means, with respect to any Subsequent Contracts, the agreement between the Seller and the Trust Depositor pursuant to which the Seller will transfer the Subsequent Contracts to the Trust Depositor, the form of which is attached to the Transfer and Sale Agreement as EXHIBIT C. "SUBSEQUENT RESERVE FUND AMOUNT" means the amount on each Subsequent Transfer Date equal to [_____]% of the aggregate balance of the Subsequent Contracts conveyed to the Trust. "SUBSEQUENT TRANSFER AGREEMENT" means the agreement described in Section 2.04(b) hereof. "SUBSEQUENT TRANSFER DATE" means any date during the Funding Period on which Subsequent Contracts are transferred to the Trust. "SUCCESSOR SERVICER" means a servicer described in Section 8.02(b). "SUPPLEMENT" means the Prospectus Supplement dated [___________]. 18 "TRANSACTION DOCUMENTS" means this Agreement, the Transfer and Sale Agreement, the Lockbox Agreement, the Indenture, the Trust Agreement, the Administration Agreement, the Note Depository Agreement, the Certificate Depository Agreement, any Subsequent Transfer Agreement and any Subsequent Purchase Agreement. "TRANSFER AND SALE AGREEMENT" means the Transfer and Sale Agreement dated as of the date hereof by and between the Seller and the Trust Depositor, as amended, supplemented or otherwise modified from time to time. "TRUST ACCOUNTS" means, collectively, the Collection Account, the Pre-Funding Account, the Note Distribution Account and the Reserve Fund, or any of them. "TRUST ACCOUNT PROPERTY" means the Trust Accounts, all amounts and investments held from time to time in any Trust Account (whether in the form of deposit accounts, physical property, book-entry securities, uncertificated securities or otherwise), including the Reserve Fund Initial Deposit, and all proceeds of the foregoing. "TRUST AGREEMENT" means the Trust Agreement, dated as of the date hereof, between the Trust Depositor and the Owner Trustee. "TRUST CORPUS" has the meaning given to such term in Section 2.01(b) hereof (and in Section 2.04(a) hereof in respect of Subsequent Contracts and related assets transferred to the Trust pursuant to Subsequent Transfer Agreements). "TRUST DEPOSITOR" has the meaning assigned such term in the preamble hereunder or any successor thereto. "TRUST ESTATE" shall have the meaning specified in the Trust Agreement. "TRUSTEES" means the Owner Trustee and the Indenture Trustee. "UCC" means the Uniform Commercial Code as enacted in Illinois or Nevada, as applicable. "UNCOLLECTIBLE ADVANCE" means with respect to any Determination Date and any Contract, the amount, if any, advanced by the Servicer pursuant to Section 7.03 which the Servicer has as of such Determination Date determined in good faith will not be ultimately recoverable by the Servicer from insurance policies on the related Motorcycle, the related Obligor or out of Net Liquidation Proceeds with respect to such Contract. The determination by the Servicer that it has made an Uncollectible Advance, or, that any Advance proposed to be made would be an Uncollectible Advance, shall be evidenced by an Officer's Certificate delivered to the Trustee. "UNDERWRITERS" means [____________] and [____________]. "UNITED STATES" means the United States of America. 19 "VICE PRESIDENT" of any Person means any vice president of such Person, whether or not designated by a number or words before or after the title "VICE PRESIDENT" who is a duly elected officer of such Person. "[NAME OF OWNER TRUSTEE]" means [______________], in its individual capacity. SECTION 1.02. USAGE OF TERMS. With respect to all terms in this Agreement, the singular includes the plural and the plural the singular; words importing any gender include the other genders; references to "WRITING" include printing, typing, lithography and other means of reproducing words in a visible form; references to agreements and other contractual instruments include all amendments, modifications and supplements thereto or any changes therein entered into in accordance with their respective terms and not prohibited by this Agreement; references to Persons include their permitted successors and assigns; and the term "INCLUDING" means "INCLUDING WITHOUT LIMITATION." SECTION 1.03. SECTION REFERENCES. All section references, unless otherwise indicated, shall be to Sections in this Agreement. SECTION 1.04. CALCULATIONS. Except as otherwise provided herein, all interest rate and basis point calculations hereunder will be made on the basis of a 360-day year and twelve 30-day months and will be carried out to at least three decimal places. SECTION 1.05. ACCOUNTING TERMS. All accounting terms used but not specifically defined herein shall be construed in accordance with generally accepted accounting principles in the United States. ARTICLE TWO ESTABLISHMENT OF TRUST; TRANSFER OF CONTRACTS SECTION 2.01. CLOSING. (a) There is hereby created by the Trust Depositor, as settlor, a separate trust which shall be known as the Harley-Davidson Motorcycle Trust [________]. The Trust shall be administered pursuant to the provisions of this Agreement for the benefit of the Noteholders and Certificateholders. The Owner Trustee is hereby specifically empowered to conduct business dealings on behalf of the Trust in accordance with the terms hereof. (b) On the Closing Date, the Trust Depositor shall sell, transfer, assign, set over and otherwise convey to the Trust by execution of an assignment substantially in the form of EXHIBIT A hereto, without recourse other than as expressly provided herein, (i) all the right, title and interest of the Trust Depositor in and to the Initial Contracts listed on the initial List of Contracts delivered on the Closing Date (including, without limitation, all security interests and all rights to receive payments which are collected pursuant thereto on or after the Initial Cutoff Date, including any liquidation proceeds therefrom, but excluding any rights to receive payments which were collected pursuant thereto prior to the Initial Cutoff Date), (ii) all rights of the Trust 20 Depositor under any physical damage or other individual insurance policy (and rights under a "FORCED PLACED" policy, if any) relating to any such Contract, an Obligor or a Motorcycle securing such Contract, (iii) all security interests in each such Motorcycle, (iv) all documents contained in the related Contract Files, (v) all rights (but not the obligations) of the Trust Depositor under any related motorcycle dealer agreements between dealers (i.e., the originators of such Contracts) and the Trust Depositor, (vi) all rights of the Trust Depositor in the Lockbox, the Lockbox Account and related Lockbox Agreement to the extent they relate to such Contracts, (vii) all rights (but not the obligations) of the Trust Depositor under the Transfer and Sale Agreement, including but not limited to the Trust Depositor's rights under Article V thereof, (viii) the remittances, deposits and payments made into the Trust Accounts from time to time and amounts in the Trust Accounts (other than the Reserve Fund) from time to time (and any investments of such amounts), and (ix) all proceeds and products of the foregoing (the property in clauses (i)-(ix) above, being the "TRUST CORPUS"). Although the Trust Depositor and the Owner Trustee agree that such transfer is intended to be a sale of ownership of the Trust Corpus, rather than the granting of a security interest to secure a borrowing, and that the Trust Corpus shall not be property of the Trust Depositor, in the event such transfer is deemed to be of a mere security interest to secure a borrowing, the Trust Depositor shall be deemed to have granted the Owner Trustee for the benefit of the Trust a perfected first priority security interest in such Trust Corpus and this Agreement shall constitute a security agreement under applicable law. (c) The Trust Depositor also hereby pledges and grants a first priority perfected security interest in, in favor of the Indenture Trustee for the benefit of the Securityholders, all its right, title and interest in and to the following (all being collectively referred to herein as the "OTHER COLLATERAL"): (i) the Reserve Fund established pursuant to Section 7.06 hereof (including, without limitation, the Reserve Fund Initial Deposit, made therein by the Trust Depositor on the Closing Date, and all additional monies, checks, securities, investments and other items or documents at any time held in or evidencing the Reserve Fund, including all rights to receive any amounts to be deposited from time to time therein); (ii) all of the Trust Depositor's right, title and interest in and to investments made with proceeds of the property described in clause (i) above; and (iii) all distributions, revenues, products, substitutions, benefits, profits and proceeds, in whatever form, of any of the foregoing; in each case as collateral security for the obligations of the Trust in respect of the Notes and the Certificates which, in accordance with and subject to the limitations and provisions hereof, may be satisfied or paid from such Other Collateral. 21 SECTION 2.02. CONDITIONS TO THE CLOSING. On or before the Closing Date, the Trust Depositor shall deliver or cause to be delivered the following documents to the Owner Trustee and the Indenture Trustee: (a) The initial List of Contracts, certified by the Chairman of the Board, President or any Vice President of the Trust Depositor, together with an assignment substantially in the form of EXHIBIT A hereto. (b) A certificate of an officer of the Seller substantially in the form of EXHIBIT B to the Transfer and Sale Agreement and of an officer of the Trust Depositor substantially in the form of EXHIBIT B hereto. (c) Opinions of counsel for the Seller and the Trust Depositor substantially in the form of EXHIBITS D, E and F hereto (and including as an addressee thereof each Rating Agency). (d) A letter or letters from Arthur Andersen LLP, or another nationally recognized accounting firm, addressed to the Seller and the Underwriters and stating that such firm has reviewed a sample of the Initial Contracts and performed specific procedures for such sample with respect to certain contract terms and which identifies those Initial Contracts which do not conform. (e) Copies of resolutions of the Board of Directors of each of the Seller/Servicer and the Trust Depositor or of the Executive Committee of the Board of Directors of each of the Seller/Servicer and the Trust Depositor approving the execution, delivery and performance of this Agreement and the other Transaction Documents to which any of them is a party, as applicable, and the transactions contemplated hereunder and thereunder, certified in each case by the Secretary or an Assistant Secretary of the Seller/Servicer and the Trust Depositor. (f) Officially certified, recent evidence of due incorporation and good standing of each of the Seller and the Trust Depositor under the laws of Nevada. (g) Evidence of proper filing with the appropriate offices in Nevada and Illinois of UCC financing statements executed by the Seller, as debtor, naming the Trust Depositor as secured party (and the Owner Trustee as assignee) and identifying the Contract Assets as collateral; and evidence of proper filing with the appropriate offices in Nevada and Illinois of UCC financing statements executed by the Trust Depositor, as debtor, naming the Owner Trustee as secured party and identifying the Trust Corpus as collateral; and evidence of proper filing with appropriate officers in Delaware of UCC financing statements executed by the Trust and naming the Indenture Trustee, as secured party and identifying the Collateral, as collateral; and evidence of proper filing with the appropriate offices in Nevada and Illinois of UCC financing statements executed by the Trust Depositor, as debtor, naming the Indenture Trustee, as secured party and identifying the Other Collateral, as collateral. 22 (h) An Officer's Certificate listing the Servicer's Servicing Officers. (i) Evidence of deposit in the Collection Account of all funds received with respect to the Initial Contracts on or after the Initial Cutoff Date to the Closing Date, together with an Officer's Certificate from the Trust Depositor to the effect that such amount is correct. (j) The Officer's Certificate of the Seller specified in Section 2.02(h) of the Transfer and Sale Agreement. (k) Evidence of deposit in the Reserve Fund of the Reserve Fund Initial Deposit by the Trust Depositor. (l) A fully executed Transfer and Sale Agreement. (m) A fully executed Trust Agreement. (n) A fully executed Administration Agreement. (o) A fully executed Indenture. SECTION 2.03. ACCEPTANCE BY OWNER TRUSTEE. On the Closing Date, if the conditions set forth in Section 2.02 have been satisfied, [the Owner Trustee shall issue on behalf of the Trust to, or upon the order of, the Trust Depositor the Certificates representing ownership of a beneficial interest in 100% of the Trust and] the Owner Trustee shall execute and issue, and the Indenture Trustee shall authenticate and deliver to, or upon the order of, the Trust Depositor the Notes secured by the Collateral. SECTION 2.04. CONVEYANCE OF SUBSEQUENT CONTRACTS. (a) Subject to the conditions set forth in paragraph (b) below, the Trust Depositor, shall sell, transfer, assign, set over and otherwise convey to the Trust, without recourse other than as expressly provided herein and therein, (i) all the right, title and interest of the Trust Depositor in and to the Subsequent Contracts listed on the Subsequent List of Contracts (including, without limitation, all security interests and all rights to receive payments which are collected pursuant thereto on or after the related Subsequent Cutoff Date, including any liquidation proceeds therefrom, but excluding any rights to receive payments which were collected pursuant thereto prior to such Subsequent Cutoff Date), (ii) all rights of the Trust Depositor under any physical damage or other individual insurance policy (or a "FORCED PLACED" policy, if any) relating to any such Contract, an Obligor or a Motorcycle securing such Contract, (iii) all security interests in each such Motorcycle, (iv) all documents contained in the related Contract Files, (v) all rights (but not the obligations) of the Trust Depositor under any related motorcycle dealer agreements between dealers (i.e., the originators of such Contracts) and the Trust Depositor, (vi) all rights of the Trust Depositor in the Lockbox, the Lockbox Account and related Lockbox Agreement to the extent they relate to such Contracts, (vii) all rights (but not the obligations) of the Trust Depositor under the Transfer and Sale Agreement related to such Contracts (to the extent not already conveyed under Section 23 2.01(b)), including but not limited to the Trust Depositor's related rights under Article V thereof, as well as all rights, but not the obligations, of the Trust Depositor under the Subsequent Purchase Agreement related to such Contracts, (viii) the remittances, deposits and payments made into the Trust Accounts from time to time and amounts in the Trust Accounts from time to time related to such Contracts (to the extent not already conveyed under Section 2.01(b)) (and any investments of such amounts), and (ix) all proceeds and products of the foregoing (the property in clauses (i)-(ix) above, upon such transfer, becoming part of the "TRUST CORPUS"). Although the Trust Depositor and the Owner Trustee agree that such transfer is intended to be a sale of ownership, rather than the granting of a security interest to secure a borrowing, and that the Trust Corpus following such transfer shall not be property of the Trust Depositor, in the event such transfer is deemed to be of a mere security interest to secure a borrowing, the Trust Depositor shall be deemed to have granted the Owner Trustee for the benefit of the Trust a perfected first priority security interest in such Trust Corpus and this Agreement shall constitute a security agreement under applicable law. (b) The Trust Depositor shall transfer to the Trust the Subsequent Contracts and the other property and rights related thereto described in paragraph (a) above only upon the satisfaction of each of the following conditions on or prior to the related Subsequent Transfer Date: (i) The Trust Depositor shall have provided the Owner Trustee, the Indenture Trustee, the Underwriters and the Rating Agencies with a timely Addition Notice and shall have provided any information reasonably requested by any of the foregoing with respect to the Subsequent Contracts; (ii) the Funding Period shall not have terminated; (iii) the Trust Depositor shall have delivered to the Owner Trustee a duly executed written assignment (including an acceptance by the Owner Trustee) in substantially the form of EXHIBIT M hereto (the "SUBSEQUENT TRANSFER AGREEMENT"), which shall include a Subsequent List of Contracts listing the Subsequent Contracts; (iv) the Trust Depositor shall have deposited or caused to be deposited in the Collection Account all collections received with respect to the Subsequent Contracts on or after the related Subsequent Cutoff Date; (v) as of each Subsequent Transfer Date, neither the Seller nor the Trust Depositor was insolvent nor will either of them have been made insolvent by such transfer nor is either of them aware of any pending insolvency; (vi) the applicable Subsequent Reserve Fund Amount for such Subsequent Transfer Date shall have been deposited by the Indenture Trustee from the Pre-Funding Account to the Reserve Fund; 24 (vii) each Rating Agency shall have notified the Trust Depositor, the Owner Trustee and the Indenture Trustee in writing that following such transfer the Class A-1 Notes and Class A-2 Notes will be rated in the highest rating category by such Rating Agency and the Certificates will be rated at least its rating as of the Closing Date by Standard & Poor's and Moody's; (viii) such addition will not result in a material adverse tax consequence to the Trust or the Certificateholders as evidenced by an Opinion of Counsel to be delivered by the Trust Depositor to the Owner Trustee, Indenture Trustee, the Rating Agencies and the Underwriters; (ix) the Trust Depositor shall have delivered to the Owner Trustee and the Indenture Trustee an Officers' Certificate confirming the satisfaction of each condition precedent specified in this paragraph (b); (x) the Trust Depositor shall have delivered to the Rating Agencies and the Underwriters one or more opinions of counsel with respect to the transfer of the Subsequent Contracts substantially in the form of the opinions of counsel delivered to such Persons on the Closing Date; (xi) no selection procedures believed by the Trust Depositor to be adverse to the interests of the Noteholders or Certificateholders shall have been utilized in selecting the Subsequent Contracts; (xii) the Trust Depositor shall have delivered to the Rating Agencies evidence that (A) the weighted average annual percentage rate of the Contracts collectively, following the transfer of the Subsequent Contracts, is not less than 12.65% and (B) that the weighted average calculated remaining term to maturity of the Contracts collectively, following the transfer of the Subsequent Contracts, does not exceed 70 months; (xiii) the Trust Depositor shall have delivered to the Rating Agencies, a report with respect to certain agreed-upon procedures relating to the Subsequent Contracts being transferred, confirming that procedures were performed substantially similar to such procedures as were performed in connection with the transfer of the Initial Contracts; (xiv) each of the representations and warranties made by the Seller pursuant to Section 3.01 of the Transfer and Sale Agreement with respect to the Subsequent Receivables shall be true and correct as of the related Subsequent Transfer Date, and the Seller shall have performed all obligations to be performed by it hereunder on or prior to such Subsequent Transfer Date; (xv) the Seller shall, at its own expense, on or prior to the Subsequent Transfer Date indicate in its Computer Disk that the Subsequent Receivables identified on the Subsequent List of Contracts in the Subsequent Transfer Agreement have been sold to the Issuer pursuant to this Agreement and the Transfer and Sale Agreement; and 25 (xvi) the Seller shall have taken any action required to maintain the first perfected ownership interest of the Issuer in the Owner Trust Estate and the first perfected security interest of the Indenture Trustee in the Collateral. (c) The Trust Depositor covenants to transfer (at or prior to the end of the Funding Period) to the Trust pursuant thereto Subsequent Contracts with an aggregate Principal Balance equal to $[__________]; PROVIDED, HOWEVER, that in complying with such covenant, the Trust Depositor agrees to make no more than one separate transfer of Subsequent Contracts per monthly period (as measured by the corresponding Distribution Dates). In the event that the Trust Depositor shall fail to deliver and sell to the Trust any or all of such Subsequent Receivables by the date on which the Funding Period ends and the Pre-Funded Amount is greater than $150,000 on such date, the Trust Depositor shall cause to be deposited into the Collection Account the amount then on deposit in the Pre-Funding Account; PROVIDED, HOWEVER, that the foregoing shall be the sole remedy of the Trust, the Owner Trustee, the Indenture Trustee or the Securityholders with respect to a failure of the Trust Depositor to comply with such covenant. ARTICLE THREE REPRESENTATIONS AND WARRANTIES The Seller under the Transfer and Sale Agreement has made, and upon execution of each Subsequent Purchase Agreement is deemed to remake, each of the representations and warranties set forth in EXHIBIT J hereto and has consented to the assignment by the Trust Depositor to the Issuer of the Trust Depositor's rights with respect thereto. Such representations speak as of the execution and delivery of this Agreement and as of the Closing Date in the case of the Initial Contracts, and as of the applicable Subsequent Transfer Date in the case of the Subsequent Contracts, but shall survive the sale, transfer and assignment of the Contracts to the Trust. Pursuant to Section 2.01 of this Agreement, the Trust Depositor has sold, assigned, transferred and conveyed to the Issuer as part of the Trust Corpus its rights under the Transfer and Sale Agreement, including without limitation, the representations and warranties of the Seller therein as set forth in EXHIBIT J attached hereto, together with all rights of the Trust Depositor with respect to any breach thereof including any right to require the Seller to repurchase any Contract in accordance with the Transfer and Sale Agreement. It is understood and agreed that the representations and warranties set forth or referred to in this Section shall survive delivery of the Contract Files to the Owner Trustee or any custodian. The Trust Depositor hereby represents and warrants to the Owner Trustee and the Indenture Trustee that it has entered into the Transfer and Sale Agreement with the Seller, that the Seller has made the representations and warranties in the Transfer and Sale Agreement as set forth in EXHIBIT J hereto, that such representations and warranties run to and are for the benefit of the Trust Depositor, and that pursuant to Section 2.01 of this Agreement the Trust Depositor has transferred and assigned to the Owner Trustee all rights of the Trust Depositor to cause the Seller under the Transfer and Sale Agreement to repurchase Contracts in the event of a breach of such representations and warranties. 26 SECTION 3.01. REPRESENTATIONS AND WARRANTIES REGARDING THE TRUST DEPOSITOR. By its execution of this Agreement and each Subsequent Transfer Agreement, the Trust Depositor represents and warrants to the Owner Trustee, the Indenture Trustee, the Noteholders and the Certificateholders that: (a) ASSUMPTION OF SELLER'S REPRESENTATIONS AND WARRANTIES. The representations and warranties set forth in EXHIBIT J are true and correct. (b) ORGANIZATION AND GOOD STANDING. The Trust Depositor is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has the corporate power to own its assets and to transact the business in which it is currently engaged. The Trust Depositor is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which the character of the business transacted by it or properties owned or leased by it requires such qualification and in which the failure so to qualify would have a material adverse effect on the business, properties, assets, or condition (financial or other) of the Trust Depositor or the Trust. (c) AUTHORIZATION; VALID SALE; BINDING OBLIGATIONS. The Trust Depositor has the power and authority to make, execute, deliver and perform its obligations under this Agreement and the other Transaction Documents to which it is a party and all of the transactions contemplated under this Agreement and the other Transaction Documents to which it is a party, and to create the Trust and cause it to make, execute, deliver and perform its obligations under this Agreement and the other Transaction Documents to which it is a party and has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement and the other Transaction Documents to which it is a party and to cause the Trust to be created. This Agreement and the related Subsequent Transfer Agreement, if any, shall effect a valid sale, transfer and assignment of the Trust Corpus, enforceable against the Trust Depositor and creditors of and purchasers from the Trust Depositor. This Agreement and the other Transaction Documents to which the Trust Depositor is a party constitute the legal, valid and binding obligation of the Trust Depositor enforceable in accordance with their terms, except as enforcement of such terms may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and by the availability of equitable remedies. (d) NO CONSENT REQUIRED. The Trust Depositor is not required to obtain the consent of any other party or any consent, license, approval or authorization from, or registration or declaration with, any governmental authority, bureau or agency in connection with the execution, delivery, performance, validity or enforceability of this Agreement or the other Transaction Documents to which it is a party. (e) NO VIOLATIONS. The execution, delivery and performance of this Agreement and the other Transaction Documents to which it is a party by the Trust Depositor, and the consummation of the transactions contemplated hereby and thereby, 27 will not violate any provision of any existing law or regulation or any order or decree of any court or of any Federal or state regulatory body or administrative agency having jurisdiction over the Trust Depositor or any of its properties or the Articles of Incorporation or Bylaws of the Trust Depositor, or constitute a material breach of any mortgage, indenture, contract or other agreement to which the Trust Depositor is a party or by which the Trust Depositor or any of the Trust Depositor's properties may be bound, or result in the creation or imposition of any security interest, lien, charge, pledge, preference, equity or encumbrance of any kind upon any of its properties pursuant to the terms of any such mortgage, indenture, contract or other agreement, other than as contemplated by the Transaction Documents. (f) LITIGATION. No litigation or administrative proceeding of or before any court, tribunal or governmental body is currently pending, or to the knowledge of the Trust Depositor threatened, against the Trust Depositor or any of its properties or with respect to this Agreement, the other Transaction Documents to which it is a party or the Securities (1) which, if adversely determined, would in the opinion of the Trust Depositor have a material adverse effect on the business, properties, assets or condition (financial or otherwise) of the Trust Depositor or the Trust or the transactions contemplated by this Agreement or the other Transaction Documents to which the Trust Depositor is a party or (2) seeking to adversely affect the federal income tax or other federal, state or local tax attributes of the Certificates or Notes. (g) PLACE OF BUSINESS; NO CHANGES. The Trust Depositor's sole place of business (within the meaning of Article 9 of the UCC) is as set forth in Section 11.04 below. The Trust Depositor has not changed its name, whether by amendment of its Articles of Incorporation, by reorganization or otherwise, and has not changed the location of its place of business, within the four months preceding the Closing Date. [(h) The Trust Depositor will always own a Certificate equal to at least one percent (1.00%) of the outstanding certificate balance.] Such representations speak as of the execution and delivery of this Agreement and as of the Closing Date in the case of the Initial Contracts, and as of the applicable Subsequent Transfer Date in the case of the Subsequent Contracts, but shall survive the sale, transfer and assignment of the Contracts to the Trust and the pledge thereof to the Indenture Trustee. SECTION 3.02. REPRESENTATIONS AND WARRANTIES REGARDING THE SERVICER. The Servicer represents and warrants to the Owner Trustee, the Indenture Trustee, the Noteholders and the Certificateholders that: (a) ORGANIZATION AND GOOD STANDING. The Servicer is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has the corporate power to own its assets and to transact the business in which it is currently engaged. The Servicer is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which the character of the 28 business transacted by it or properties owned or leased by it requires such qualification and in which the failure so to qualify would have a material adverse effect on the business, properties, assets, or condition (financial or otherwise) of the Servicer or the Trust. The Servicer is properly licensed in each jurisdiction to the extent required by the laws of such jurisdiction to service the Contracts in accordance with the terms hereof other than such licenses the failure to obtain would not have a material adverse effect on the business, properties, assets, or condition (financial or otherwise) of the Servicer. (b) AUTHORIZATION; BINDING OBLIGATIONS. The Servicer has the power and authority to make, execute, deliver and perform this Agreement and the other Transaction Documents to which the Servicer is a party and all of the transactions contemplated under this Agreement and the other Transaction Documents to which the Servicer is a party, and has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement and the other Transaction Documents to which the Servicer is a party. This Agreement and the other Transaction Documents to which the Servicer is a party constitute the legal, valid and binding obligation of the Servicer enforceable in accordance with their terms, except as enforcement of such terms may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and by the availability of equitable remedies. (c) NO CONSENT REQUIRED. The Servicer is not required to obtain the consent of any other party or any consent, license, approval or authorization from, or registration or declaration with, any governmental authority, bureau or agency in connection with the execution, delivery, performance, validity or enforceability of this Agreement and the other Transaction Documents to which the Servicer is a party. (d) NO VIOLATIONS. The execution, delivery and performance of this Agreement and the other Transaction Documents to which the Servicer is a party by the Servicer will not violate any provisions of any existing law or regulation or any order or decree of any court or of any Federal or state regulatory body or administrative agency having jurisdiction over the Servicer or any of its properties or the Articles of Incorporation or Bylaws of the Servicer, or constitute a material breach of any mortgage, indenture, contract or other agreement to which the Servicer is a party or by which the Servicer or any of the Servicer's properties may be bound, or result in the creation of or imposition of any security interest, lien, pledge, preference, equity or encumbrance of any kind upon any of its properties pursuant to the terms of any such mortgage, indenture, contract or other agreement, other than this Agreement. (e) LITIGATION. No litigation or administrative proceeding of or before any court, tribunal or governmental body is currently pending, or to the knowledge of the Servicer threatened, against the Servicer or any of its properties or with respect to this Agreement, any other Transaction Document to which the Servicer is a party which, if adversely determined, would in the opinion of the Servicer have a material adverse effect on the business, properties, assets or condition (financial or otherwise) of the Servicer or 29 the Trust or the transactions contemplated by this Agreement or any other Transaction Document to which the Servicer is a party. ARTICLE FOUR PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS SECTION 4.01. CUSTODY OF CONTRACTS. (a) Subject to the terms and conditions of this Section 4.01, the contents of each Contract File shall be held in the custody of the Servicer for the benefit of, and as agent for, the Noteholders, the Certificateholders, the Indenture Trustee and the Owner Trustee as the owner thereof. (b) The Servicer agrees to maintain the related Contract Files at its offices where they are currently maintained, or at such other offices of the Servicer in the State of Nevada as shall from time to time be identified to the Trustees by written notice. The Servicer may temporarily move individual Contract Files or any portion thereof without notice as necessary to conduct collection and other servicing activities in accordance with its customary practices and procedures; PROVIDED, HOWEVER, that the Servicer will take all action necessary to maintain the perfection of the Trust's interest in the Contracts and the proceeds thereof. It is intended that by the Servicer's agreement pursuant to Section 4.01(a) above and this Section 4.01(b) the Trustees shall be deemed to have possession of the Contract Files for purposes of Section 9-305 of the Uniform Commercial Code of the State in which the Contract Files are located. (c) As custodian, the Servicer shall have and perform the following powers and duties: (i) hold the Contract Files on behalf of the Noteholders and the Certificateholders and the Owner Trustee and the Indenture Trustee, maintain accurate records pertaining to each Contract to enable it to comply with the terms and conditions of this Agreement, maintain a current inventory thereof, conduct annual physical inspections of Contract Files held by it under this Agreement and certify to the Owner Trustee and the Indenture Trustee annually that it continues to maintain possession of such Contract Files; (ii) implement policies and procedures in writing and signed by a Servicing Officer with respect to persons authorized to have access to the Contract Files on the Servicer's premises and the receipting for Contract Files taken from their storage area by an employee of the Servicer for purposes of servicing or any other purposes; (iii) attend to all details in connection with maintaining custody of the Contract Files on behalf of the Noteholders and the Certificateholders, the Owner Trustee and the Indenture Trustee; 30 (iv) at all times maintain the original of the fully executed Contract and store such original Contract in a fireproof vault; (v) stamp each Contract on both the first and the signature page (if different) as of the Closing Date (or Subsequent Transfer Date, as the case may be) in the form attached hereto as EXHIBIT L; (vi) within 30 days of the Closing Date (or Subsequent Transfer Date, as the case may be) deliver an Officer's Certificate to the Owner Trustee and the Indenture Trustee certifying that as of a date no earlier than the Closing Date (or Subsequent Transfer Date, as the case may be) it has conducted an inventory of the Contract Files (which in the case of Subsequent Contracts, need be only of the Contract Files related to such Subsequent Contracts) and that there exists a Contract File for each Contract and stating all exceptions to such statement, if any; and (vii) within 185 days of the Closing Date (or Subsequent Transfer Date, as the case may be) deliver an Officer's Certificate to the Owner Trustee listing each Contract with respect to which there did not exist as of 180 days of the Closing Date (or Subsequent Transfer Date, as the case may be) an original title certificate to the motorcycle and the certificate of lien recordation relating thereto. (d) In performing its duties under this Section 4.01, the Servicer agrees to act with reasonable care, using that degree of skill and care that it exercises with respect to similar contracts for the installment purchase of consumer goods owned and/or serviced by it, and in any event with no less degree of skill and care than would be exercised by a prudent servicer of motorcycle conditional sales contracts. The Servicer shall promptly report to the Owner Trustee and the Indenture Trustee any failure by it to hold the Contract Files as herein provided and shall promptly take appropriate action to remedy any such failure. In acting as custodian of the Contract Files, the Servicer further agrees not to assert any legal or beneficial ownership interest in the Contracts or the Contract Files, except as provided in Section 5.06. The Servicer agrees to indemnify the Noteholders, the Certificateholders, the Owner Trustee and the Indenture Trustee for any and all liabilities, obligations, losses, damages, payments, costs, or expenses of any kind whatsoever which may be imposed on, incurred by or asserted against the Noteholders, the Certificateholders, the Owner Trustee and the Indenture Trustee as the result of any act or omission by the Servicer relating to the maintenance and custody of the Contract Files; PROVIDED, HOWEVER, that the Servicer will not be liable for any portion of any such amount resulting from the gross negligence or willful misconduct of any Noteholder, Certificateholder, the Owner Trustee or the Indenture Trustee. The Trustees shall have no duty to monitor or otherwise oversee the Servicer's performance as custodian hereunder. SECTION 4.02. FILING. On or prior to the Closing Date, the Servicer shall cause the UCC financing statement(s) referred to in Section 2.02(g) hereof to be filed and from time to time the Servicer shall take and cause to be taken such actions and execute such documents as are necessary or desirable or as the Owner Trustee or Indenture Trustee may reasonably request to perfect and protect the Trust's first priority perfected interest in the Trust Corpus against all 31 other persons, including, without limitation, the filing of financing statements, amendments thereto and continuation statements, the execution of transfer instruments and the making of notations on or taking possession of all records or documents of title. SECTION 4.03. NAME CHANGE OR RELOCATION. (a) During the term of this Agreement, neither the Seller nor the Trust Depositor shall change its name, identity or structure or relocate its chief executive office without first giving at least 30 days' prior written notice to the Owner Trustee and the Indenture Trustee. (b) If any change in either the Seller's or the Trust Depositor's name, identity or structure or other action would make any financing or continuation statement or notice of lien filed under this Agreement seriously misleading within the meaning of applicable provisions of the UCC or any title statute, the Servicer, no later than five days after the effective date of such change, shall file such amendments as may be required to preserve and protect the Trust's interests in the Trust Corpus and the proceeds thereof. In addition, neither the Seller nor the Trust Depositor shall change its place of business (within the meaning of Article 9 of the UCC) from the location specified in Section 11.04 below unless it has first taken such action as is advisable or necessary to preserve and protect the Trust's interest in the Trust Corpus. Promptly after taking any of the foregoing actions, the Servicer shall deliver to the Owner Trustee and the Indenture Trustee an Opinion of Counsel reasonably acceptable to the Owner Trustee and the Indenture Trustee stating that, in the opinion of such counsel, all financing statements or amendments necessary to preserve and protect the interests of the Owner Trustee and the Indenture Trustee in the Trust Corpus have been filed, and reciting the details of such filing. SECTION 4.04. CHIEF EXECUTIVE OFFICE. During the term of this Agreement, the Trust Depositor will maintain its chief executive office in one of the States of the United States, except Louisiana, Tennessee, Colorado, Kansas, New Mexico, Oklahoma, Utah or Wyoming. SECTION 4.05. COSTS AND EXPENSES. The Servicer agrees to pay all reasonable costs and disbursements in connection with the perfection and the maintenance of perfection, as against all third parties, of the Trust's right, title and interest in and to the Contracts (including, without limitation, the security interest in the Motorcycles granted thereby). ARTICLE FIVE SERVICING OF CONTRACTS SECTION 5.01. RESPONSIBILITY FOR CONTRACT ADMINISTRATION. The Servicer will have the sole obligation to manage, administer, service and make collections on the Contracts and perform or cause to be performed all contractual and customary undertakings of the holder of the Contracts to the Obligor. The Owner Trustee, at the written request of a Servicing Officer, shall furnish the Servicer with any powers of attorney or other documents necessary or appropriate in the opinion of the Owner Trustee to enable the Servicer to carry out its servicing and 32 administrative duties hereunder. The Servicer is hereby appointed the servicer hereunder until such time as any Service Transfer may be effected under Article VIII. SECTION 5.02. STANDARD OF CARE. In managing, administering, servicing and making collections on the Contracts pursuant to this Agreement, the Servicer will exercise that degree of skill and care consistent with the skill and care that the Servicer exercises with respect to similar contracts serviced by the Servicer, and, in any event no less degree of skill and care than would be exercised by a prudent servicer of motorcycle conditional sales contracts; PROVIDED, HOWEVER, that notwithstanding the foregoing, the Servicer shall not release or waive the right to collect the Principal Balance on any Contract. SECTION 5.03. RECORDS. The Servicer shall, during the period it is servicer hereunder, maintain such books of account and other records as will enable the Owner Trustee and the Indenture Trustee to determine the status of each Contract. SECTION 5.04. INSPECTION. (a) At all times during the term hereof, the Servicer shall afford the Owner Trustee and the Indenture Trustee and their respective authorized agents reasonable access during normal business hours to the Servicer's records relating to the Contracts and will cause its personnel to assist in any examination of such records by the Owner Trustee or the Indenture Trustee, or such authorized agents and allow copies of the same to be made. The examination referred to in this Section will be conducted in a manner which does not unreasonably interfere with the Servicer's normal operations or customer or employee relations. Without otherwise limiting the scope of the examination the Owner Trustee or the Indenture Trustee may, using generally accepted audit procedures, verify the status of each Contract and review the Computer Disk and records relating thereto for conformity to Monthly Reports prepared pursuant to Article IX and compliance with the standards represented to exist as to each Contract in this Agreement. (b) At all times during the term hereof, the Servicer shall keep available a copy of the List of Contracts at its principal executive office for inspection by Certificateholders. SECTION 5.05. TRUST ACCOUNTS. (a) On or before the Closing Date, the Trust Depositor shall establish the Collection Account, Note Distribution Account, Pre-Funding Account and Reserve Fund, each with and in the name of the Indenture Trustee for the benefit of the Noteholders and the Certificateholders, respectively. The Indenture Trustee is hereby required to ensure that each of the Trust Accounts is established and maintained as an Eligible Account. (b) The Indenture Trustee shall deposit (or the Servicer shall deposit, with respect to payments by or on behalf of the Obligors and Net Liquidation Proceeds received directly by the Servicer), without deposit into any intervening account, into the Collection Account as promptly as practical (but in any case not later than the second Business Day following the receipt thereof): (i) With respect to principal and interest on the Contracts (as well as Late Payment Penalty Fees and extension fees) received on or after the Initial Cutoff Date or 33 Subsequent Cutoff Date, as applicable (which for the purpose of this paragraph (b)(i) shall include those monies in the Lockbox Account allocable to principal and interest on the Contracts), all such amounts received by the Owner Trustee or Servicer; (ii) All Net Liquidation Proceeds related to the Contracts; (iii) The aggregate of the Repurchase Prices for Contracts repurchased by the Trust Depositor as described in Section 7.08; (iv) All Advances made by the Servicer pursuant to Section 7.03(a); (v) All amounts paid by the Trust Depositor in connection with an optional repurchase of the Contracts described in Section 7.10; (vi) All amounts realized in respect of Carrying Charges transferred from the Interest Reserve Account as contemplated in Section 7.03(b); and (vii) All amounts received in respect of interest, dividends, gains, income and earnings on investments of funds in the Trust Accounts (except the Reserve Fund) as contemplated herein. (c) The Indenture Trustee shall, if amounts remain on deposit in the Pre-Funding Account at the expiration of the Funding Period, make a demand, immediately upon expiration of the Funding Period, upon the Trust Depositor to cause to be deposited into the Collection Account the amount then in deposit in the Pre-Funding Account. (d) If the Servicer so directs, in writing, the Indenture Trustee shall invest the amounts in the Trust Accounts in Qualified Eligible Investments that are payable on demand or that mature not later than one Business Day prior to the next succeeding Distribution Date. Once such funds are invested, the Indenture Trustee shall not change the investment of such funds. Any loss on such investments shall be deposited in the applicable Trust Account by the Servicer out of its own funds immediately as realized. Funds in the Trust Accounts not so invested must be insured to the extent permitted by law by the Bank Insurance Fund or the Savings Association Insurance Fund of the Federal Deposit Insurance Corporation. Subject to the restrictions herein, the Indenture Trustee may purchase a Qualified Eligible Investment from itself or an Affiliate. Subject to the other provisions hereof, the Indenture Trustee shall have sole control over each such investment and the income thereon, and any certificate or other instrument evidencing any such investment, if any, shall be delivered directly to the Indenture Trustee or its agent, together with each document of transfer, if any, necessary to transfer title to such investment to the Indenture Trustee in a manner which complies with this Section 5.05(d). All interest, dividends, gains upon sale and other income from, or earnings on, investments of funds in the Trust Accounts (other than the Reserve Fund) shall be deposited in the Collection Account pursuant to Section 5.05(b) and distributed on the next Distribution Date pursuant to Section 7.05. The Trust Depositor and the Trust agree and acknowledge that the Indenture Trustee is to have "CONTROL" (within the meaning of Section 8-102 of the UCC as enacted in Illinois) of collateral comprised 34 of "INVESTMENT PROPERTY" (within the meaning of Section 9-115 of the UCC as enacted in Illinois) for all purposes of this Agreement. (d) Notwithstanding anything to the contrary herein, the Servicer may remit payments on the Contracts and Net Liquidation Proceeds to the Collection Account in next-day funds or immediately available funds no later than ___ a.m., Central time, on the Business Day prior to the next succeeding Distribution Date, but only for so long as (a)(i) the short-term certificate of deposit ratings of the Servicer are at least P-1 by Moody's and "A-1" by Standard & Poor's or (ii) the Rating Agency shall have notified the Servicer, the Indenture Trustee and the Owner Trustee, in writing, that monthly remittances of collections will not result in reduction or withdrawal of any then outstanding rating of any outstanding Note or Certificate and (b) the Servicer is Harley-Davidson Credit Corp. (e) As of the Business Day immediately preceding the related Distribution Date, all collections for the related Collection Period with respect to each Contract shall be applied by the Servicer as follows: (i) First, to reimburse any outstanding Advances made by the Servicer with respect to such Contract; (ii) Second, first to interest accrued on such Contract as of such date and then to principal until the Principal Balance of such Contract is brought current; and (iii) Third, to reduce the unpaid late charges or extension fees (if any) as provided in such Contract. (f) Any collections on a Contract remaining after application in accordance with the provisions of SECTION 5.05(e) shall constitute an excess payment (an "EXCESS PAYMENT"). Excess Payments shall be applied as a prepayment of the Principal Balance of such Contract. (g) The Servicer will, from time to time as provided herein, be permitted to withdraw from the Collection Account any amount deposited therein that, based on the Servicer's good-faith determination, was deposited in error or required to be repaid to the related Obligor. SECTION 5.06. ENFORCEMENT. (a) The Servicer will, consistent with Section 5.02, act with respect to the Contracts in such manner as will maximize the receipt of principal and interest on such Contracts. The Servicer will act in a commercially reasonable manner with respect to the repossession and disposition of a Motorcycle following a default under the related Contract with a view to realizing proceeds at least equal to the Motorcycle's fair market value. If the Servicer determines that eventual payment in full of a Contract is unlikely, the Servicer will follow its normal practices and procedures to recover all amounts due upon that Contract, including repossessing and disposing of the related Motorcycle at a public or private sale or taking other action permitted by applicable law. The Servicer will be entitled to recover all reasonable out-of-pocket expenses incurred by it in liquidating a Contract and disposing of the related Motorcycle. 35 (b) The Servicer may sue to enforce or collect upon Contracts, in its own name, if possible, or as agent for the Trustees. If the Servicer elects to commence a legal proceeding to enforce a Contract, the act of commencement shall be deemed to be an automatic assignment of the Contract to the Servicer for purposes of collection only. If, however, in any enforcement suit or legal proceeding it is held that the Servicer may not enforce a Contract on the ground that it is not a real party in interest or a holder entitled to enforce the Contract, the Owner Trustee (or the Indenture Trustee) on behalf of the Trust shall, at the Servicer's expense, take such steps as the Servicer deems reasonably necessary to enforce the Contract, including bringing suit in its name or the names of the Noteholders under the Indenture and the Certificateholders as owners of the Trust. (c) The Servicer shall exercise any rights of recourse against third persons that exist with respect to any Contract in accordance with the Servicer's usual practice. In exercising recourse rights, the Servicer is authorized on the Owner Trustee's behalf to reassign the Defaulted Contract or the related Motorcycle to the Person against whom recourse exists at the price set forth in the document creating the recourse; PROVIDED, HOWEVER, the Servicer in exercising recourse against any third persons as described in the immediately preceding sentence shall do so in such manner as to maximize the aggregate recovery with respect to the Contract; and PROVIDED FURTHER, HOWEVER, that notwithstanding the foregoing the Servicer in its capacity as such may exercise such recourse only if such Contract (i) was not required to be repurchased by the Seller pursuant to the Transfer and Sale Agreement or (ii) was required to be repurchased by the Seller and the Seller has defaulted on such repurchase obligation. (d) The Servicer will not permit any rescission or cancellation of any Contract due to the acts or omissions of the Trust Depositor. (e) The Servicer may grant to the Obligor on any Contract an extension of payments due under such Contract; PROVIDED that (i) the extension period is limited to 45 days, (ii) the Obligor has not received an extension during the previous twelve-month period, (iii) the evidence supports the Obligor's willingness and capability to resume monthly payments, (iv) such extension is consistent with the Servicer's customary servicing procedures and is consistent with Section 5.02, (v) such extension does not extend the maturity date of the Contract beyond the latest maturity date of any of the Contracts as of the Initial Cutoff Date (or, if a transfer of Subsequent Contracts to the Trust occurs, beyond the latest maturity date of such Subsequent Contracts) and (vi) the aggregate Principal Balances of Contracts which have had extensions granted does not exceed more than [____]% of the aggregate of the Initial Class A-1 Note Balance, the Initial Class A-2 Note Balance, the Initial Class B Note Balance [and the Initial Certificate Balance]. (f) The Servicer will not add to the outstanding Principal Balance of any Contract the premium of any physical damage or other individual insurance on a Motorcycle securing such Contract it obtains on behalf of the Obligor under the terms of such Contract, but may create a separate Obligor obligation with respect to such premium if and as provided by the Contract. 36 (g) If the Servicer shall have repossessed a Motorcycle on behalf of the Trust, the Servicer shall either (i) maintain at its expense physical damage insurance with respect to such Motorcycle, or (ii) indemnify the Trust against any damage to such Motorcycle prior to resale or other disposition. The Servicer shall not allow such repossessed Motorcycles to be used in an active trade or business, but rather shall dispose of the Motorcycle in a reasonable time in accordance with the Servicer's normal business practices. SECTION 5.07. TRUSTEES TO COOPERATE. Upon payment in full on any Contract, the Servicer will notify the Trustees and the Trust Depositor on the next succeeding Distribution Date by certification of a Servicing Officer (which certification shall include a statement to the effect that all amounts received in connection with such payments which are required to be deposited in the Collection Account pursuant to Section 5.05 have been so deposited) and shall (if the Servicer is not then in possession of the Contracts and Contract Files) request delivery of the Contract and Contract File to the Servicer. Upon receipt of such delivery and request, the Trustees shall promptly release or cause to be released such Contract and Contract File to the Servicer. Upon receipt of such Contract and Contract File, each of the Trust Depositor and the Servicer is authorized to execute an instrument in satisfaction of such Contract and to do such other acts and execute such other documents as the Servicer deems necessary to discharge the Obligor thereunder and eliminate the security interest in the Motorcycle related thereto. The Servicer shall determine when a Contract has been paid in full; to the extent that insufficient payments are received on a Contract credited by the Servicer as prepaid or paid in full and satisfied, the shortfall shall be paid by the Servicer out of its own funds. From time to time as appropriate for servicing and repossession in connection with any Contract, if the Servicer is not then in possession of the Contracts and Contract Files, the Indenture Trustee shall, upon written request of a Servicing Officer and delivery to the Indenture Trustee of a receipt signed by such Servicing Officer, cause the original Contract and the related Contract File to be released to the Servicer and shall execute such documents as the Servicer shall deem reasonably necessary to the prosecution of any such proceedings. Such receipt shall obligate the Servicer to return the original Contract and the related Contract File to the Indenture Trustee when the need by the Servicer has ceased unless the Contract shall be repurchased as described in Section 7.10. Upon request of a Servicing Officer, the Indenture Trustee shall perform such other acts as reasonably requested by the Servicer and otherwise cooperate with the Servicer in the enforcement of the Securityholders' rights and remedies with respect to Contracts. SECTION 5.08. COSTS AND EXPENSES. All costs and expenses incurred by the Servicer in carrying out its duties hereunder, fees and expenses of accountants and payments of all fees and expenses incurred in connection with the enforcement of Contracts (including enforcement of Defaulted Contracts and repossessions of Motorcycles securing such Contracts when such Contracts are not repurchased pursuant to Section 7.08) and all other fees and expenses not expressly stated hereunder to be for the account of the Trust shall be paid by the Servicer and the Servicer shall not be entitled to reimbursement hereunder. SECTION 5.09. MAINTENANCE OF SECURITY INTERESTS IN MOTORCYCLES. The Servicer shall take such steps as are necessary to maintain continuous perfection and the first priority of the security interest created by each Contract in the related Motorcycle. The Owner Trustee hereby 37 authorizes the Servicer to take such steps as are necessary to perfect such security interest and to maintain the first priority thereof in the event of a relocation of a Motorcycle or for any other reason. SECTION 5.10. SUCCESSOR SERVICER/LOCKBOX AGREEMENTS. The Servicer shall use its best efforts to cause Obligors to make all payments on the Contracts directly to one or more Lockbox Banks, acting as agent for the Trust pursuant to a Lockbox Agreement. In the event the Servicer shall for any reason no longer be acting as such, the Successor Servicer shall thereupon assume all of the rights and obligations of the outgoing servicer under the Lockbox Agreement; PROVIDED, HOWEVER, that the Successor Servicer shall not be liable for any acts or obligations of the Servicer prior to such succession. In such event, the Successor Servicer shall be deemed to have assumed all of the outgoing Servicer's interest therein and to have replaced the outgoing Servicer as a party to each such Lockbox Agreement to the same extent as if such Lockbox Agreement had been assigned to the Successor Servicer, except that the outgoing Servicer shall not thereby be relieved of any liability or obligations on the part of the outgoing Servicer to the Lockbox Bank under such Lockbox Agreement. The outgoing Servicer shall, upon the request of the Owner Trustee, but at the expense of the outgoing Servicer, deliver to the Successor Servicer all documents and records relating to each such Lockbox Agreement and an accounting of amounts collected and held by the Lockbox Bank and otherwise use its best efforts to effect the orderly and efficient transfer of any Lockbox Agreement to the Successor Servicer. ARTICLE SIX THE TRUST DEPOSITOR SECTION 6.01. COVENANTS OF THE TRUST DEPOSITOR. (a) CORPORATE EXISTENCE. During the term of this Agreement, the Trust Depositor will keep in full force and effect its existence, rights and franchises as a corporation under the laws of the jurisdiction of its incorporation and will obtain and preserve its qualification to do business in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Agreement, the other Transaction Documents and each other instrument or agreement necessary or appropriate to the proper administration of this Agreement and the transactions contemplated hereby. (b) ARM'S LENGTH TRANSACTIONS. During the term of this Agreement, all transactions and dealings between the Trust Depositor and its Affiliates will be conducted on an arm's-length basis. (c) NO OTHER BUSINESS. The Trust Depositor shall not engage in any business other than financing, purchasing, owning, selling and managing the Contracts in the manner contemplated by this Agreement and the other Transaction Documents and activities incidental thereto. 38 (d) NO BORROWING. The Trust Depositor shall not issue, incur, assume, guarantee or otherwise become liable, directly or indirectly, for any Indebtedness except for (i) the Securities and (ii) any other Indebtedness permitted by or arising under the other Transaction Documents. The proceeds of the Notes and the Certificates shall be used exclusively to fund the Trust Depositor's purchase of the Contracts and the other assets specified in this Agreement and to pay the transactional expenses of the Trust Depositor. (e) GUARANTEES, LOANS ADVANCES AND OTHER LIABILITIES. Except as otherwise contemplated by the Transaction Documents, the Trust Depositor shall not make any loan or advance or credit to, or guarantee (directly or indirectly or by an instrument having the effect of assuming another's payment or performance on any obligation or capability of so doing or otherwise), endorse or otherwise become contingently liable, directly or indirectly, in connection with the obligations, stocks or dividends of, or own, purchase, repurchase or acquire (or agree contingently to do so) any stock, obligations, assets or securities of, any other interest in, or make any capital contribution to, any other Person. (f) CAPITAL EXPENDITURES. The Trust Depositor shall not make any expenditure (by long-term or operating lease or otherwise) for capital assets (either realty or personalty). (g) RESTRICTED PAYMENTS. Except as permitted by the Transaction Documents, the Trust Depositor shall not, directly or indirectly, (i) pay any dividend or make any distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, to the Owner Trustee or any owner of a beneficial interest in the Trust Depositor or otherwise with respect to any ownership or equity interest or security in or of the Trust Depositor or to the Servicer, (ii) redeem, purchase, retire or otherwise acquire for value any such ownership or equity interest or security or (iii) set aside or otherwise segregate any amounts for any such purpose; PROVIDED, HOWEVER, that the Trust Depositor may make, or cause to be made, (A) distributions to the Servicer, the Owner Trustee and the Certificateholders as contemplated by, and to the extent funds are available for such purpose under, this Agreement, the Indenture or the Trust Agreement and (B) payments to the Indenture Trustee and the Owner Trustee pursuant to SECTION 1(a) of the Administration Agreement. SECTION 6.02. LIABILITY OF TRUST DEPOSITOR; INDEMNITIES. The Trust Depositor shall be liable in accordance herewith only to the extent of the obligations specifically undertaken by the Trust Depositor under this Agreement. The Trust Depositor shall indemnify, defend and hold harmless the Issuer, the Owner Trustee, [______], the Indenture Trustee and the Servicer from and against any taxes that may at any time be asserted against any such Person with respect to the transactions contemplated herein and in the other Transaction Documents, including any sales, gross receipts, general corporation, tangible personal property, Illinois personal property replacement privilege or license taxes (but, in the case of the Issuer, not including any taxes asserted with respect to, and as of the date of, the sale of the Contracts to the Issuer or the issuance and original sale of the Securities, or asserted with respect to ownership of the Contracts, or federal or other income taxes arising out 39 of distributions on the Certificates or the Notes) and costs and expenses in defending against the same. The Trust Depositor shall indemnify, defend and hold harmless the Issuer, the Owner Trustee, [______], the Indenture Trustee and the Securityholders from and against any loss, liability or expense incurred by reason of the Trust Depositor's willful misfeasance, bad faith or negligence (other than errors in judgment) in the performance of its duties under this Agreement, or by reason of reckless disregard of its obligations and duties under this Agreement. The Trust Depositor shall indemnify, defend and hold harmless the Issuer, the Owner Trustee, [______] and the Indenture Trustee from and against all costs, expenses, losses, claims, damages and liabilities arising out of or incurred in connection with the acceptance or performance of the trusts and duties herein and, in the case of the Owner Trustee, in the Trust Agreement and, in the case of the Indenture Trustee, in the Indenture, except to the extent that such cost, expense, loss, claim, damage or liability in the case of (i) the Owner Trustee or [______], as the case may be, shall be due to the willful misfeasance, bad faith or negligence of the Owner Trustee or [______], as the case may be, or shall arise from the breach by the Owner Trustee or [______], as the case may be, of any of its representations or warranties set forth in Section 7.03 of the Trust Agreement, or (ii) the Indenture Trustee, shall be due to the willful misfeasance, bad faith or negligence of the Indenture Trustee. The Trust Depositor shall be liable directly to and will indemnify any injured party or any other creditor of the Trust for all losses, claims, damages, liabilities and expenses of the Trust to the extent that Trust Depositor would be liable if the Trust were a partnership under the Delaware Revised Uniform Limited Partnership Act in which Trust Depositor were a general partner; PROVIDED, HOWEVER, that Trust Depositor shall not be liable for any losses incurred by a Certificateholder in the capacity of an investor in the Trust Certificates or a Noteholder in the capacity of an investor in the Notes. In addition, any third party creditors of the Trust (other than in connection with the obligations described in the immediately preceding sentence for which Trust Depositor shall not be liable) shall be deemed third party beneficiaries of this paragraph. The obligations of Trust Depositor under this paragraph shall be evidenced by the Trust Certificates described in the Trust Agreement, which for purposes of the Business Trust Statute shall be deemed to be a separate class of Trust Certificates from all other Trust Certificates issued by the Trust; provided that the rights and obligations evidenced by all Trust Certificates, regardless of class, shall, except as provided in this Section, be identical. Indemnification under this Section shall include, without limitation, reasonable fees and expenses of counsel and expenses of litigation and shall survive the termination of the Trust and the resignation or removal of the Trustees. If the Trust Depositor shall have made any indemnity payments pursuant to this Section and the Person to or on behalf of whom such payments are made thereafter shall collect any of such amounts from others, such Person shall promptly repay such amounts to the Trust Depositor, without interest. 40 SECTION 6.03. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF, TRUST DEPOSITOR; CERTAIN LIMITATIONS. (a) The Trust Depositor shall not consolidate with or merge into any other corporation or convey, transfer or lease substantially all of its assets as an entirety to any Person unless the corporation formed by such consolidation or into which the Trust Depositor has merged or the Person which acquires by conveyance, transfer or lease substantially all the assets of the Trust Depositor as an entirety, can lawfully perform the obligations of the Trust Depositor hereunder and executes and delivers to the Owner Trustee and the Indenture Trustee an agreement in form and substance reasonably satisfactory to the Owner Trustee and the Indenture Trustee which contains an assumption by such successor entity of the due and punctual performance and observance of each covenant and condition to be performed or observed by the Trust Depositor under this Agreement. The Trust Depositor shall provide notice of any merger, consolidation or succession pursuant to this Section to each Rating Agency and shall receive from each Rating Agency a letter to the effect that such merger, consolidation or succession will not result in a qualification, downgrading or withdrawal of the then-current ratings of each Class of Notes or the Certificates. The Trust Depositor and Harley-Davidson Credit shall maintain separate corporate offices. (b) Notwithstanding any other provision in this Section and any provision of law, the Trust Depositor shall not do any of the following: (i) engage in any business or activity other than as set forth in its Articles of Incorporation; (ii) without the affirmative vote of a majority of the members of the Board of Directors of the Trust Depositor (which must include the affirmative vote of at least two duly appointed Independent directors) (A) dissolve or liquidate, in whole or in part, or institute proceedings to be adjudicated bankrupt or insolvent, (B) consenting to the institution of bankruptcy or insolvency proceedings against it, (C) file a petition seeking or consent to reorganization or relief under any applicable federal or state law relating to bankruptcy, (D) consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the corporation or a substantial part of its property, (E) make a general assignment for the benefit of creditors, (F) admit in writing its inability to pay its debts generally as they become due, or (G) take any corporate action in furtherance of the actions set forth in clauses (A) through (F) above; PROVIDED, HOWEVER, that no director may be required by any shareholder of the Trust Depositor to consent to the institution of bankruptcy or insolvency proceedings against the Trust Depositor so long as it is solvent; or (iii) merge or consolidate with any other corporation, company or entity or sell all or substantially all of its assets or acquire all or substantially all of the assets or capital stock or other ownership interest of any other corporation, company or entity. 41 SECTION 6.04. LIMITATION ON LIABILITY OF TRUST DEPOSITOR AND OTHERS. The Trust Depositor and any director or officer or employee or agent of the Trust Depositor may rely in good faith on any document of any kind, prima facie properly executed and submitted by any Person respecting any matters arising hereunder. The Trust Depositor and any director or officer or employee or agent of the Trust Depositor shall be reimbursed by the Owner Trustee or the Indenture Trustee, as the case may be, for any contractual damages, liability or expense incurred by reason of the Owner Trustee's or the Indenture Trustee's willful misfeasance, bad faith or negligence (except errors in judgment) in the performance of their respective duties hereunder, or by reason of reckless disregard of their respective obligations and duties hereunder. The Trust Depositor shall not be under any obligation to appear in, prosecute or defend any legal action that shall not be incidental to its obligations under this Agreement, and that in its opinion may involve it in any expense or liability. SECTION 6.05. TRUST DEPOSITOR NOT TO RESIGN. Subject to the provisions of Section 6.03, the Trust Depositor shall not resign from the obligations and duties hereby imposed on it as Trust Depositor hereunder. SECTION 6.06. TRUST DEPOSITOR MAY OWN CERTIFICATES. The Trust Depositor and any Affiliate thereof may in its individual or any other capacity become the owner or pledgee of Notes or Certificates with the same rights as it would have if it were not the Trust Depositor or an Affiliate thereof, except as expressly provided herein or in any Transaction Document. Notes or Certificates so owned by or pledged to the Trust Depositor or such Affiliate shall have an equal and proportionate benefit under the provisions of this Agreement, without preference, priority or distinction as among all of the Notes or Certificates, as the case may be. ARTICLE SEVEN DISTRIBUTIONS; RESERVE FUND SECTION 7.01. MONTHLY DISTRIBUTIONS. (a) Each Noteholder and Certificateholder as of the related Record Date shall be paid on the next succeeding Distribution Date by check mailed to such Noteholder or Certificateholder at the address for such Noteholder or Certificateholder appearing on the Note Register or Certificate Register or by wire transfer if such Noteholder or Certificateholder provides written instructions to the Indenture Trustee or the Owner Trustee, respectively, at least ten days prior to such Distribution Date. (b) The Indenture Trustee shall serve as the paying agent hereunder (the "PAYING AGENT") and shall make the payments to or on behalf of the Noteholders and Certificateholders required hereunder. The Indenture Trustee hereby agrees that all amounts held by it for payment hereunder will be held in trust for the benefit of the Noteholders and Certificateholders. SECTION 7.02. FEES. The Indenture Trustee shall be paid the Indenture Trustee Fee and the Servicer shall be paid the Monthly Servicing Fee, each of which shall be paid solely from the monies and in accordance with the priorities described in Section 7.05(a). No recourse may 42 be had to the Seller, Trust Depositor, Trustees, Servicer, or any of their respective Affiliates in the event that amounts available under Section 7.05(a) are insufficient for payment of the Indenture Trustee Fee and the Monthly Servicing Fee. SECTION 7.03. ADVANCES; REALIZATION OF CARRYING CHARGE. (a) On each Determination Date, the Servicer shall compute the amount of Delinquent Interest, if any, on the Contracts for the immediately preceding Due Period. Not later than each Determination Date, the Servicer shall advance (each, an "ADVANCE") such Delinquent Interest by depositing the aggregate amount of such Delinquent Interest in the Collection Account; PROVIDED, HOWEVER, that the Servicer shall be obligated to advance Delinquent Interest only to the extent that the Servicer, in its sole discretion, expects that such Advance will not become an Uncollectible Advance. The Servicer shall indicate on each Monthly Report (i) the amount of Delinquent Interest, if any, on the Contracts for the related Due Period and (ii) the amount of the Advance, if any, made by the Servicer in respect of such Delinquent Interest pursuant to this Section 7.03. If the amount of such Advance is less than the amount of the Delinquent Interest, the relevant Monthly Report shall be accompanied by a certificate of a Servicing Officer setting forth in reasonable detail the basis for the determination by the Servicer that the portion of the Delinquent Interest not advanced would become an Uncollectible Advance. By each Determination Date, the Servicer shall determine the amount of prior unreimbursed Advances for which it desires to be reimbursed pursuant to the provisions of this Section (such amount, the "REIMBURSEMENT AMOUNT"). The Servicer shall be entitled to be reimbursed for any outstanding Advance with respect to a Contract by means of a first priority withdrawal from the Collection Account of such Reimbursement Amount as provided in Section 7.05(a)(ii). (b) The Servicer shall determine no later than 12:00 noon, New York City time, on the second Business Day prior to a Distribution Date the Carrying Charges in respect of the upcoming Distribution Date. To the extent of such amount, the Indenture Trustee shall transfer an amount equal to the Carrying Charges from the Interest Reserve Account (solely to the extent of the amount then on deposit) into the Collection Account as contemplated in Section 5.05(b)(vi) hereof. SECTION 7.04. INTEREST RESERVE ACCOUNT. (a) On or prior to the Closing Date, the Trust Depositor shall establish with and in the name of the Indenture Trustee on behalf of the Securityholders, an Eligible Account designated "HARLEY-DAVIDSON CUSTOMER FUNDING CORP. INTEREST RESERVE ACCOUNT - HARLEY DAVIDSON MOTORCYCLE TRUST [________] - [______________], AS INDENTURE TRUSTEE" (such account being the "Interest Reserve Account"). (b) No withdrawals may be made of funds in the Interest Reserve Account except as provided in (c) below. Except as specifically provided, funds in the Interest Reserve Account shall not be commingled with funds in any other account established with respect to the Notes, Certificates or with any other monies. 43 (c) All investment earnings realized in respect of amounts in the Pre-Funding Account shall be deposited when and as received in the Interest Reserve Account, such that the Pre-Funded Amount shall never exceed the amount initially deposited into the Pre-Funding Account on the Closing Date. With respect to amounts on deposit in the Interest Reserve Account, the Indenture Trustee shall disburse from such funds the amount specified in respect of Carrying Charges in accordance with Section 7.03 herein. In the event that (i) the Funding Period has terminated, (ii) all amounts on deposit in the Pre-Funding Account have been disbursed, (iii) a Distribution Date has elapsed following the occurrence of both (i) and (ii), and (iv) all amounts referred to in clause (ii) have been applied, then any amounts remaining in the Interest Reserve Account shall be allocated and distributed to the Trust Depositor. SECTION 7.05. DISTRIBUTIONS. (a) On each Distribution Date, the Indenture Trustee, at the Servicer's direction, will make the following distributions in the following order of priority: (i) to the Mandatory Special Redemption subaccount in the Note Distribution Account to the Class A-1 Noteholders and Class A-2 Noteholders, the amount of any Mandatory Special Redemption, pro rata, calculated on the then current principal balance of the Class A-1 and Class A-2 Notes with the amounts derived from draws on the Pre-Funding Account (which amounts are available for payment of such Mandatory Special Redemptions and not for any other purpose), to be distributed (i) to the Class A-1 Noteholders, in an amount equal to the Class A-1 Percentage multiplied by the amount in the Mandatory Special Redemption Subaccount and (ii) to the Class A-2 Noteholders, in an amount equal to the Class A-2 Percentage multiplied by the amount in the Mandatory Special Redemption Subaccount with the amounts derived from draws on the Pre-Funding Account (which amounts are available solely for payment of such Mandatory Special Redemptions and not for any other purpose); PROVIDED, HOWEVER, in the event the amount in the Mandatory Special Redemption subaccount is less than $150,000 such amount shall be distributed solely to the Class A-1 Noteholders; (ii) to the Servicer from Available Monies, the Reimbursement Amount to the Servicer for Advances previously made; (iii) to the Servicer from Available Monies, the Servicing Fee, including any unpaid Servicing Fee with respect to one or more prior Due Periods; (iv) to the Indenture Trustee from Available Monies, any accrued and unpaid Indenture Trustee Fee with respect to one or more prior Due Periods; (v) to the Note Distribution Account from Available Monies, together with any amounts deposited therein pursuant to Section 7.06, the Note Interest Distributable Amount with respect to such Distribution Date for each Class of Notes; 44 [(vi) to the Certificate Distribution Account from Available Interest, together with any amounts deposited therein pursuant to Section 7.06, the Certificate Interest Distributable Amount with respect to such Distribution Date.] (vii) to the Note Distribution Account from Available Monies, together with any amounts deposited therein pursuant to Section 7.06, the Note Principal Distributable Amount with respect to such Distribution Date; [(viii) to the Certificate Distribution Account from Available Principal, together with any amounts deposited therein pursuant to Section 7.06, the Certificate Principal Distributable Amount with respect to such Distribution Date; and] (b) in the event that the distributions described in clauses (i) through (viii) above have been funded exclusively from Available Monies, any remaining Available Monies ("EXCESS AMOUNTS") will be deposited into the Reserve Fund in accordance with Section 7.06(d), until the amount on deposit therein equals the Specified Reserve Fund Balance with respect to such Distribution Date and the Indenture Trustee will pay any excess over such Specified Reserve Fund Balance to the Trust Depositor. SECTION 7.06. RESERVE FUND. (a) On or prior to the Closing Date, the Indenture Trustee, on behalf of the Trust Depositor shall deposit the Reserve Fund Initial Deposit into the Reserve Fund from the net proceeds of the Securities. The Reserve Fund will be held by the Indenture Trustee for the benefit of the Noteholders in order to effectuate the subordination of the rights of the Certificateholders to the extent described above. (b) The Indenture Trustee shall determine no later than 10:00 a.m., Chicago, Illinois time, on the Distribution Date (but after making, and taking into account, the determination, demand and transfer of funds contemplated in Section 7.05 above) whether there exists a Shortfall with respect to the upcoming Distribution Date. In the event that the Indenture Trustee determines that there exists a Shortfall, the Indenture Trustee shall no later than 12:00 noon, Chicago, Illinois time, on such Distribution Date remit monies from the Reserve Fund in the following order of priority: first, to the Note Distribution Account; the amount of such Shortfall relating to the Note Interest Distributable Amount, second, to the Certificate Distribution Account, the amount of such Shortfall relating to the Certificate Interest Distributable Amount; third, to the Note Distribution Account, the amount of such Shortfall relating to the Note Principal Distributable Amount; and fourth, to the Certificate Distribution Account, the amount of such Shortfall relating to the Certificate Principal Distributable Amount. (c) The Servicer shall at the written direction of the Trust Depositor invest the funds in the Reserve Fund in Qualified Eligible Investments. Funds in the Reserve Fund shall be invested in investments that are payable on demand or mature on or before the Business day prior to each Distribution Date. Once such funds are invested, the Indenture Trustee shall not change the investment of such funds prior to maturity. Upon any such investment, the Indenture 45 Trustee shall, consistent with the definition of Qualified Eligible Investment herein, make an appropriate notation of security interest in such Qualified Eligible Investment on the Indenture Trustee's records, by book entry or otherwise. All income and gain realized from any such investments as well as any interest earned on Reserve Fund Deposits shall be deposited and retained in the Reserve Fund (subject to Section 7.06(e)). Losses, if any, realized on amounts in the Reserve Fund invested pursuant to this paragraph shall first be credited against undistributed investment earnings on amounts in the Reserve Fund invested pursuant to this paragraph, and shall thereafter be deemed to reduce the amount on deposit in the Reserve Fund. The Trust Depositor and the Indenture Trustee shall not be liable for the amount of any loss incurred in respect of any investment, or lack of investment, of funds held in the Reserve Fund. All income or loss on funds held in the Reserve Fund shall be taxable to the Trust Depositor. (d) Any Excess Amounts will be applied to the Specified Reserve Fund Balance. (e) On each Distribution Date on which the amount on deposit in the Reserve Fund (after giving effect to all deposits thereto and withdrawals therefrom on such Distribution Date) is greater than the Specified Reserve Fund Balance with respect to such Distribution Date, the Indenture Trustee shall withdraw such excess funds and pay them to the Trust Depositor. SECTION 7.07. ESTABLISHMENT OF PRE-FUNDING ACCOUNT. (a) On or prior to the Closing Date, the Trust Depositor shall establish with and in the name of the Indenture Trustee on behalf of the Securityholders, an Eligible Account designated "HARLEY-DAVIDSON CUSTOMER FUNDING CORP. PRE-FUNDING ACCOUNT - HARLEY DAVIDSON MOTORCYCLE TRUST [________] - - [______________], AS INDENTURE TRUSTEE" (such account being the "Pre-Funding Account"). (b) During the Funding Period, following receipt from the Trust Depositor of an Addition Notice, and upon further receipt of a written demand from the Trust Depositor for a disbursement of funds from the Pre-Funding Account to be made on or before the date on which the Funding Period terminates (which written demand must be delivered not later than one Business Day prior to the requested date of funding and must be accompanied by the written consent of the Indenture Trustee), the Indenture Trustee will disburse the amount demanded from the Pre-Funding Account to Harley-Davidson Credit upon the order of the Trust Depositor for the purpose of purchasing Subsequent Contracts from Harley-Davidson Credit pursuant to a Subsequent Purchase Agreement. With respect to amounts still remaining on deposit in the Pre-Funding Account on the date upon which the Funding Period ends (and provided a timely written demand for funding as described above has not been received requesting funding on such date) the Indenture Trustee shall immediately transfer all funds remaining in the Pre-Funding Account to the Note Distribution Account. (c) If (x) the Pre-Funded Amount has not been reduced to zero on the Distribution Date on which the Funding Period ends (or, if the Funding Period does not end on a Distribution Date, on the first Distribution Date following the end of the Funding Period) or (y) the Pre-Funded Amount has been reduced to $150,000 or less on any Determination Date, in either case 46 after giving effect to any reductions in the Pre-Funded Amount on such Distribution Date or Determination Date pursuant to paragraph (a) above, the Trust Depositor shall instruct the Indenture Trustee to withdraw from the Pre-Funding Account the Pre-Funded Amount and, in the case of (x), on such Distribution Date or, in the Determination Date (i) if the Pre-Funded Amount is equal to or less than $150,000, deposit the Pre-Funded Amount in the Note Distribution Account for payment as principal of the Class A-1 Notes up to the Outstanding Amount thereof and then for payment of principal of the Class A-2 Notes and (ii) if the Pre-Funded Amount is greater than $150,000, deposit the Pre-Funded Amount in the Note Distribution Account for payment as principal of the Class A-1 Notes and Class A-2 Notes, pro rata, calculated on the then current principal balance of the Class A-1 and Class A-2 Notes. SECTION 7.08. REPURCHASES OF CONTRACTS FOR BREACH OF REPRESENTATIONS AND WARRANTIES. Upon a discovery by the Servicer, the Trust Depositor or the Trustees of a breach of a representation or warranty of the Trust Depositor as set forth in Section 3.01(a) or of the Seller as set forth in EXHIBIT J hereto or as made in any Subsequent Purchase Agreement relating to Subsequent Contracts that materially adversely affects the Trust's interest in such Contract (without regard to the benefits of the Reserve Fund), the party discovering the breach shall give prompt written notice to the other parties; PROVIDED, that the Trustees shall have no duty or obligation to inquire or to investigate the breach by the Trust Depositor or the Seller of any of such representations or warranties. The Seller, as provided in the Transfer and Sale Agreement and in accordance with this Section 7.08, shall repurchase a Contract at its Repurchase Price, two Business Days prior to the first Determination Date after the Seller becomes aware, or should have become aware, or receives written notice from the Trustee, the Servicer or the Trust Depositor of any breach of a representation or warranty of the Seller set forth in Article III of the Transfer and Sale Agreement that materially and adversely affects such Contract or the Trust's interest in such Contract and which breach has not been cured; PROVIDED, HOWEVER, that with respect to any Contract incorrectly described on the List of Contracts with respect to unpaid Principal Balance which the Seller would otherwise be required to repurchase under the Transfer and Sale Agreement, the Trust Depositor may, in lieu of repurchasing such Contract, deposit in the Collection Account not later than one Business Day after such Determination Date cash in an amount sufficient to cure such deficiency or discrepancy; and PROVIDED FURTHER that with respect to a breach of representation or warranty relating to the Contracts in the aggregate and not to any particular Contract the Seller may select Contracts (without adverse selection) to repurchase such that had such Contracts not been included as part of the Trust Corpus there would have been no breach of such representation or warranty; PROVIDED FURTHER that (a) the failure of a Contract File to be complete or of the original certificate of title and evidence of recordation of such certificate to be included in the Contract File as of 180 days after the Closing Date (or Subsequent Transfer Date, in the case of Subsequent Contracts) or (b) the failure to maintain perfection of the security interest in the Motorcycle securing a Contract in accordance with Section 5.09, shall be deemed to be a breach materially and adversely affecting the Trust's interest in the Contract or in the related Contracts. Notwithstanding any other provision of this Agreement, the obligation of the Seller under the Transfer and Sale Agreement and described in this Section 7.08 shall not terminate or be deemed released by any party hereto upon a Service Transfer pursuant to Article 47 VIII. The repurchase obligation described in this Section 7.08 is in no way to be satisfied with monies in the Reserve Fund. SECTION 7.09. REASSIGNMENT OF REPURCHASED CONTRACTS. Upon receipt by the Indenture Trustee for deposit in the Collection Account of the Repurchase Price as described in Section 7.08 or Section 7.10, and upon receipt of a certificate of a Servicing Officer in the form attached hereto as EXHIBIT G, the Indenture Trustee shall assign to the Seller all of the Trust's right, title and interest in the repurchased Contract without recourse, representation or warranty, except as to the absence of liens, charges or encumbrances created by or arising as a result of actions of the Trustee. SECTION 7.10. SELLER'S REPURCHASE OPTION. As provided in the Transfer and Sale Agreement, on written notice to the Indenture Trustee at least 20 days prior to a Distribution Date, and provided that the sum of (i) the aggregate unpaid principal balance of the Class A-1 Notes, the Class A-2 Notes and the Class B Notes and (ii) the Certificate Balance on such Distribution Date is less than 10% of the Aggregate Principal Balance as of the Closing Date, and provided a valuation letter is delivered as required in Section 5.02 of the Transfer and Sale Agreement, the Seller, through the Trust Depositor, may (but is not required to) repurchase on that Distribution Date all outstanding Contracts (and related Contract Assets) at a price equal to the sum of (i) the aggregate unpaid principal balance of the Class A-1 Notes, the Class A-2 Notes and the Class B Notes and (ii) the Certificate Balance as of that Distribution Date plus the aggregate of the Note Interest Distributable Amount and the Certificate Interest Distributable Amount for the current Distribution Date, the Reimbursement Amount (if any) as well as accrued and unpaid Monthly Servicing Fees and the Indenture Trustee Fees to the date of such repurchase. Such price will be deposited in the Collection Account not later than one (1) Business Day before such Distribution Date, against the Trustees' release of the Contracts and the Contract Files to the Seller. ARTICLE EIGHT EVENTS OF TERMINATION; SERVICE TRANSFER SECTION 8.01. EVENTS OF TERMINATION. "Event of Termination" means the occurrence of any of the following: (a) Any failure by the Servicer to make any payment or deposit required to be made hereunder or in the Transfer and Sale Agreement (or in any Subsequent Purchase Agreement or Subsequent Transfer Agreement) and the continuance of such failure for a period of five (5) Business Days after receipt of written notice from the Trustees or discovery by the Servicer of such failure; (b) Failure on the Servicer's part to observe or perform in any material respect any covenant or agreement in this Agreement (or in any Subsequent Transfer Agreement) (other than a covenant or agreement, the breach of which is specifically addressed elsewhere in this 48 Agreement) which (i) materially and adversely affects the rights of the Securityholders and (ii) continues unremedied for thirty (30) days after receipt of written notice from the Trustees or by Noteholders of more than 25% of the aggregate principal amount of the Class A-1 Notes and Class A-2 Notes, or, if there are no Class A-1 Notes or Class A-2 Notes outstanding, by Noteholders of more than 25% of the aggregate principal amount of the Class B Notes, or, if there are no Notes outstanding, by Certificateholders of more than 25% of the Certificate Balance;; (c) Any assignment by the Servicer of its duties or rights hereunder (or under any Subsequent Transfer Agreement), except as specifically permitted hereunder or thereunder, or any attempt to make such an assignment; (d) An involuntary case under any applicable bankruptcy, insolvency or other similar law shall have been commenced in respect of the Servicer and shall not have been dismissed within 90 days, or a court having jurisdiction in the premises shall have entered a decree or order for relief in respect of either 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 either the Servicer, or for any substantial liquidation or winding up of its affairs; (e) 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; (f) Any failure by the Servicer to deliver to the Trustees the Monthly Report pursuant to the terms of this Agreement which remains uncured for five Business Days after the date which such failure commences; (g) Any representation, warranty or statement of the Servicer made in this Agreement, in any Subsequent Transfer Agreement or any certificate, report or other writing delivered pursuant hereto shall prove to be incorrect in any material respect as of the time when the same shall have been made and the incorrectness of such representation, warranty or statement has a material adverse effect on the Trust and, within 30 days after written notice thereof shall have been given to the Servicer by either Trustee or by Noteholders of more than 25% of the aggregate principal amount of the Class A-1 Notes and Class A-2 Notes or, if there are no Class A-1 Notes or Class A-2 Notes outstanding, by Noteholders of more than 25% of the aggregate principal amount of the Class B Notes, or, if there are no Notes outstanding, by Certificateholders of more than 25% of the Certificate Balance, the circumstances or condition in respect of which such representation, warranty or statement was incorrect shall not have been eliminated or otherwise cured.. 49 SECTION 8.02. WAIVER OF SERVICER DEFAULT. Noteholders representing more than 50% of the outstanding balance of the Class A-1 Notes and the Class A-2 Notes, voting as a single class, or if there are no Class A-1 Notes or Class A-2 Notes outstanding, Noteholders representing more than 50% of the outstanding balance of the Class B Notes or, if there are no Notes outstanding, Certificateholders representing more than 50% of the Certificate Balance, may, by written notice delivered to the parties hereto, waive any Servicer Default other than a Servicer Default described in SECTION 8.01(a). SECTION 8.03. SERVICE TRANSFER. (a) If a Servicer Default has occurred and is continuing and has not been waived pursuant to SECTION 8.02, (x) Noteholders representing more than 50% of the outstanding balance of the Class A-1 Notes and the Class A-2 Notes, voting as a single class, or if there are no Class A-1 Notes or Class A-2 Notes outstanding, Noteholders representing more than 50% of the outstanding balance of the Class B Notes or, if there are no Notes outstanding, Certificateholders representing more than 50% of the Certificate Balance or (y) the Indenture Trustee or, if there are no Notes outstanding, the Owner Trustee may, by written notice delivered to the parties hereto, terminate all (but not less than all) of the Servicer's management, administrative, servicing, custodial and collection functions (such termination being herein called a "SERVICE TRANSFER"). (b) Upon receipt of the notice required by Section 8.03(a) (or, if later, on a date designated therein), all rights, benefits, fees, indemnities, authority and power of the Servicer under this Agreement, whether with respect to the Contracts, the Contract Files or otherwise, shall pass to and be vested in the Indenture Trustee (the "SUCCESSOR SERVICER") pursuant to and under this Section 8.03; and, without limitation, the Successor Servicer is authorized and empowered to execute and deliver on behalf of the Servicer, as attorney-in-fact or otherwise, any and all documents and other instruments, and to do any and all acts or things necessary or appropriate to effect the purposes of such notice of termination. The Servicer agrees to cooperate with the Successor Servicer in effecting the termination of the responsibilities and rights of the Servicer hereunder, including, without limitation, the transfer to the Successor Servicer for administration by it of all cash amounts which shall at the time be held by the Servicer for deposit, or have been deposited by the Servicer, in the Collection Account, or for its own account in connection with its services hereafter or thereafter received with respect to the Contracts. The Servicer shall transfer to the Successor Servicer all records held by the Servicer relating to the Contracts in such electronic form as the Successor Servicer may reasonably request and (ii) any Contract Files in the Servicer's possession. In addition, the Servicer shall permit access to its premises (including all computer records and programs) to the Successor Servicer or its designee, and shall pay the reasonable transition expenses of the Successor Servicer. Upon a Service Transfer, the Successor Servicer shall also be entitled to receive the Monthly Servicing Fee for performing the obligations of the Servicer. SECTION 8.04. SUCCESSOR SERVICER TO ACT; APPOINTMENT OF SUCCESSOR SERVICER. On or after a Service Transfer pursuant to Section 8.03, the Successor Servicer shall be the successor in all respects to the Servicer in its capacity as servicer under this Agreement and the transactions set forth or provided for herein and shall be subject to all the responsibilities, duties and liabilities relating thereto placed on the Servicer by the terms and provisions hereof, and the 50 terminated Servicer shall be relieved of such responsibilities, duties and liabilities arising after such Service Transfer; PROVIDED, HOWEVER, that (i) the Successor Servicer will not assume any obligations of the Servicer described in Section 8.04 and (ii) the Successor Servicer shall not be liable for any acts or omissions of the Servicer occurring prior to such Service Transfer or for any breach by the Servicer of any of its representations and warranties contained herein or in any related document or agreement. Notwithstanding the above, if the Successor Servicer is legally unable or unwilling to act as Servicer, Noteholders representing more than 50% or more of the outstanding balance of each Class of Notes and Certificateholders with aggregate fractional interests representing more than 50% or more of the Trust, may appoint a successor servicer (other than the original Servicer or an Affiliate of the original Servicer) to act as Servicer. As compensation therefor, the Successor Servicer shall be entitled to receive reasonable compensation equal to the Monthly Servicing Fee. The Owner Trustee, Noteholders and the Indenture Trustee and such successor shall take such action, consistent with this Agreement, as shall be necessary to effectuate any such succession. To the extent the terminated Servicer has made Advances, it shall be entitled to reimbursement of the same notwithstanding its termination hereunder, to the same extent as if it had continued to service the Contracts hereunder. SECTION 8.05. NOTIFICATION TO SECURITYHOLDERS. (a) Promptly following the occurrence of any Servicer Default, the Servicer shall give written notice thereof to the Trustees, the Trust Depositor and each Rating Agency at the addresses described in Section 11.04. The Indenture Trustee shall give written notice to the Noteholders and the Owner Trustee shall give written notice thereof to the Certificateholders at their respective addresses appearing on the Note Register and the Certificate Register, respectively. (b) Within 10 days following any termination or appointment of a Successor Servicer pursuant to this Article VIII, the Indenture Trustee shall give written notice thereof to each Rating Agency and the Trust Depositor at the addresses described in Section 11.04 hereof, and to the Noteholders at their addresses appearing on the Note Register and the Owner Trustee shall give written notice to the Certificateholders at their addresses appearing in the Certificate Register, respectively.. SECTION 8.06. EFFECT OF TRANSFER. (a) After a Service Transfer, the terminated Servicer shall have no further obligations with respect to the management, administration, servicing, custody or collection of the Contracts and the Successor Servicer appointed pursuant to Section 8.03 shall have all of such obligations, except that the terminated Servicer will transmit or cause to be transmitted directly to the Successor Servicer for its own account, promptly on receipt and in the same form in which received, any amounts (properly endorsed where required for the Successor Servicer to collect them) received as payments upon or otherwise in connection with the Contracts. (b) A Service Transfer shall not affect the rights and duties of the parties hereunder (including but not limited to the indemnities of the Servicer) other than those relating to the management, administration, servicing, custody or collection of the Contracts. 51 SECTION 8.07. DATABASE FILE. The Servicer will provide the Successor Servicer with a magnetic tape containing the database file for each Contract (i) as of the Cutoff Date, (ii) the Subsequent Cutoff Date, (iii) thereafter, as of the last day of the preceding Due Period on each Determination Date prior to a Servicer Default and (iv) on and as of the Business Day before the actual commencement of servicing functions by the Successor Servicer following the occurrence of a Servicer Default. SECTION 8.08. SUCCESSOR SERVICER INDEMNIFICATION. The Servicer shall defend, indemnify and hold the Successor Servicer and any officers, directors, employees or agents of the Successor Servicer harmless against any and all claims, losses, penalties, fines, forfeitures, legal fees and related costs, judgments and any other costs, fees, and expenses that the Successor Servicer may sustain in connection with the claims asserted at any time by third parties against the Successor Servicer which result from (i) any willful or grossly negligent act taken or omission by the Servicer or (ii) a breach of any representations of the Servicer in Section 3.02 hereof. The indemnification provided by this Section 8.08 shall survive the termination of this Agreement. SECTION 8.09. RESPONSIBILITIES OF THE SUCCESSOR SERVICER. The Successor Servicer will not be responsible for delays attributable to the Servicer's failure to deliver information, defects in the information supplied by the Servicer or other circumstances beyond the control of the Successor Servicer. The Successor Servicer will make arrangements with the Servicer for the prompt and safe transfer of, and the Servicer shall provide to the Successor Servicer, all necessary servicing files and records, including (as deemed necessary by the Successor Servicer at such time): (i) microfiche loan documentation, (ii) servicing system tapes, (iii) Contract payment history, (iv) collections history and (v) the trial balances, as of the close of business on the day immediately preceding conversion to the Successor Servicer, reflecting all applicable loan information. The Successor Servicer shall have no responsibility and shall not be in default hereunder nor incur any liability for any failure, error, malfunction or any delay in carrying out any of its duties under this Agreement if any such failure or delay results from the Successor Servicer acting in accordance with information prepared or supplied by a Person other than the Successor Servicer or the failure of any such Person to prepare or provide such information. The Successor Servicer shall have no responsibility, shall not be in default and shall incur no liability (i) for any act or failure to act by any third party, including the Servicer, the Trust Depositor or the Trustees or for any inaccuracy or omission in a notice or communication received by the Successor Servicer from any third party or (ii) which is due to or results from the invalidity, unenforceability of any Contract with applicable law or the breach or the inaccuracy of any representation or warranty made with respect to any Contract. SECTION 8.10. LIABILITY OF SERVICER; INDEMNITIES. (a) The Servicer shall indemnify, defend and hold harmless the Issuer, the Owner Trustee, the Indenture Trustee and the Securityholders from and against any loss, liability or expense incurred by reason of the Servicer's willful misfeasance, bad faith or gross negligence (other than errors in judgment) in 52 the performance of its duties under this Agreement, or by reason of reckless disregard of its obligations and duties under this Agreement. (b) Indemnification under this Section shall include, without limitation, reasonable fees and expenses of counsel and expenses of litigation. If the Servicer shall have made any indemnity payments pursuant to this Section and the Person to or on behalf of whom such payments are made thereafter shall collect any of such amounts from others, such Person shall promptly repay such amounts to the Servicer, without interest. SECTION 8.11. LIMITATION OF LIABILITY OF SERVICER. (a) Neither the Servicer nor any of the directors, officers, employees or agents of the Servicer shall be under any liability to the Issuer, the Owner Trustee, the Indenture Trustee, the Certificateholders or the Noteholders, except as provided under this Agreement, for any action taken or for refraining from the taking of any action pursuant to this Agreement or for errors in judgment; PROVIDED, HOWEVER, that this provision shall not protect the Servicer or any such person against any liability that would otherwise 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 under this Agreement. The Servicer and any director, officer, employee or agent of the Servicer may rely in good faith on the advice of counsel or on any document of any kind, prima facie properly executed and submitted by any Person respecting any matters arising under this Agreement. (b) Except as provided in this Agreement, the Servicer shall not be under any obligation to appear in, prosecute or defend any legal action that shall not be incidental to its duties to service the Contracts in accordance with this Agreement, and that in its opinion may cause it to incur any expense or liability; PROVIDED, HOWEVER, that the Servicer may undertake any reasonable action that it may deem necessary or desirable in respect of the Transaction Documents and the rights and duties of the parties to the Transaction Documents and the interests of the Certificateholders under the Trust Agreement and the Noteholders under the Indenture. In such event, the legal expenses and costs of such action and any liability resulting therefrom shall be expenses, costs and liabilities of the Servicer and the Servicer will not be entitled to be reimbursed therefor. SECTION 8.12. MERGER OR CONSOLIDATION OF SERVICER. Any Person 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 shall be a party, or any Person succeeding to the business of the Servicer (which Person assumes the obligations of the Servicer), shall be the successor of the Servicer hereunder, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. The Servicer shall give prior written notice of any such merger or consolidation to which it is a party to the Issuer, the Owner Trustee, the Indenture Trustee and the Rating Agencies. 53 SECTION 8.13. SERVICER NOT TO RESIGN. Subject to the provisions of SECTION 8.03, Servicer shall not resign from the obligations and duties hereby imposed on it as Servicer under this Agreement except upon determination that the performance of its duties under this Agreement shall no longer be permissible under applicable law. Notice of any such determination permitting the resignation of Servicer shall be communicated to the Owner Trustee and the Indenture Trustee at the earliest practicable time (and, if such communication is not in writing, shall be confirmed in writing at the earliest practicable time) and any such determination shall be evidenced by an Opinion of Counsel to such effect delivered to the Owner Trustee and the Indenture Trustee concurrently with or promptly after such notice. No such resignation shall become effective until a Successor Servicer shall have assumed the responsibilities and rights of the predecessor Servicer in accordance with SECTION 8.04. SECTION 8.14. APPOINTMENT OF SUBSERVICER. So long as Harley-Davidson Credit Corp. acts as the Servicer, the Servicer may at any time without notice or consent subcontract substantially all its duties under this Agreement to any corporation more than 50% of the voting stock of which is owned, directly or indirectly, by Harley-Davidson, Inc.. The Servicer may at any time perform specific duties as servicer under this Agreement through other subcontractors; PROVIDED, HOWEVER, that no such delegation or subcontracting shall relieve the Servicer of its responsibilities with respect to such duties as to which the Servicer shall remain primarily responsible with respect thereto. ARTICLE NINE REPORTS SECTION 9.01. MONTHLY REPORTS. No later than 10:00 a.m. Chicago, Illinois time on each Determination Date, the Servicer shall cause the Trustees and each Rating Agency to receive a "MONTHLY REPORT" substantially in the form of EXHIBIT I hereto. SECTION 9.02. OFFICER'S CERTIFICATE. On or before [_________] of each yeaer, the Servicer shall deliver to each Trustee and Rating Agency a Servicing Officer substantially in the form of EXHIBIT C, certifying the accuracy of the Monthly Reports and that no Servicer Default or event that with notice or lapse of time or both would become a Servicer Default has occurred, or if such event has occurred and is continuing, specifying the event and its status. SECTION 9.03. OTHER DATA. In addition, the Trust Depositor and the Servicer shall, upon the request of the Trustees, Moody's or Standard & Poor's, furnish the Trustees, Moody's or Standard & Poor's, as the case may be, such underlying data as may be reasonably requested. SECTION 9.04. ANNUAL REPORT OF ACCOUNTANTS. (a) The Servicer shall cause a firm of nationally recognized independent certified public accountants (the "INDEPENDENT ACCOUNTANTS"), who may also render other services to the Servicer, the Seller or to the Trust Depositor, to deliver to the Trustees, the Underwriters and 54 each Rating Agency, on or before March 31 (or 90 days after the end of the Servicer's fiscal year, if other than December 31) of each year, beginning on March 31, 2001, with respect to the twelve months ended the immediately preceding December 31 (or other applicable date), a statement (the "ACCOUNTANT'S REPORT") addressed to the Board of Directors of the Servicer and to the Trustees to the effect that such firm has audited the financial statements of the Seller and issued its report thereon and that such audit: (1) was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as such firm considered necessary in the circumstances; (2) included an examination of documents and records relating to the servicing of motorcycle conditional sales contracts under pooling and servicing agreements substantially similar to one another (such statement to have attached thereto a schedule setting forth the pooling and servicing agreements covered thereby, including this Agreement); (3) included an examination of the delinquency and loss statistics relating to the Seller's portfolio of motorcycle conditional sales contracts; and (4) except as described in the statement, disclosed no exceptions or errors in the records relating to motorcycle loans serviced for others that, in the firm's opinion, generally accepted auditing standards requires such firm to report. The Accountant's Report shall further state that: (1) a review in accordance with procedures agreed upon with the Seller was made of one randomly selected Monthly Report; and (2) except as disclosed in the Report, no exceptions or errors in the Monthly Report so examined were found. (b) The Accountant's Report shall also indicate that the firm is independent of the Seller and the Servicer within the meaning of the Code of Professional Ethics of the American Institute of Certified Public Accountants. SECTION 9.05. ANNUAL STATEMENT OF COMPLIANCE FROM SERVICER. The Servicer will deliver to the Trustees, the Underwriters and each of the Rating Agencies, on or before January 31 of each year commencing January 31, 2001, an Officer's Certificate stating that (a) a review of the activities of the Servicer during the prior calendar year and of its performance under this Agreement was made under the supervision of the officer signing such certificate and (b) to such officer's knowledge, based on such review, the Servicer has fully performed all its obligations under this Agreement, or, if there has been a default in the performance of any such obligation, specifying each such default known to such officer and the nature and status thereof. A copy of 55 such certificate may be obtained (i) by any Noteholder by a request in writing to the Indenture Trustee and (ii) by any Certificateholder by a request in writing to the Owner Trustee. SECTION 9.06. MONTHLY REPORTS TO SECURITYHOLDERS. (a) On or before each Distribution Date, the Servicer shall prepare and, concurrently with each distribution to Certificateholders and Noteholders pursuant to Article VII, deliver to the Trustees and the Trustees shall cause to be delivered and mailed to each Noteholder and each Certificateholder at the address appearing on the Note Register and Certificate Register, respectively a statement as of the related Distribution Date setting forth (the "MONTHLY REPORT"): (i) the amount of distribution allocable to principal of each Class of Notes and the amount of distribution allocable to the Certificate Balance; (ii) the amount of the distribution allocable to interest on each Class of Notes and the amount of Certificateholder's interest distribution; (iii) the amount of fees payable out of the Trust, separately identifying the Monthly Servicing Fee and the Indenture Trustee Fee; (iv) the amount of any Note Interest Carryover Shortfall, Note Principal Carryover Shortfall, Certificate Interest Carryover Shortfall and Certificate Principal Carryover Shortfall on such Distribution Date and the change in such amounts from those with respect to the immediately preceding Distribution Date; (v) the outstanding principal amount and Note Pool Factor for each Class of Notes and the Certificate Balance and Certificate Pool Factor, in each case of such Distribution Date each after giving effect to the distribution of principal to each Class of Notes and the Certificates; (vi) the amount of the distributions described in (i) or (ii) above payable with funds from the Reserve Fund or from any other source not constituting Available Monies and the amount remaining in the Reserve Fund after giving effect to all deposits and withdrawals from the Reserve Fund on such date; (vii) the amount of any Mandatory Special Redemption to be made on such Distribution Date; (viii) for each Distribution Date during the Funding Period, the remaining Pre-Funded Amount; (ix) for each Distribution Date during the Funding Period to and including the Distribution Date immediately following the end of the Funding Period, the Principal Balance and number of Subsequent Contracts conveyed to the Trust during the related Due Period; 56 (x) the remaining Principal Balance after giving effect to the distribution of principal (and Mandatory Special Redemption, if any) to each class of Notes and Certificates to be made on such Distribution Date; (xi) the amount otherwise distributable to the Class B Notes or the Certificates that has instead been distributed to one or more senior Class of Notes on such Distribution Date; (xii) the number and aggregate principal balance of Contracts delinquent 31-59 days, 60-89 days and 90 or more days, computed as of the end of the related Due Period; (xiii) the number and aggregate principal balance of Contracts that became Liquidated Contracts during the immediately preceding Due Period, the amount of liquidation proceeds for such Due Period, the amount of liquidation expenses being deducted from liquidation proceeds for such Due Period, the Net Liquidation Proceeds and the Net Liquidation Losses for such Due Period; (xiv) the Loss Ratio, Average Loss Ratio, Cumulative Loss Ratio, the Delinquency Ratio and the Average Delinquency Ratio as of such Distribution Date; (xv) the number of Contracts and the aggregate Principal Balance of such Contracts, as of the first day of the Due Period relating to such Distribution Date (after giving effect to payments received during such Due Period and to any transfers of Subsequent Contracts to the Trust occurring on or prior to such Distribution Date); (xvi) the aggregate Principal Balance and number of Contracts that were repurchased by the Seller pursuant to the Agreement with respect to the related Due Period, identifying such Contracts and the Repurchase Price for such Contracts; and (xvii) such other customary factual information as is available to the Servicer as the Servicer deems necessary and can reasonably obtain from its existing data base to enable the Noteholders and Certificateholders to prepare their tax returns. (b) Within 75 days after the end of each calendar year, the Servicer shall prepare and the Indenture Trustee and Owner Trustee, respectively, shall mail to each Noteholder or Certificateholder of record at any time during such year a report as to the aggregate amounts reported pursuant to subsections (i), (ii), (iii) and (iv) of this Section, attributable to such Noteholder or Certificateholder. (c) The Indenture Trustee shall send via first class mail a paper copy of the Monthly Report to (i) the initial Clearing Agency under the Note Depository Agreement or any qualified successor appointed pursuant to Section 2.11 of the Indenture, (ii) the initial Clearing Agency under the Certificate Depository Agreement or any qualified successor appointed pursuant to Section 3.14 of the Trust Agreement and (iii) each Securityholder or party to this Agreement. 57 ARTICLE TEN TERMINATION SECTION 10.01. SALE OF TRUST ASSETS. (a) Upon any sale of the assets of the Trust pursuant to Section 9.02 of the Trust Agreement, the Servicer shall instruct the Indenture Trustee to deposit the proceeds from such sale after all payments and reserves therefrom have been made (the "INSOLVENCY PROCEEDS") in the Collection Account. On the Distribution Date on which the Insolvency Proceeds are deposited in the Collection Account (or, if such proceeds are not so deposited on a Distribution Date, on the Distribution Date immediately following such deposit), the Servicer shall instruct the Indenture Trustee to make the following deposits (after the application on such Distribution Date of Available Monies and funds on deposit in the Reserve Fund pursuant to Section 7.06) from the Insolvency Proceeds and any funds remaining on deposit in the Reserve Fund (including the proceeds of any sale of investments therein as described in the following sentence): (i) to the Note Distribution Account, any portion of the Note Interest Distributable Amount not otherwise deposited into the Note Distribution Account on such Distribution Date; (ii) to the Note Distribution Account, the outstanding principal amount of the Notes (after giving effect to the reduction in the outstanding principal amount of the Notes to result from the deposits made in the Note Distribution Account on such Distribution Date and on prior Distribution Dates); (iii) to the Certificate Distribution Account, any portion of the Certificate Interest Distributable Amount not otherwise deposited into the Certificate Distribution Account on such Distribution Date; and (iv) to the Certificate Distribution Account, the Certificate Balance (after giving effect to the reduction in the Certificate Balance to result from the deposits made in the Certificate Distribution Account on such Distribution Date). (b) As described in Article Nine of the Trust Agreement, notice of any termination of the Trust shall be given by the Servicer to the Owner Trustee and the Indenture Trustee as soon as practicable after the Servicer has received notice thereof. (c) Following the satisfaction and discharge of the Indenture and the payment in full of the principal of and interest on the Notes, the Certificateholders will succeed to the rights of the Noteholders hereunder and the Owner Trustee will succeed to the rights of, and assume the obligations of, the Indenture Trustee pursuant to this Agreement. 58 ARTICLE ELEVEN MISCELLANEOUS SECTION 11.01. AMENDMENT. (a) This Agreement may be amended from time to time by the Trust Depositor, the Servicer, the Indenture Trustee and the Owner Trustee on behalf of the Issuer, collectively, but without the consent of any Securityholders, (i) to correct manifest error, to cure any ambiguity, to correct or supplement any provisions in this Agreement which are inconsistent with the provisions herein which may be ambiguous or inconsistent with any other provisions herein or in any other Transaction Document, as the case may be, or to add any other provisions with respect to matters or questions arising under this Agreement that shall not be inconsistent with the provisions of this Agreement, (ii) to add or provide any credit enhancement for any Class of Notes or the Certificates and (iii) to change any provision applicable for determining the Specified Reserve Fund Balance or the manner in which the Reserve Fund is funded; PROVIDED, HOWEVER that any such action shall not, as evidenced by an Opinion of Counsel, materially and adversely affect in any material respect the interests of any Securityholder and provided, further, that in connection with any amendment pursuant to clause (iii) above, the Servicer shall deliver to the Owner Trustee and the Indenture Trustee a letter from Standard & Poor's (so long as Standard & Poor's is a Rating Agency) and Moody's (so long as Moody's is a Rating Agency) to the effect that such amendment will not cause its then-current rating on any Class of Notes or the Certificates to be qualified, reduced or withdrawn. (b) This Agreement may also be amended from time to time by the Trust Depositor, the Servicer, the Indenture Trustee and the Owner Trustee on behalf of the Issuer, with the consent of the Noteholders of more than 50% of the aggregate principal amount of the Class A-1 Notes and Class A-2 Notes or, if there are no Class A-1 Notes or Class A-2 Notes outstanding, with the consent of the Noteholders of more than 50% of the aggregate principal amount of the Class B Notes or, if there are no Notes outstanding, with the consent of Certificateholders of more than 50% of the Certificate Balance, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of the Noteholders or the Certificateholders; PROVIDED, HOWEVER, that no such amendment shall (i) increase or reduce in any manner the amount of, or accelerate or delay the timing of, collections of payments on the Contracts or distributions which are required to be made on any Note or Certificate, (ii) except as otherwise provided in SECTION 10.01(a), the Specified Reserve Fund Balance or the manner in which the Reserve Fund is funded, (iii) change the interest rate on any Notes or Certificates which such change adversely affects the priority of payment of principal or interest made to the Noteholders or Certificateholders or (iv) reduce the aforesaid percentage required to consent to any such amendment, without the consent of the Noteholders and Certificateholders then outstanding; and PROVIDED, FURTHER, that no such amendment or consent shall be effective unless each Rating Agency delivers written confirmation that such amendment or consent will not cause its then-current rating on any Class of Notes or Certificates to be qualified, reduced or withdrawn. 59 (c) Promptly after execution of any amendment or consent, the Indenture Trustee shall furnish written notification of the substance of such amendment or consent, together with a copy thereof, to each Rating Agency. (d) Promptly after the execution of any such amendment or consent, the Owner Trustee and the Indenture Trustee, as the case may be, shall furnish written notification of the substance of such amendment or consent to each Certificateholder and Noteholder, respectively. It shall not be necessary for the consent of Noteholders and Certificateholders pursuant to Section 11.01(b) to approve the particular form of any proposed amendment or consent, but it shall be sufficient if such consent shall approve the substance thereof. The manner of obtaining such consents and of evidencing the authorization by Noteholders and Certificateholders of the execution thereof shall be subject to such reasonable requirements as the Owner Trustee or the Indenture Trustee may prescribe. (e) Prior to the execution of any amendment to this Agreement, the Owner Trustee and the Indenture Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by this Agreement. The Owner Trustee and the Indenture Trustee may, but shall not be obligated to, enter into any such amendment which affects the Owner Trustee's or the Indenture Trustee's own rights, duties or immunities under this Agreement or otherwise. (f) Upon the execution of any amendment or consent pursuant to this SECTION 11.01, this Agreement shall be modified in accordance therewith, and such amendment or consent shall form a part of this Agreement for all purposes, and every holder of Notes and Certificates theretofore or thereafter issued hereunder shall be bound thereby. SECTION 11.02. PROTECTION OF TITLE TO TRUST. (a) The Servicer shall execute and file such financing statements and cause to be executed and filed such continuation statements, all in such manner and in such places as may be required by law fully to preserve, maintain and protect the interest of the Issuer, the Securityholders, the Indenture Trustee and the Owner Trustee in the Contracts and in the proceeds thereof. The Servicer shall deliver (or cause to be delivered) to the Owner Trustee and the Indenture Trustee file-stamped copies of, or filing receipts for, any document filed as provided above, as soon as available following such filing. (b) Neither the Seller, the Trust Depositor nor the Servicer shall change its name, identity or corporate structure in any manner that would, could or might make any financing statement or continuation statement filed in accordance with Section 4.02(a) seriously misleading within the meaning of Section 9-402(7) of the UCC, unless it shall have given the Issuer, the Owner Trustee and the Indenture Trustee at least 30 days' prior written notice thereof and shall have promptly filed appropriate amendments to all previously filed financing statements or continuation statements. 60 (c) The Seller, the Trust Depositor and the Servicer shall give the Issuer, the Owner Trustee and the Indenture Trustee at least 30 days' prior written notice of any relocation of the principal executive office of Harley-Davidson Credit or the Trust Depositor and the Servicer (in the case of notice provided by the Servicer) if, as a result of such relocation, the applicable provisions of the UCC would require filing of any amendment of any previously filed financing or continuation statement or of any new financing statement and shall promptly file any such amendment or new financing statement. The Servicer shall at all times maintain each office from which it shall service Contracts, and its principal executive office, within the United States. (d) The Servicer shall maintain or cause to be maintained accounts and records as to each Contract accurately and in sufficient detail to permit (i) the reader thereof to know at any time the status of such Contract, including payments and recoveries made and payments owing (and the nature of each) and (ii) reconciliation between payments or recoveries on (or with respect to) each Contract and the amounts from time to time deposited in or credited to the Collection Account in respect of each Contract. (e) The Servicer shall maintain or cause to be maintained its computer systems so that, from and after the time of sale under this Agreement of the Contracts, the Servicer's master computer records (including any backup archives) that shall refer to a Contract indicate clearly the interest of the Issuer and the Indenture Trustee in such Contract and that such Contract is owned by the Issuer and has been pledged to the Indenture Trustee. Indication of the Issuer's ownership of and the Indenture Trustee's interest in a Contract shall be deleted from or modified on the Servicer's computer systems when, and only when, the related Contract shall have been paid in full or repurchased or shall have become a Liquidated Contract. (f) If at any time the Trust Depositor or the Servicer shall propose to sell, grant a security interest in, or otherwise transfer any interest in automotive retail installment sales contracts to any prospective purchaser, lender or other transferee, the Servicer shall give or cause to be given to such prospective purchaser, lender or other transferee computer tapes, records or print-outs (including any restored from back-up archives) that, if they shall refer in any manner whatsoever to any Contract, shall indicate clearly that such Contract has been sold and is owned by the Issuer and has been pledged to the Indenture Trustee. (g) The Servicer shall permit the Owner Trustee and its agents, at any time during normal business hours, to inspect, audit and make copies of and abstracts from the Servicer's records regarding any Contract. (h) Upon request, the Servicer shall furnish to the Owner Trustee and the Indenture Trustee, within five Business Days, a list of all Contracts then held as part of the Trust Estate, together with a reconciliation of such list to the Schedule of Contracts and to each of the Monthly Reports furnished before such request indicating removal of Contracts from the Trust. (i) The Servicer shall deliver to the Owner Trustee, the Indenture Trustee and each Rating Agency promptly after the execution and delivery of this Agreement and of each amendment hereto, an Opinion of Counsel either (A) stating that, in the opinion of such counsel, 61 all financing statements and continuation statements have been executed and filed that are necessary fully to preserve and protect the interest of the Owner Trustee and the Indenture Trustee and reciting the details of each filings or referring to prior Opinions of Counsel in which such details are given, or (B) stating that, in the opinion of such counsel, no such action shall be necessary to preserve and protect such interest. SECTION 11.03. GOVERNING LAW. This Agreement shall be construed in accordance with the laws of the State of Illinois and the obligations, rights, and remedies of the parties under the Agreement shall be determined in accordance with such laws, except that the duties of the Owner Trustee shall be governed by the laws of the State of Delaware. SECTION 11.04. NOTICES. All notices, demands, certificates, requests and communications hereunder ("notices") shall be in writing and shall be effective (a) upon receipt when sent through the U.S. mails, registered or certified mail, return receipt requested, postage prepaid, with such receipt to be effective the date of delivery indicated on the return receipt, or (b) one Business Day after delivery to an overnight courier, or (c) on the date personally delivered to an Authorized Officer of the party to which sent, or (d) on the date transmitted by legible telecopier transmission with a confirmation of receipt, in all cases addressed to the recipient as follows: (i) If to the Servicer or Seller: Harley-Davidson Credit Corp. 150 South Wacker Drive, Suite 3100 Chicago, Illinois 60606 Attention: Perry A. Glassgow Telecopier No.: (312) 368-4372 (ii) If to the Trust Depositor: Harley-Davidson Customer Funding Corp. 4150 Technology Way Carson City, Nevada 89706 Telecopier No.: (775) 884-4469 (iii) If to the Indenture Trustee: ______________________________ ______________________________ ______________________________ Telecopier No.: ______________ (iv) If to the Owner Trustee: 62 ______________________________ ______________________________ ______________________________ Telecopier No.: ______________ (v) If to Moody's: Moody's Investors Service, Inc. 99 Church Street New York, New York 10007 Attention: ABS Monitoring Department Telecopier No.: (212) 553-1350 (vi) If to Standard & Poor's: Standard & Poor's Ratings Services, A Division of The McGraw Hill Companies 55 Water Street New York, New York 10004 Telecopier No.: (212) 438-2657 (vii) If to the Underwriters: ______________________________ ______________________________ ______________________________ Telecopier No.: ______________ ______________________________ ______________________________ ______________________________ Telecopier No.: ______________ Each party hereto may, by notice given in accordance herewith to each of the other parties hereto, designate any further or different address to which subsequent notices shall be sent. 63 SECTION 11.05. SEVERABILITY OF PROVISIONS. If one or more of the covenants, agreements, provisions or terms of this Agreement shall be for any reason whatsoever held invalid, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement or of the Notes or Certificates or the rights of the Holders thereof. SECTION 11.06. ASSIGNMENT. Notwithstanding anything to the contrary contained herein, as provided in Sections 6.03 and 8.03, this Agreement may not be assigned by the Trust Depositor or the Servicer without the prior written consent of Holders of Notes aggregating not less than 66-2/3% of each Class and Certificateholders evidencing not less than 66-2/3% of the Certificate Balance or the Rating Agencies rating the Securities confirm that such assignment will not result in a reduction or withdrawal of any rating on any Security. SECTION 11.07. THIRD PARTY BENEFICIARIES. Except as otherwise specifically provided herein, the parties hereto hereby manifest their intent that no third party shall be deemed a third party beneficiary of this Agreement, and specifically that the Obligors are not third party beneficiaries of this Agreement. SECTION 11.08. COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall together constitute but one and the same instrument. SECTION 11.09. HEADINGS. The headings of the various Articles and Sections herein are for convenience of reference only and shall not define or limit any of the terms or provisions hereof. SECTION 11.10. LIMITATION OF LIABILITY OF OWNER TRUSTEE AND INDENTURE TRUSTEE. (a) Notwithstanding anything contained herein to the contrary, this instrument has been countersigned by [____________], not in its individual capacity but solely in its capacity as Owner Trustee of the Issuer, and in no event shall [_____________] in its individual capacity or any beneficial owner of the Issuer have any liability for the representations, warranties, covenants, agreements or other obligations of the Issuer hereunder, as to all of which recourse shall be had solely to the assets of the Issuer. For all purposes of this Agreement, in the performance of any duties or obligations of the Issuer hereunder, the Owner Trustee shall be subject to, and entitled to the benefits of, the terms and provisions of Articles Six, Seven and Eight of the Trust Agreement. (b) Notwithstanding anything contained herein to the contrary, this Agreement has been countersigned by [______________], not in its individual capacity but solely as Indenture Trustee, and in no event shall [______________] have any liability for the representations, warranties, covenants, agreements or other obligations of the Issuer hereunder or in any of the certificates, notices or agreements delivered pursuant hereto, as to all of which recourse shall be had solely to the assets of the Issuer. 64 [signature page follows] 65 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective officers as of the day and year first above written. HARLEY-DAVIDSON MOTORCYCLE TRUST [________] By: [______________], not in its individual capacity but solely as Owner Trustee on behalf of the Trust By: _____________________________________ Printed Name:________________________ Title:_______________________________ HARLEY-DAVIDSON CUSTOMER FUNDING CORP., as Trust Depositor By:_____________________________________ Printed Name: Perry A. Glassgow Title: Treasurer HARLEY-DAVIDSON CREDIT CORP., as Servicer By:_____________________________________ Printed Name: Perry A. Glassgow Title: Treasurer [______________], not in its individual capacity but solely as Indenture Trustee By:_____________________________________ Printed Name:______________________ Title:_____________________________ Signature Page to Sale and Servicing Agreement EXHIBIT A [Form of Assignment] In accordance with the Sale and Servicing Agreement (the "SALE AND SERVICING AGREEMENT") dated as of [________] made by and between the undersigned, as Trust Depositor ("TRUST DEPOSITOR"), Harley-Davidson Credit Corp., as Servicer, [______________], as Indenture Trustee and Harley-Davidson Motorcycle Trust [________] (the "TRUST"), as assignee thereunder, the undersigned does hereby sell, transfer, convey and assign, set over and otherwise convey to the Trust (i) all the right, title and interest of the Trust Depositor in and to the Initial Contracts listed on the initial List of Contracts delivered on the Closing Date (including, without limitation, all security interests and all rights to receive payments which are collected pursuant thereto on or after the Initial Cutoff Date, including any liquidation proceeds therefrom, but excluding any rights to receive payments which were collected pursuant thereto prior to the Initial Cutoff Date), (ii) all rights of the Trust Depositor under any physical damage or other individual insurance policy (and rights under a "FORCED PLACED" policy, if any) relating to any such Contract, an Obligor or a Motorcycle securing such Contract, (iii) all security interests in each such Motorcycle, (iv) all documents contained in the related Contract Files, (v) all rights (but not the obligations) of the Trust Depositor under any related motorcycle dealer agreements between dealers (i.e., the originators of such Contracts) and the Trust Depositor, (vi) all rights of the Trust Depositor in the Lockbox, the Lockbox Account and related Lockbox Agreement to the extent they relate to such Contracts, (vii) all rights (but not the obligations) of the Trust Depositor under the Transfer and Sale Agreement, including but not limited to the Trust Depositor's rights under Article V thereof, (viii) the remittances, deposits and payments made into the Trust Accounts from time to time and amounts in the Trust Accounts (other than the Reserve Fund) from time to time (and any investments of such amounts), and (ix) all proceeds and products of the foregoing This Assignment is made pursuant to and in reliance upon the representation and warranties on the part of the undersigned contained in Article III of the Sale and Servicing Agreement and no others. Capitalized terms used herein but not otherwise defined shall have the meanings assigned to such terms in the Sale and Servicing Agreement. IN WITNESS WHEREOF, the undersigned has caused this Assignment to be duly executed this _____ day of [___________]. HARLEY-DAVIDSON CUSTOMER FUNDING CORP. By:_________________________________________ Printed Name: Perry A. Glassgow Title: Treasurer A-1 EXHIBIT B [Form of Closing Certificate of Trust Depositor] HARLEY-DAVIDSON CUSTOMER FUNDING CORP. PRESIDENT'S CERTIFICATE The undersigned certifies that she is President of Harley-Davidson Customer Funding Corp., a Nevada corporation (the "TRUST DEPOSITOR"), and that as such is duly authorized to execute and deliver this certificate on behalf of the Trust Depositor in connection with the Sale and Servicing Agreement (the "AGREEMENT") dated as of [________] (the "EFFECTIVE DATE") by and among the Trust Depositor, [______________] (the "INDENTURE Trustee"), as Indenture Trustee, Harley-Davidson Credit Corp. ("HARLEY-DAVIDSON CREDIT"), as Servicer, and Harley-Davidson Motorcycle Trust [________] ("ISSUER") (all capitalized terms used herein without definition have the respective meanings set forth in the Agreement), and further certifies as follows: (1) Attached hereto as EXHIBIT I is a true and correct copy of the Articles of Incorporation of the Trust Depositor, together with all amendments thereto as in effect on the date hereof. (2) There has been no other amendment or other document filed affecting the Articles of Incorporation of the Trust Depositor since October 23, 1996, and no such amendment has been authorized by the Board of Directors or shareholders of the Trust Depositor. (3) Attached hereto as EXHIBIT II is a Certificate of the Secretary of State of the State of Nevada dated [__________] stating that the Trust Depositor is duly incorporated under the laws of the State of Nevada and is in good standing. (4) Attached hereto as EXHIBIT III is a true and correct copy of the By-laws of the Trust Depositor, as amended, which were in full force and effect on October 30, 1996, and at all times subsequent thereto. (5) Attached hereto as EXHIBIT IV is a true and correct copy of resolutions adopted pursuant to the unanimous written consent of the Board of Directors of the Trust Depositor relating to the execution, delivery and performance of the Agreement; the Transfer and Sale Agreement dated as of the Effective Date between the Trust Depositor and Harley-Davidson Credit; the Trust Agreement dated as of the Effective Date between the Trust Depositor and the [_____________] (the "Owner Trustee"), as Owner Trustee; the Administration Agreement dated as of the Effective Date between the Trust Depositor, the Issuer, the Indenture Trustee, Harley-Davidson Credit, as Administrator; the Underwriting Agreement dated [____________] among the Trust Depositor, Harley- B-1 Davidson Credit and [______________] and [______________] (collectively, the "PROGRAM AGREEMENTS"). Said resolutions have not been amended, modified, annulled or revoked, and are on the date hereof in full force and effect and are the only resolutions relating to these matters which have been adopted by the Board of Directors. (6) No event with respect to the Trust Depositor has occurred and is continuing which would constitute an Event of Termination or an event that, with notice or the passage of time or both, would become an Event of Termination under the Agreement. To the best of my knowledge after reasonable investigation, there has been no material adverse change in the condition, financial or otherwise, or the earnings, business affairs or business prospects of the Trust Depositor, whether or not arising in the ordinary course of business since the respective dates as of which information is given in the Prospectus and except as set forth therein. (7) All federal, state and local taxes of the Trust Depositor due and owing as of the date hereof have been paid. (8) All representations and warranties of the Trust Depositor contained in the Program Agreements or any other related documents, or in any document, certificate or financial or other statement delivered in connection therewith are true and correct as of the date hereof. (9) There is no action, investigation or proceeding pending or, to our knowledge, threatened against the Trust Depositor before any court, administrative agency or other tribunal (a) asserting the invalidity of the Program Agreements; (b) seeking to prevent the consummation of any of the transactions contemplated by the Program Agreements; or (c) which is likely materially and adversely to affect the Trust Depositor's performance of its obligations under, or the validity or enforceability of, the Program Agreements. (10) No consent, approval, authorization or order of, and no notice to or filing with, any governmental agency or body or state or federal court is required to be obtained by the Trust Depositor for the Trust Depositor's consummation of the transactions contemplated by the Program Agreements, except such as have been obtained or made and such as may be required under the blue sky laws of any jurisdiction in connection with the issuance and sale of the Certificates. (11) The Trust Depositor is not a party to any agreements or instruments evidencing or governing indebtedness for money borrowed or by which the Trust Depositor or its property is bound (other than the Program Agreements). Neither Harley-Davidson Credit's transfer and assignment of the Contract Assets to the Trust Depositor, the Trust Depositor's concurrent transfer and assignment of the Trust Corpus to the Trust, nor the concurrent transfer and assignment of the Collateral by the Trust to the Indenture Trustee nor the issuance and sale of the Certificates and the Notes, nor the execution and delivery of the Program Agreements, nor the consummation of any other of the B-2 transactions contemplated therein, will violate or conflict with any agreement or instrument to which the Trust Depositor is a party or by which it is otherwise bound. (12) In connection with the transfer of Contracts and related collateral contemplated in the Agreement, (a) the Trust Depositor has not made such transfer with actual intent to hinder, delay or defraud any creditor of the Trust Depositor, and (b) the Trust Depositor has not received less than a reasonably equivalent value in exchange for such transfer, is not on the date thereof insolvent (nor will become insolvent as a result thereof), is not engaged (or about to engage) in a business or transaction for which it has unreasonably small capital, and does not intend to incur or believe it will incur debts beyond its ability to pay when matured. (13) Each of the agreements and conditions of the Trust Depositor to be performed on or before the Closing Date pursuant to the Program Agreements have been performed in all material respects. * * * * B-3 IN WITNESS WHEREOF, I have affixed my signature hereto this ___ day of [_________]. By: _____________________________________ Printed Name: Donna F. Zarcone Title: President EXHIBIT C [Form of Closing Certificate of Servicer/Seller] HARLEY-DAVIDSON CREDIT CORP. PRESIDENT'S CERTIFICATE The undersigned certifies that she is President of Harley-Davidson Credit Corp. ("HARLEY-DAVIDSON Credit"), and that as such is duly authorized to execute and deliver this certificate on behalf of Harley-Davidson Credit, as Servicer, in connection with the Sale and Servicing Agreement (the "SALE AND SERVICING AGREEMENT") dated as of [________] (the "EFFECTIVE DATE") by and among Harley-Davidson Credit, as Servicer, Harley-Davidson Customer Funding Corp. ("CFC"), [______________], as Indenture Trustee and Harley-Davidson Motorcycle Trust [________] ("ISSUER"), in connection with the Transfer and Sale Agreement dated as of the Effective Date (the "TRANSFER AND SALE AGREEMENT") by and between Harley-Davidson Credit and CFC (all capitalized terms used herein without definition having the respective meanings set forth in the Sale and Servicing Agreement), and further certifies as follows: (1) Attached hereto as EXHIBIT I is a true and correct copy of the Articles of Incorporation of Harley-Davidson Credit, together with all amendments thereto as in effect on the date hereof. (2) There has been no other amendment or other document filed affecting the Articles of Incorporation of Harley-Davidson Credit since July 6, 1995, and no such amendment has been authorized by the Board of Directors or shareholders of Harley-Davidson Credit. (3) Attached hereto as EXHIBIT II is a Certificate of the Secretary of State of the State of Nevada dated [__________]stating that Harley-Davidson Credit is duly incorporated under the laws of the State of Nevada and is in good standing. (4) Attached hereto as EXHIBIT III is a true and correct copy of the By-laws of Harley-Davidson Credit which were in full force and effect on November 5, 1992 and at all times subsequent thereto. (5) Attached hereto as EXHIBIT IV is a true and correct copy of resolutions adopted pursuant to a unanimous written consent of the Board of Directors of Harley-Davidson Credit and relating to the authorization, execution, delivery and performance of the Transfer and Sale Agreement; the Sale and Servicing Agreement; the Underwriting Agreement dated [__________] among Harley-Davidson Credit, CFC, [_______________] and [_____________] (the "UNDERWRITING AGREEMENT"); and the Administration Agreement dated [________] among Harley-Davidson Credit, CFC, the Issuer and [______________], as Indenture Trustee (the "INDENTURE TRUSTEE") (the C-1 "ADMINISTRATION AGREEMENT"). Said resolutions have not been amended, modified, annulled or revoked, and are on the date hereof in full force and effect and are the only resolutions relating to these matters which have been adopted by the Board of Directors. (6) No event with respect to Harley-Davidson Credit has occurred and is continuing which would constitute an Event of Termination or an event that, with notice or the passage of time, would constitute an Event of Termination under the Sale and Servicing Agreement. To the best of my knowledge after reasonable investigation, there has been no material adverse change in the condition, financial or otherwise, or the earnings, business affairs or business prospects of Harley-Davidson Credit, whether or not arising in the ordinary course of business, since the respective dates as of which information is given in the Prospectus and except as set forth therein. (7) All federal, state and local taxes of Harley-Davidson Credit due and owing as of the date hereof have been paid. (8) All representations and warranties of Harley-Davidson Credit contained in the Transfer and Sale Agreement, the Sale and Servicing Agreement, the Underwriting Agreement and the Administration Agreement (collectively, the "PROGRAM AGREEMENTS") or in any document, certificate or financial or other statement delivered in connection therewith are true and correct as of the date hereof. (9) There is no action, investigation or proceeding pending or, to my knowledge, threatened against Harley-Davidson Credit before any court, administrative agency or other tribunal (a) asserting the invalidity of any Program Agreement to which Harley-Davidson Credit is a party; or (b) which is likely materially and adversely to affect Harley-Davidson Credit's performance of its obligations under, or the validity or enforceability of, the Program Agreements. (10) No consent, approval, authorization or order of, and no notice to or filing with, any governmental agency or body or state or federal court is required to be obtained by Harley-Davidson Credit for Harley-Davidson Credit's consummation of the transactions contemplated by the Program Agreements, except such as have been obtained or made and such as may be required under the blue sky laws of any jurisdiction in connection with the issuance and sale of the Notes or Certificates. (11) SCHEDULE A hereto contains a complete list of all material agreements (other than the Transfer and Sale Agreement) or instruments evidencing or governing indebtedness for money borrowed to which Harley-Davidson Credit is a party or by which Harley-Davidson Credit or its property is bound. Neither Harley-Davidson Credit's transfer and assignment of the Contract Assets to CFC, CFC's concurrent transfer and assignment of the Trust Corpus to the Trust, nor the concurrent transfer and assignment by the Trust of the Collateral to the Indenture Trustee, nor the issuance and sale of the Notes or Certificates or the entering into of the Program Agreements, nor the consummation of any other of the transactions contemplated therein, will violate or C-2 conflict with any agreement or instrument to which Harley-Davidson Credit is a party or by which it is otherwise bound. (12) In connection with the transfers of Contracts and related assets contemplated in the Transfer and Sale Agreement, (a) Harley-Davidson Credit has not made such transfer with actual intent to hinder, delay or defraud any creditor of Harley-Davidson Credit, and (b) Harley-Davidson Credit has not received less than a reasonably equivalent value in exchange for such transfer, is not on the date hereof insolvent (nor will Harley-Davidson Credit become insolvent as a result thereof), is not engaged (or about to engage) in a business or transaction for which it has unreasonably small capital, and does not intend to incur or believe it will incur debts beyond its ability to pay when matured. (13) The sole shareholder of Harley-Davidson Credit is Harley-Davidson Financial Services, Inc., a Delaware corporation, which has its chief executive office and only office in Chicago, Illinois, and has no other offices in any other state. (14) Each of the agreements and conditions of Harley-Davidson Credit to be performed or satisfied on or before the Closing Date under the Program Agreements has been performed or satisfied in all material respects. (15) Each Contract being transferred pursuant to the Transfer and Sale Agreement is evidenced by a written agreement providing for a repayment obligation as well as a security interest in the related Motorcycle securing such obligation, and conforms as to these matters in all material respects with the form of written Contract provided as EXHIBIT A hereto (with such minor variations as to specific terms as may be required or deemed desirable in respect of the laws or requirements of particular states). (16) Harley-Davidson Credit has not executed for filing any UCC financing statements listing the Contract Assets as collateral other than financing statements relating to the transactions contemplated in the Transfer and Sale Agreement and in the agreements listed on SCHEDULE A hereto. * * * * * * C-3 IN WITNESS WHEREOF, I have affixed my signature hereto this ___ day of [_________]. By: _____________________________________ Printed Name: Donna F. Zarcone Title: President EXHIBIT D [Form of Opinion of Counsel for Trust Depositor Regarding General Corporate Matters (Including Perfection Opinion)] D-1 EXHIBIT E [Form of Opinion of Counsel for Trust Depositor Regarding the "TRUE SALE" Nature of the Transaction] E-1 EXHIBIT F [Form of Opinion of Counsel for Trust Depositor Regarding Non-consolidation] F-1 EXHIBIT G [Form of Certificate Regarding Repurchased Contracts] Harley-Davidson Credit Corp. Certificate Regarding Repurchased Contracts The undersigned certifies that he is the Treasurer of Harley-Davidson Credit Corp., a Nevada corporation (the "SERVICER"), and that as such is duly authorized to execute and deliver this certificate on behalf of the Servicer pursuant to Section 7.08 of the Sale and Servicing Agreement (the "AGREEMENT") dated as of [________] by and among Harley-Davidson Customer Funding Corp., as Trust Depositor, the Servicer, [______________], as Indenture Trustee, and Harley-Davidson Motorcycle Trust [________] (all capitalized terms used herein without definition having the respective meanings specified in the Agreement), and further certifies that: 1. The Contracts on the attached schedule are to be repurchased by the Seller on the date hereof pursuant to Section 7.08 of the Agreement and Section 5.01 of the Transfer and Sale Agreement. 2. Upon deposit of the Repurchase Price for such Contracts, such Contracts may, pursuant to Section 7.08 of the Agreement, be assigned by the Issuer to the Seller. IN WITNESS WHEREOF, I have affixed hereunto my signature this ______ day of _____________. Harley-Davidson Credit Corp. By: ___________________________________ Printed Name: Perry A. Glassgow Title: Treasurer G-1 EXHIBIT H [List of Contracts] H-1 EXHIBIT I [Form of Monthly Report to Noteholders And Certificateholders] Harley-Davidson Motorcycle Trust [________] $[__________][____]% Harley-Davidson Motorcycle Contract Backed Notes, Class A-1 $[__________][____]% Harley-Davidson Motorcycle Contract Backed Notes, Class A-2 $[__________] [____]% Harley-Davidson Motorcycle Contract Backed Notes, Class B [$[__________] [____]% Harley-Davidson Motorcycle Contract Backed Certificates] Monthly Report For the [ ] Distribution Date A. Calculation of Available Monies 1. Available Principal (as defined in Article I of the Sale and Servicing Agreement) $____________ 2. Available Interest (as defined in Article I of the Sale and Servicing Agreement) $____________ 3. Available Monies (l. plus 2.) $____________ B. Calculation of Principal Distributable Amount (as defined in Article I of the Sale and Servicing Agreement) $____________ C. Calculation of Available Interest (as defined in Article I of the Sale and Servicing Agreement). $____________ D. Calculation of Note Monthly Principal Distributable Amount $____________ 1. Note Percentage for such Distribution Date (a) for each Distribution Date to but excluding the Distribution Date on which the principal amount of the Class B Notes is reduced to zero 100.00% (b) on the Distribution Date on which the principal amount of the Class B Notes is reduced to zero 100.00% I-1 (c) after the principal amount of the Class B Notes have been reduced to zero 0.00% 2. Principal Distributable Amount (from B) $____________ 3. Note Monthly Principal Distributable Amount for (a) Class A-1 Notes (D.1(a) multiplied by D.2 until Principal Balance of Class A-1 Notes Principal Balance is zero) $____________ (b) Class A-2 Notes (D.1(b) multiplied by D.2 until Class A-2 Notes Principal Balance is zero) $____________ (c) Class B Notes (D.1(c) multiplied by D.2 until Class B Notes Principal Balance is zero) $____________ (d) Note Principal Carryover Shortfall $____________ (e) Special Mandatory Redemption Amounts (from Pre-Funding Account as defined in Article I of the Sale and Servicing Agreement) $____________ (f) Note Monthly Principal Distributable Amount (the sum of items 3(a), 3(b) and 3(c) $____________ I-2 E. Calculation of Note Monthly Interest Distributable Amount. 1. Class A-l Interest Rate ___% 2. Class A-2 Interest Rate ___% 3. Class B Interest Rate ___% 4. One-twelfth of the Class A-1 Interest Rate times the Class A-1 Note Balance from and including the fifteenth day of the month based on a 360-day year of 12 months of 30 days each (or from and including the Closing Date with respect to the first Distribution Date) to but excluding the fifteenth day of the month of the current Distribution Date $_____________ 5. One-twelfth of the Class A-2 Note Interest Rate times the Class A-2 Note Balance from and including the fifteenth day of the month based on a 360-day year of 12 months of 30 days each (or from and including the Closing Date with respect to the first Distribution Date) to but excluding the fifteenth day of the month of the current Distribution Date $_____________ 6. One-twelfth of the Class B Note Interest Rate times the Class B Note Balance from and including the fifteenth day of the month based on a 360-day year of 12 months of 30 days each (or from and including the Closing Date with respect to the first Distribution Date) to but excluding the fifteenth day of the month of the current Distribution Date $_____________ 7. Interest Carryover Shortfall for such Distribution Date $_____________ 7. Note Monthly Interest Distributable Amount (the sum of items 5, 6 and 7) $_____________ F. Calculation of Note Distributable Amount (sum of D.3(e) plus E.6.) $_____________ I-3 G. Calculation of Certificate Principal Distributable Amount 1. Certificate Balance $____________ 2. Available Principal $____________ 3. Certificate Percentage for each respective Distribution Date 0.00% 3(a). for each Distribution Date to but excluding the Distribution Date on which the Principal Amount of the Class B Notes is reduced to zero 0.00% 3(b). on any Distribution Date until the Principal Amount of the Class B Notes is reduced to zero 100.00% 3(c). thereafter 4(a). Available Principal multiplied by the Certificate Percentage $____________ for such Distribution Date 4(b). Certificate Principal Carryover Shortfall for such Distribution Date $____________ 5. Certificate Principal Distributable Amount (the sum of 4.(a) and 4.(b)) $____________ H. Calculation of Certificate Interest Distributable Amount 1. Certificate Pass-Through Rate ___% 2(a). One-twelfth of the Certificate Pass-Through Rate times the Certificate Balance on the immediately preceding Distribution Date, after giving effect to all payments of principal to the Certificateholders and such preceding Distribution Date (or in case of the first Distribution Date on the original Principal Amount of the Certificates) based on a 360-day year of 12 months of 30 days each. $____________ 2(b). Certificate Interest Carryover Shortfall for such Distribution Date $____________ 3. Certificate Interest Distributable Amount (sum of 2.(a) and 2.(b)) $____________ I-4 I. Calculation of Certificate Distributable Amount (sum of G.5 and H.3) $____________ J. Fees 1. The Monthly Servicing Fee for such Distribution Date (1/12 of the product of 1% and the Principal Balance of the Contracts as of the beginning of the related Due Period) $____________ 2. Late Payment Penalty Fees for such Distribution Date $____________ 3. Extension Fees for such Distribution Date $____________ 4. Indenture Trustee Fee for such Distribution Date excluding expense component (1/12 of the product of .005% and the sum of (i) the Principal Balance of the Contracts as of the beginning of the related Due Period and (ii) the Pre-Funded Amount as of the beginning of such Period; provided, however, in no event shall such fee be less than $200.00 per month) $____________ K. CALCULATION OF THE AVAILABLE MONIES FOR SUCH DISTRIBUTION DATE 1. The amount of funds deposited into the Collection Account pursuant to Section 5.05(b) of the Sale and Servicing Agreement with respect to the related Due Period $_____________ a. All amounts received by the Indenture Trustee or the Servicer with respect to principal and interest on the Contracts, as well as Late Payment Penalty Fees and Extensions Fees for the related Due Period $_____________ b. All Net Liquidation Proceeds $_____________ c. The aggregate of the Repurchase Prices for Contracts required to be repurchased by the Seller as described in Section 7.08 of the Sale and Servicing Agreement $_____________ I-5 d. All Advances made by Servicer pursuant to Section 7.03(a) of the Sale and Servicing Agreement $_____________ e. All amounts paid by the Seller in connection with an optional repurchase of the Contracts described in Section 7.10 of the Sale and Servicing Agreement $_____________ f. All amounts obtained from the Indenture Trustee in respect of Carrying Charges to be deposited into the Collection Account for the upcoming Distribution Date as contemplated in Section 7.03(b) of the Sale and Servicing Agreement $_____________ g. All amounts received in respect of interest, dividends, gains, income and earnings on investments of funds in the Trust Accounts as contemplated in Section 5.05(b)(viii) of the Sale and Servicing Agreement $_____________ h. Total amount of funds deposited into the Collection Account pursuant to Section 5.05(b) (the sum of a. through g.) $_____________ 2. The amount of funds permitted to be withdrawn from the Collection Account pursuant to clauses (ii) through (iv) of Section 7.05(a) of the Sale and Servicing Agreement with respect to the related Due Period $_____________ a. Amounts to be paid to the Servicer as the Reimbursement Amount in accordance with Section 7.03(a) of the Sale and Servicing Agreement $_____________ b. Amounts to be paid to the Servicer in respect to the Servicing Fee for the related Due Period $_____________ I-6 c. Amounts to be paid to the Indenture Trustee in respect of the Indenture Trustee's Fee for the related Due Period $_____________ d. Amounts to be paid to the Owner Trustee in respect of the Owner Trustee Fee for the related Due Period $_____________ e. Total amount of funds permitted to be withdrawn from the Collection Account pursuant to clauses (ii) through (iv) Section 7.05(a) of the Sale and Servicing Agreement with respect to the related Due Period (sum of a. through d.) $_____________ 3. The Available Monies (not including amounts from Reserve Fund Account) for such Distribution Date available to pay Note Distributable Amounts and Certificate Distributable Amounts (1(h) minus 2(e)) $_____________ 4. The Available Monies otherwise distributable to the Certificateholders that will be distributed to the Noteholders on such Distribution Date $____________ L. The shortfall of Available Monies for such Distribution Date to pay either the Note Distributable Amount or the Certificate Distributable Amount (the Available Monies for such Distribution Date minus the sum of the Note Distributable Amount as set forth in F. and the Certificate Distributable Amount as set forth in I.) $____________ M. The amount to be withdrawn from the Reserve Fund on such Distribution Date to cover the Note Interest Distributable Amount $____________ N. The amount to be withdrawn from the Reserve Fund on such Distribution Date to cover the Certificate Interest Distributable Amount $____________ O. The amount to be withdrawn from the Reserve Fund on such Distribution Date to cover the Note Principal Distributable Amount $____________ I-7 P. The amount to be withdrawn from the Reserve Fund on such Distribution Date to cover the Certificate Principal Distributable Amount $____________ Q. Interest Earnings on the Reserve Fund. $____________ R. The amount on deposit in the Reserve Fund after giving effect to deposits and withdrawals therefrom on such Distribution Date $____________ S. The Specified Reserve Fund Amount for such Distribution Date will be an amount equal to the greater of (a) [___]% of the Principal Balance of the Contracts in the Trust as of the first day of the immediately preceding Due Period; provided, however, in the event a Reserve Fund Trigger Event occurs with respect to a Distribution Date and has not terminated for three (3) consecutive Distribution Dates (inclusive) such amount shall be equal to [___]% of the Principal Balance of the Contracts in the Trust as of the first day of the immediately preceding Due Period) and (b) [___]% of the aggregate of the Initial Class A-1 Note Balance, Initial Class A-2 Note Balance, Initial Class B Note Balance and Initial Certificate Balance; provided, however, in no event shall the Specified Reserve Fund Balance be greater than the aggregate outstanding principal balance of the Securities. $____________ T. The Pool Factor 1. The Class A-1 Note Pool Factor immediately before such Distribution Date ____________ 2. The Class A-2 Note Pool Factor immediately after such Distribution Date ____________ 3. The Class B Note Pool Factor immediately after such Distribution Date ____________ 4. The Certificate Pool Factor immediately after such Distribution Date ____________ 5. The Class A-1 Note Pool Factor immediately before such Distribution Date ____________ I-8 6. The Class A-2 Note Pool Factor immediately after such Distribution Date ____________ 7. The Class B Note Pool Factor immediately after such Distribution Date ____________ 8. The Certificate Pool Factor immediately after such Distribution Date ____________ U. Delinquent Contracts 1. 31-59 Days #______ $____________ 2. 60-89 Days #______ $____________ 3. 90 or More Days #______ $____________ V. Liquidated Contracts 1. Total Liquidated Contracts #______ $____________ 2. Identity (attach) 3. Liquidation proceeds for the Due Period $____________ 4. Liquidation expenses for the Due Period $____________ 5. Net Liquidation Proceeds for the Due Period $____________ 6. Net Liquidation Losses for the Due Period $____________ W. Advances 1. Unreimbursed Advances prior to such Distribution Date $____________ 2. Amount paid to Servicer on such Distribution Date to reimburse Servicer for such unreimbursed Advances $____________ 3. Amount of Delinquent Interest for such Distribution Date $____________ I-9 4. Amount of new Advances on such Distribution Date (if such amount is less than the amount of Delinquent Interest, attach the certificate required by Section 7.03 of the Sale and Servicing Agreement) $____________ 5. Total of unreimbursed Advances after new Advances on such Distribution Date $____________ X. Repurchased Contracts 1. Number of Contracts to be repurchased by the Seller pursuant to Section 7.08 of the Sale and Servicing Agreement $____________ 2. Principal Amount of such Contracts $____________ 3. Related Repurchase Price of such Contracts $____________ Y. Contracts 1. Number of Contracts as of beginning of Due Period $____________ 2. Principal Balance of Contracts as of beginning of Due Period $____________ 3. The weighted average Contract Rate of the Contracts as of the beginning of the Due Period $____________ 4. The weighted average remaining term to maturity of the Contracts as of the beginning of the Due Period $____________ 5. Number of Contracts as of end of Due Period $____________ 6. Principal Balance of Contracts as of end of Due Period $____________ 7. The weighted average Contract Rate of the Contracts as of the end of the Due Period $____________ 8. The weighted average remaining term to maturity of the Contracts as of the end of the Due Period $____________ 9. Pre-Funded Amount as of beginning of Due Period $____________ I-10 10. Pre-Funded Amount as of end of Due Period $____________ Z. Interest Reserve Account 1. Interest Reserve Amount as of previous Distribution Date $____________ 2. Carrying Charges (if any) to be paid on upcoming Distribution Date $____________ 3. Interest Reserve Amount as of upcoming Distribution Date $____________ AA. Ratios 1. Cumulative Loss Ratio a. The aggregate Net Liquidation Losses for all Contracts since the Cutoff Date through the end of the related Due Period $_____________ b. The sum of the Principal Balance of the Contracts as of the Cutoff Date plus the Principal Balance of any Subsequent Contracts as of the related Subsequent Cutoff Date $_____________ c. The Cumulative Loss Ratio for such Distribution Date (the quotient of a. divided by b., expressed as a percentage) $_____________ 2. Average Delinquency Ratio for such Distribution Date (a) The Delinquency Amount (the Principal Balance of all Contracts that were delinquent 60 days or more as of the end of the Due Period) $_____________ I-11 (b) The Delinquency Ratio (the fraction (expressed as a percentage) computed by dividing (a) the Delinquency Amount during the immediately preceding Due Period by (b) the Principal Balance of the Contracts as of the beginning of the related Due Period) for such Distribution Date _____% (c) The Delinquency Ratio for the prior Distribution Date _____% (d) The Delinquency Ratio for the second prior Distribution Date _____% (e) The Average Delinquency Ratio (the arithmetic average of a. through c.) _____% 3. Average Loss Ratio for such Distribution Date (a) Net Liquidation Losses $________ (b) The Loss Ratio for (the fraction (expressed as a percentage) derived by dividing (x) Net Liquidation Losses for all Contracts that became Liquidated Contracts during the immediately preceding Due Period multiplied by twelve by (y) the outstanding Principal Balances of all Contracts as of the beginning of the Due Period) such Distribution Date _____% (c) The Loss Ratio for the prior Distribution Date _____% (d) The Loss Ratio for the second prior Distribution Date _____% (e) The Average Loss Ratio (the arithmetic average of a. through c.) _____% 4. Computation of Specified Reserve Fund Balance Reserve Fund Trigger Events I-12 (1) Average Delinquency Ratio (if (a) (i) Average Delinquency Ratio [____]% with respect to any Distribution Date which occurs within the period from the Closing Date to, and inclusive of, the first anniversary of the Closing Date, (ii) [____]% with respect to any Distribution Date which occurs within the period from the day after the first anniversary of the Closing Date to, and inclusive of, the second anniversary of the Closing Date or (iii) [____]% for any Distribution Date which occurs within the period from the day after the second anniversary of the Closing Date to, and inclusive of, the third anniversary of the Closing Date or (iv) [____]% for any Distribution Date following the third anniversary of the Closing Date, then a Reserve Fund Trigger Event has occurred) ____% (2) Average Loss Ratio (if Average Loss Ratio is equal to or greater than (i) [____]% with respect to any Distribution Date which occurs within the period from the Closing Date to, and inclusive of, the eighteen months following the Closing Date or (ii) [____]% with respect to any Distribution Date which occurs following the eighteen month period following the Closing Date, then a Reserve Fund Trigger Event has occurred) _____% I-13 (3) Cumulative Loss Ratio (if Cumulative Loss Ratio is equal to or greater than (i) [____]% with respect to any Distribution Date which occurs within the period from the Closing Date to, and inclusive of, the first anniversary of the Closing Date, (ii) [____]% with respect to any Distribution Date which occurs within the period from the day after the first anniversary of the Closing Date to, and inclusive of, the second anniversary of the Closing Date, (iii) [____]% for any Distribution Date while occurs within the period from the day after the second anniversary of the Closing Date to, and inclusive of the third anniversary of the Closing Date, or (iv) [____]% following the third anniversary of the Closing Date, then a Reserve Fund Trigger Event has occurred) _____%
I-14 EXHIBIT J [Seller's Representations and Warranties] (1) REPRESENTATIONS AND WARRANTIES REGARDING SELLER. Seller represents and warrants, as of the execution and delivery of this Agreement and as of the Closing Date, in the case of the Initial Contracts, and as of the applicable Subsequent Transfer Date, in the case of Subsequent Contracts, that: (a) ORGANIZATION AND GOOD STANDING. Seller is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has the corporate power to own its assets and to transact the business in which it is currently engaged. Seller is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which the character of the business transacted by it or properties owned or leased by it requires such qualification and in which the failure so to qualify would have a material adverse effect on the business, properties, assets, or condition (financial or otherwise) of Seller or Trust Depositor. Seller is properly licensed in each jurisdiction to the extent required by the laws of such jurisdiction to service the Contracts in accordance with the terms of the Sale and Servicing Agreement. (b) AUTHORIZATION; BINDING OBLIGATION. Seller has the power and authority to make, execute, deliver and perform this Agreement and the other Transaction Documents to which the Seller is a party and all of the transactions contemplated under this Agreement and the other Transaction Documents to which the Seller is a party, and has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement and the other Transaction Documents to which the Seller is a party. This Agreement and the other Transaction Documents to which the Seller is a party constitute the legal, valid and binding obligation of Seller enforceable in accordance with their terms, except as enforcement of such terms may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and by the availability of equitable remedies. (c) NO CONSENT REQUIRED. Seller is not required to obtain the consent of any other party or any consent, license, approval or authorization from, or registration or declaration with, any governmental authority, bureau or agency in connection with the execution, delivery, performance, validity or enforceability of this Agreement and the other Transaction Documents to which the Seller is a party. (d) NO VIOLATIONS. Seller's execution, delivery and performance of this Agreement and the other Transaction Documents to which the Seller is a party will not violate any provision of any existing law or regulation or any order or decree of any court or the Articles of Incorporation or Bylaws of Seller, or constitute a material breach of any mortgage, indenture, contract or other agreement to which Seller is a party or by which Seller or any of Seller's properties may be bound. J-1 (e) LITIGATION. No litigation or administrative proceeding of or before any court, tribunal or governmental body is currently pending, or to the knowledge of Seller threatened, against Seller or any of its properties or with respect to this Agreement or any other Transaction Document to which the Seller is a party which, if adversely determined, would in the opinion of Seller have a material adverse effect on the business, properties, assets or condition (financial or other) of Seller or the transactions contemplated by this Agreement or any other Transaction Document to which the Seller is a party. (f) PLACE OF BUSINESS; NO CHANGES. Seller's sole place of business (within the meaning of Article 9 of the UCC) is as follows: Harley-Davidson Credit Corp. 4150 Technology Way Carson City, Nevada 89706 Seller has not changed its name whether by amendment of its Articles of Incorporation, by reorganization or otherwise, and has not changed the location of its place of business (except within Carson City, Nevada), within the four months preceding the Closing Date. (g) Approximately 5.0% of the aggregate principal balance of contracts financed from time to time by the Seller are secured by motorcycles manufactured by Buell. (2) REPRESENTATIONS AND WARRANTIES REGARDING EACH CONTRACT. Seller represents and warrants as to each Contract as of the execution and delivery of this Agreement and as of the Closing Date, in the case of the Initial Contracts, and as of the applicable Subsequent Transfer Date, in the case of Subsequent Contracts, that: (a) LIST OF CONTRACTS. The information set forth in the List of Contracts (or Subsequent List of Contracts, in the case of Subsequent Contracts) is true, complete and correct in all material respects as of the Initial Cutoff Date or applicable Subsequent Cutoff Date, as the case may be. (b) PAYMENTS. As of the Initial Cutoff Date or applicable Subsequent Cutoff Date, as the case may be, the most recent scheduled payment with respect to any Contract either had been made or was not delinquent for more than 30 days. To the best of Seller's knowledge, all payments made on each Contract were made by the respective Obligor. (c) NO WAIVERS. As of the Closing Date (or the applicable Subsequent Transfer Date, in the case of Subsequent Contracts), the terms of the Contracts have not been waived, altered or modified in any respect, except by instruments or documents included in the related Contract File. J-2 (d) BINDING OBLIGATION. Each Contract is the genuine, legal, valid and binding obligation of the Obligor thereunder and is enforceable in accordance with its terms, except as such enforceability may be limited by such enforceability may be limited by insolvency, bankruptcy, moratorium, reorganization or other similar laws affecting the enforcement of creditors' rights generally. (e) NO DEFENSES. No Contract is subject to any right of rescission, setoff, counterclaim or defense, including the defense of usury, and the operation of any of the terms of such Contract or the exercise of any right thereunder will not render the Contract unenforceable in whole or in part or subject to any right of rescission, setoff, counterclaim or defense, including the defense of usury, and no such right of rescission, setoff, counterclaim or defense has been asserted with respect thereto. (f) INSURANCE. As of time of origination of the Contract, the related Motorcycle securing each Contract is covered by physical damage insurance (i) in an amount not less than the value of the Motorcycle at the time of origination of the Contract, (ii) naming Seller as a loss payee and (iii) insuring against loss and damage due to fire, theft, transportation, collision and other risks covered by comprehensive coverage, and all premiums due on such insurance have been paid in full from the date of the Contract's origination. (g) ORIGINATION. Each Contract was originated by a Harley-Davidson motorcycle dealer in the regular course of its business which dealer had all necessary licenses and permits to originate the Contracts in the state where such dealer was located, was fully and properly executed by the parties thereto, and has been purchased by Seller in the regular course of its business. Each Contract was sold by such motorcycle dealer to the Seller without any fraud or misrepresentation on the part of such motorcycle dealer. (h) LAWFUL ASSIGNMENT. No Contract was originated in or is subject to the laws of any jurisdiction whose laws would make the sale, transfer and assignment of the Contract under this Agreement or under the Sale and Servicing Agreement or the pledge of the Contract under the Indenture or pursuant to transfers of the Certificates unlawful, void or voidable. (i) COMPLIANCE WITH LAW. None of the Contracts, the origination of the Contracts by the dealers, the purchase of the Contracts by the Seller, the sale of the Contracts by the Seller to the Trust Depositor or by the Trust Depositor to the Trust, or any combination of the foregoing, violated as of the Closing Date or as of any Subsequent Transfer Date, as applicable, any requirement of any federal, state or local law and regulations thereunder, including, without limitation, usury, truth in lending, motor vehicle installment loan and equal credit opportunity laws, applicable to the Contracts and the sale of Motorcycles. Seller shall, for at least the period of this Agreement, maintain in its possession, available for the Trust Depositor's, and the J-3 Trustee's inspection, and shall deliver to Trust Depositor or the Trustee upon demand, evidence of compliance with all such requirements. (j) CONTRACT IN FORCE. As of the Closing Date (or the applicable Subsequent Transfer Date in the case of Subsequent Contracts), no Contract has been satisfied or subordinated in whole or in part or rescinded, and the related Motorcycle securing any Contract has not been released from the lien of the Contract in whole or in part. (k) VALID SECURITY INTEREST. Each Contract creates a valid, subsisting and enforceable first priority perfected security interest in favor of Seller in the Motorcycle covered thereby, and such security interest has been assigned by Seller to the Trust Depositor. The original certificate of title, certificate of lien or other notification (the "LIEN CERTIFICATE") issued by the body responsible for the registration of, and the issuance of certificates of title relating to, motor vehicles and liens thereon (the "REGISTRAR OF TITLES") of the applicable state to a secured party which indicates the lien of the secured party on the Motorcycle is recorded on the original certificate of title, and original certificate of title for each Motorcycle, show, or if a new or replacement Lien Certificate is being applied for with respect to such Motorcycle the Lien Certificate will be received within 180 days of the Closing Date (or the applicable Subsequent Transfer Date in the case of Subsequent Contracts) and will show, the Seller as original secured party under each Contract as the holder of a first priority security interest in such Motorcycle. With respect to each Contract for which the Lien Certificate has not yet been returned from the Registrar of Titles, the Seller has received written evidence from the related dealer that such Lien Certificate showing the Seller as lienholder has been applied for, the Seller's security interest has been validly assigned by the Seller to the Trust Depositor and by the Trust Depositor to the Issuer and Owner Trustee pursuant to this Agreement. Immediately after the sale, each Contract will be secured by an enforceable and perfected first priority security interest in the Motorcycle in favor of the Trust as secured party, which security interest is prior to all other liens upon and security interests in such Motorcycle which now exist or may hereafter arise or be created (except, as to priority, for any lien for taxes, labor, materials or of any state law enforcement agency affecting a Motorcycle). (1) CAPACITY OF PARTIES. All parties to any Contract had capacity to execute such Contract and all other documents related thereto and to grant the security interest purported to be granted thereby. (m) GOOD TITLE. Each Contract was purchased by Seller for value and taken into possession prior to the Cutoff Date (or the applicable Subsequent Cutoff Date in the case of Subsequent Contracts) in the ordinary course of its business, without knowledge that the Contract was subject to a security interest. No Contract has been sold, assigned or pledged to any person other than Trust Depositor and the Trustee as the transferee of Trust Depositor, and prior to the transfer of the Contract to Trust Depositor, Seller had good and marketable title to each Contract free and clear of any encumbrance, equity, loan, pledge, charge, claim or security interest and was the sole owner thereof and had J-4 full right to transfer the Contract to Trust Depositor and to permit Trust Depositor to transfer the same to the Issuer and Owner Trustee, and, as of the Closing Date (or the applicable Subsequent Transfer Date in the case of Subsequent Contracts), the Issuer and the Owner Trustee will have a first priority perfected security interest therein. (n) NO DEFAULTS. As of the Initial Cutoff Date (or the applicable Subsequent Cutoff Date in the case of Subsequent Contracts), no default, breach, violation or event permitting acceleration existed with respect to any Contract and no event had occurred which, with notice and the expiration of any grace or cure period, would constitute such a default, breach, violation or event permitting acceleration under such Contract. Seller has not waived any such default, breach, violation or event permitting acceleration, and Seller has not granted any extension of payment terms on any Contract. As of the Initial Cutoff Date (or the applicable Subsequent Cutoff Date in the case of Subsequent Contracts), no Motorcycle had been repossessed. (o) NO LIENS. As of the Closing Date (or the applicable Subsequent Transfer Date in the case of Subsequent Contracts) there are, to the best of Seller's knowledge, no liens or claims which have been filed for work, labor or materials affecting the Motorcycle securing any Contract which are or may be liens prior to, or equal with, the lien of such Contract. (p) INSTALLMENTS. Each Contract has a fixed Contract Rate and provides for monthly payments of principal and interest which, if timely made, would fully amortize the loan on a simple-interest basis over its term. (q) ENFORCEABILITY. Each Contract contains customary and enforceable provisions such as to render the rights and remedies of the holder thereof adequate for the realization against the collateral of the benefits of the security. (r) ONE ORIGINAL. Each Contract is evidenced by only one original executed Contract, which original is being held by the Servicer as custodian. (s) NO GOVERNMENT CONTRACTS. No Obligor is the United States government or an agency, authority, instrumentality or other political subdivision of the United States government. (t) LOCKBOX BANK. The Lockbox Bank is the only institution holding any Lockbox Account for receipt of payments from Obligors, and all Obligors, and only such Obligors, have been instructed to make payments to the Lockbox Account, and no person claiming through or under Seller has any claim or interest in the Lockbox Account other than the Lockbox Bank; provided, however, that other "Trusts" (as defined in the Lockbox Agreement) shall have an interest in certain other collections therein not related to the Contracts. J-5 (u) OBLIGOR BANKRUPTCY. At the Cutoff Date (or the applicable Subsequent Cutoff Date in the case of Subsequent Contracts), no Obligor was subject to a bankruptcy proceeding. (v) CHATTEL PAPER. The Contracts constitute chattel paper within the meaning of the UCC as in effect in the States of Nevada and Illinois. (w) NO IMPAIRMENT. Neither the Seller nor the Trust Depositor has done anything to convey any right to any Person that would result in such Person having a right to payments due under the Contract or otherwise to impair the rights of the Issuer in any Contract or the proceeds thereof. (x) CONTRACT NOT ASSUMABLE. No Contract is assumable by another Person in a manner which would release the Obligor thereof from such Obligor's obligations to the Trust Depositor with respect to such Contract. (3) REPRESENTATIONS AND WARRANTIES REGARDING THE CONTRACTS IN THE AGGREGATE. Seller represents and warrants, as of the execution and delivery of this Agreement and as of the Closing Date, in the case of the Initial Contracts, and as of the applicable Subsequent Transfer Date, in the case of Subsequent Contracts, that: (a) AMOUNTS. The sum of the aggregate Principal Balances payable by Obligors under the Contracts as of the Initial Cutoff Date (or the applicable Subsequent Cutoff Date in the case of Subsequent Contracts), plus the Pre-Funded Amount as of such date, equals the sum of the principal balance of the Class A-1 Certificate Notes, the Class A-2 Notes, the Class B Notes and Certificates on the Closing Date or the related Subsequent Transfer Date, as applicable. (b) CHARACTERISTICS. The Initial Contracts have the following characteristics: (i) all the Contracts are secured by Motorcycles; (ii) no Initial Contract has a remaining maturity of more than [___] months; and (iii) the final scheduled payment on the Initial Contract with the latest maturity is due not later than [__________]. Approximately [______]% of the Principal Balance of the Initial Contracts as of the Initial Cutoff Date is attributable to loans for purchases of new Motorcycles and approximately [____]% is attributable to loans for purchases of used Motorcycles. No Initial Contract was originated after the Initial Cutoff Date. No Initial Contract has a Contract Rate less than [____]%. The first scheduled payment date of the Contracts (including any Subsequent Contracts) is due no later than [_________]. (c) MARKING RECORDS. As of the Closing Date (or the applicable Subsequent Transfer Date in the case of Subsequent Contracts), Seller has caused the Computer Disk relating to the Contracts sold under the Transfer and Sale Agreement hereunder and concurrently reconveyed by the Trust Depositor to the Trust and pledged by the Trust to the Indenture Trustee to be clearly and unambiguously marked to indicate that such J-6 Contracts constitute part of the Trust, are owned by the Trust and constitute security for the Notes. (d) NO ADVERSE SELECTION. No selection procedures adverse to Noteholders and Certificateholders have been employed in selecting the Contracts. (e) TRUE SALE. The transaction contemplated by this Agreement constitutes a valid sale, transfer and assignment from Seller to Trust Depositor and from Trust Depositor to the Trust of all of Seller's right, title and interest in the Contract Assets as of the Closing Date and any Subsequent Transfer Date, as applicable. (f) ALL FILINGS MADE. All filings (including, without limitation, UCC filings) required to be made by any Person and actions required to be taken or performed by any Person in any jurisdiction to give the Trustee a first priority perfected lien on, or ownership interest in, the Contracts and the proceeds thereof and the rest of the Trust Corpus have been made, taken or performed. (g) DELTA LOANS. No more than [____]% of the Principal Balance of the Contracts as of the end of the Funding Period is attributable to Delta Loans. (4) REPRESENTATIONS AND WARRANTIES REGARDING THE CONTRACT FILES. Seller represents and warrants as of the execution and delivery of this Agreement and as of the Closing Date, in the case of the Initial Contracts, and as of the applicable Subsequent Transfer Date, in the case of Subsequent Contracts, that: (a) POSSESSION. Immediately prior to the Closing Date or any Subsequent Transfer Date, the Servicer will have possession of each original Contract and the related complete Contract File, and there are and there will be no custodial agreements relating to the same in effect. Each of such documents which is required to be signed by the Obligor has been signed by the Obligor in the appropriate spaces. All blanks on any form have been properly filled in and each form has otherwise been correctly prepared. The complete Contract File for each Contract currently is in the possession of the Servicer. (b) BULK TRANSFER LAWS. The transfer, assignment and conveyance of the Contracts and the Contract Files by the Seller pursuant to the Transfer and Sale Agreement or any Subsequent Purchase Agreement and by Trust Depositor pursuant to the Sale and Servicing Agreement or any Subsequent Transfer Agreement is not subject to the bulk transfer or any similar statutory provisions in effect in any applicable jurisdiction. J-7 EXHIBIT K [Lockbox Bank and Lockbox Account] LOCKBOX Harley-Davidson Credit Corp. 135 South LaSalle Street Chicago, Illinois 60674 LOCKBOX BANK LaSalle Bank National Association 135 South LaSalle Street Chicago, Illinois 60674 K-1 EXHIBIT L [Form of Contract Stamp] This Contract/Note is subject to a security interest granted to Harley-Davidson Motorcycle Trust [________]. UCC-1 Financing Statements covering this Contract/Note have been filed with the Secretary of State of the State of Nevada and the Secretary of State of the State of Illinois. Such lien will be released only in connection with appropriate filings in such offices. Consequently, potential purchasers of this Contract/Note must refer to such filings to determine whether such lien has been released. L-1 EXHIBIT M [Form of Subsequent Transfer Agreement] [see EXHIBIT C of the Transfer and Sale Agreement] M-1 EX-10.3 11 EXHIBIT 10.3 EXHIBIT 10.3 FORM OF POOLING AND SERVICING AGREEMENT BY AND AMONG HARLEY-DAVIDSON CUSTOMER FUNDING CORP. as Trust Depositor HARLEY-DAVIDSON CREDIT CORP. as Servicer AND [_______________] not in its individual capacity but solely as Trustee of HARLEY-DAVIDSON MOTORCYCLE TRUST [___] Dated as of [________] CERTIFICATES FOR HARLEY-DAVIDSON MOTORCYCLE CONTRACTS [_____] GRANTOR TRUST [___]% CLASS A CERTIFICATES [___]% CLASS B CERTIFICATES TABLE OF CONTENTS TABLE OF CONTENTS.................................................................................................2 ARTICLE I.........................................................................................................6 Section 1.01. General.......................................................................................6 Section 1.02. Specific Terms................................................................................6 ARTICLE II.......................................................................................................24 Section 2.01. Closing......................................................................................24 Section 2.02. Conditions to the Closing....................................................................25 Section 2.03. Acceptance by Trustee........................................................................26 Section 2.04. Conveyance of Subsequent Contracts...........................................................26 Section 2.05. Tax Treatment................................................................................29 ARTICLE III......................................................................................................29 REPRESENTATIONS AND WARRANTIES...................................................................................29 Section 3.01. Representations and Warranties Regarding the Trust Depositor.................................29 Section 3.02. Representations and Warranties Regarding the Servicer........................................31 ARTICLE IV.......................................................................................................32 PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS;.....................................................32 Section 4.01. Custody of Contracts.........................................................................32 Section 4.02. Filing.......................................................................................34 Section 4.03. Name Change or Relocation....................................................................34 Section 4.04. Chief Executive Office.......................................................................35 Section 4.05. Costs and Expenses...........................................................................35 ARTICLE V........................................................................................................35 SERVICING OF CONTRACTS...........................................................................................35 Section 5.01. Responsibility for Contract Administration...................................................35 Section 5.02. Standard of Care.............................................................................35 Section 5.03. Records......................................................................................35 Section 5.04. Inspection...................................................................................35 Section 5.05. Trust Accounts...............................................................................36 Section 5.06. Enforcement..................................................................................38 Section 5.07. Trustee to Cooperate.........................................................................39 Section 5.08. Costs and Expenses...........................................................................40 Section 5.09. Maintenance of Security Interests in Motorcycles.............................................40 ARTICLE VI.......................................................................................................40 REPORTS..........................................................................................................40 Section 6.01. Monthly Reports..............................................................................40 Section 6.02. Officer's Certificate........................................................................41 Section 6.03. Other Data...................................................................................41 Section 6.04. Annual Report of Accountants.................................................................41 Section 6.05. Annual Statement of Compliance from Servicer.................................................42 Section 6.06. Statements to Certificateholders:............................................................42 ARTICLE VII......................................................................................................44 - 2 - SERVICER DEFAULTS; SERVICE TRANSFER..............................................................................44 Section 7.01. Servicer Defaults............................................................................44 Section 7.02. Service Transfer.............................................................................45 Section 7.03. [Reserved]...................................................................................46 Section 7.04. Notification to Certificateholders...........................................................46 Section 7.05. Effect of Transfer...........................................................................47 Section 7.06. Database File................................................................................47 Section 7.07. Successor Servicer Indemnification...........................................................47 ARTICLE VIII.....................................................................................................50 PAYMENTS AND RESERVE FUND........................................................................................50 Section 8.01. Monthly Payments.............................................................................50 Section 8.02. Fees.........................................................................................50 Section 8.03. Advances; Realization of Carrying Charge.....................................................50 Section 8.04. Payments.....................................................................................51 Section 8.05. Withdrawal from Reserve Fund to Cover a Shortfall............................................52 Section 8.06. Repurchases of Contracts for Breach of Representations and Warranties........................52 Section 8.07. Reassignment of Repurchased Contracts........................................................53 ARTICLE IX.......................................................................................................54 THE CERTIFICATES.................................................................................................54 Section 9.01 The Certificates.............................................................................54 Section 9.02 Authentication of Certificates...............................................................54 Section 9.03 Registration of Transfer and Exchange........................................................54 Section 9.04 Certain Transfer Restrictions. [RESERVED]....................................................55 Section 9.05 Mutilated, Destroyed, Lost or Stolen Certificates............................................55 Section 9.06 Persons Deemed Owners........................................................................56 Section 9.07 Access to List of Certificateholders' Names and Addresses....................................56 Section 9.08 Book-Entry Certificates......................................................................56 Section 9.09 Notices to Clearing Agency...................................................................57 ARTICLE X........................................................................................................57 INDEMNITIES......................................................................................................57 Section 10.01. Servicer Indemnification......................................................................57 Section 10.02. Liabilities to Obligors.......................................................................58 Section 10.03. Tax Indemnification...........................................................................58 Section 10.04. Servicer's Indemnities........................................................................58 Section 10.05. Operation of Indemnities......................................................................58 ARTICLE XI.......................................................................................................58 THE TRUSTEE......................................................................................................59 Section 11.01. Duties of Trustee.............................................................................59 Section 11.02. Certain Matters Affecting the Trustee.........................................................60 Section 11.03. Trustee Not Liable for Certificates or Contracts..............................................62 Section 11.04. Trustee May Own Certificates..................................................................62 Section 11.05. Rights to Direct Trustee and to Waive Servicer Defaults.......................................62 Section 11.06. The Servicer to Pay Trustee's Expenses........................................................62 - 3 - Section 11.07. Eligibility Requirements for Trustee..........................................................63 Section 11.08. Resignation or Removal of Trustee.............................................................63 Section 11.09. Successor Trustee.............................................................................64 Section 11.10. Merger or Consolidation of Trustee............................................................65 Section 11.11. Tax Returns...................................................................................65 Section 11.12. Obligor Claims................................................................................65 Section 11.13 Appointment of Co-Trustee or Separate Trustee.................................................66 Section 11.14 Representations and Warranties of Trustee.....................................................67 ARTICLE XII......................................................................................................68 MISCELLANEOUS....................................................................................................68 Section 12.01. Servicer Not to Resign........................................................................68 Section 12.02. Prohibited Transactions with Respect to the Trust.............................................68 Section 12.03. Maintenance of Office or Agency...............................................................69 Section 12.04. Termination...................................................................................69 Section 12.05. Acts of Certificateholders....................................................................69 Section 12.06. Calculations..................................................................................70 Section 12.07. Assignment or Delegation by Trust Depositor...................................................70 Section 12.08. Amendment.....................................................................................70 Section 12.09. Notices.......................................................................................71 Section 12.10. Merger and Integration........................................................................72 Section 12.11. Headings......................................................................................72 Section 12.12. Governing Law.................................................................................72 Section 12.13. No Insolvency Petition........................................................................72 Section 12.14. Third Party Beneficiary.......................................................................73 Section 12.15. No Additional Securities......................................................................73 Section 12.16. No Additional Indebtedness by the Trust Depositor.............................................73 Exhibit A-1......................................................................................................75 Certificate for Harley-Davidson Motorcycle Contracts.............................................................75 Certificate for Harley-Davidson Motorcycle Contracts.............................................................83
- 4 - This Agreement, dated as of [_____], is made by and among Harley-DavidsonCustomer Funding Corp., a Nevada corporation (the "TRUST DEPOSITOR"), Harley-Davidson Credit Corp., a Nevada corporation, as Servicer (in such capacity, the "SERVICER") and [_____________], a ________________ not in its individual capacity but solely as Trustee (in such capacity, the "TRUSTEE") of Harley-Davidson Motorcycle Trust [_____] (the "TRUST"). In consideration of the premises and the mutual agreements hereinafter set forth, the Trust Depositor, the Servicer and the Trustee agree as provided herein: ARTICLE I DEFINITIONS SECTION 1.01. GENERAL. For the purpose of this Agreement, except as otherwise expressly provided or unless the context otherwise requires, the terms defined in this Article include the plural as well as the singular, the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular article, section or other subdivision, and Section references refer to Sections of this Agreement. SECTION 1.02 SPECIFIC TERMS. "ACT" HAS THE MEANING ASSIGNED IN SECTION 9.02 (B). "ADDITION NOTICE" means, with respect to any transfer of Subsequent Contracts to the Trust pursuant to Section 2.04 and the Deposit Agreement and the Trust Depositor's corresponding prior purchase of such Contracts from the Seller, a notice, which shall be given at least 10 days prior to the related Subsequent Transfer Date, identifying the Subsequent Contracts to be transferred and the aggregate Principal Balance of such Subsequent Contracts. "ADVANCE" means, with respect to any Payment Date, the amounts, if any, deposited by the Servicer in the Collection Account for such Payment Date pursuant to Section 8.03. "AFFILIATE" of any specified Person means any other Person controlling or controlled by, or under common control with, such specified Person. For the purposes of this definition, "CONTROL" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "CONTROLLING" or "CONTROLLED" have meanings correlative to the foregoing. "AGREEMENT" means this Pooling and Servicing Agreement, as amended, supplemented or otherwise modified from time to time in accordance with the terms hereof. "APPLICANTS" has the meaning assigned in Section 9.06. "AUTHENTICATING AGENT" means any authenticating agent appointed pursuant to Section 9.07. - 6 - "AVAILABLE FUNDS" means, with respect to any Payment Date, the sum of the Available Interest and the Available Principal for such Payment Date. "AVAILABLE INTEREST" means, with respect to any Payment Date, the total (without duplication) of the following amounts received by the Servicer on or in respect of the Contracts during the related Due Period: (i) all amounts received in respect of interest on the Contracts (as well as Late Payment Penalty Fees and Extension Fees), (ii) the interest component of all Net Liquidation Proceeds, (iii) the interest component of the aggregate of the Repurchase Prices for Contracts repurchased by the Seller pursuant to Section 8.06, (iv) all Advances made by the Servicer pursuant to Section 8.03, (v) the interest component of all amounts paid by the Seller in connection with an optional repurchase of the Contracts pursuant to Section 8.08, (vi) all amounts received in respect of Carrying Charges transferred from the Interest Reserve Account pursuant to Section 8.03, and (vii) all amounts received in respect of interest, dividends, gains, income and earnings on investment of funds in the Trust Accounts as contemplated in the last sentence of Section 5.05(d). "AVAILABLE PRINCIPAL" means, with respect to any Payment Date, the total (without duplication) of the following amounts received by the Servicer on or in respect of the Contracts during the related Due Period: (i) all amounts received in respect of principal on the Contracts, (ii) the principal component of all Net Liquidation Proceeds, (iii) the principal component of the aggregate of the Repurchase Prices for Contracts repurchased by the Seller pursuant to Section 8.06, and (iv) the principal component of all amounts paid by the Seller in connection with an optional repurchase of the Contracts pursuant to Section 8.08. "AVERAGE DEFAULT RATIO" means, for any Payment Date, the arithmetic average of the Default Ratios for such Payment Dates and the two immediately preceding Payment Dates. "AVERAGE DELINQUENCY RATIO" means, the arithmetic average of the Delinquency Ratios for that Payment Date and the two immediately preceding Payment Dates. "AVERAGE LOSS RATIO" means, for a Payment Date is equal to the arithmetic average of the Loss Ratios for such Payment Date and the two immediately preceding Payment Dates. "BOOK-ENTRY CERTIFICATES" means beneficial interests in Class A Certificates or Class B Certificates, ownership and transfers of which shall be registered through book entries by a Clearing Agency as described in Section 9.08. "BUELL" means Buell Motorcycle Company. "BUSINESS DAY" means any day other than (a) a Saturday or a Sunday, or (b) another day on which banking institutions in the city of Chicago, Illinois are authorized or obligated by law, executive order, or governmental decree to be closed. - 7 - "CARRYING CHARGES" means the sum of (i) the product of (A) one-twelfth of the sum of (x) the Class A Pass-Through Rate and (y) [___]% times (B) the Class A Percentage of the Pre-Funded Amount as of the beginning of the related Due Period plus (ii) the product of (A) one-twelfth of the sum of (x) the Class B Pass-Through Rate and (y) [___]% times (B) the Class B Percentage of the Pre-Funded Amount as of the beginning of the related Due Period. "CERTIFICATEHOLDER" or "HOLDER" means the person in whose name either a Class A Certificate or a Class B Certificate is registered on the Certificate Register, except that, solely for the purposes of giving any consent, waiver, request or demand pursuant to this Agreement, any Certificate registered in the name of the Trust Depositor or any Affiliate of the Trust Depositor shall be deemed not to be outstanding and the Fractional Interest evidenced thereby shall not be taken into account in determining whether the requisite Fractional Interest necessary to effect any such consent, request, waiver or demand has been obtained; PROVIDED, HOWEVER, that in determining whether the Trustee shall be protected in relying upon any such consent, waiver, request or demand only Certificates which the Trustee knows to be so owned shall be so disregarded. "CERTIFICATE OWNER" means, with respect to a Book-Entry Certificate, the Person who is the beneficial owner of such Book-Entry Certificate, as reflected on the books of the Clearing Agency or on the books of a Person maintaining an account with the Clearing Agency (directly as a Clearing Agency Participant or as an indirect participant, in each case in accordance with the rules of the Clearing Agency). "CERTIFICATE REGISTER" means the register maintained pursuant to Section 9.02(a). "CERTIFICATE REGISTRAR" or "REGISTRAR" means the registrar appointed pursuant to Section 9.02. "CERTIFICATES" means the Class A Certificates and the Class B Certificates. "CLASS" means all Certificates whose form is identical except for variation in denomination, principal amount or Holder. "CLASS A CERTIFICATE" means a Certificate for Harley-Davidson Motorcycle Contracts evidencing a Fractional Interest executed and delivered by the Trustee substantially in the form of EXHIBIT A-1. "CLASS A CERTIFICATE BALANCE" shall initially equal the Class A Initial Certificate Balance and, on any date thereafter, shall equal the Class A Certificate Balance, reduced by all amounts previously distributed to Class A Certificateholders and allocable to principal. "CLASS A CERTIFICATE FACTOR" means, at any time, the percentage (carried out to seven decimal places) derived from a fraction, the numerator of which is the Class A Certificate Balance at such time and the denominator of which is the Class A Initial Certificate Balance. - 8 - "CLASS A DISTRIBUTABLE AMOUNT" means, with respect to any Payment Date, the sum of the Class A Principal Distributable Amount and the Class A Interest Distributable Amount. "CLASS A INITIAL CERTIFICATE BALANCE" means $[_____], which is equal to the aggregate Principal Balance of the Initial Contracts as of the Initial Cutoff Date plus the Pre-Funded Amount as of the Closing Date multiplied by the Class A Percentage, and with respect to a particular Certificate means the amount set forth on the face thereof. "CLASS A INTEREST CARRYOVER SHORTFALL" means, with respect to any Payment Date, (i) the excess of the Class A Interest Distributable Amount for the preceding Payment Date over the amount of interest that was actually distributed to Class A Certificateholders on such preceding Payment Date, plus (ii) 30 days of interest on the amount specified in clause (i), to the extent permitted by law, at the Class A Pass-Through Rate. "CLASS A INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any Payment Date (other than the first Payment Date), the sum of (i) the product of (A) one-twelfth (or, with respect to the first Payment Date, a fraction, the numerator of which equals the number of days from and including the Closing Date to but excluding the first Payment Date and the denominator of which equals 360) of the Class A Pass-Through Rate and (B) the Class A Certificate Balance as of the immediately preceding Payment Date (after giving effect to distributions of principal made on such immediately preceding Payment Date) or, in the case of the first Payment Date, the Class A Initial Certificate Balance plus (ii) the Class A Interest Carryover Shortfall for such Payment Date. "CLASS A PASS-THROUGH RATE" means [___]% per annum computed on the basis of a 360-day year consisting of twelve 30-day months. "CLASS A PERCENTAGE" means [___]%. "CLASS A POOL FACTOR" means, at any time, the percentage (carried out to seven decimal places) derived from a fraction, the numerator of which is the Class A Certificate Balance at such time and the denominator of which is the Class A Initial Certificate Balance. "CLASS A PRINCIPAL CARRYOVER SHORTFALL" means, with respect to any Payment Date, (i) the excess of the Class A Principal Distributable Amount over (ii) the amount of principal that was actually distributed to Class A Certificateholders on such preceding Payment Date. "CLASS A PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any Payment Date, the sum of (i) the product of (a) the Class A Percentage and (b) the Monthly Principal with respect to such Payment Date plus (ii) the Class A Principal Carryover Shortfall with respect to such Payment Date; PROVIDED, HOWEVER, that the Class A Principal Distributable Amount on the Final Scheduled Payment Date shall not be less than the amount that is necessary (after giving effect to other amounts to be deposited in the Collection Account on such Payment Date and allowable to principal) to reduce the outstanding principal amount of the Class A Certificates to zero. - 9 - "CLASS B CERTIFICATE" means a Certificate for Harley-Davidson Motorcycle Contracts evidencing a Fractional Interest executed and delivered by the Trustee substantially in the form of EXHIBIT A-2. "CLASS B CERTIFICATE BALANCE" shall initially equal the Class B Initial Certificate Balance and, on any Payment Date (after giving effect to all payments made to Certificateholders on such date) shall equal the amount by which the sum of (i) the Pool Balance as of the last day of the related Due Period and (ii) the Pre-Funded Amount as of such day exceeds the Class A Certificate Balance on such Payment Date (after giving effect to all payments made to the Class A Certificateholders on such date). "CLASS B CERTIFICATE FACTOR" means, at any time, the percentage (carried out to seven decimal places) derived from a fraction, the numerator of which is the Class B Certificate Balance at such time and the denominator of which is the Class B Initial Certificate Balance. "CLASS B DISTRIBUTABLE AMOUNT" means, with respect to any Payment Date, the sum of the Class B Principal Distributable Amount and the Class B Interest Distributable Amount. "CLASS B INITIAL CERTIFICATE BALANCE" means $[____], which is equal to the aggregate Principal Balance of the Initial Contracts as of the Initial Cutoff Date plus the Pre-Funded Amount as of the Closing Date multiplied by the Class B Percentage, and with respect to a particular Certificate means the amount set forth on the face thereof. "CLASS B INTEREST CARRYOVER SHORTFALL" means, with respect to any Payment Date, (i) the excess of the Class B Interest Distributable Amount for the preceding Payment Date over the amount of interest that was actually distributed to Class B Certificateholders on such preceding Payment Date, plus (ii) 30 days of interest on the amount specified in clause (i), to the extent permitted by law, at the Class B Pass-Through Rate. "CLASS B INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any Payment Date (other than the first Payment Date), the sum of (i) the product of (A) one-twelfth (or, with respect to the first Payment Date, a fraction the numerator of which equals the number of days from and including the Closing Date to but excluding the first Payment Date and the denominator of which equals 360) of the Class B Pass-Through Rate and (B) the Class B Certificate Balance as of the immediately preceding Payment Date (after giving effect to distributions of principal made on such immediately preceding Payment Date) or, in the case of the first Payment Date, the Class B Initial Certificate Balance plus (ii) the Class B Interest Carryover Shortfall for such Payment Date. "CLASS B PRINCIPAL CARRYOVER SHORTFALL" means, with respect to any Payment Date, (i) the excess of the Class B Principal Distributable Amount over (ii) the amount of principal that was actually distributed to Class B Certificateholders on such preceding Payment Date. "CLASS B PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any Payment Date, the sum of (i) the product of (A) the Class B Percentage and (B) the Monthly Principal for such - 10 - Payment Date plus (ii) the Class B Principal Carryover Shortfall for such Payment Date; PROVIDED, HOWEVER, that the Class B Principal Distributable Amount on the Final Scheduled Payment Date shall not be less than the amount that is necessary (after giving effect to other amounts to be deposited in the Collection Account on such Payment Date and allocable to principal) to reduce the outstanding principal amount of the Class B Certificates to zero. "CLASS B PASS-THROUGH RATE" means [___]% per annum computed on the basis of a 360-day year consisting of twelve 30-day months. The Class B Pass-Through Rate includes (i) at any time during the Funding Period, the sum of (a) the Class A Pass-Through Rate multiplied by the Class B Percentage multiplied by the Pool Balance, (b) 1.75 basis points on the Pool Balance and (c) a portion of the amount deposited to the Collection Account from the Interest Reserve Account during the Funding Period equal to the difference between the Class B Pass-Through Rate multiplied by the Class B Certificate Balance and the sum of items (a) and (b) above and (ii) at any time after the Funding Period, the sum of (a) the Class A Pass-Through Rate multiplied by the Class B Certificate Balance and (b) 1.75 basis points on the Pool Balance. In no event will the Class B Pass-Through Rate exceed 7.00% per annum. "CLASS B PERCENTAGE" means [___]% "CLASS B POOL FACTOR" means, at any time, the percentage (carried out to seven decimal places) derived from a fraction, the numerator of which is the Class B Certificate Balance at such time and the denominator of which is the Class B Initial Certificate Balance. "CLEARING AGENCY" means an organization registered as a "CLEARING AGENCY" pursuant to Section 17A of the Securities Exchange Act of 1934, as amended. "CLEARING AGENCY PARTICIPANT" means a broker, dealer, bank, other financial institution or other Person for whom from time to time a Clearing Agency effects book-entry transfers and pledges of securities deposited with the Clearing Agency. "CLOSING DATE" means [_______]. "CODE" means the Internal Revenue Code of 1986, as amended. "COLLATERAL AGENT" means the Collateral Agent named in the Security Agreement and any successor thereto pursuant to the terms of the Security Agreement. "COLLECTION ACCOUNT" means a trust account as described in Section 5.05 maintained in the name of the Trust which shall be an Eligible Account. "COMPUTER DISK" means the computer disk generated by the Servicer which provides information relating to the Contracts and which was used by the Seller in selecting the Contracts sold to the Trust Depositor pursuant to the Transfer and Sale Agreement (and any Subsequent Purchase Agreement) by the Trust Depositor in selecting the Contracts sold to the Trust pursuant - 11 - to this Agreement (and any Subsequent Transfer Agreement), and includes the master file and the history file as well as servicing information with respect to the Contracts. "CONTRACT ASSETS" has the meaning assigned in Section 2.01 (and 2.04, as applicable in the case of Subsequent Contracts) of the Transfer and Sale Agreement. "CONTRACT FILE" means, as to each Contract, (a) the original copy of the Contract, including the executed conditional sales contract or other evidence of the obligation of the Obligor, (b) the original title certificate to the Motorcycle and, where applicable, the certificate of lien recordation, or, if such title certificate has not yet been issued, an application for such title certificate, or other appropriate evidence of a security interest in the covered Motorcycle; (c) the assignments of the Contract; (d) the original copy of any agreement(s) modifying the Contract including, without limitation, any extension agreement(s) and (e) documents evidencing the existence of physical damage insurance covering such Motorcycle. "CONTRACT RATE" means, as to any Contract, the annual rate of interest specified in the Contract. "CONTRACTS" means the motorcycle conditional sales contracts described in the List of Contracts and constituting part of the Trust Corpus (as such list may be supplemented from time to time to reflect transfers of Subsequent Contracts), and includes, without limitation, all related security interests and any and all rights to receive payments which are collected pursuant thereto on or after the Initial Cutoff Date or, with respect to any Subsequent Contracts, any related Subsequent Cutoff Date, but excluding any rights to receive payments which are collected pursuant thereto prior to the Initial Cutoff Date, or with respect to any Subsequent Contracts, any related Subsequent Cutoff Date. "CORPORATE TRUST OFFICE" means the office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which office at the date of the execution of this Agreement is located at the address set forth in Section 12.09. "CRAM DOWN LOSS" means, with respect to a Contract, if a court of appropriate jurisdiction in an insolvency proceeding shall have issued an order reducing the Principal Balance of such Contract the amount of such reduction (with a "CRAM DOWN LOSS" being deemed to have occurred on the date of issuance of such order). "CUMULATIVE LOSS RATIO" means, as of any Payment Date, the fraction (expressed as a percentage) computed by the Servicer by dividing (i) the aggregate Net Liquidation Losses for all Contracts since the Cutoff Date through the end of the related Due Period by (ii) the sum of (A) the Principal Balance of the Contracts as of the Cutoff Date plus (B) the Principal Balance of any Subsequent Contracts as of the related Subsequent Cutoff Date. "CUTOFF DATE" means either or both (as the context may require) the Initial Cutoff Date and any Subsequent Cutoff Date. - 12 - "DEFAULTED CONTRACT" means a Contract with respect to which there has occurred one or more of the following: (i) all or some portion of any payment under the Contract is 120 days or more delinquent, (ii) repossession (and expiration of any redemption period) of a Motorcycle securing a Contract or (iii) the Servicer has determined in good faith that an Obligor is not likely to resume payment under a Contract. "DEFAULT RATIO" means, as of any Payment Date, the fraction (expressed as a percentage) derived by dividing (x) the Principal Balance for all Contracts that become Defaulted Contracts during the immediately preceding Due Period multiplied by twelve by (y) the outstanding Principal Balances of all Contracts as of the beginning of the related Due Period. "DELINQUENCY AMOUNT" means, as of any Payment Date means the Principal Balance of all Contracts that were delinquent 60 days or more as of the end of the related Due Period (including Contracts in respect of which the related Motorcycles have been repossessed and are still inventory). "DELINQUENT INTEREST" means, for each Contract and each Determination Date as to which the full payment due in the related Due Period has not been paid (any such payment being "DELINQUENT" for purposes of this definition), all interest accrued on such Contract from the Due Date in the Due Period one month prior to the Due Period in which the payment is delinquent. "DELINQUENCY RATIO" means, for any Payment Date, the fraction (expressed as a percentage) computed by dividing (a) the Delinquency Amount during the immediately preceding Due Period multiplied by twelve by (b) the Principal Balance of the Contracts as of the beginning of the related Due Period. "DEPOSIT AGREEMENT" means the Agreement to Deposit Contracts, dated as of [___], from the Trust Depositor in favor of the Trustee for the benefit of the Trust, which comprises part of the Trust Corpus. "DETERMINATION DATE" means the fourth Business Day following the conclusion of a Due Period during the term of this Agreement. "DUE DATE" means, with respect to any Contract, the day of the month on which each scheduled payment of principal and interest is due on such Contract, exclusive of days of grace. "DUE PERIOD" means a calendar month during the term of this Agreement, and the Due Period related to a Determination Date or Payment Date shall be the calendar month immediately preceding such date; PROVIDED, however, that with respect to the Initial Determination Date or Initial Payment Date, the Due Period shall be the period from the Initial Cutoff Date to and including [_____]. "ELIGIBLE ACCOUNT" means a segregated direct deposit account maintained with a depository institution or trust company organized under the laws of the United States of America, or any of the States thereof, or the District of Columbia, having a certificate of deposit, - 13 - short-term deposit or commercial paper rating of at least A-1+ by Standard & Poor's and P-1 by Moody's. "ELIGIBLE INVESTMENTS" means any one or more of the following types of investments: (a) (i) direct interest-bearing obligations of, and interest-bearing obligations guaranteed as to timely payment of principal and interest by, the United States or any agency or instrumentality of the United States the obligations of which are backed by the full faith and credit of the United States; and (ii) direct interest-bearing obligations of, and interest-bearing obligations guaranteed as to timely payment of principal and interest by, the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, but only if, at the time of investment, such obligations are assigned the highest credit rating by each Rating Agency; (b) demand or time deposits in, certificates of deposit of, or bankers' acceptances issued by any depositary institution or trust company organized under the laws of the United States or any State and subject to supervision and examination by federal and/or State banking authorities (including, if applicable, the Trustee or any agent of the Trustee acting in their respective commercial capacities); PROVIDED that the short-term unsecured debt obligations of such depositary institution or trust company at the time of such investment, or contractual commitment providing for such investment, are assigned the highest credit rating by each Rating Agency; (c) repurchase obligations pursuant to a written agreement (i) with respect to any obligation described in clause (a) above, where the Trustee has taken actual or constructive delivery of such obligation in accordance with Section 5.05, and (ii) entered into with a depositary institution or trust company organized under the laws of the United States or any State thereof, the deposits of which are insured by the Federal Deposit Insurance Corporation and the short-term unsecured debt obligations of which are rated "A-1+" by Standard & Poor's and "P-1" by Moody's (including, if applicable, the Trustee or any agent of the Trustee acting in their respective commercial capacities); (d) securities bearing interest or sold at a discount issued by any corporation incorporated under the laws of the United States or any State whose long-term unsecured debt obligations are assigned the highest credit rating by each Rating Agency at the time of such investment or contractual commitment providing for such investment; PROVIDED, HOWEVER, that securities issued by any particular corporation will not be Eligible Investments to the extent that an investment therein will cause the then outstanding principal amount of securities issued by such corporation and held as part of the Trust to exceed 10% of the Eligible Investments held in the Trust (with Eligible Investments valued at par); (e) commercial paper that (i) is payable in United States dollars and (ii) is rated in the highest credit rating category by each Rating Agency; - 14 - (f) money market mutual funds registered under the Investment Company Act of 1940, as amended, having a rating, at the time of such investment, from each of the Rating Agencies in the highest investment category granted thereby; and (g) any other demand or time deposit, obligation, security or investment as may be acceptable to each Rating Agency and as may from time to time be confirmed in writing to the Trustee by each Rating Agency; PROVIDED, HOWEVER, that securities issued by any entity (except as provided in paragraph (a)) will not be Eligible Investments to the extent that an investment therein will cause the then outstanding principal amount of securities issued by such entity and held in the Pre-Funding Account to exceed $10 million (with Eligible Investments held in the Pre-Funding Account valued at par). "EXTENSION FEE" means any extension fee paid by the Obligor on a Contract. "FINAL SCHEDULED PAYMENT DATE" means [____]. "FRACTIONAL INTEREST" means an undivided interest in the Trust and, as to a particular Certificateholder, means the undivided interest in the Trust owned by that Certificateholder equal to the percentage obtained by dividing (a) the Certificate Balance of all Certificates held by such Certificateholder at the time of determination by (b) the aggregate of the Certificate Balance of all of the Certificates held by all Certificateholders at such time. "FUNDING PERIOD" means the period beginning on the Closing Date and ending on the first to occur of (a) the Payment Date on which the amount on deposit in the Pre-Funding Account (after giving effect to any transfers therefrom in connection with the transfer of Subsequent Contracts to the Trust on such Payment Date) is less than $100,000, (b) the date on which a Servicer Default occurs, (c) the date on which an Insolvency Event occurs with respect to the Seller and (d) the close of business on the date which is 90 days from and including the Closing Date. "HOLDER" means a Person in whose name a Certificate is registered in the Certificate Register. "INITIAL CONTRACTS" means those Contracts conveyed to the Trust on the Closing Date. "INITIAL CUTOFF DATE" means [_____]. "INSOLVENCY EVENT" means with respect to a specified Person, (a) the filing of a decree or order for relief by a court having jurisdiction in the premises in respect of such Person or any substantial part of its property in an involuntary case under any applicable Federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial part of its property, or ordering the winding-up or liquidation of such Person's affairs, - 15 - and such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (b) the commencement by such Person of a voluntary case under any applicable Federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or the consent by such Person to the entry of an order for relief in an involuntary case under any such law, or the consent by such Person to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial part of its property, or the making by such Person of any general assignment for the benefit of creditors, or the failure by such Person generally to pay its debts as such debts become due, or the taking of action by such Person in furtherance of any of the foregoing. "INTEREST RESERVE ACCOUNT" means the account designated as the Interest Reserve Account in, and which is established and maintained pursuant to, Section 3.01 of the Security Agreement. "INTEREST RESERVE AMOUNT" means, as of any date of determination, the amount on deposit in the Interest Reserve Account on such date, and as of the Closing Date shall be $[___]. "Late Payment Penalty Fees" means any late payment fees paid by Obligors on Contracts after all sums received have been allocated first to regular installments due or overdue and all such installments are then paid in full. "LIQUIDATED CONTRACT" means a Contract with respect to which there has occurred one or more of the following: (i) 90 days have elapsed following the date of repossession (and expiration of any redemption period) with respect to the Motorcycle securing such Contract, (ii) such Contract is a Defaulted Contract with respect to which the Servicer has determined in good faith that all amounts expected to be recovered have been received, or (iii) all or any portion of any payment is delinquent 150 days or more. "LIQUIDATED DAMAGES" means the amounts payable by the Trust Depositor to the Trust upon the end of the Funding Period under Section 2.02 of the Deposit Agreement, to be derived from any remaining Pre-Funded Amount at the end of the Funding Period, and described as "Liquidated Damages" in Section 2.02 of the Deposit Agreement. "LIST OF CONTRACTS" means the list identifying each Contract constituting part of the Trust Corpus, which list shall consist of the initial List of Contracts reflecting the Initial Contracts transferred to the Trust on the Closing Date, together with any Subsequent List of Contracts reflecting the Subsequent Contracts transferred to the Trust on the related Subsequent Transfer Date, and which list (a) identifies each Contract and (b) sets forth as to each Contract (i) the Principal Balance as of the applicable Cutoff Date, (ii) the amount of monthly payments due from the Obligor, (iii) the Contract Rate and (iv) the maturity date, and which list (as in effect on the Closing Date) is attached to this Agreement as EXHIBIT I. "LOCKBOX" means the Lockbox maintained by the Lockbox Bank identified on EXHIBIT L hereto. - 16 - "LOCKBOX ACCOUNT" means the account maintained with the Lockbox Bank and identified on EXHIBIT L hereto. "LOCKBOX AGREEMENT" means the Third Amended and Restated Lockbox Administration Agreement dated as of March 1, 1996 by and among the Servicer, the Trust Depositor, Eaglemark Customer Funding Corporation-II, NBD Bank, N.A., Bank of America National Trust and Savings Association ("BOFA"), Norwest Bank Minnesota, National Association (the "PREDECESSOR TRUSTEE"), the Trustee, Financial Security Assurance Inc. ("FSA," with respect to certain prior trusts, the "PRIOR TRUSTS"), with respect to the Lockbox Account, unless such agreement shall be terminated in accordance with its terms, in which event "LOCKBOX AGREEMENT" shall mean such other agreement, in form and substance acceptable to the above-described parties and FSA, or if an Insurer Default (as defined in FSA's documentation relating to such Prior Trusts) shall have occurred and be continuing or FSA is owed no obligation with respect to such Prior Trusts, the majority of the Certificateholders with respect to such Prior Trusts), the Servicer, the Trustee and the Lockbox Bank. "LOCKBOX BANK" means the financial institution maintaining the Lockbox Account and identified on EXHIBIT L hereto or any successor thereto acceptable to a majority of the Certificateholders. "LOSS RATIO" means, for any Payment Date, the fraction (expressed as a percentage) derived by dividing (x) Net Liquidation Losses for all Contracts that became Liquidated Contracts during the immediately preceding Due Period multiplied by twelve by (y) the outstanding Principal Balances of all Contracts as of the beginning of the Due Period. "MONTHLY PRINCIPAL" means, as to any Payment Date, the following amount calculated as of the related Determination Date: the difference between (i) the sum of (A) the Principal Balance of the Contracts as of the first day of the Due Period preceding the Due Period in which such Payment Date occurs (or, in the case of the first Payment Date, the Principal Balance of the Contracts as of the Initial Cutoff Date), plus (B) the Pre-Funded Amount on such date (or, in the case of the first Payment Date, the Pre-Funded Amount on the Closing Date) and (ii) the sum of (A) the Principal Balance of the Contracts as of the first day of the Due Period in which such Payment Date occurs, plus (B) the Pre-Funded Amount on such day, plus (C) the amount of any Special Distribution occurring from the day referred to in clause (i)(A) above to the day referred to in clause (ii)(A) above; provided, that on the Final Scheduled Payment Date, Monthly Principal shall equal the aggregate of the Class A Certificate Balance and the Class B Certificate Balance. For purposes of determining the amount in clause (ii)(C) above as to any particular Payment Date and with respect to the Due Period preceding such Payment Date, if the Funding Period ends during such Due Period and Liquidated Damages (as defined in the Security Agreement) are consequently paid from the Pre-Funding Account during such Due Period but will not be distributed as a Special Distribution until the Payment Date occurring in the following Due Period (i.e., the particular Payment Date referred to above), then the amount calculated in clause (ii)(C) for such preceding Due Period shall be deemed to include such Special Distribution, in such amount (although paid as a Special Distribution) on the Payment - 17 - Date occurring during the following Due Period) will not be included in the next calculation of clause (ii)(C) to be made with respect to the following Due Period. "MONTHLY REPORT" has the meaning assigned in Section 6.01. "MONTHLY SERVICING FEE" means, as to any Payment Date, one-twelfth of the product of 1% and the Principal Balance of the Contracts as of the beginning of the related Due Period. "MOODY'S" means Moody's Investors Service, Inc. or any successor thereto. "MOTORCYCLE" means a motorcycle manufactured by Harley-Davidson, Inc. (or in certain limited instances Buell) securing a Contract. "NET LIQUIDATION LOSSES" means, as of any Payment Date, with respect to a Liquidated Contract, the amount, if any, by which (a) the outstanding Principal Balance of such Liquidated Contract plus accrued and unpaid interest thereon at the Contract Rate to the date on which such Liquidated Contract became a Liquidated Contract exceeds (b) the Net Liquidation Proceeds for such Liquidated Contract. "NET LIQUIDATION PROCEEDS" means, as to any Liquidated Contract, the proceeds realized on the sale or other disposition of the related Motorcycle, including proceeds realized on the repurchase of such Motorcycle by the originating dealer for breach of warranties, and the proceeds of any insurance relating to such Motorcycle, after payment of all reasonable expenses incurred thereby, together, in all instances, with the expected or actual proceeds of any recourse rights relating to such Contract as well as any post-disposition proceeds received by the Servicer. "OBLIGOR" means a Motorcycle buyer or other person who owes payments under a Contract. "OFFICER'S CERTIFICATE" means a certificate signed by the Chairman of the Board, President, or any Vice President of the Seller, the Trust Depositor or the Servicer and delivered to the Trustee. "PAYING AGENT" has the meaning assigned in Section 8.01(b). "PAYMENT DATE" means the fifteenth day of each calendar month during the term of this Agreement, or if such day is not a Business Day, the next succeeding Business Day, with the first such Payment Date hereunder being [_____]. "PERSON" means any individual, corporation, partnership, joint venture, association, joint stock company, trust (including any beneficiary thereof), unincorporated organization or government or any agency or political subdivision thereof. "POOL BALANCE" means, as of any date, the aggregate Principal Balance of Contracts as of the close of business on such date. - 18 - "PRE-FUNDED AMOUNT" means as of any date, the amount on deposit in the Pre-Funding Account at the close of business on such date. "PRE-FUNDING ACCOUNT" means the account designated as the Pre-Funding Account in, and which is established and maintained pursuant to, Section 3.01 of the Security Agreement. "PRINCIPAL BALANCE" means (a) with respect to any Contract as of any date, an amount equal to the unpaid principal balance of such Contract as of the opening of business on the Initial Cutoff Date or related Subsequent Cutoff Date, as applicable, reduced by the sum of (x) all payments received by the Servicer as of such date allocable to principal and (y) any Cram Down Loss in respect of such Contract; provided, however, that (i) if (x) a Contract is repurchased by the Seller pursuant to Section 5.01 of the Transfer and Sale Agreement and Section 8.06 hereof because of a breach of representation or warranty, or if (y) the Seller gives notice of its intent to purchase the Contracts in connection with an optional termination of the Trust pursuant to Section 5.02 of the Transfer and Sale Agreement and Section 8.08 hereof, in each case the Principal Balance of such Contract or Contracts shall be deemed as of the related Determination Date to be zero for the Due Period in which such event occurs and for each Due Period thereafter, (ii) from and after the third Due Period succeeding the final Due Period in which the Obligor is required to make the final scheduled payment on a Contract, the Principal Balance, if any, of such Contract shall be deemed to be zero, and (iii) from and after the Due Period in which a Contract becomes a Liquidated Contract, the Principal Balance of such Contract shall be deemed to be zero; and (b) where the context requires, the aggregate of the Principal Balances described in clause (a) for all such Contracts. "RATING AGENCY" means each of Moody's and Standard & Poor's, so long as such Persons maintain a rating on the Certificates; and if either Moody's or Standard & Poor's no longer maintains a rating on the Certificates, such other nationally recognized statistical rating organization selected by the Trust Depositor. "RECORD DATE" means, with respect to any Payment Date, the last Business Day of the preceding calendar month. "REIMBURSEMENT AMOUNT" has the meaning assigned in Section 8.03 hereof. "REPURCHASE PRICE" means, with respect to a Contract to be repurchased hereunder, an amount equal to (a) the remaining principal balance of such Contract, plus (b) accrued and unpaid interest at the Contract Rate on such Contract through the end of the immediately preceding Due Period. "REQUISITE INTEREST RESERVE AMOUNT" means, as of the Closing Date, $[_____] and as of any Payment Date thereafter during the Funding Period an amount equal to the product of (i) a fraction, the numerator of which equals the difference between (x) the sum of the weighted average of the Class A Pass-Through Rate and the Class B Pass-Through Rate and ___% and (y) ___%, and the denominator of which equals 360, times (ii) the Pre-Funded Amount on such date - 19 - times (iii) the number of days remaining in the Funding Period. The Requisite Interest Reserve Amount for any Subsequent Transfer Date shall be calculated after taking into account the transfer of Subsequent Contracts to the Trust on such Payment Date. "RESERVE AGENT" means the Reserve Agent named in the Reserve Fund Agreement, and any successor thereto pursuant to the terms of the Reserve Fund Agreement. "RESERVE FUND" means with respect to the Trust, the Reserve Fund established and maintained pursuant to the Reserve Fund Agreement. The Reserve Fund shall in no event be deemed part of the Trust Corpus. "RESERVE FUND ADDITIONAL DEPOSITS" means, with respect to any transfer of Subsequent Contracts to the Trust, the amount (if any) required to be deposited in the Reserve Fund on or prior to such transfer in satisfaction of the condition set forth in Section 2.04(b)(vi) hereof. "RESERVE FUND AGREEMENT" means the Reserve Fund Agreement, dated as of [____] among the Trust Depositor, the Reserve Agent and the Trustee (as amended, supplemented or otherwise modified from time to time). "RESERVE FUND DEPOSITS" shall have the meaning provided in the Reserve Fund Agreement. "RESERVE FUND INITIAL DEPOSIT" means $[____]. "RESERVE FUND TRIGGER EVENT" means as of any particular Payment Date (i) the Average Delinquency Ratio is equal to or greater than ___%; (ii) the Average Loss Ratio is equal to or greater than ___%, (iii) the Cumulative Loss Ratio is equal to or greater than (a) ___% with respect to any Payment Date which occurs within the period from the Closing Date to, and inclusive of, the first anniversary of the Closing Date, (b) ___% with respect to any Payment Date which occurs within the period from the day after the first anniversary of the Closing Date to, and inclusive of, the second anniversary of the Closing Date, or (c) ___% for any Payment Date following the second anniversary of the Closing Date or (iv) the Average Default Ratio is equal to or greater than ___%. "RESERVE FUND REQUISITE AMOUNT" means, with respect to any Payment Date, an amount equal to ___% of the Principal Balance of the Contracts in the Trust as of the first day of the immediately preceding Due Period or, upon the occurrence of a Reserve Fund Trigger Event which has not terminated for three consecutive Payment Dates (inclusive of the respective Payment Date), an amount equal to ___% of the Principal Balance of the Contracts in the Trust as of the first day of the immediately preceding Due Period; provided, however, in no event, after the Funding Period, shall the Reserve Fund Requisite Amount be less than ___% of the aggregate of the Initial Class A Certificate Balance and Initial Class B Certificate Balance. "RESPONSIBLE OFFICER" means, with respect to the Trustee, the chairman and any vice chairman of the board of directors, the president, the chairman and vice chairman of any - 20 - executive committee of the board of directors, every vice president, assistant vice president, the secretary, every assistant secretary, cashier or any assistant cashier, controller or assistant controller, the treasurer, every assistant treasurer, every trust officer, assistant trust officer and every other officer or assistant officer of the Trustee customarily performing functions similar to those performed by persons who at the time shall be such officers, respectively, or to whom a corporate trust matter is referred because of knowledge of, familiarity with, and authority to act with respect to a particular matter. "SECURITY AGREEMENT" means the Security Agreement, dated as of [____] among the Trust Depositor, the Collateral Agent and the Trustee, securing the Trust Depositor's obligations to the Trust under the Deposit Agreement. "SELLER" means Harley-Davidson Credit Corp., a Nevada corporation, or its successor, in its capacity as Seller of Contract Assets under the Transfer and Sale Agreement and any Subsequent Purchase Agreement. "SERVICER" means Harley-Davidson Credit Corp., a Nevada corporation, or its successor, until any Service Transfer hereunder and thereafter means the [____] appointed pursuant to Article VII below with respect to the duties and obligations required of the Servicer under this Agreement. "SERVICER DEFAULT" has the meaning assigned to such term in SECTION 8.01. "SERVICE TRANSFER" has the meaning assigned in Section 7.02(a). "SERVICING FEE" means, on any Determination Date, the sum of (a) the Monthly Servicing Fee payable on the related Payment Date, (b) Late Payment Penalty Fees received by the Servicer during the related Due Period, and (c) Extension Fees received by the Servicer during the related Due Period. "SERVICING OFFICER" means any officer of the Servicer involved in, or responsible for, the administration and servicing of Contracts whose name appears on a list of servicing officers appearing in an Officer's Certificate furnished to the Trustee by the Servicer, as the same may be amended from time to time. "SHORTFALL" means, with respect to a Payment Date as determined in accordance with Section 8.04(b), the amounts described in clauses (v) through (viii) thereof over Available Funds (after the payment of amounts described in clauses (i) through (iv) of Section 8.04(b) on such Payment Date) in the Collection Account with respect to the related Due Period. "SPECIAL DISTRIBUTION" means a distribution on a Payment Date of amounts deposited in the Special Distribution Subaccount derived from the payment of Liquidated Damages under the Deposit Agreement, which shall be deemed a distribution of principal with respect to the Certificates. - 21 - "SPECIAL DISTRIBUTION SUBACCOUNT" means the account described in Section 5.05(a) established for the purpose of Special Distributions. "STANDARD & POOR'S" means Standard & Poor's Ratings Services, a division of The McGraw Hill Company or any successor thereto. "SUBSEQUENT CONTRACTS" means all Contracts sold and transferred to the Trust pursuant to Section 2.04 hereof and Section 2.01 of the Deposit Agreement. "SUBSEQUENT CUTOFF DATE" means the date specified as such for Subsequent Contracts in the related Subsequent Transfer Agreement. "SUBSEQUENT LIST OF CONTRACTS" means a list, in the form of the initial List of Contracts delivered on the Closing Date, but listing each Subsequent Contract transferred to the Trust pursuant to the related Subsequent Transfer Agreement. "SUBSEQUENT PURCHASE AGREEMENT" means, with respect to any Subsequent Contracts, the agreement between the Seller and the Trust Depositor pursuant to which the Seller transferred the Subsequent Contracts to the Trust Depositor, the form of which is attached to the Transfer and Sale Agreement as EXHIBIT C. "SUBSEQUENT TRANSFER AGREEMENT" means the agreement described in Section 2.04 hereof and Section 2.01 of the Deposit Agreement. "SUBSEQUENT TRANSFER DATE" means any date during the Funding Period on which Subsequent Contracts are transferred to the Trust. "TRANSACTION DOCUMENTS" means this Agreement, the Transfer and Sale Agreement, the Reserve Fund Agreement, the Deposit Agreement, the Security Agreement, the Lockbox Agreement, any Subsequent Transfer Agreement and any Subsequent Purchase Agreement. "TRANSFER AND SALE AGREEMENT" means the Transfer and Sale Agreement dated as of [____] by and between the Trust Depositor and the Seller, as amended, supplemented or otherwise modified from time to time. "TRUST" means the trust created by this Agreement, comprised of the Trust Corpus. "TRUST ACCOUNTS" means, collectively, the Collection Account and the Special Distribution Subaccount therein, or any of them. "TRUST CORPUS" has the meaning given to such term in Section 2.01(b) hereof (and in Section 2.04(a) hereof in respect of Subsequent Contracts and related assets transferred to the Trust pursuant to Subsequent Transfer Agreements). Although the Trust Depositor has pledged the Reserve Fund to the Trustee pursuant to the Reserve Fund Agreement, the Reserve Fund - 22 - shall not under any circumstances be deemed to be a part of or otherwise includable in the Trust or the Trust Corpus. "TRUST DEPOSITOR" has the meaning assigned such term in the preamble hereunder or any successor thereto. "TRUSTEE'S FEE" means, with respect to any Payment Date, one-twelfth of the product of ___% and the sum of (i) the Principal Balance of the Contracts as of the beginning of the related Due Period and (ii) the Pre-Funded Amount as of the beginning of such period; provided, however, in no event shall such fee be less than $200.00 per month. "UCC" means the Uniform Commercial Code as enacted in Illinois or Nevada, as applicable. "UNCOLLECTIBLE ADVANCE" means with respect to any Determination Date and any Contract, the amount, if any, advanced by the Servicer pursuant to Section 8.03 which the Servicer has as of such Determination Date determined in good faith will not be ultimately recoverable by the Servicer from insurance policies on the related Motorcycle, the related Obligor or out of Net Liquidation Proceeds with respect to such Contract. The determination by the Servicer that it has made an Uncollectible Advance shall be evidenced by an Officer's Certificate delivered to the Trustee. - 23 - ARTICLE II ESTABLISHMENT OF TRUST; TRANSFER OF CONTRACTS Section 2.01. Closing. (a) There is hereby created by the Trust Depositor, as settlor, a separate trust which shall be known as the Harley-Davidson Motorcycle Trust [_____]. The Trust shall be administered pursuant to the provisions of this Agreement for the benefit of the Certificateholders. The Trustee is hereby specifically empowered to conduct business dealings on behalf of the Trust in accordance with the terms hereof. (b) On the Closing Date, the Trust Depositor shall sell, transfer, assign, set over and otherwise convey to the Trust by execution of an assignment substantially in the form of EXHIBIT B hereto, without recourse other than as expressly provided herein, (i) all the right, title and interest of the Trust Depositor in and to the Initial Contracts listed on the initial List of Contracts delivered on the Closing Date (including, without limitation, all security interests and all rights to receive payments which are collected pursuant thereto on or after the Initial Cutoff Date, including any liquidation proceeds therefrom, but excluding any rights to receive payments which were collected pursuant thereto prior to the Initial Cutoff Date), (ii) all rights of the Trust Depositor under any physical damage or other individual insurance policy (and rights under a "forced placed" policy, if any) relating to any such Contract, an Obligor or a Motorcycle securing such Contract, (iii) all security interests in each such Motorcycle, (iv) all documents contained in the related Contract Files, (v) all rights (but not the obligations) of the Trust Depositor under any related motorcycle dealer agreements between dealers (i.e., the originators of such Contracts) and the Seller, (vi) all rights of the Trust Depositor in the Lockbox, the Lockbox Account and related Lockbox Agreement to the extent they relate to such Contracts, (vii) all rights (but not the obligations) of the Trust Depositor under the Transfer and Sale Agreement, including but not limited to the Trust Depositor's rights under Article V thereof, (viii) the remittances, deposits and payments made into the Trust Accounts from time to time and amounts in the Trust Accounts from time to time (and any investments of such amounts), and (ix) all proceeds and products of the foregoing (the property in clauses (i)-(ix) above, along with the Deposit Agreement (which has been executed directly in favor of the Trustee for the benefit of the Trust), being the "TRUST CORPUS"). Although the Trust Depositor and the Trustee agree that such transfer is intended to be a sale of ownership of the Trust Corpus, rather than the granting of a security interest to secure a borrowing, and that the Trust Corpus shall not be property of the Trust Depositor, in the event such transfer is deemed to be of a mere security interest to secure a borrowing, the Trust Depositor shall be deemed to have granted the Trustee for the benefit of the Trust a perfected first priority security interest in such Trust Corpus and this Agreement shall constitute a security agreement under applicable law. - 24 - Section 2.02. Conditions to the Closing. On or before the Closing Date, the Trust Depositor shall deliver or cause to be delivered the following documents to the Trustee: (a) The initial List of Contracts, certified by the Chairman of the Board, President or any Vice President of the Trust Depositor, together with an assignment substantially in the form of EXHIBIT B hereto. (b) A certificate of an officer of the Seller substantially in the form of EXHIBIT B to the Transfer and Sale Agreement and of an Officer of the Trust Depositor substantially in the form of EXHIBIT C hereto. (c) Opinions of counsel for the Seller and the Trust Depositor substantially in the form of EXHIBITS D-1, D-2 and D-3 hereto (and including as an addressee thereof each Rating Agency). (d) A letter from Arthur Andersen LLP, or another nationally recognized accounting firm, addressed to the Trustee and stating that such firm has reviewed a sample of the Initial Contracts and performed specific procedures for such sample with respect to certain contract terms and which identifies those Initial Contracts which do not conform. (e) Copies of resolutions of the Board of Directors of each of the Seller/Servicer and the Trust Depositor or of the Executive Committee of the Board of Directors of each of the Seller/Servicer and the Trust Depositor approving the execution, delivery and performance of this Agreement and the other Transaction Documents to which any of them is a party, as applicable, and the transactions contemplated hereunder and thereunder, certified in each case by the Secretary or an Assistant Secretary of the Seller/Servicer and the Trust Depositor. (f) Officially certified recent evidence of due incorporation and good standing of each of the Seller and the Trust Depositor under the laws of Nevada. (g) Evidence of proper filing with the appropriate offices in Nevada and Illinois of UCC financing statements executed by the Seller, as debtor, naming the Trust Depositor as secured party (and the Trustee as assignee) and identifying the Contract Assets as collateral; and evidence of proper filing with the appropriate offices in Nevada and Illinois of UCC financing statements executed by the Trust Depositor, as debtor, (i) naming the Trustee as secured party and identifying the Trust Corpus as collateral, and (ii) naming the Trustee as secured party and identifying the Reserve Fund Deposits therein as collateral, and (iii) naming the Trustee as secured party and identifying the Collateral (as defined in the Security Agreement) as collateral. (h) An Officer's Certificate listing the Servicer's Servicing Officers. (i) Evidence of deposit in the Collection Account of all funds received with respect to the Initial Contracts on or after the Initial Cutoff Date to the Closing Date, - 25 - together with an Officer's Certificate from the Seller to the effect that such amount is correct. (j) The Officer's Certificate of the Seller specified in Section 2.02(i) of the Transfer and Sale Agreement. (k) A fully executed copy of the Reserve Fund Agreement, together with evidence of deposit in the Reserve Fund of the Reserve Fund Initial Deposit by the Depositor in accordance with the Reserve Fund Agreement. (l) Evidence of deposit in the Interest Reserve Account of $[_____]. (m) A fully executed Deposit Agreement. (n) A fully executed Security Agreement. (o) A fully executed Transfer and Sale Agreement. Section 2.03. Acceptance by Trustee. On the Closing Date, if the conditions set forth in Section 2.02 have been satisfied, the Trustee shall issue on behalf of the Trust to, or upon the order of, the Trust Depositor the Class A Certificates and Class B Certificates representing ownership of a beneficial interest in 100% of the Trust. Section 2.04. Conveyance of Subsequent Contracts. (a) Subject to the conditions set forth in paragraph (b) below, the Trust Depositor, pursuant to the mutually agreed upon terms contained in the Deposit Agreement and pursuant to one or more Subsequent Transfer Agreements, shall sell, transfer, assign, set over and otherwise convey to the Trust, without recourse other than as expressly provided herein and therein, (i) all the right, title and interest of the Trust Depositor in and to the Subsequent Contracts (including, without limitation, all security interests and all rights to receive payments which are collected pursuant thereto on or after the related Subsequent Cutoff Date, including any liquidation proceeds therefrom, but excluding any rights to receive payments which were collected pursuant thereto prior to such Subsequent Cutoff Date), (ii) all rights of the Trust Depositor under any physical damage or other individual insurance policy (or a "forced placed" policy, if any) relating to any such Contract, an Obligor or a Motorcycle securing such Contract, (iii) all security interests in each such Motorcycle, (iv) all documents contained in the related Contract Files, (v) all rights (but not the obligations) of the Trust Depositor under any related motorcycle dealer agreements between dealers (i.e., the originators of such Contracts) and the Seller, (vi) all rights of the Trust Depositor in the Lockbox, the Lockbox Account and related Lockbox Agreement to the extent they relate to such Contracts, (vii) all rights (but not the obligations) of the Trust Depositor under the Transfer and Sale Agreement related to such Contracts (to the extent not already conveyed under Section 2.01(b)), including but not limited to the Trust Depositor's related rights under Article V thereof, as well as all rights, but not the obligations, of the Trust Depositor under the Subsequent Purchase Agreement related to such Contracts, (viii) the remittances, deposits and payments made into the Trust Accounts from time to time and amounts in the Trust Accounts from time to - 26 - time related to such Contracts (to the extent not already conveyed under Section 2.01(b)) (and any investments of such amounts), and (ix) all proceeds and products of the foregoing (the property in clauses (i)-(ix) above, upon such transfer, becoming part of the "TRUST CORPUS"). Although the Trust Depositor and the Trustee agree that such transfer is intended to be a sale of ownership, rather than the granting of a security interest to secure a borrowing, and that the Trust Corpus following such transfer shall not be property of the Trust Depositor, in the event such transfer is deemed to be of a mere security interest to secure a borrowing, the Trust Depositor shall be deemed to have granted the Trustee for the benefit of the Trust a perfected first priority security interest in such Trust Corpus and this Agreement shall constitute a security agreement under applicable law. (b) The Trust Depositor shall transfer to the Trust the Subsequent Contracts and the other property and rights related thereto described in paragraph (a) above only upon the satisfaction of each of the following conditions on or prior to the related Subsequent Transfer Date: (i) The Seller shall have provided the Trustee, the Placement Agent and the Rating Agencies with a timely Addition Notice and shall have provided any information reasonably requested by any of the foregoing with respect to the Subsequent Contracts; (ii) the Funding Period shall not have terminated; (iii) the Trust Depositor shall have delivered to the Trustee a duly executed written assignment (including an acceptance by the Trustee) in substantially the form of EXHIBIT N hereto (the "SUBSEQUENT TRANSFER AGREEMENT"), which shall include a Subsequent List of Contracts listing the Subsequent Contracts; (iv) the Trust Depositor shall have deposited or caused to be deposited in the Collection Account all collections received with respect to the Subsequent Contracts on or after the related Subsequent Cutoff Date; (v) as of each Subsequent Transfer Date, neither the Seller nor the Trust Depositor was insolvent nor will either of them have been made insolvent by such transfer nor is either of them aware of any pending insolvency; (vi) the applicable Reserve Fund Additional Deposit for such Subsequent Transfer Date (if any is required) shall have been made; (vii) each Rating Agency shall have notified the Trust Depositor and the Trustee in writing that following such transfer the Class A Certificates will be rated in the highest rating category by such Rating Agency and the Class B Certificates will be rated at least "BBB" by Standard & Poor's and Baa2 by Moody's; (viii) such addition will not result in a material adverse tax consequence to the Trust or the Certificateholders as evidenced by an Opinion of Counsel to be delivered by the Seller to the Trustee, the Rating Agency and the Placement Agent; - 27 - (ix) the Trust Depositor shall have delivered to the Trustee an Officers' Certificate confirming the satisfaction of each condition precedent specified in this paragraph (b); (x) the Trust Depositor shall have delivered to the Rating Agencies and the Placement Agent one or more opinions of counsel with respect to the transfer of the Subsequent Contracts substantially in the form of the opinions of counsel delivered to such Persons on the Closing Date; (xi) the Trust Depositor shall have taken any action necessary to maintain the first perfected ownership interest of the Trust in the Trust Corpus and the first perfected security interest of the Reserve Agent in the Reserve Fund Deposits; (xii) no selection procedures believed by the Trust Depositor to be adverse to the interests of the Certificateholders shall have been utilized in selecting the Subsequent Contracts; (xiii) the Trust Depositor shall have delivered to the Rating Agencies evidence that (A) the weighted average annual percentage rate of the Contracts collectively, following the transfer of the Subsequent Contracts, is not less than ___%, and (B) that the weighted average calculated remaining term to maturity of the Contracts collectively, following the transfer of the Subsequent Contracts, does not exceed 66 months ; and (xiv) the Trust Depositor shall have delivered to the Rating Agencies, a report with respect tocertain agreed-upon procedures relating to the Subsequent Contracts being transferred, confirming that procedures were performed substantially similar to such procedures as were performed in connection with the transfer of the Initial Contracts. (c) As provided in the Deposit Agreement, the Trust Depositor covenants to transfer (at or prior to the end of the Funding Period) to the Trust pursuant thereto Subsequent Contracts with an aggregate Principal Balance equal to $[_____]; PROVIDED, HOWEVER, that in complying with such covenant the Trust Depositor agrees to make no more than one separate transfer of Subsequent Contracts per monthly period (as measured by the corresponding Payment Dates), and PROVIDED FURTHER, HOWEVER, that the sole remedy of the Trust or the Certificateholders with respect to a failure to comply with such covenant shall be to enforce the provisions of Section 2.02 of the Deposit Agreement by demanding the payment of Liquidated Damages thereunder. - 28 - SECTION 2.05. TAX TREATMENT. It is the intention of the Trust Depositor that, for federal income tax purposes, the Trust will be classified as a grantor trust and not as an association taxable as a corporation. The Trust Depositor and the Servicer by entering into this Agreement, and each Certificateholder by the purchase of a Certificate, agree to report such transactions for federal income tax purposes in a manner consistent with such characterization. ARTICLE III REPRESENTATIONS AND WARRANTIES The Seller under the Transfer and Sale Agreement has made, and upon execution of each Subsequent Purchase Agreement is deemed to remake, each of the representations and warranties set forth in EXHIBIT K hereto and has consented to the assignment by the Trust Depositor to the Trustee of the Trust Depositor's rights with respect thereto. Such representations speak as of the execution and delivery of this Agreement and as of the Closing Date in the case of the Initial Contracts, and as of the applicable Subsequent Transfer Date in the case of the Subsequent Contracts, but shall survive the sale, transfer and assignment of the Contracts to the Trust. Pursuant to Section 2.01 of this Agreement, the Trust Depositor has sold, assigned, transferred and conveyed to the Trustee as part of the Trust Corpus its rights under the Transfer and Sale Agreement, including without limitation, the representations and warranties of the Seller therein as set forth in EXHIBIT K attached hereto, together with all rights of the Trust Depositor with respect to any breach thereof including any right to require the Seller to repurchase any Contract in accordance with the Transfer and Sale Agreement. It is understood and agreed that the representations and warranties set forth or referred to in this Section shall survive delivery of the Contract Files to the Trustee or any custodian. The Trust Depositor hereby represents and warrants to the Trustee that it has entered into the Transfer and Sale Agreement with the Seller, that the Seller has made the representations and warranties in the Transfer and Sale Agreement as set forth in EXHIBIT K hereto, that such representations and warranties run to and are for the benefit of the Trust Depositor, and that pursuant to Section 2.01 of this Agreement the Trust Depositor has transferred and assigned to the Trustee all rights of the Trust Depositor to cause the Seller under the Transfer and Sale Agreement to repurchase Contracts in the event of a breach of such representations and warranties. SECTION 3.01. REPRESENTATIONS AND WARRANTIES REGARDING THE TRUST DEPOSITOR. By its execution of this Agreement and each Subsequent Transfer Agreement, the Trust Depositor represents and warrants to the Trustee and the Certificateholders that: (a) ASSUMPTION OF SELLER'S REPRESENTATIONS AND WARRANTIES. The representations and warranties set forth in EXHIBIT K are true and correct. (b) ORGANIZATION AND GOOD STANDING. The Trust Depositor is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of - 29 - its organization and has the corporate power to own its assets and to transact the business in which it is currently engaged. The Trust Depositor is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which the character of the business transacted by it or properties owned or leased by it requires such qualification and in which the failure so to qualify would have a material adverse effect on the business, properties, assets, or condition (financial or other) of the Trust Depositor or the Trust. (c) AUTHORIZATION; VALID SALE; BINDING OBLIGATIONS. The Trust Depositor has the power and authority to make, execute, deliver and perform this Agreement and the other Transaction Documents to which it is a party and all of the transactions contemplated under this Agreement and the other Transaction Documents to which it is a party, and to create the Trust and cause it to make, execute, deliver and perform its obligations under this Agreement and the other Transaction Documents to which it is a party and has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement and the other Transaction Documents to which it is a party and to cause the Trust to be created. This Agreement and the related Subsequent Transfer Agreement, if any, shall effect a valid sale, transfer and assignment of the Trust Corpus, enforceable against the Trust Depositor and creditors of and purchasers from the Trust Depositor. This Agreement and the other Transaction Documents to which the Trust Depositor is a party constitute the legal, valid and binding obligation of the Trust Depositor enforceable in accordance with their terms, except as enforcement of such terms may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and by the availability of equitable remedies. (d) NO CONSENT REQUIRED. The Trust Depositor is not required to obtain the consent of any other party or any consent, license, approval or authorization from, or registration or declaration with, any governmental authority, bureau or agency in connection with the execution, delivery, performance, validity or enforceability of this Agreement or the other Transaction Documents to which it is a party. (e) NO VIOLATIONS. The execution, delivery and performance of this Agreement and the other Transaction Documents to which it is a party by the Trust Depositor, and the consummation of the transactions contemplated hereby and thereby, will not violate any provision of any existing law or regulation or any order or decree of any court or of any Federal or state regulatory body or administrative agency having jurisdiction over the Trust Depositor or any of its properties or the Articles of Incorporation or Bylaws of the Trust Depositor, or constitute a material breach of any mortgage, indenture, contract or other agreement to which the Trust Depositor is a party or by which the Trust Depositor or any of the Trust Depositor's properties may be bound, or result in the creation or imposition of any security interest, lien, charge, pledge, preference, equity or encumbrance of any kind upon any of its properties pursuant to the terms of any such mortgage, indenture, contract or other agreement, other than as contemplated by the Transaction Documents. - 30 - (f) LITIGATION. No litigation or administrative proceeding of or before any court, tribunal or governmental body is currently pending, or to the knowledge of the Trust Depositor threatened, against the Trust Depositor or any of its properties or with respect to this Agreement, the other Transaction Documents to which it is a party or the Certificates (1) which, if adversely determined, would in the opinion of the Trust Depositor have a material adverse effect on the business, properties, assets or condition (financial or otherwise) of the Trust Depositor or the Trust or the transactions contemplated by this Agreement or the other Transaction Documents to which the Trust Depositor is a party or (2) seeking to adversely affect the federal income tax or other federal, state or local tax attributes of the Certificates. (g) PLACE OF BUSINESS; NO CHANGES. The Trust Depositor's sole place of business (within the meaning of Article 9 of the UCC) is as set forth in Section 12.09 below. The Trust Depositor has not changed its name, whether by amendment of its Articles of Incorporation, by reorganization or otherwise, and has not changed the location of its place of business, within the four months preceding the Closing Date. Such representations speak as of the execution and delivery of this Agreement and as of the Closing Date in the case of the Initial Contracts, and as of the applicable Subsequent Transfer Date in the case of the Subsequent Contracts, but shall survive the sale, transfer and assignment of the Contracts to the Trust. SECTION 3.02. REPRESENTATIONS AND WARRANTIES REGARDING THE SERVICER. The Servicer represents and warrants to the Trustee and the Certificateholders that: (a) ORGANIZATION AND GOOD STANDING. The Servicer is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has the corporate power to own its assets and to transact the business in which it is currently engaged. The Servicer is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which the character of the business transacted by it or properties owned or leased by it requires such qualification and in which the failure so to qualify would have a material adverse effect on the business, properties, assets, or condition (financial or otherwise) of the Servicer or the Trust. The Servicer is properly licensed in each jurisdiction to the extent required by the laws of such jurisdiction to service the Contracts in accordance with the terms hereof. (b) AUTHORIZATION; BINDING OBLIGATIONS. The Servicer has the power and authority to make, execute, deliver and perform this Agreement and the other Transaction Documents to which the Servicer is a party and all of the transactions contemplated under this Agreement and the other Transaction Documents to which the Servicer is a party, and has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement and the other Transaction Documents to which the Servicer is a party. This Agreement and the other Transaction Documents to which the Servicer is a party constitute the legal, valid and binding obligation of the Servicer - 31 - enforceable in accordance with their terms, except as enforcement of such terms may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and by the availability of equitable remedies. (c) NO CONSENT REQUIRED. The Servicer is not required to obtain the consent of any other party or any consent, license, approval or authorization from, or registration or declaration with, any governmental authority, bureau or agency in connection with the execution, delivery, performance, validity or enforceability of this Agreement and the other Transaction Documents to which the Servicer is a party. (d) NO VIOLATIONS. The execution, delivery and performance of this Agreement and the other Transaction Documents to which the Servicer is a party by the Servicer will not violate any provisions of any existing law or regulation or any order or decree of any court or of any Federal or state regulatory body or administrative agency having jurisdiction over the Servicer or any of its properties or the Articles of Incorporation or Bylaws of the Servicer, or constitute a material breach of any mortgage, indenture, contract or other agreement to which the Servicer is a party or by which the Servicer or any of the Servicer's properties may be bound, or result in the creation of or imposition of any security interest, lien, pledge, preference, equity or encumbrance of any kind upon any of its properties pursuant to the terms of any such mortgage, indenture, contract or other agreement, other than this Agreement. (e) LITIGATION. No litigation or administrative proceeding of or before any court, tribunal or governmental body is currently pending, or to the knowledge of the Servicer threatened, against the Servicer or any of its properties or with respect to this Agreement, any other Transaction Document to which the Servicer is a party or the Certificates which, if adversely determined, would in the opinion of the Servicer have a material adverse effect on the business, properties, assets or condition (financial or otherwise) of the Servicer or the Trust or the transactions contemplated by this Agreement or any other Transaction Document to which the Servicer is a party. ARTICLE IV PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS; Section 4.01. Custody of Contracts. (a) Subject to the terms and conditions of this Section 4.01, the contents of each Contract File shall be held in the custody of the Servicer for the benefit of, and as agent for, the Certificateholders and the Trustee as the owner thereof. (b) The Servicer agrees to maintain the related Contract Files at its offices where they are currently maintained, or at such other offices of the Servicer in the State of Nevada as shall from time to time be identified to the Trustee by written notice. The Servicer may temporarily move individual Contract Files or any portion thereof without notice as necessary to conduct collection and other servicing activities in accordance with its customary practices and - 32 - procedures; PROVIDED, HOWEVER, that the Servicer will take all action necessary to maintain the perfection of the Trust's interest in the Contracts and the proceeds thereof. It is intended that by the Servicer's agreement pursuant to Section 4.01(a) above and this Section 4.01(b) the Trustee shall be deemed to have possession of the Contract Files for purposes of Section 9-305 of the Uniform Commercial Code of the State in which the Contract Files are located. (c) As custodian, the Servicer shall have and perform the following powers and duties: (i) hold the Contract Files on behalf of the Certificateholders and the Trustee, maintain accurate records pertaining to each Contract to enable it to comply with the terms and conditions of this Agreement, maintain a current inventory thereof, conduct annual physical inspections of Contract Files held by it under this Agreement and certify to the Trustee annually that it continues to maintain possession of such Contract Files; (ii) implement policies and procedures in writing and signed by a Servicing Officer with respect to persons authorized to have access to the Contract Files on the Servicer's premises and the receipting for Contract Files taken from their storage area by an employee of the Servicer for purposes of servicing or any other purposes; (iii) attend to all details in connection with maintaining custody of the Contract Files on behalf of the Certificateholders and the Trustee; (iv) at all times maintain the original of the fully executed Contract and store such original Contract in a fireproof vault; (v) stamp each Contract on both the first and the signature page (if different) as of the Closing Date (or Subsequent Transfer Date, as the case may be) in the form attached hereto as EXHIBIT M; (vi) within 30 days of the Closing Date (or Subsequent Transfer Date, as the case may be) deliver an Officer's Certificate to the Trustee certifying that as of a date no earlier than the Closing Date (or Subsequent Transfer Date, as the case may be) it has conducted an inventory of the Contract Files (which in the case of Subsequent Contracts, need be only of the Contract Files related to such Subsequent Contracts) and that there exists a Contract File for each Contract and stating all exceptions to such statement, if any; and (vii) within 185 days of the Closing Date (or Subsequent Transfer Date, as the case may be) deliver an Officer's Certificate to the Trustee listing each Contract with respect to which there did not exist as of 180 days of the Closing Date (or Subsequent Transfer Date, as the case may be) an original title certificate to the motorcycle and the certificate of lien recordation relating thereto. - 33 - (d) In performing its duties under this Section 4.01, the Servicer agrees to act with reasonable care, using that degree of skill and care that it exercises with respect to similar contracts for the installment purchase of consumer goods owned and/or serviced by it, and in any event with no less degree of skill and care than would be exercised by a prudent servicer of motorcycle conditional sales contracts. The Servicer shall promptly report to the Trustee any failure by it to hold the Contract Files as herein provided and shall promptly take appropriate action to remedy any such failure. In acting as custodian of the Contract Files, the Servicer further agrees not to assert any legal or beneficial ownership interest in the Contracts or the Contract Files, except as provided in Section 5.06. The Servicer agrees to indemnify the Certificateholders, the Trustee for any and all liabilities, obligations, losses, damages, payments, costs, or expenses of any kind whatsoever which may be imposed on, incurred by or asserted against the Certificateholders, or the Trustee as the result of any act or omission by the Servicer relating to the maintenance and custody of the Contract Files; PROVIDED, HOWEVER, that the Servicer will not be liable for any portion of any such amount resulting from the gross negligence or willful misconduct of any Certificateholder, or the Trustee. The Trustee shall have no duty to monitor or otherwise oversee the Servicer's performance as custodian hereunder. Section 4.02. Filing. On or prior to the Closing Date, the Servicer shall cause the UCC financing statement(s) referred to in Section 2.02(g) hereof to be filed and from time to time the Servicer shall take and cause to be taken such actions and execute such documents as are necessary or desirable or as the Trustee may reasonably request to perfect and protect the Trust's first priority perfected interest in the Trust Corpus against all other persons, including, without limitation, the filing of financing statements, amendments thereto and continuation statements, the execution of transfer instruments and the making of notations on or taking possession of all records or documents of title. Section 4.03. Name Change or Relocation. (a) During the term of this Agreement, neither the Seller nor the Trust Depositor shall change its name, identity or structure or relocate its chief executive office without first giving at least 30 days' prior written notice to the Trustee. (b) If any change in either the Seller's or the Trust Depositor's name, identity or structure or other action would make any financing or continuation statement or notice of lien filed under this Agreement seriously misleading within the meaning of applicable provisions of the UCC or any title statute, the Servicer, no later than five days after the effective date of such change, shall file such amendments as may be required to preserve and protect the Trust's interests in the Trust Corpus and the proceeds thereof. In addition, neither the Seller nor the Trust Depositor shall change its place of business (within the meaning of Article 9 of the UCC) from the location specified in Section 12.09 below unless it has first taken such action as is advisable or necessary to preserve and protect the Trust's interest in the Trust Corpus. Promptly after taking any of the foregoing actions, the Servicer shall deliver to the Trustee an opinion of counsel reasonably acceptable to the Trustee stating that, in the opinion of such counsel, all financing statements or amendments necessary to preserve and protect the interests of the Trustee in the Trust Corpus have been filed, and reciting the details of such filing. - 34 - Section 4.04. Chief Executive Office. During the term of this Agreement, the Trust Depositor will maintain its chief executive office in one of the States of the United States, except Louisiana, Tennessee, Colorado, Kansas, New Mexico, Oklahoma, Utah or Wyoming. Section 4.05. Costs and Expenses. The Servicer agrees to pay all reasonable costs and disbursements in connection with the perfection and the maintenance of perfection, as against all third parties, of the Trust's right, title and interest in and to the Contracts (including, without limitation, the security interest in the Motorcycles granted thereby). ARTICLE V SERVICING OF CONTRACTS Section 5.01. Responsibility for Contract Administration. The Servicer will have the sole obligation to manage, administer, service and make collections on the Contracts and perform or cause to be performed all contractual and customary undertakings of the holder of the Contracts to the Obligor. The Trustee, at the written request of a Servicing Officer, shall furnish the Servicer with any powers of attorney or other documents necessary or appropriate in the opinion of the Trustee to enable the Servicer to carry out its servicing and administrative duties hereunder. The Servicer is hereby appointed the servicer hereunder until such time as any Service Transfer may be effected under Article VII. Section 5.02. Standard of Care. In managing, administering, servicing and making collections on the Contracts pursuant to this Agreement, the Servicer will exercise that degree of skill and care consistent with the skill and care that the Servicer exercises with respect to similar contracts serviced by the Servicer, and, in any event no less degree of skill and care than would be exercised by a prudent servicer of motorcycle conditional sales contracts; PROVIDED, HOWEVER, that notwithstanding the foregoing, the Servicer shall not release or waive the right to collect the unpaid balance on any Contract. Section 5.03. Records. The Servicer shall, during the period it is servicer hereunder, maintain such books of account and other records as will enable the Trustee to determine the status of each Contract. Section 5.04. Inspection. (a) At all times during the term hereof, the Servicer shall afford the Trustee and its respective authorized agents reasonable access during normal business hours to the Servicer's records relating to the Contracts and will cause its personnel to assist in any examination of such records by the Trustee, or such authorized agents and allow copies of the same to be made. The examination referred to in this Section will be conducted in a manner which does not unreasonably interfere with the Servicer's normal operations or customer or employee relations. Without otherwise limiting the scope of the examination the Trustee may, using generally accepted audit procedures, verify the status of each Contract and review the Computer Disk and records relating thereto for conformity to Monthly Reports prepared pursuant to Article VI and compliance with the standards represented to exist as to each Contract in this Agreement. - 35 - (b) At all times during the term hereof, the Servicer shall keep available a copy of the List of Contracts at its principal executive office for inspection by Certificateholders. Section 5.05. Trust Accounts. (a) On or before the Closing Date, the Trust Depositor shall establish the Collection Account and the Special Distribution Subaccount therein, each in the name of the Trustee for the benefit of the Certificateholders. The Trustee is hereby required to ensure that each of the Trust Accounts is established and maintained as an Eligible Account. (b) The Trustee shall deposit (or the Servicer shall deposit, with respect to payments by or on behalf of the Obligors and Net Liquidation Proceeds received directly by the Servicer), without deposit into any intervening account, into the Collection Account as promptly as practical (but in any case not later than the second Business Day following the receipt thereof): (i) With respect to principal and interest on the Contracts (as well as Late Payment Penalty Fees and Extension Fees) received on or after the Initial Cutoff Date or Subsequent Cutoff Date, as applicable (which for the purpose of this paragraph (b)(i) shall include those monies in the Lockbox Account allocable to principal and interest on the Contracts), all such amounts received by the Trustee or Servicer; (ii) All Net Liquidation Proceeds related to the Contracts; (iii) The aggregate of the Repurchase Prices for Contracts repurchased by the Depositor as described in Section 9.06 which amounts shall come from the Seller pursuant to Section 5.01 of the Transfer and Sale Agreement; (iv) All Advances made by the Servicer pursuant to Section 8.03(a); (v) All amounts paid by the Seller in connection with an optional repurchase of the Contracts described in Section 8.08; (vi) All amounts realized in respect of Carrying Charges transferred from the Interest Reserve Account as contemplated in Section 8.03(b); and (vii) All amounts received in respect of interest, dividends, gains, income and earnings on investments of funds in the Trust Accounts (except the Reserve Fund) as contemplated in the last sentence of Section 5.05(d) hereof. (c) The Trustee shall, if amounts remain on deposit in the Pre-Funding Account at the expiration of the Funding Period, make demand, immediately upon expiration of the Funding Period, upon the Trust Depositor and the Collateral Agent for the payment of Liquidated Damages as contemplated in Section 2.02 of the Deposit Agreement and Section 3.03 of the Security Agreement. The Trustee shall deposit the amounts received from the Deposit Collateral Agent in respect of such Liquidated Damages into the Special Distribution Subaccount in the Collection Account to be distributed on the next upcoming Payment Date as contemplated in Section 8.04(b) hereof. - 36 - (d) If the Servicer so directs, in writing, the Trustee shall in its capacity as Trustee hereunder, invest the amounts in the Trust Accounts in Eligible Investments that mature not later than one Business Day prior to the next succeeding Payment Date. Once such funds are invested, the Trustee shall not change the investment of such funds. Any loss on such investments shall be deposited in the applicable Trust Account by the Servicer out of its own funds immediately as realized. Funds in the Trust Accounts not so invested must be insured to the extent permitted by law by the Bank Insurance Fund or the Savings Association Insurance Fund of the Federal Deposit Insurance Corporation. Subject to the restrictions herein, the Trustee may purchase an Eligible Investment from itself or an Affiliate. Any investment of funds in the Trust Accounts shall be made in Eligible Investments (a) held in the possession of the Trustee or maintained with another institution as an Eligible Account with respect to which such institution has noted the Trustee's interest therein on its books and records and a confirmation of the Trustee's interest has been sent to the Trustee by such institution, and (b) with respect to Eligible Investments comprised of securities, the Trustee has purchased such securities for value in good faith without notice of any adverse claim thereto, and which securities (A) if certificated and in bearer form, have been delivered to the Trustee, or in registered form, have been issued or endorsed to the Trustee or in blank, (B) if uncertificated, the transfer of which is registered on the books of the issuer thereof, or (C) have been transferred (x) through acquisition or possession by a financial intermediary of a certificated security specially endorsed to or issued in the name of the Trustee, or (y) through confirmation by a financial intermediary (not a clearing corporation) of the Trustee's purchase of a certificated security and appropriate identification of its interest in the records of such intermediary, or (z) through the making of appropriate entries to the Trustee's (or its designee's) account on the books of a clearing corporation in accordance with Section 8-320 of the applicable Uniform Commercial Code. Subject to the other provisions hereof, the Trustee shall have sole control over each such investment and the income thereon, and any certificate or other instrument evidencing any such investment, if any, shall be delivered directly to the Trustee or its agent, together with each document of transfer, if any, necessary to transfer title to such investment to the Trustee in a manner which complies with this Section 5.05(d). All interest, dividends, gains upon sale and other income from, or earnings on, investments of funds in the Trust Accounts shall be deposited in the Collection Account pursuant to Section 5.05(b)(ii) and distributed on the next Payment Date pursuant to Section 8.04(b). (e) Notwithstanding anything to the contrary herein, the Servicer may remit payments on the Contracts and Net Liquidation Proceeds to the Collection Account in next-day funds or immediately available funds no later than ____ a.m., Central time, on the Business Day prior to the next succeeding Payment Date, but only for so long as (a)(i) the short-term certificate of deposit ratings of the Servicer are at least P-1 by Moody's and "A-1" by Standard & Poor's or (ii) the Rating Agency shall have notified the Servicer and the Trustee, in writing, that monthly remittances of collections will not result in reduction or withdrawal of any then outstanding rating of any outstanding Note or Certificate and (b) the Servicer is Harley-Davidson Credit Corp. - 37 - (f) As of the Business Day immediately preceding the related Payment Date, all collections for the related Collection Period with respect to each Contract shall be applied by the Servicer as follows: (i) First, to reimburse any outstanding Advances made by the Servicer with respect to such Contract; (ii) Second, first to interest accrued on such Contract as of such date and then to principal until the Principal Balance of such Contract is brought current; and (iii) Third, to reduce the unpaid late charges or extension fees (if any) as provided in such Contract. (g) Any collections on a Contract remaining after application in accordance with the provisions of Section 5.05(f) shall constitute an excess payment (an "EXCESS PAYMENT"). Excess Payments shall be applied as a prepayment of the Principal Balance of such Contract. (h) The Servicer will, from time to time as provided herein, be permitted to withdraw from the Collection Account any amount deposited therein that, based on the Servicer's good-faith determination, was deposited in error or required to be repaid to the related Obligor. Section 5.06. Enforcement. (a) The Servicer will, consistent with Section 5.02, act with respect to the Contracts in such manner as will maximize the receipt of all payments called for under the terms of the Contracts. The Servicer will act in a commercially reasonable manner with respect to the repossession and disposition of a Motorcycle following a default under the related Contract with a view to realizing proceeds at least equal to the Motorcycle's fair market value. If the Servicer determines that eventual payment in full of a Contract is unlikely, the Servicer will follow its normal practices and procedures to recover all amounts due upon that Contract, including repossessing and disposing of the related Motorcycle at a public or private sale or taking other action permitted by applicable law. The Servicer will be entitled to recover all reasonable out-of-pocket expenses incurred by it in liquidating a Contract and disposing of the related Motorcycle. (b) The Servicer may sue to enforce or collect upon Contracts, in its own name, if possible, or as agent for the Trustee. If the Servicer elects to commence a legal proceeding to enforce a Contract, the act of commencement shall be deemed to be an automatic assignment of the Contract to the Servicer for purposes of collection only. If, however, in any enforcement suit or legal proceeding it is held that the Servicer may not enforce a Contract on the ground that it is not a real party in interest or a holder entitled to enforce the Contract, the Trustee on behalf of the Trust shall, at the Servicer's expense, take such steps as the Servicer deems reasonably necessary to enforce the Contract, including bringing suit in its name or the names of the Certificateholders. - 38 - (c) The Servicer shall exercise any rights of recourse against third persons that exist with respect to any Contract in accordance with the Servicer's usual practice. In exercising recourse rights, the Servicer is authorized on the Trustee's behalf to reassign the defaulted Contract or the related Motorcycle to the person against whom recourse exists at the price set forth in the document creating the recourse; PROVIDED, HOWEVER, the Servicer in exercising recourse against any third persons as described in the immediately preceding sentence shall do so in such manner as to maximize the aggregate recovery with respect to the Contract; and PROVIDED FURTHER, HOWEVER, that notwithstanding the foregoing the Servicer in its capacity as such may exercise such recourse only if such Contract was not required to be repurchased by the Seller pursuant to the Transfer and Sale Agreement or was required to be repurchased by the Seller and the Seller has defaulted on such repurchase obligation. (d) The Servicer will not permit any rescission or cancellation of any Contract due to the acts or omissions of the Servicer. (e) The Servicer may grant to the Obligor on any Contract an extension of payments due under such Contract, PROVIDED that (i) the extension period is limited to 45 days, (ii) the Obligor has been in good standing for the previous twelve-month period, (iii) such extension is consistent with the Servicer's customary servicing procedures and is consistent with Section 5.02, (iv) such extension does not extend the maturity date of the Contract beyond the latest maturity date of any of the Contracts as of the Initial Cutoff Date (or, if a transfer of Subsequent Contracts to the Trust occurs, beyond the latest maturity date of such Subsequent Contracts) and (v) the aggregate Principal Balances of Contracts which have had extensions granted does not exceed more than 3.00% of the aggregate of the Class A Initial Certificate Balance and the Class B Initial Certificate Balance. (f) The Servicer will not add to the outstanding Principal Balance of any Contract the premium of any physical damage or other individual insurance on a Motorcycle securing such Contract it obtains on behalf of the Obligor under the terms of such Contract, but may create a separate Obligor obligation with respect to such premium if and as provided by the Contract. (g) If the Servicer shall have repossessed a Motorcycle on behalf of the Trust, the Servicer shall either (i) maintain at its expense physical damage insurance with respect to such Motorcycle, or (ii) indemnify the Trust against any damage to such Motorcycle prior to resale or other disposition. The Servicer shall not allow such repossessed Motorcycles to be used in an active trade or business, but rather shall dispose of the Motorcycle in a reasonable time in accordance with the Servicer's normal business practices. Section 5.07. Trustee to Cooperate. Upon payment in full on any Contract, the Servicer will notify the Trustee and the Trust Depositor on the next succeeding Payment Date by certification of a Servicing Officer (which certification shall include a statement to the effect that all amounts received in connection with such payments which are required to be deposited in the Collection Account pursuant to Section 5.05 have been so deposited) and shall (if the Servicer is not then in possession of the Contracts and Contract Files) request delivery of the Contract and - 39 - Contract File to the Servicer. Upon receipt of such delivery and request, the Trustee shall promptly release or cause to be released such Contract and Contract File to the Servicer. Upon receipt of such Contract and Contract File, each of the Trust Depositor and the Servicer is authorized to execute an instrument in satisfaction of such Contract and to do such other acts and execute such other documents as the Servicer deems necessary to discharge the Obligor thereunder and eliminate the security interest in the Motorcycle related thereto. The Servicer shall determine when a Contract has been paid in full; to the extent that insufficient payments are received on a Contract credited by the Servicer as prepaid or paid in full and satisfied, the shortfall shall be paid by the Servicer out of its own funds. From time to time as appropriate for servicing and repossession in connection with any Contract, if the Servicer is not then in possession of the Contracts and Contract Files, the Trustee shall, upon written request of a Servicing Officer and delivery to the Trustee of a receipt signed by such Servicing Officer, cause the original Contract and the related Contract File to be released to the Servicer and shall execute such documents as the Servicer shall deem reasonably necessary to the prosecution of any such proceedings. Such receipt shall obligate the Servicer to return the original Contract and the related Contract File to the Trustee when the need by the Servicer has ceased unless the Contract shall be repurchased as described in Section 8.09. Upon request of a Servicing Officer, the Trustee shall perform such other acts as reasonably requested by the Servicer and otherwise cooperate with the Servicer in the enforcement of the Certificateholders' rights and remedies with respect to Contracts. Section 5.08. Costs and Expenses. All costs and expenses incurred by the Servicer in carrying out its duties hereunder, fees and expenses of accountants and payments of all fees and expenses incurred in connection with the enforcement of Contracts (including enforcement of defaulted Contracts and repossessions of Motorcycles securing such Contracts when such Contracts are not repurchased pursuant to Section 8.06) and all other fees and expenses not expressly stated hereunder to be for the account of the Trust shall be paid by the Servicer and the Servicer shall not be entitled to reimbursement hereunder. Section 5.09. Maintenance of Security Interests in Motorcycles. The Servicer shall take such steps as are necessary to maintain continuous perfection and the first priority of the security interest created by each Contract in the related Motorcycle. The Trustee hereby authorizes the Servicer to take such steps as are necessary to perfect such security interest and to maintain the first priority thereof in the event of a relocation of a Motorcycle or for any other reason. ARTICLE VI REPORTS Section 6.01. Monthly Reports. No later than 10:00 a.m. Chicago, Illinois time two Business Days following each Determination Date, the Servicer shall cause the Trustee and each Rating Agency to receive a "Monthly Report" substantially in the form of EXHIBIT J hereto. - 40 - Section 6.02. Officer's Certificate. Each Monthly Report delivered pursuant to Section 6.01 shall be accompanied by a certificate of a Servicing Officer substantially in the form of EXHIBIT F, certifying the accuracy of the Monthly Report and that no Servicer Default or event that with notice or lapse of time or both would become a Servicer Default has occurred, or if such event has occurred and is continuing, specifying the event and its status. Section 6.03. Other Data. In addition, the Trust Depositor and the Servicer shall, on request of the Trustee, Moody's or Standard & Poor's, furnish the Trustee, Moody's or Standard & Poor's, as the case may be, such underlying data as may be reasonably requested. Section 6.04. Annual Report of Accountants. (a) The Servicer shall cause a firm of nationally recognized independent certified public accountants (the "INDEPENDENT ACCOUNTANTS"), who may also render other services to the Servicer or to the Trust Depositor, to deliver to the Trustee, the Placement Agent and each Rating Agency, on or before March 31 (or 90 days after the end of the Servicer's fiscal year, if other than December 31) of each year, beginning on March 31, 1997, with respect to the twelve months ended the immediately preceding December 31 (or other applicable date), a statement (the "ACCOUNTANT'S REPORT") addressed to the Board of Directors of the Servicer to the Trustee to the effect that such firm has audited the financial statements of the Servicer and issued its report thereon and that such audit (1) was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as such firm considered necessary in the circumstances; (2) included an examination of documents and records relating to the servicing of motorcycle conditional sales contracts under pooling and servicing agreements substantially similar to one another (such statement to have attached thereto a schedule setting forth the pooling and servicing agreements covered thereby, including this Agreement); (3) included an examination of the delinquency and loss statistics relating to the Servicer's portfolio of motorcycle conditional sales contracts; and (4) except as described in the statement, disclosed no exceptions or errors in the records relating to motorcycle loans serviced for others that, in the firm's opinion, generally accepted auditing standards requires such firm to report. The Accountant's Report shall further state that (1) a review in accordance with agreed upon procedures was made of one randomly selected Monthly Report and - 41 - (2) except as disclosed in the Report, no exceptions or errors in the Monthly Report so examined were found. (b) The Accountant's Report shall also indicate that the firm is independent of the Servicer within the meaning of the Code of Professional Ethics of the American Institute of Certified Public Accountants. Section 6.05. Annual Statement of Compliance from Servicer. The Servicer will deliver to the Trustee and each of the Rating Agencies, on or before January 31 of each year commencing January 31, 19__, an Officer's Certificate stating that (a) a review of the activities of the Servicer during the prior calendar year and of its performance under this Agreement was made under the supervision of the officer signing such certificate and (b) to such officer's knowledge, based on such review, the Servicer has fully performed all its obligations under this Agreement, or, if there has been a default in the performance of any such obligation, specifying each such default known to such officer and the nature and status thereof. A copy of such certificate may be obtained by any Certificateholder by a request in writing to the Trustee. Section 6.06. Statements to Certificateholders. (a) On or before two Business Days prior to each Payment Date, the Servicer shall prepare and, concurrently with each distribution to Certificateholders pursuant to Article VIII, the Trustee, in its capacity as Certificate Registrar and Paying Agent, shall cause to be delivered and mailed to each Holder of a Class A Certificate and each Holder of a Class B Certificate at the address appearing on the Certificate Register a statement as of the related Payment Date setting forth: (i) the amount distributed on such date and allocable to principal of the Class A Certificates and the Class B Certificates; (ii) the amount distributed on such date and allocable to interest on the Class A Certificates and the Class B Certificates; (iii) the amount of the Class A and Class B Principal and Interest Carryover Shortfalls, if any, for such Payment Date and the change in the Class A and Class B Principal and Interest Carryover Shortfalls from the immediately preceding Payment Date; (iv) the amount otherwise distributable to the Class B Certificateholders that will be distributed to the Class A Certificateholders on such Payment Date; (v) the amount of the distributions described in (i) or (ii) above payable pursuant to a claim on the Reserve Fund or from any other source not constituting Available Funds and the amount remaining in the Reserve Fund after giving effect to all deposits and withdrawals from the Reserve Fund on such date; (vi) the amount of any Special Distribution to be made on such Payment Date; - 42 - (vii) for each Payment Date during the Funding Period, the remaining Pre-Funded Amount; (viii) for each Payment Date to and including the Payment Date immediately following the end of the Funding Period, the Principal Balance and number of Subsequent Contracts conveyed to the Trust during the related Due Period; (ix) the remaining Class A Certificate Balance and Class B Certificate Balance after giving effect to the distribution of principal (and Special Distribution, if any) to be made on such Payment Date; (x) the Pool Balance as of the close of business on the last day of the related Due Period; (xi) the Class A Pool Factor and the Class B Pool Factor immediately before and immediately after such Payment Date; (xii) the amount of fees payable out of the Trust, separately identifying the Monthly Servicing Fee and the Trustee Fee; (xiii) the number and aggregate Principal Balance of Contracts delinquent 31-59 days, 60-89 days and 90 or more days, computed as of the end of the related Due Period; (xiv) the number and aggregate Principal Balance of Contracts that became Liquidated Contracts during the immediately preceding Due Period, the amount of liquidation proceeds for such Due Period, the amount of liquidation expenses being deducted from liquidation proceeds for such Due Period, and the Net Liquidation Proceeds for such Due Period; (xv) the Loss Ratio, Average Loss Ratio, Cumulative Loss Ratio, Default Ratio, Average Default Ratio, Delinquency Ratio and Average Delinquency Ratio each as of such Payment Date; (xvi) the number of Contracts and the aggregate Principal Balance of such Contracts, as of the first day of the Due Period relating to such Payment Date and as of the end of such Payment Date (after giving effect to payments received during such Due Period and to any transfers of Subsequent Contracts to the Trust occurring on or prior to such Payment Date); (xvii) the aggregate Principal Balance and number of Contracts that were repurchased by the Seller pursuant to Section 8.06 with respect to the related Due Period, identifying such Contracts and the Repurchase Price for such Contracts; and - 43 - (xix) such other customary factual information as is available to the Servicer as the Servicer deems necessary and can reasonably obtain from its existing data base to enable Certificateholders to prepare their tax returns. (b) Within 75 days after the end of each calendar year, the Servicer shall prepare and the Certificate Registrar shall mail to each Certificateholder of record at any time during such year a report as to the aggregate amounts reported pursuant to subsections (a)(i), (ii) and (xii) of this Section 6.06, attributable to such Certificateholder. ARTICLE VII SERVICER DEFAULTS; SERVICE TRANSFER SECTION 7.01. SERVICER DEFAULTS. "SERVICER DEFAULT" means the occurrence of any of the following: (a) Any failure by the Servicer (i) to make any payment or deposit required to be made hereunder or (ii) to direct the Trustee to make any payment or distribution required to be made hereunder and the continuance of such failure for a period of five (5) Business Days after receipt of written notice from the Trustee or discovery by the Servicer thereof; (b) Failure on the Servicer's part to observe or perform in any material respect any covenant or agreement set forth herein (other than a covenant or agreement, the breach of which is specifically addressed elsewhere in this Agreement) which (i) materially and adversely affects the rights of the Certificateholders and (ii) continues unremedied for thirty (30) days after receipt of written notice from the Trustee or by Certificateholders with aggregate Fractional Interests representing 25% or more of the Trust;; (c) Any assignment by the Servicer of its duties or rights hereunder or under the Transfer and Sale Agreement (or under any Subsequent Purchase Agreement or Subsequent Transfer Agreement), except as specifically permitted hereunder or thereunder, or any attempt to make such an assignment; (d) An involuntary case under any applicable bankruptcy, insolvency or other similar law shall have been commenced in respect of the Servicer and shall not have been dismissed within 90 days, or a court having jurisdiction in the premises shall have entered a decree or order for relief in respect of either 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, or for any substantial liquidation or winding up of its affairs; (e) 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 - 44 - 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; (f) Any failure by the Servicer to deliver to the Trustee the Monthly Report pursuant to the terms of this Agreement which remains uncured for five Business Days after the date which such failure commences; (g) Any representation, warranty or statement of the Servicer made in this Agreement, in any Subsequent Transfer Agreement or any certificate, report or other writing delivered pursuant hereto shall prove to be incorrect in any material respect as of the time when the same shall have been made and the incorrectness of such representation, warranty or statement has a material adverse effect on the Trust and, within 30 days after written notice thereof shall have been given to the Servicer by either the Trustee or by the Certificateholders with aggregate Fractional Interests representing 25% or more of the Trust, the circumstances or condition in respect of which such representation, warranty or statement was incorrect shall not have been eliminated or otherwise cured. Section 7.02. WAIVER OF SERVICER DEFAULT. Certificateholders with aggregate Fractional Interests representing more than 50% or more of the Trust, may, by written notice delivered to the parties hereto, waive any Servicer Default other than a Servicer Default described in SECTION 8.01(a). Section 7.03. Service Transfer. (a) If a Servicer Default has occurred and is continuing, (x) Certificateholders with aggregate Fractional Interests representing more than 50% or more of the Trust or (y) the Trustee may, by written notice delivered to the parties hereto, terminate all (but not less than all) of the Servicer's management, administrative, servicing, custodial and collection functions (such termination being herein called a "SERVICE TRANSFER"). (b) Upon receipt of the notice required by Section 7.03(a) (or, if later, on a date designated therein), all rights, benefits, fees, indemnities, authority and power of the Servicer under this Agreement, whether with respect to the Contracts, the Contract Files or otherwise, shall pass to and be vested in the [ ] (the "SUCCESSOR SERVICER") pursuant to and under this Section 7.03; and, without limitation, the Successor Servicer is authorized and empowered to execute and deliver on behalf of the Servicer, as attorney-in-fact or otherwise, any and all documents and other instruments, and to do any and all acts or things necessary or appropriate to effect the purposes of such notice of termination. The Servicer agrees to cooperate with the Successor Servicer in effecting the termination of the responsibilities and rights of the Servicer hereunder, including, without limitation, the transfer to the Successor Servicer for administration - 45 - by it of all cash amounts which shall at the time be held by the Servicer for deposit, or have been deposited by the Servicer, in the Collection Account, or for its own account in connection with its services hereafter or thereafter received with respect to the Contracts. The Servicer shall transfer to the Successor Servicer all records held by the Servicer relating to the Contracts in such electronic form as the Successor Servicer may reasonably request and (ii) any Contract Files in the Servicer's possession. In addition, the Servicer shall permit access to its premises (including all computer records and programs) to the Successor Servicer or its designee, and shall pay the reasonable transition expenses of the Successor Servicer. Upon a Service Transfer, the Successor Servicer shall also be entitled to receive the Servicing Fee for performing the obligations of the Servicer. SECTION 7.04. SUCCESSOR SERVICER TO ACT; APPOINTMENT OF SUCCESSOR SERVICER. On and after a Service Transfer pursuant to SECTION 8.03, the Successor Servicer shall be the successor in all respects to the Servicer in its capacity as servicer under this Agreement and the transactions set forth or provided for herein and shall be subject to all the responsibilities, duties and liabilities relating thereto placed on the Servicer by the terms and provisions hereof, and the terminated Servicer shall be relieved of such responsibilities, duties and liabilities arising after such Service Transfer; PROVIDED, HOWEVER, that [(i) the Successor Servicer will not assume any obligations of the Servicer described in SECTION 8.03 and (ii)] the Successor Servicer shall not be liable for any acts or omissions of the Servicer occurring prior to such Service Transfer or for any breach by the Servicer of any of its representations and warranties contained herein or in any related document or agreement. Notwithstanding the above, if the Successor Servicer is legally unable or unwilling to act as Servicer, it may appoint or petition a court of competent jurisdiction to appoint an established financial institution (x) having a net worth of not less than $100,00,000 as of the last day of the most recent fiscal quarter for such institution and (y) whose regular business shall include the servicing of automobile receivables, act as Servicer. As compensation therefor, the Successor Servicer shall be entitled to receive reasonable compensation equal to the Monthly Servicing Fee. The Trustee and such Successor Servicer shall take such action, consistent with this Agreement, as shall be necessary to effectuate any such succession. To the extent the terminated Servicer has made Advances, it shall be entitled to reimbursement of the same notwithstanding its termination hereunder, to the same extent as if it had continued to service the Contracts hereunder. Section 7.05. Notification to Certificateholders. (a) Promptly following the occurrence of any Servicer Default, the Servicer shall give written notice thereof to the Trustee, the Trust Depositor, the Back-up Servicer and each Rating Agency at the addresses described in Section 12.09 hereof and to the Certificateholders at their respective addresses appearing on the Certificate Register. (b) Within 10 days following any termination or appointment of a Back-up Servicer pursuant to this Article VII, the Trustee shall give written notice thereof to each Rating Agency and the Trust Depositor at the addresses described in Section 12.09 hereof, and to the Certificateholders at their respective addresses appearing on the Certificate Register. - 46 - Section 7.06. Effect of Transfer. (a) After a Service Transfer, the terminated Servicer shall have no further obligations with respect to the management, administration, servicing, custody or collection of the Contracts and the Successor Servicer appointed pursuant to Section [___] shall have all of such obligations, except that the terminated Servicer will transmit or cause to be transmitted directly to the Successor Servicer for its own account, promptly on receipt and in the same form in which received, any amounts (properly endorsed where required for the Successor Servicer to collect them) received as payments upon or otherwise in connection with the Contracts. (b) A Service Transfer shall not affect the rights and duties of the parties hereunder (including but not limited to the indemnities of the Servicer and the Seller pursuant to Article X and Section 11.06), other than those relating to the management, administration, servicing, custody or collection of the Contracts. Section 7.07. Database File. The Servicer will provide the Successor Servicer with a magnetic tape containing the database file for each Contract (i) as of the Cutoff Date, (ii) the Subsequent Cutoff Date, (iii) thereafter, as of the last day of the preceding Due Period on each Determination Date prior to a Servicer Default and (iv) on and as of the Business Day before the actual commencement of servicing functions by the Successor Servicer following the occurrence of a Servicer Default. Section 7.08. Successor Servicer Indemnification. The Servicer shall defend, indemnify and hold the Successor Servicer and any officers, directors, employees or agents of the Successor Servicer harmless against any and all claims, losses, penalties, fines, forfeitures, legal fees and related costs, judgments and any other costs, fees, and expenses that the Successor Servicer may sustain in connection with the claims asserted at any time by third parties against the Successor Servicer which result from (i) any willful or grossly negligent act taken or omission by the Servicer or (ii) a breach of any representations of the Servicer in Section 3.02 hereof. The indemnification provided by this Section 7.07 shall survive the termination of this Agreement. Section 7.09. RESPONSIBILITIES OF THE SUCCESSOR SERVICER. The Successor Servicer will not be responsible for delays attributable to the Servicer's failure to deliver information, defects in the information supplied by the Servicer or other circumstances beyond the control of the Successor Servicer. The Successor Servicer will make arrangements with the Servicer for the prompt and safe transfer of, and the Servicer shall provide to the Successor Servicer, all necessary servicing files and records, including (as deemed necessary by the Successor Servicer at such time): (i) microfiche loan documentation, (ii) servicing system tapes, (iii) Contract payment history, (iv) collections history and (v) the trial balances, as of the close of business on the day immediately preceding conversion to the Successor Servicer, reflecting all applicable loan information. - 47 - The Successor Servicer shall have no responsibility and shall not be in default hereunder nor incur any liability for any failure, error, malfunction or any delay in carrying out any of its duties under this Agreement if any such failure or delay results from the Successor Servicer acting in accordance with information prepared or supplied by a Person other than the Successor Servicer or the failure of any such Person to prepare or provide such information. The Successor Servicer shall have no responsibility, shall not be in default and shall incur no liability (i) for any act or failure to act by any third party, including the Servicer, the Depositor or the Trustee or for any inaccuracy or omission in a notice or communication received by the Successor Servicer from any third party or (ii) which is due to or results from the invalidity, unenforceability of any Contract with applicable law or the breach or the inaccuracy of any representation or warranty made with respect to any Contract. - 48 - Section 7.10. LIMITATION OF LIABILITY OF SERVICER. (a) Neither the Servicer nor any of the directors, officers, employees or agents of the Servicer shall be under any liability to the Issuer, the Trustee or the Certificateholders, except as provided under this Agreement, for any action taken or for refraining from the taking of any action pursuant to this Agreement or for errors in judgment; PROVIDED, HOWEVER, that this provision shall not protect the Servicer or any such person against any liability that would otherwise 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 under this Agreement. The Servicer and any director, officer, employee or agent of the Servicer may rely in good faith on the advice of counsel or on any document of any kind, prima facie properly executed and submitted by any Person respecting any matters arising under this Agreement. (b) Except as provided in this Agreement, the Servicer shall not be under any obligation to appear in, prosecute or defend any legal action that shall not be incidental to its duties to service the Contracts in accordance with this Agreement, and that in its opinion may cause it to incur any expense or liability; PROVIDED, HOWEVER, that the Servicer may undertake any reasonable action that it may deem necessary or desirable in respect of the Transaction Documents and the rights and duties of the parties to the Transaction Documents and the interests of the Certificateholders. In such event, the legal expenses and costs of such action and any liability resulting therefrom shall be expenses, costs and liabilities of the Servicer and the Servicer will not be entitled to be reimbursed therefor. Section 7.11. MERGER OR CONSOLIDATION OF SERVICER. Any Person 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 shall be a party, or any Person succeeding to the business of the Servicer (which Person assumes the obligations of the Servicer), shall be the successor of the Servicer hereunder, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. The Servicer shall give prior written notice of any such merger or consolidation to which it is a party to the Issuer, the Indenture Trustee and the Rating Agencies. Section 7.12. SERVICER NOT TO RESIGN. Subject to the provisions of SECTION 8.03, Servicer shall not resign from the obligations and duties hereby imposed on it as Servicer under this Agreement except upon determination that the performance of its duties under this Agreement shall no longer be permissible under applicable law. Notice of any such determination permitting the resignation of Servicer shall be communicated to the Trustee at the earliest practicable time (and, if such communication is not in writing, shall be confirmed in writing at the earliest practicable time) and any such determination shall be evidenced by an Opinion of Counsel to such effect delivered to the Trustee concurrently with or promptly after such notice. No such resignation shall become effective until a Successor Servicer shall have assumed the responsibilities and rights of the predecessor Servicer in accordance with SECTION 8.04. - 49 - Section 7.13. APPOINTMENT OF SUBSERVICER. So long as Harley-Davidson Credit Corp. acts as the Servicer, the Servicer may at any time without notice or consent subcontract substantially all its duties under this Agreement to any corporation more than 50% of the voting stock of which is owned, directly or indirectly, by Aon Corporation. The Servicer may at any time perform specific duties as servicer under this Agreement through other subcontractors; PROVIDED, HOWEVER, that no such delegation or subcontracting shall relieve the Servicer of its responsibilities with respect to such duties as to which the Servicer shall remain primarily responsible with respect thereto. ARTICLE VIII PAYMENTS AND RESERVE FUND SECTION 8.01. MONTHLY PAYMENTS. (a) Each Certificateholder as of the related Record Date shall be paid on the next succeeding Payment Date by check mailed to such Certificateholder at the address for such Certificateholder appearing on the Certificate Register or by wire transfer if such Certificateholder provides written instructions to the Trustee at least ten days prior to such Payment Date. (b) The Trustee shall serve as the paying agent hereunder (the "PAYING AGENT") and shall make the payments to the Certificateholders required hereunder. The Trustee hereby agrees that all amounts held by it for payment hereunder will be held in trust for the benefit of the Certificateholders. SECTION 8.02. FEES. The Trustee shall be paid the Trustee's Fee and the Servicer shall be paid the Monthly Servicing Fee, each of which shall be paid solely from the monies and in accordance with the priorities described in Section 8.04(b). No recourse may be had to the Seller, Trust Depositor, Trustee, Servicer, or any of their respective Affiliates in the event that amounts available under Section 8.04(b) are insufficient for payment of the Trustee Fee and the Monthly Servicing Fee. Section 8.03. Advances; Realization of Carrying Charge. (a) On each Determination Date, the Servicer shall compute the amount of Delinquent Interest, if any, on the Contracts for the immediately preceding Due Period. Not later than each Determination Date, the Servicer shall advance (each, an "ADVANCE") such Delinquent Interest by depositing the aggregate amount of such Delinquent Interest in the Collection Account, PROVIDED, HOWEVER, that the Servicer shall be obligated to advance Delinquent Interest only to the extent that the Servicer, in its sole discretion, expects that such Advance will not become an Uncollectible Advance. The Servicer shall indicate on each Monthly Report (i) the amount of Delinquent Interest, if any, on the Contracts for the related Due Period and (ii) the amount of the Advance, if any, made by the Servicer in respect of such Delinquent Interest pursuant to this Section 8.03. If the amount of such Advance is less than the amount of the Delinquent Interest, the relevant Monthly Report shall be accompanied by a certificate of a Servicing Officer setting forth in reasonable detail the basis for the determination by the Servicer that the portion of the Delinquent Interest not advanced would become an Uncollectible Advance. By each Determination Date, the Servicer - 50 - shall determine the amount of prior unreimbursed Advances for which it desires to be reimbursed pursuant to the provisions of Section 8.03 (such amount, the "REIMBURSEMENT AMOUNT"). The Servicer shall be entitled to be reimbursed for any outstanding Advance with respect to a Contract by means of a first priority withdrawal from the Collection Account of such Reimbursement Amount as provided in Section 8.04(b)(i). (b) The Servicer shall determine no later than 12:00 noon, New York City time, on the second Business Day prior to a Payment Date the Carrying Charges in respect of the upcoming Payment Date. To the extent of such amount, the Trustee shall, pursuant to the Deposit Agreement, make demand upon the Trust Depositor for payment of the Carrying Charges, to be satisfied from (and solely to the extent of) the amount then on deposit in the Interest Reserve Account. Such demand shall be effected by giving the notice to the Collateral Agent described in Section 3.03 of the Security Agreement. Amounts realized from such demand shall be deposited immediately into the Collection Account as contemplated in Section 5.05(b)(vi) hereof. Section 8.04. Payments. (a) On each Determination Date, the Servicer shall determine the amount of the Available Funds for the related Payment Date and shall calculate the Available Interest, the Available Principal, the Class A Distributable Amount, the Class B Distributable Amount, and all other distributions to be made on the related Payment Date. (b) On each Payment Date, the Trustee will, based on the information in the Monthly Report, distribute as a Special Distribution from the Special Distribution Subaccount (a) to the Holders of the Class A Certificateholders, pro rata, in an amount equal to the Class A Percentage multiplied by the amount in the Special Distribution Subaccount and (b) to the Class B Certificateholders, pro rata, in an amount equal to the Class B Percentage multiplied by the amount in the Special Distribution Subaccount, and shall also distribute the following amounts in the following order of priority: (i) from Available Funds, the Reimbursement Amount to the Servicer; (ii) from Available Interest, the Servicing Fee for the related Due Period to the Servicer; (iii) from Available Interest, the Trustee's Fee for the related Due Period to the Trustee; (iv) to the Class A Certificateholders of record, from Available Interest, an amount equal to the Class A Interest Distributable Amount for such Payment Date and, if such Available Interest is insufficient, the Class A Certificateholders will receive such shortfall first, from the Class B Percentage of Available Principal and second, if such amounts are still insufficient, from monies on deposit in the Reserve Fund; (v) to the Class B Certificateholders of record, from Available Interest, an amount equal to the Class B Interest Distributable Amount for such Payment Date and, if - 51 - such Available Interest is insufficient, the Class B Certificateholders will receive such shortfall from monies on deposit in the Reserve Fund; (vi) to the Class A Certificateholders of record, from Available Principal, an amount equal to the Class A Principal Distributable Amount for such Payment Date and, if such Available Principal is insufficient, the Class A Certificateholders will receive such shortfall first, from Available Interest, and second, if such amounts are still insufficient, from monies on deposit in the Reserve Fund; (vii) to the Class B Certificateholders of record, from Available Principal, an amount equal to the Class B Principal Distributable Amount for such Payment Date and, if such Available Principal is insufficient, the Class B Certificateholders will receive such shortfall first, from Available Interest, and second, if such amounts are still insufficient, from monies on deposit in the Reserve Fund; and (viii) any remaining Available Funds after the payments described in clauses (i) through (vii) above shall be paid to the Reserve Agent for deposit in the Reserve Fund. Any monies intended for the payment of Class A Distributable Amounts or Class B Distributable Amounts but which remain unclaimed by Certificateholders for a period of two years after the Final Scheduled Payment Date shall, upon the written request of the Trust Depositor, be paid to the Trust Depositor, and such Certificateholders shall thereafter look only to the Trust Depositor for payment, and then only to the extent of the amounts so received without interest thereon; PROVIDED, HOWEVER, that within thirty days prior to the expiration of the two-year period mentioned above, the Trustee, before being required to make any such repayment, may, at the expense of the Trust Depositor, cause to be published in a financial journal a notice that after a date named therein said monies will be returned to the Trust Depositor. Section 8.05. Withdrawal from Reserve Fund to Cover a Shortfall. The Trustee shall determine no later than 10:00 a.m., Chicago, Illinois time, on the Payment Date (but after making, and taking into account, the determination, demand and transfer of funds contemplated in Section 8.03(b) above) whether there exists a Shortfall with respect to the upcoming Payment Date. In the event that the Trustee determines that there exists a Shortfall, the Trustee shall furnish to the Reserve Agent no later than 12:00 noon, Chicago, Illinois time, on such Payment Date a written notice specifying the Shortfall for such Payment Date and directing the Reserve Agent to remit monies in respect of such Shortfall (to the extent of funds available to be so distributed pursuant to the Reserve Fund Agreement) to the Trustee for deposit in the Collection Account. Upon receipt of any such funds the Trustee shall deposit such amounts into the Collection Account. Section 8.06. Repurchases of Contracts for Breach of Representations and Warranties. Upon a discovery by the Servicer, the Trust Depositor or the Trustee of a breach of a representation or warranty of the Seller as set forth in EXHIBIT K hereto or as made in any - 52 - Subsequent Purchase Agreement relating to Subsequent Contracts that materially adversely affects the Trust's interest in such Contract (without regard to the benefits of the Reserve Fund), the party discovering the breach shall give prompt written notice to the other parties PROVIDED, that the Trustee shall have no duty or obligation to inquire or to investigate the breach by the Seller of any of such representations or warranties. The Seller, as provided in the Transfer and Sale Agreement and in accordance with this Section 8.06, shall repurchase a Contract at its Repurchase Price, two Business Days prior to the first Determination Date after the Seller becomes aware, or should have become aware, or receives written notice from the Trustee, the Servicer or the Trust Depositor of any breach of a representation or warranty of the Seller set forth in Article III of the Transfer and Sale Agreement that materially adversely affects such Contract or the Trust's interest in such Contract and which breach has not been cured; PROVIDED, HOWEVER, that with respect to any Contract incorrectly described on the List of Contracts with respect to unpaid Principal Balance which the Seller would otherwise be required to repurchase under the Transfer and Sale Agreement, the Seller may, in lieu of repurchasing such Contract, deposit in the Collection Account not later than one Business Day after such Determination Date cash in an amount sufficient to cure such deficiency or discrepancy, and PROVIDED FURTHER that with respect to a breach of representation or warranty relating to the Contracts in the aggregate and not to any particular Contract the Seller may select Contracts (without adverse selection) to repurchase such that had such Contracts not been included as part of the Trust Corpus there would have been no breach of such representation or warranty; PROVIDED FURTHER that (a) the failure of a Contract File to be complete or of the original certificate of title and evidence of recordation of such certificate to be included in the Contract File as of 180 days after the Closing Date (or Subsequent Transfer Date, in the case of Subsequent Contracts) or (b) the failure to maintain perfection of the security interest in the Motorcycle securing a Contract in accordance with Section 5.09, shall be deemed to be a breach materially and adversely affecting the Trust's interest in the Contract or in the related Contracts. Notwithstanding any other provision of this Agreement, the obligation of the Seller under the Transfer and Sale Agreement and described in this Section 8.06 shall not terminate or be deemed released by any party hereto upon a Service Transfer pursuant to Article VII. The repurchase obligation described in this Section 8.06 is in no way to be satisfied with monies in the Reserve Fund. Section 8.07. Reassignment of Repurchased Contracts. Upon receipt by the Trustee for deposit in the Collection Account of the Repurchase Price as described in Section 8.06 or Section 8.08, and upon receipt of a certificate of a Servicing Officer in the form attached hereto as EXHIBIT G, the Trustee shall assign to the Seller all of the Trust's right, title and interest in the repurchased Contract without recourse, representation or warranty, except as to the absence of liens, charges or encumbrances created by or arising as a result of actions of the Trustee. Section 8.08. Seller's Repurchase Option. As provided in the Transfer and Sale Agreement, on written notice to the Trustee at least 20 days prior to a Payment Date, and provided that aggregate of the Class A Certificate Balance and Class B Certificate Balance is then less than 10% of the Class A Initial Certificate Balance and Class B Initial Certificate Balance, and provided a valuation letter is delivered as required in Section 5.02 of the Transfer and Sale Agreement, the Seller may (but is not required to) repurchase on that Payment Date all - 53 - outstanding Contracts at a price equal to the aggregate of the Class A and Class B Certificate Balance on the previous Payment Date plus the aggregate of the Class A Interest Distributable Amount and the Class B Interest Distributable Amount for the current Payment Date thereon, the Reimbursement Amount (if any) as well as accrued and unpaid Monthly Servicing Fees and Trustee Fees to the date of such repurchase. Such price is to be deposited in the Collection Account one Business Day before such Payment Date, against the Trustee's release of the Contracts and the Contract Files to the Seller in the manner described in Section 8.07 above. ARTICLE IX THE CERTIFICATES Section 9.01. The Certificates. The Class A Certificates and the Class B Certificates shall be substantially in the form of Exhibit A-1 and Exhibit A-2, respectively. The Certificates shall be issued in fully registered form in minimum denominations of $[ ] and integral multiples of $[ ] in excess thereof, except that one Class A Certificate and one Class B Certificate may be issued in a denomination representing the remainder of the Class A Certificate Balance or Class B Certificate Balance, as applicable. The Certificates shall be executed on behalf of the Trust by manual or facsimile signature of an authorized officer of the Trustee. Certificates bearing the manual or facsimile signatures of individuals who were, at the time when such signatures were affixed, authorized to sign on behalf of the Trustee shall be validly issued and entitled to the benefit of this Agreement, notwithstanding the fact that such individuals or any of them have ceased to be so authorized prior to the authentication and delivery of such Certificates or did not hold such offices at the date of authentication and delivery of such Certificates. Section 9.02. Authentication of Certificates. Concurrently with the conveyance of the Contracts to the Trust, the Trustee shall cause the Certificates to be executed on behalf of the Trust by an authorized Trust officer, and authenticated and delivered to or upon the written order of the Trust Depositor, without further corporate action by the Trust Depositor, in authorized denominations. No Certificate shall entitle its Holder to any benefit under this Agreement or be valid for any purpose unless there shall appear on such Certificate a certificate of authentication, executed by the Trustee by manual signature. Such authentication shall constitute conclusive evidence that such Certificate shall have been duly authenticated and delivered hereunder. All Certificates shall be dated the date of their authentication. Section 9.03. Registration of Transfer and Exchange. (a) The Trustee shall cause to be kept a register (the "CERTIFICATE REGISTER") in which, subject to such reasonable regulations as it may prescribe, the Trustee shall provide for the registration of Certificates and the registration of transfers of Certificates. The Trustee shall be the initial "CERTIFICATE REGISTRAR" for the purpose of registering Certificates and transfers of Certificates as herein provided. Upon the resignation of any Certificate Registrar, the Trustee shall promptly appoint a successor or, if it elects not to make such an appointment, assume the duties of Certificate Registrar. - 54 - If a Person other than the Trustee is appointed as Certificate Registrar, the Trustee shall give prompt written notice of the appointment of such Certificate Registrar and of the location, and any change in the location, of the Certificate Register, and the Trustee shall have the right to inspect the Certificate Register at all reasonable times, to obtain copies thereof and to rely conclusively upon a certificate executed on behalf of the Certificate Registrar by an authorized officer thereof as to the names and addresses of the Certificateholders and the principal amounts and number of the Certificates. Upon surrender for registration of transfer of any Certificate at the office or agency of the Trustee to be maintained as provided in Section 6.08, the Trustee shall execute, authenticate and deliver to the designated transferee or transferees, one or more new Certificates in any authorized denominations of a like aggregate principal amount. At the option of the Certificateholder, Certificates may be exchanged for other Certificates in any authorized denominations of a like aggregate principal amount. Whenever any Certificates are so surrendered for exchange, the Trustee shall execute, authenticate and deliver to the Certificateholder the Certificates that the Certificateholder making the exchange is entitled to receive. All Certificates issued upon any registration of transfer or exchange of Certificates shall be the valid obligations of the Trust, evidencing the same interest in the Trust and entitled to the same benefits under this Agreement as the Certificates surrendered upon such registration of transfer or exchange. (b) Every Certificate presented or surrendered for registration of transfer or exchange shall be duly endorsed by, or be accompanied by a written instrument of transfer in form satisfactory to the Trustee duly executed by, the holder thereof or such holder's attorney duly authorized in writing, with such signature guaranteed by a commercial bank or trust company located or having a correspondent located in [________] or the city in which the Corporate Trust Office is located or by a member firm of a national securities exchange, and such other documents as the Trustee may require. (c) No service charge shall be made to a Certificateholder for any registration of transfer or exchange of Certificates, but the Trustee may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Certificates. SECTION 9.04. CERTAIN TRANSFER RESTRICTIONS. [RESERVED] Section 9.05. Mutilated, Destroyed, Lost or Stolen Certificates. If (a) any mutilated Certificate shall be surrendered to the Certificate Registrar or if the Certificate Registrar shall receive evidence to its satisfaction of the destruction, loss or theft of any Certificate and (b) there shall be delivered to the Certificate Registrar and the Trustee such security or indemnity as may be required by them to save each of them harmless, then in the absence of notice that such - 55 - Certificate has been acquired by a bona fide purchaser, the Trustee on behalf of the Trust shall execute, and the Trustee shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like tenor and denomination. In connection with the issuance of any new Certificate under this Section, the Trustee and the Certificate Registrar may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. Any duplicate Certificate issued pursuant to this Section shall constitute conclusive evidence of ownership of a beneficial interest in the Trust, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time. Section 9.06. Persons Deemed Owners. Prior to due presentation of a Certificate for registration of transfer, the Trustee or the Certificate Registrar may treat the Person in whose name any Certificate is registered in the Certificate Register as the owner of such Certificate for the purpose of receiving distributions pursuant to Section 8.04 and for all other purposes whatsoever, and neither the Trustee nor the Certificate Registrar shall be bound by any notice to the contrary. Section 9.07. Access to List of Certificateholders' Names and Addresses. The Certificate Registrar will furnish to the Trustee, the Trust Depositor and the Servicer, within five days after receipt by the Certificate Registrar of a request therefor from the Trustee or the Certificateholder in writing, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Certificateholders as of the most recent Record Date. If Class A Certificateholders or Class B Certificateholders with aggregate Fractional Interests representing 25% or more of the Class A Certificate Balance or Class B Certificate Balance, respectively, (hereinafter referred to as "APPLICANTS") apply in writing to the Trustee, and such application states that the Applicants desire to communicate with other Certificateholders with respect to their rights under this Agreement or under the Certificates and is accompanied by a copy of the communication which such Applicants propose to transmit, then the Trustee shall, within five Business Days after the receipt of such application, afford such Applicants access during normal business hours to the most recent list of Certificateholders held by the Trustee. If such list is as of a date more than 90 days prior to the date of receipt of such Applicants' request, the Trustee shall promptly request from the Certificate Registrar a current list as provided above, and shall afford such Applicants access to such list promptly upon receipt. Every Certificateholder, by receiving and holding a Certificate, agrees with the Certificate Registrar and the Trustee that none of the Trust Depositor, the Certificate Registrar or the Trustee shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Certificateholders Section 9.08. Book-Entry Certificates. Unless the Holder thereof requests that Class A Certificates be delivered in definitive, fully registered form ("DEFINITIVE CERTIFICATES"), the Class A Certificates, upon original issuance, will be issued in the form of one or more typewritten Certificates representing Book-Entry Certificates, to be delivered to the Depository Trust Company, the initial Clearing Agency, by or on behalf of the Trust. The Book-Entry Certificates - 56 - shall be registered initially on the Certificate Register in the name of Cede & Co., the nominee of the initial Clearing Agency. With respect to the Book-Entry Certificates: (1) the provisions of this Section shall be in full force and effect; (2) the Depositor, the Servicer, the Certificate Registrar and the Trustee may deal with the Clearing Agency for all purposes (including the making of distributions on the Book-Entry Certificates) as the sole Holder of such Book-Entry Certificates and shall have no obligation to the related Certificate Owner; (3) to the extent that the provisions of this Section conflict with any other provisions of this Agreement, the provisions of this Section shall control; (4) the rights of such Certificate Owners shall be exercised only through the Clearing Agency and shall be limited to those established by law and agreements between such Certificate Owners and the Clearing Agency and/or the Clearing Agency Participants pursuant to the Depository Agreement. The initial Clearing Agency will make book-entry transfers among the Clearing Agency Participants and receive and transmit distributions of principal and interest on the Book-Entry Certificates to such Clearing Agency Participants; and (5) whenever this Agreement requires or permits actions to be taken based upon instructions or directions of Certificateholders evidencing a specified percentage of the Certificate Balance, the Clearing Agency shall be deemed to represent such percentage only to the extent that it has received instructions to such effect from Certificate Owners and/or Clearing Agency Participants owning or representing, respectively, such required percentage of the beneficial interest in the Book-Entry Certificates and has delivered such instructions in writing to the Trustee. Neither the Trustee nor the Certificate Registrar shall have any responsibility to monitor or restrict the transfer of beneficial ownership in any Certificate an interest in which is transferable through the facilities of the Depository. Section 9.09. Notices to Clearing Agency. Whenever a notice or other communication to Holders of the Book-Entry Certificates is required under this Agreement, the Trustee and the Servicer shall give all such notices and communications specified herein to be given to Holders of Certificates to the Clearing Agency. ARTICLE X INDEMNITIES Section 10.01. Servicer Indemnification. The Servicer agrees to defend and indemnify the Trust, the Trustee the Paying Agent, the Certificateholders and any agents of the Trustee, - 57 - and the Certificateholders against any and all costs, expenses, losses, damages, claims and liabilities, and shall also assume the obligations of the Trust Depositor to pay expenses and costs incurred pursuant to the terms of the Security Agreement (which expenses and costs shall not be borne by the Collateral as defined therein), including reasonable fees and expenses of counsel and expenses of litigation arising out of or resulting from this Agreement or any of the related Transaction Documents, or the use, ownership or operation of any Motorcycle by the Servicer or any Affiliate of the Servicer. Notwithstanding any other provision of this Agreement, the obligation of the Servicer described in this Section 10.01 shall not terminate or be deemed released upon a Service Transfer pursuant to Article VII and shall survive any termination of this Agreement. Section 10.02. Liabilities to Obligors. No obligation or liability to any Obligor under any of the Contracts is intended to be assumed by the Trust or the Certificateholders under or as a result of this Agreement and the transactions contemplated hereby and, to the maximum extent permitted and valid under mandatory provisions of law, the Trust and the Certificateholders expressly disclaim any such assumption. Section 10.03. Tax Indemnification. As provided in the Transfer and Sale Agreement, the Seller has agreed to pay, and to indemnify, defend and hold harmless the Trust, the Trustee and the Certificateholders from, any taxes which may at any time be asserted with respect to, and as of the date of, the transfer of the Contracts to the Trust, including, without limitation, any sales, gross receipts, general corporation, personal property, privilege or license taxes (but not including any federal, state or other taxes arising out of the creation of the Trust and the issuance of the Certificates) and costs, expenses and reasonable counsel fees in defending against the same, whether arising by reason of the acts to be performed by the Trust Depositor, the Seller or the original Servicer under this Agreement or imposed against the Trust, a Certificateholder or otherwise. Notwithstanding any other provision of this Agreement, the obligation of the Seller described in this Section 10.03 shall not terminate or be deemed released upon a Service Transfer pursuant to Article VII and shall survive any termination of this Agreement. Section 10.04. Servicer's Indemnities. The Servicer shall defend and indemnify the Trust, the Trustee and the Certificateholders against any and all costs, expenses, losses, damages, claims and liabilities, including reasonable fees and expenses of counsel and expenses of litigation, in respect of any action taken by such Servicer with respect to any Contract. This indemnity shall survive any Service Transfer (but the original Servicer's obligations under this Section 10.04 shall not relate to any actions of any subsequent Servicer after a Service Transfer) and any payment of the amount owing under, or any repurchase by the Seller of, any such Contract and shall survive any termination of this Agreement. Section 10.05. Operation of Indemnities. Indemnification under this Article X shall include, without limitation, reasonable fees and expenses of counsel and expenses of litigation. If the Servicer has made any indemnity payments to the Trustee pursuant to this Article X and the Trustee thereafter collects any of such amounts from others, the Trust will repay such amounts collected to the Servicer, without interest. - 58 - ARTICLE XI THE TRUSTEE Section 11.01. Duties of Trustee. The Trustee, prior to the occurrence of a Servicer Default and after the curing of all Servicer Defaults which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Agreement. If a Servicer Default has occurred (which has not been cured), the Trustee shall exercise such of the rights and powers vested in it by this Agreement, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. The Trustee, upon receipt of all resolutions, certificates, statements, opinions, reports, documents, orders or other instruments furnished to the Trustee which are specifically required to be furnished pursuant to any provision of this Agreement, shall examine them to determine whether they conform as to form to the requirements of this Agreement and shall promptly notify the Servicer and each Certificateholder of any failure of any of the foregoing to so conform. Subject to Section 11.03, no provision of this Agreement shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act (including actions or omissions within its control resulting in the failure of Certificateholders to receive timely payment of either the Class A Distributable Amount or the Class B Distributable Amount) or its own misconduct; PROVIDED, HOWEVER, that: (a) Prior to the occurrence of a Servicer Default, and after the curing of all such Servicer Defaults which may have occurred, the duties and obligations of the Trustee shall be determined solely by the express provisions of this Agreement, the Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Agreement, no implied covenants or obligations shall be read into this Agreement against the Trustee and, in the absence of bad faith on the part of the Trustee, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Trustee and conforming to the requirements of this Agreement; (b) The Trustee shall not be liable for an error of judgment made in good faith by a Responsible Officer of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; (c) The Trustee shall not be personally liable with respect to any action taken, suffered or omitted to be taken by it in good faith in accordance with the direction of Certificateholders with aggregate Fractional Interests representing 25% or more of the Trust relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Agreement; and - 59 - (d) The Trustee shall not be charged with knowledge of any event referred to in Section 7.01 unless a Responsible Officer of the Trustee at the Corporate Trust Office obtains actual knowledge of such event or the Trustee receives written notice of such event from the Seller, the Trust Depositor, the Servicer or the Certificateholders with aggregate Fractional Interests representing 25% or more of the Trust. The Trustee shall not be required to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if there is reasonable ground for believing that the repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it, PROVIDED, HOWEVER, that nothing contained herein shall relieve the Trustee of the obligations, upon the occurrence of a Servicer Default (which has not been cured), to exercise such of the rights and powers vested in it by this Agreement, and to use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. None of the provisions contained in this Agreement shall in any event require the Trustee to perform, or be responsible for the manner of performance of, any of the obligations of the Seller, the Trust Depositor or the Servicer under this Agreement. Without limiting the generality of this Section 11.01, the Trustee shall have no duty (i) to see to any recording, filing or depositing of this Agreement or any agreement referred to herein or any financing statement evidencing a security interest in the Motorcycles or to see to the maintenance of any such recording or filing or depositing or to any re-recording, refiling or redepositing of any thereof, (ii) to see to any insurance of the Motorcycles or Obligors or to effect or maintain any such insurance, (iii) to see to the payment or discharge of any tax, assessment or other governmental charge or any lien or encumbrance of any kind owing with respect to, assessed or levied against any part of the Trust, (iv) to confirm or verify the contents of any reports or certificates delivered to the Trustee pursuant to this Agreement believed by the Trustee to be genuine and to have been signed or presented by the proper party or parties, or (v) to inspect the Motorcycles at any time or ascertain or inquire as to the performance or observance of any of the Seller's or the Servicer's representations, warranties or covenants or the Servicer's duties and obligations as Servicer and as custodian of the Contract Files under this Agreement. SECTION 11.02. CERTAIN MATTERS AFFECTING THE TRUSTEE. Except as otherwise provided in Section 11.01 and provided the Paying Agent shall also benefit from the provisions of this Section 11.02: (a) The Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, Officer's Certificate, certificate of a Servicing Officer, certificate of auditors or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, appraisal, bond or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; - 60 - (b) The Trustee may consult with counsel and any opinion of any counsel for the Seller, the Trust Depositor or the Servicer shall be full and complete authorization and protection in respect of any action taken or suffered or omitted by the Trustee hereunder in good faith and in accordance with such opinion of counsel; (c) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Agreement, or to institute, conduct or defend any litigation hereunder or in relation hereto, at the request, order or direction of any of the Certificateholders, pursuant to the provisions of this Agreement, unless such Certificateholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby; PROVIDED, HOWEVER, that nothing contained herein shall relieve the Trustee of the obligations, upon the occurrence of a Servicer Default (which has not been cured), to exercise such of the rights and powers vested in it by this Agreement, and to use the same degree of care and skill in their exercise as a prudent man would exercise or use under the circumstances in the conduct of his own affairs; (d) Prior to the occurrence of a Servicer Default and after the curing of all Servicer Defaults which may have occurred, the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond or other paper or document, unless requested in writing so to do by Certificateholders with aggregate Fractional Interests representing 25% or more of the Trust; PROVIDED, HOWEVER, that if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Agreement, the Trustee may require reasonable indemnity against such cost, expense or liability as a condition to so proceeding. The reasonable expense of every such examination shall be paid by the Servicer or, if paid by the Trustee, shall be reimbursed by the Servicer upon demand; and (e) The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys or co-trustees or a custodian and shall not be liable for any acts or omissions of such agents, attorneys or co-trustees or custodians if appointed by it with due care hereunder; PROVIDED, HOWEVER, if the Servicer is acting as custodian, the Servicer is deemed by all parties to have been appointed with due care. - 61 - Section 11.03. Trustee Not Liable for Certificates or Contracts. The Trustee assumes no responsibility for the correctness of the recitals contained herein or in the Certificates (other than the Trustee's execution thereof). The Trustee makes no representations as to the validity or sufficiency of this Agreement, the Trust or of the Certificates (other than its execution thereof) or of any Contract, Contract File or related document. The Trustee shall not be accountable for the use or application by the Servicer or the Trust Depositor of funds paid to the Trust Depositor in consideration of conveyance of the Contracts to the Trust by the Trust Depositor or deposited in or withdrawn from the Collection Account by the Servicer. Section 11.04. Trustee May Own Certificates. The Trustee in its individual or other capacity may become the owner or pledgee of Certificates representing less than all the beneficial interest in the Trust with the same rights as it would have if it were not Trustee. Section 11.05. RIGHTS TO DIRECT TRUSTEE AND TO WAIVE SERVICER DEFAULTS. Certificateholders with aggregate Fractional Interests representing 25% or more of the Trust shall have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Trustee under this Agreement or any Transaction Document assigned to the Trustee, or exercising any trust or power conferred on the Trustee under this Agreement or any Transaction Document assigned to the Trustee; PROVIDED, HOWEVER, that, subject to Section 11.01, the Trustee shall have the right to decline to follow any such direction if the Trustee being advised by counsel determines that the action so directed may not lawfully be taken, or if the Trustee in good faith shall, by a Responsible Officer or Responsible Officers of the Trustee, determine that the proceedings so directed would be illegal or involve the Trustee in personal liability or (in the case of directions by the Certificateholders) be unduly prejudicial to the rights of Certificateholders not parties to such direction; and PROVIDED FURTHER that nothing in this Agreement shall impair the right of the Trustee to take any action deemed proper by the Trustee and which is not inconsistent with such direction by the Certificateholders. Certificateholders with aggregate Fractional Interests representing 51% or more of the Trust may waive any past Servicer Default hereunder and its consequences, and upon any such waiver, such Servicer Default shall cease to exist and shall be deemed to have been cured for every purpose of this Agreement; but no such waiver shall extend to any subsequent or other Servicer Default or impair any right consequent thereon. The Trustee shall have no liability for acting upon the direction of the Certificateholders. Section 11.06. The Servicer to Pay Trustee's Expenses. The Servicer agrees to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on the Trustee's part, arising out of or in connection with the acceptance or administration of this trust and its duties hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. This Section 11.06 shall be for the benefit of the Trustee in its capacities as Trustee, Paying Agent, and Certificate Registrar hereunder, and shall not terminate or be deemed released - 62 - upon a Service Transfer pursuant to Article VII and shall survive the termination of this Agreement. Section 11.07. Eligibility Requirements for Trustee. The Trustee hereunder shall at all times be a financial institution organized and doing business under the laws of the United States of America or any state, authorized under such laws to exercise corporate trust powers, whose long term Unsecured debt is rated at least Baa3 by Moody's and shall have a combined capital and surplus of at least $50,000,000 or shall be a member of a bank holding system the aggregate combined capital and surplus of which is $50,000,000 and subject to supervision or examination by Federal or state authority, PROVIDED that the Trustee's separate capital and surplus shall at all times be at least the amount required by Section 310(a)(2) of the Trust Indenture Act of 1939, as amended. If such Person publishes reports of condition at least annually, pursuant to law or to the requirements of a supervising or examining authority, then for the purposes of this Section 11.07, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 11.07, the Trustee shall resign immediately in the manner and with the effect specified in Section 11.08. Section 11.08. Resignation or Removal of Trustee. The Trustee may at any time resign and be discharged from the trusts hereby created by giving written notice thereof to the Servicer with a copy to the Trust Depositor, the Seller, and the Certificateholders. Upon receiving such notice of resignation, the Servicer shall promptly appoint a successor Trustee by written instrument, in duplicate, one copy of which instrument shall be delivered to each of the Trust Depositor, the Seller, and the Certificateholders and one copy to the successor Trustee. If no successor Trustee shall have been so appointed and shall have accepted such appointment within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. If at any time the Trustee shall cease to be eligible in accordance with the provisions of Section 11.07 and shall fail to resign after written request therefor by the Servicer, or if at any time the Trustee shall be legally unable to act, or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then the Servicer may remove the Trustee. If the Servicer shall have removed the Trustee under the authority of the immediately preceding sentence, the Servicer shall promptly appoint a successor Trustee by written instrument one copy of which instrument shall be delivered to the Trustee so removed, the Trust Depositor and the Seller and one copy to the successor trustee. Any resignation or removal of the Trustee and appointment of a successor Trustee pursuant to any of the provisions of this Section 11.08 shall not become effective until acceptance of appointment by the successor Trustee as provided in Section 11.09. - 63 - Any resigning or removed Trustee shall be entitled to payment of all Trustee's Fees earned and reimbursement for all expenses incurred by it up to the date of resignation. All indemnification obligations of the Servicer and the Seller shall survive such resignation or removal. Section 11.09. Successor Trustee. Any successor Trustee appointed as provided in Section 11.08 shall execute, acknowledge and deliver to the Servicer, the Trust Depositor and to its predecessor Trustee, with a copy to the Certificateholders, an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor Trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become fully vested with all the rights, powers, duties and obligations of its predecessor hereunder, with like effect as if originally named as Trustee. The predecessor Trustee shall deliver or cause to be delivered to the successor Trustee the Contracts and the Contract Files (if any such Contracts and Contract Files are in the Trustee's possession) and any related documents and statements held by it hereunder; and, if the Contracts are then held by a custodian pursuant to a custodial agreement, the predecessor Trustee and the custodian shall amend such custodial agreement to make the successor Trustee the successor to the predecessor Trustee thereunder; and the Servicer, the Trust Depositor and the predecessor Trustee shall execute and deliver such instruments and do such other things as may reasonably be required for fully and certainly vesting and confirming in the successor Trustee all such rights, powers, duties and obligations. No successor Trustee shall accept appointment as provided in this Section 11.09 unless at the time of such acceptance such successor Trustee shall be eligible under the provisions of Section 11.07. Upon acceptance of appointment by a successor Trustee as provided in this Section 11.09, the Servicer shall cause notice of the succession of such Trustee hereunder to be mailed to each Rating Agency and to each Certificateholder at their addresses as shown in the Certificate Register. If the Servicer fails to mail such notice within ten days after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be mailed at the expense of the Servicer. - 64 - Section 11.10. Merger or Consolidation of Trustee. Any Person into which the Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any Person succeeding to the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such Person shall be eligible under the provisions of Section 11.07, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. Upon such occasion, the Servicer shall cause notice thereof to be mailed to each Rating Agency and each Certificateholder. If the Servicer fails to mail such notice within ten days after such succession, the successor Trustee shall cause such notice to be mailed at the expense of the Servicer with a copy to each Certificateholder. Section 11.11. Tax Returns. (a) The Servicer, on behalf of the Trust, shall request that the Trustee furnish the Servicer with all such information in the Trustee's possession as may be reasonably required in connection with the preparation of all tax returns of the Trust and the Trustee shall, upon such request, furnish such information and execute such returns; and (b) As directed by the Servicer in writing, the Trustee shall take all action specified in such writing relating to (i) certain withholding requirements applicable to non-U.S. persons; (ii) backup withholding requirements; and (iii) certain taxpayer certification requirements relating to clauses (i) and (ii) above. Section 11.12. Obligor Claims. In connection with any offset defenses, or affirmative claims for recovery, asserted in legal actions brought by Obligors under one or more Contracts based upon provisions therein complying with, or upon other rights or remedies arising from, any legal requirements applicable to the Contracts, including, without limitation, the Federal Trade Commission's Trade Regulation Rule Concerning Preservation of Consumers' Claims and Defenses (16 C.F.R. Section 433) as amended from time to time: (a) The Trustee is not, and shall not be deemed to be, either in any individual capacity, as trustee hereunder or otherwise, a creditor, or a joint venturer with or an Affiliate of, or acting in concert or cooperation with, any seller of Motorcycles, in the arrangement, origination or making of Contracts. The Trustee is the holder of the Contracts only as trustee on behalf of the Certificateholders, and not as a principal or in any individual or personal capacity; (b) The Trustee shall not be personally liable for or obligated to pay Obligors any affirmative claims asserted thereby, or responsible to Certificateholders for any offset defense amounts applied against Contract payments pursuant to such legal actions; (c) The Trustee will pay, solely from available Trust monies, affirmative claims for recovery by Obligors only pursuant to final judicial orders or judgments, or judicially approved settlement agreements, resulting from such legal actions; and - 65 - (d) The Servicer has agreed to indemnify, hold harmless and defend the Trustee and Certificateholders from and against any and all liability, loss, costs and expenses of the Trustee and Certificateholders resulting from any affirmative claims for recovery asserted or collected by Obligors under the Contracts. Notwithstanding any other provision of this Agreement, the obligation of the Servicer described in this Section 11.12(d) shall not terminate or be deemed released upon a Service Transfer pursuant to Article VII and shall survive termination of this Agreement. Section 11.13. Appointment of Co-Trustee or Separate Trustee. Notwithstanding any other provisions hereof, at any time, for the purpose of meeting any legal requirements of any jurisdiction having authority over the Trust, the Contracts or the Obligors, the Servicer and Trustee acting jointly shall have the power and shall execute and deliver all instruments to appoint one or more Persons approved by the Trustee to act as co-trustee or co-trustees, jointly with the Trustee, or separate trustee or separate trustees, of all or any part of the Trust, and to vest in such Person or Persons, in such capacity, such title to the Trust, or any part thereof, and, subject to the other provisions of this Section 11.13, such powers, duties, obligations, rights and trusts as the Servicer and the Trustee may consider necessary or desirable. If the Servicer shall not have joined in such appointment within 15 days after the receipt by it of a request to do so, or in case a Servicer Default shall have occurred and be continuing, the Trustee alone shall have the power to make such appointment. No co-trustee or separate trustee hereunder shall be required to meet the terms of eligibility as a successor trustee under Section 11.07 hereunder and no notice to Certificateholders of the appointment of co-trustee(s) or separate trustee(s) shall be required under Section 11.09 hereof; PROVIDED, HOWEVER, that notice of appointment of any co-trustee or separate trustee shall be provided to Moody's, and any co-trustee or separate trustee shall have a long-term debt rating from Moody's of Baa3 or higher. In the case of any appointment of a co-trustee or separate trustee pursuant to this Section 11.13, all rights, powers, duties and obligations conferred or imposed upon the Trustee shall be conferred or imposed upon and exercised or performed by the Trustee and such co-trustee or separate trustee jointly, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed (whether as Trustee hereunder or as successor to the Servicer hereunder), the Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Trust or any portion thereof in any such jurisdiction) shall be exercised and performed by such co-trustee or separate trustee at the direction of the Trustee. Any notice, request or other writing given to the Trustee shall be deemed to have been given to each of the then co-trustees and separate trustees, as effectively as if given to each of them. Every instrument appointing any co-trustee or separate trustee shall refer to this Agreement and the conditions of this Article XI. Each co-trustee and separate trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Trustee or separately, as may be provided therein, subject to all the provisions of this Agreement, specifically including every provision of - 66 - this Agreement relating to the conduct of, affecting the liability of, or affording protection to, the Trustee. Every such instrument shall be filed with the Trustee. Any co-trustee or separate trustee may, at any time, constitute the Trustee, its agent or attorney-in-fact, with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect of this Agreement on its behalf and in its name. If any co-trustee or separate trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Trustee, to the extent permitted by law, without the appointment of a new or successor trustee. Section 11.14. Representations and Warranties of Trustee. The Trustee, solely in its capacity as Trustee, makes the following representations and warranties: (a) The Trustee is duly organized and validly existing as a _________________ in good standing under the laws of the [State of __________], with trust powers and with power and authority to own its properties and to conduct its business as such properties shall be currently owned and such business is presently conducted. (b) The Trustee has the power and authority to execute and deliver this Agreement and to carry out its terms; and the execution, delivery, and performance of this Agreement has been duly authorized by the Trustee by all necessary corporate action. (c) This Agreement constitutes a legal, valid, and binding obligation of the Trustee, enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, or other similar laws affecting the enforcement of creditors' rights in general and by general principles of equity, regardless of whether such enforceability shall be considered in a proceeding in equity or at law. (d) The consummation of the transactions contemplated by this Agreement, and the fulfillment of the terms hereof, do not conflict with, result in any breach of any of the terms and provisions of, nor constitute (with or without notice or lapse of time) a default under, the charter or by-laws of the Trustee or any indenture, agreement, or other instrument to which the Trustee is a party or by which it is bound; nor result in the creation or imposition of any lien upon any of its properties pursuant to terms of any such indenture, agreement, or other instrument; nor violate any law or any order, rule, or regulation applicable to the Trustee of any court or of any Federal or state regulatory body, administrative agency, or other governmental instrumentality having jurisdiction over the Trustee or its properties. (e) There are no proceedings or investigations pending or, to the best knowledge of the Trustee, threatened before any court, regulatory body, administrative agency, or other governmental instrumentality having jurisdiction over the Trustee or its properties (i) asserting the invalidity of this Agreement, or (ii) seeking to prevent the - 67 - consummation of any of the transactions contemplated by this Agreement, or (iii) seeking any determination or ruling that might materially and adversely affect the performance by the Trustee of its obligations under, or the validity or enforceability of, this Agreement. (f) In no event shall the Trustee be required to perform, or be responsible for the manner of performance of, any of the obligations of the Servicer, or any other party, under this Agreement. (g) The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Agreement, the Trust Corpus or the Certificates, it shall not be accountable for the Trust Depositor's use of the proceeds from the Certificates, and it shall not be responsible for any statement of the Trust Depositor in the Agreement or in any document issued in connection with the sale of the Certificates or in the Certificates other than the Trustee's certificate of authentication. ARTICLE XII MISCELLANEOUS Section 12.01. Servicer Not to Resign. The Servicer shall not resign from the obligations and duties hereby imposed on it except upon a determination that the performance of its duties hereunder is no longer permissible under applicable law. Any such determination permitting the resignation of the Servicer shall be evidenced by an opinion of counsel for the Servicer to such effect delivered to the Trustee. No such resignation shall become effective until a Successor Servicer shall have assumed the responsibilities and obligations of the Servicer in accordance with Section 7.03. Section 12.02. Prohibited Transactions with Respect to the Trust. Neither the Servicer nor the Trust Depositor shall: (a) Provide credit to any Certificateholder for the purpose of enabling such Certificateholder to purchase Certificates; (b) Purchase any Certificates in an agency or trustee capacity; or (c) Except as provided herein, lend any money to the Trust. - 68 - Section 12.03. Maintenance of Office or Agency. The Trustee shall maintain an office or agency in Chicago, Illinois where Certificates may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Trustee in respect of the Certificates and this Agreement may be served. On the date hereof the Trustee's office for such purposes is located at the address set forth in Section 12.09. The Trustee will give prompt written notice to Certificateholders of any change in the location of the Certificate Register or any such office or agency. Section 12.04. Termination. This Agreement shall terminate (after distribution of all Class A Distributable Amounts and Class B Distributable Amounts due to Certificateholders pursuant to Sections 8.01 and 8.04) on the Payment Date on which the Class A Certificate Balance and Class B Certificate Balance is reduced to zero; PROVIDED, that in no event shall the trust created hereby continue beyond the expiration of 21 years from the death of the last survivor of the descendants of Joseph P. Kennedy, the late Ambassador of the United States to the Court of St. James, living on the date hereof, and PROVIDED, FURTHER, that the Servicer's and the Trust Depositor's representations and warranties and the indemnities by the Seller and Servicer shall survive termination. Upon such termination, the Trustee shall provide each Rating Agency written notice of such termination. Additionally, upon such termination any amounts remaining in the Collection Account after distribution of all amounts payable to the Certificateholders in respect of Class A Distributable Amounts and Class B Distributable Amounts and payment of all other amounts owed to the Certificateholders shall be paid to the Seller. Section 12.05. Acts of Certificateholders. (a) Except as otherwise specifically provided herein, whenever Certificateholder approval, authorization, direction, notice, consent, waiver or other action is required hereunder, such approval, authorization, direction, notice, consent, waiver or other action shall be deemed to have been given or taken on behalf of, and shall be binding upon, all Certificateholders if agreed to by Certificateholders with aggregate Fractional Interests representing 51% or more of the Trust. (b) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Agreement to be given or taken by Certificateholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Certificateholders in person or by an agent duly appointed in writing; and except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where required, to the Servicer. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Agreement and (subject to Section 11.01) conclusive in favor of the Trustee, the Servicer, the Trust Depositor and the Seller if made in the manner provided in this Section 12.05. (c) The fact and date of the execution by any Certificateholder of any such instrument or writing may be proved in any reasonable manner which the Trustee deems sufficient. - 69 - (d) The ownership of Certificates shall be proved by the Certificate Register, absent manifest error. (e) Any request, demand, authorization, direction, notice, consent, waiver or other act by a Certificateholder shall bind every holder of every Certificate issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, in respect of anything done, or omitted to be done by the Trustee, the Servicer or the Trust Depositor in reliance thereon, whether or not notation of such action is made upon such security. (f) The Trustee may require such additional proof of any matter referred to in this Section 12.05 as it shall deem necessary. Section 12.06. Calculations. Except as otherwise provided in this Agreement, all interest rate and basis point calculations under this Agreement will be made on the basis of a 360-day year comprised of twelve 30-day months and will be carried out to at least three decimal places. Section 12.07. Assignment or Delegation by Trust Depositor. Except as specifically authorized hereunder, the Trust Depositor may not convey and assign or delegate any of its rights or obligations hereunder absent the prior written consent of 100% of the Class A Certificateholders and the Class B Certificateholders, and any attempt to do so without such consent shall be void. Section 12.08. Amendment. (a) This Agreement may be amended from time to time by the Servicer, the Trust Depositor and the Trustee, without the consent of any of the Certificateholders, to correct manifest error, to cure any ambiguity, to correct or supplement any provisions herein or therein which may be inconsistent with any other provisions herein or therein, as the case may be, or to add any other provisions with respect to matters or questions arising under this Agreement which shall not be inconsistent with the provisions of this Agreement; PROVIDED, HOWEVER, that such action shall not, as evidenced by an opinion of Counsel for the Trust Depositor, adversely affect the interests of any Certificateholder. (b) This Agreement may also be amended from time to time by the Servicer, the Trust Depositor and the Trustee, with the consent of Certificateholders with aggregate Fractional Interests representing 66-2/3% or more of each Class voting as a separate Class, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of the Certificateholders; and any Servicer Default may be waived by the Certificateholders with aggregate Fractional Interests representing 51% of the Trust; PROVIDED, HOWEVER, that no such amendment or waiver described above shall (a) reduce in any manner the amount of, or delay the timing of, collections of payments on the Contracts or distributions which are required to be made on any Certificate or (b) reduce the aforesaid percentage required to consent to any such amendment, without the consent of the holders of all Certificates then outstanding. Notwithstanding anything to the contrary contained herein, the Depositor may, from time to time after the date of this Agreement, request each Rating Agency to approve a formula for determining the Reserve Fund Requisite - 70 - Amount that is different from that on the Closing Date and would result in a decrease in the Reserve Fund Requisite Amount or the manner by which the Reserve Fund is funded. In the event each Rating Agency delivers a letter to the Trustee to the effect that the use of any such new formulation will not result in a qualification, reduction or withdrawal of its then-current rating of the Class A Certificates and the Class B Certificates, then either the Reserve Fund Requisite Amount will be determined in accordance with such new formula or the manner by which the Reserve Fund is funded will be modified. (c) Promptly after the execution of any amendment or consent pursuant to this Section 12.08, the Trustee shall furnish written notification of the substance of such amendment and a copy of such amendment to each Certificateholder, and to each Rating Agency. (d) It shall not be necessary for the consent of Certificateholders under this Section 12.08 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent shall approve the substance thereof. The manner of obtaining such consents and of evidencing the authorization of the execution thereof by Certificateholders shall be subject to such reasonable requirements as the Trustee may prescribe. (e) The Trustee may, but shall not be obligated to, enter into any such amendment which affects the Trustee's own rights, duties or immunities under this Agreement or otherwise. (f) In connection with any amendment pursuant to this Section 12.08, the Trustee shall be entitled to receive an opinion of counsel to the Servicer and acceptable to the Trustee to the effect that such amendment is authorized or permitted by this Agreement. (g) Upon the execution of any amendment or consent pursuant to this Section 12.08, this Agreement shall be modified in accordance therewith, and such amendment or consent shall form a part of this Agreement for all purposes, and every holder of Certificates theretofore or thereafter issued hereunder shall be bound thereby. Section 12.09. Notices. All communications and notices pursuant hereto to the Servicer, the Trust Depositor, the Servicer, the Trustee, the Seller, Standard & Poor's, Moody's and the Placement Agent shall be in writing and delivered or mailed to it at the appropriate following address: If to the Servicer: Harley-Davidson Credit Corp. 150 South Wacker Drive Chicago, Illinois 60606 Attention: [ ] If to the Trust Depositor: Harley-Davidson Customer Funding Corp. 4150 Technology Way Carson City, Nevada 89706 Attention: President - 71 - If to the Trustee: __________________ __________________ __________________ If to the Seller: Harley-Davidson Credit Corp. 4150 Technology Way Carson City, Nevada 89706 Attention: [ ] If to Moody's: Moody's Investors Service 99 Church Street New York, New York 10007 Attention: ABS Monitoring Department If to Standard & Poor's: Standard & Poor's Ratings Services, a division of The McGraw Hill Company, 25 Broadway New York, New York 10004 Attention: Asset Backed Securities Surveillance If to the Placement Agent [ ] or at such other address as the party may designate by notice to the other parties hereto, which notice shall be effective when received. All communications and notices pursuant hereto to a Certificateholder shall be in writing and delivered or mailed at the address shown in the Certificate Register. Section 12.10. Merger and Integration. Except as specifically stated otherwise herein, this Agreement sets forth the entire understanding of the parties relating to the subject matter hereof, and all prior understandings, written or oral, are superseded by this Agreement. This Agreement may not be modified, amended, waived, or supplemented except as provided herein. Section 12.11. Headings. The headings herein are for purposes of reference only and shall not otherwise affect the meaning or interpretation of any provision hereof. Section 12.12. Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Illinois. Section 12.13. No Insolvency Petition. The Trustee and the Servicer hereby covenant and agree that, prior to the date which is one year and one day after the payment in full of the Certificates, they will not institute against, or join with any other Person in instituting against the Trust Depositor or the Trust any involuntary insolvency proceedings under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or requesting the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar - 72 - official), or for the substantial liquidation of their respective affairs. This Section 12.13 shall survive the termination of this Agreement. Section 12.14. Third Party Beneficiary. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. Except as otherwise provided in this Article XII, no other Person shall have any right or obligation hereunder. Section 12.15. No Additional Securities. Notwithstanding anything to the contrary contained herein, the Trust shall not issue any additional Certificates or issue any other form of securities. Moreover, except as provided for herein during the Funding Period or in Section 5.05(d), the Trust will not purchase, or otherwise obtain any assets after the Closing Date or reinvest amounts received with respect to the assets in the Trust. Section 12.16. No Additional Indebtedness by the Trust Depositor. The Trust Depositor hereby covenants that it shall not incur any indebtedness other than indebtedness necessary to meet its obligations under the Transaction Documents or any other similar documentation relating to any future grantor trusts in which the Trust Depositor participates. - 73 - In WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the date first above written. HARLEY-DAVIDSON CUSTOMER FUNDING CORP., as Trust Depositor By___________________________________ Name: Title: HARLEY-DAVIDSON CREDIT CORP., as Servicer By___________________________________ Name: Title: [TRUSTEE] By___________________________________ Name: Title: - 74 - EXHIBIT A-1 CERTIFICATE FOR HARLEY-DAVIDSON MOTORCYCLE CONTRACTS Harley-Davidson Motorcycle Trust ___ ___.% Certificate, Class A This Class A Certificate does not represent an obligation of or an interest in Harley-Davidson Customer Funding Corp., Harley-Davidson Credit Corp. or any affiliate thereof, except to the extent set forth in the Agreement. This Class A Certificate has not been registered under the Securities Act of 1933 or any state securities laws and may not be sold, transferred or pledged in the absence of an effective Registration Statement under such Act and laws or unless the conditions set forth in Section 9.02 of the Agreement have been complied with. The principal represented by this Class A Certificate is payable in installments, as described herein and in the Agreement. Accordingly, the unpaid Class A Certificate Balance of this Class A Certificate may be less than that set forth below. Anyone acquiring this Class A Certificate may ascertain the current unpaid Class A Certificate Balance represented by this certificate by inquiry of the Trustee. No. Class A Initial Certificate Principal Balance:$_________ Fractional Interest: ______% This certifies that ____________________________ is the registered owner of the undivided Fractional Interest represented by the Class A Initial Certificate Principal Balance set forth above in Harley-Davidson Motorcycle Trust _____ (the "TRUST"), which includes among its assets a pool of fixed-rate, simple interest Harley-Davidson motorcycle conditional sales contracts (including, without limitation, all security interests and any and all rights to receive payments which are collected pursuant thereto on or after the Initial Cutoff Date or the related Subsequent Cutoff Date in respect of Subsequent Contracts as described below) (the "CONTRACTS") and rights under the Deposit Agreement described herein. The Trust has been created pursuant to a Pooling and Servicing Agreement (the "AGREEMENT"), dated as of _______________, by and among Harley-Davidson Customer Funding Corp., as trust depositor (the "TRUST DEPOSITOR"), Harley-Davidson Credit Corp., as servicer (in such capacity, the "SERVICER"), and [______________], as Trustee of the Trust (in such capacity, the "TRUSTEE"). This Class A Certificate is one of the Class A Certificates described in the Agreement and is issued, together with the Class B Certificates, pursuant and subject to the Agreement. By acceptance of this Class A Certificate the holder assents to and becomes bound by the Agreement. The Agreement provides that the holder of a Class A Certificate agrees to report the income on the Class A Certificate in a manner consistent with the intended characterization of the Trust as a grantor trust. To the extent not defined herein, all capitalized terms have the meanings assigned to such terms in the Agreement and all Section references, unless otherwise specified, are to Sections of the Agreement. - 75 - It is contemplated by the Transaction Documents that the proceeds from the issuance of the Certificates will be used in their entirety to purchase Contracts, including the Subsequent Contracts. To the extent that proceeds from the Certificates are intended to purchase Subsequent Contracts, those proceeds shall be deposited at Closing in the Pre-Funding Account and will be withdrawn therefrom from time to time during the Funding Period only to purchase Subsequent Contracts. Any funds remaining in the Pre-Funding Account at the end of the Funding Period shall be distributed as a Special Distribution of principal to the Class A Certificateholders in an amount equal to the Class A Percentage multiplied by the amount on deposit in the Special Distribution Account. The Pre-Funding Account and the funds therein are not a part of the Trust but will be held by the Collateral Agent for the benefit of the Trustee pursuant to the Security Agreement. The Agreement contemplates, subject to its terms, payment on the fifteenth day (or if such day is not a Business Day, the next succeeding Business Day) (each, a "PAYMENT DATE") of each calendar month commencing _________, so long as the Agreement has not been terminated, by check from funds drawn from the Collection Account (or in certain instances the Special Distribution Account) to the registered Class A Certificateholder at the address appearing on the Certificate Register (or by wire transfer if the Class A Certificateholder delivers written instructions to the Trustee at least ten days prior to such Payment Date) as of the last Business Day of the immediately preceding calendar month (each such month during the term of the Agreement constituting a "DUE PERIOD"), an amount equal to the Class A Certificateholder's Fractional Interest of the Class A Principal Distributable Amount and the Class A Interest Distributable Amount (as well as, in certain instances, the Fractional Interest of Special Distributions). The final scheduled Payment Date of this Certificate is_________________, which relates to the month following the latest maturity date of the Contracts (including any Subsequent Contracts). This Class A Certificate does not represent an obligation of or an interest in the Trust Depositor, the Servicer, the Back-up Servicer or the Trustee and the Trustee in its individual capacity is not personally liable to the Class A Certificateholder for any amounts payable under this Class A Certificate or the Agreement or, except as expressly provided in the Agreement, subject to any liability under the Agreement. This Class A Certificate does not purport to summarize the Agreement and reference is made to the Agreement for information with respect to the interests, rights, benefits, obligations, proceeds and duties evidenced hereby and the rights, duties and immunities of the Trustee. Copies of the Agreement and all amendments thereto will be provided to any Class A Certificateholder free of charge upon a written request to the Trustee, at its Corporate Trust Department, 311 West Monroe Street, 12th Floor, Chicago, Illinois 60606. "CLASS A INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any Payment Date (other than the first Payment Date), the sum of (i) the product of (A) one-twelfth (or, with respect to the first Payment Date, a fraction, the numerator of which equals the number of days from and including the Closing Date to but excluding the first Payment Date and the denominator of which - 76 - equals 360) of the Class A Pass-Through Rate and (B) the Class A Certificate Balance as of the immediately preceding Payment Date (after giving effect to distributions of principal made on such immediately preceding Payment Date) or, in the case of the first Payment Date, the Class A Initial Certificate Balance plus (ii) the Class A Interest Carryover Shortfall for such Payment Date. "CLASS A PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any Payment Date, the sum of (i) the product of (a) the Class A Percentage and the (b) Monthly Principal for such Payment Date plus (ii) the Class A Principal Carryover Shortfall for such Payment Date. "AVAILABLE INTEREST" means, with respect to any Payment Date, the total (without duplication) of the following amounts received by the Servicer on or in respect of the Contracts during the related Due Period: (i) all amounts received in respect of interest on the Contracts (as well as Late Payment Penalty Fees and Extension Fees), (ii) the interest component of all Net Liquidation Proceeds, (iii) the interest component of the aggregate of the Repurchase Prices for Contracts repurchased by the Seller pursuant to Section 8.06, (iv) all Advances made by the Servicer pursuant to Section 8.03, (v) the interest component of all amounts paid by the Seller in connection with an optional repurchase of the Contracts pursuant to Section 8.08, (vi) all amounts received in respect of Carrying Charges transferred from the Interest Reserve Account pursuant to Section 8.03, and (vii) all amounts received in respect of interest, dividends, gains, income and earnings on investment of funds in the Trust Accounts as contemplated in the last sentence of Section 5.05(d). "AVAILABLE PRINCIPAL" means, with respect to any Payment Date, the total (without duplication) of the following amounts received by the Servicer on or in respect of the Contracts during the related Due Period: (i) all amounts received in respect of principal on the Contracts, (ii) the principal component of all Net Liquidation Proceeds, (iii) the principal component of the aggregate of the Repurchase Prices for Contracts repurchased by the Seller pursuant to Section 8.06, and (iv) the principal component of all amounts paid by the Seller in connection with an optional repurchase of the Contracts pursuant to Section 8.08. "CLASS A INTEREST CARRYOVER SHORTFALL" means, with respect to any Payment Date, (i) the excess of the Class A Interest Distributable Amount for the preceding Payment Date over the amount of interest that was actually distributed to Class A Certificateholders on such preceding Payment Date, plus (ii) 30 days of interest on the amount specified in clause (i), to the extent permitted by law, at the Class A Pass-Through Rate. "CLASS A PRINCIPAL CARRYOVER SHORTFALL" means, with respect to any Payment Date, (i) the excess of the Class A Principal Distributable Amount over (ii) the amount of principal that was actually distributed to Class A Certificateholders on such preceding Payment Date. "PRINCIPAL BALANCE" means (a) with respect to any Contract as of any date, an amount equal to the unpaid principal balance of such Contract as of the opening of business on the Initial Cutoff Date or related Subsequent Cutoff Date, as applicable, reduced by the sum of (x) all payments received by the Servicer as of such date allocable to principal and (y) any Cram Down Loss in respect of such Contract; PROVIDED, HOWEVER, that (i) if (x) a Contract is repurchased by the Seller pursuant to Section 5.01 of the Transfer and Sale Agreement and Section 8.06 because of a breach of representation or warranty or if (y) the Seller gives notice of its intent to purchase the Contracts in connection with an optional termination of the Trust pursuant to Section 5.02 of the Transfer and Sale Agreement and Section 8.08, in each case the Principal Balance of such Contract or Contracts shall be deemed as of the related Determination Date to be zero for the Due Period in which such event occurs and for each Due Period - 77 - thereafter, (ii) from and after the third Due Period succeeding the final Due Period in which the Obligor is required to make the final scheduled payment on a Contract, the Principal Balance, if any, of such Contract shall be deemed to be zero, and (iii) from and after the Due Period in which a Contract becomes a Liquidated Contract, the Principal Balance of such Contract shall be deemed to be zero; and (b) where the context requires, the aggregate of the Principal Balances described in clause (a) for all such Contracts. "MONTHLY PRINCIPAL" means, as to any Payment Date, the following amount calculated as of the related Determination Date: the difference between (i) the sum of (A) the Principal Balance of the Contracts as of the first day of the Due Period preceding the Due Period in which such Payment Date occurs (or, in the case of the first Payment Date, the Principal Balance of the Contracts as of the Initial Cutoff Date), plus (B) the Pre-Funded Amount on such date (or, in the case of the first Payment Date, the Pre-Funded Amount on the Closing Date) and (ii) the sum of (A) the Principal Balance of the Contracts as of the first day of the Due Period in which such Payment Date occurs, plus (B) the Pre-Funded Amount on such day, plus (C) the amount of any Special Distribution occurring from the day referred to in clause (i)(A) above to the day referred to in clause (ii)(A) above; provided, that on the Final Scheduled Payment Date, Monthly Principal shall equal the aggregate of the Class A Certificate Balance and the Class B Certificate Balance. For purposes of determining the amount in clause (ii)(C) above as to any particular Payment Date and with respect to the Due Period preceding such Payment Date, if the Funding Period ends during such Due Period and Liquidated Damages (as defined in the Security Agreement) are consequently paid from the Pre-Funding Account during such Due Period but will not be distributed as a Special Distribution until the Payment Date occurring in the following Due Period (i.e., the particular Payment Date referred to above), then the amount calculated in clause (ii)(C) for such preceding Due Period shall be deemed to include such Special Distribution in such amount (although paid as a Special Distribution on the Payment Date occurring during the following Due Period) will not be included in the next calculation of clause (ii)(C) to be made with respect to the following Due Period. On each Payment Date, the Trustee will cause to be distributed from Available Funds, Available Interest and Available Principal for such Payment Date in the Collection Account to the Certificateholders the following amounts (after the payment of the Reimbursement Amount, the Servicing Fee, the Trustee's Fee and the Back-up Servicer Fee) in the following priorities (which includes the benefit of (a) the subordination (as described below) of the Class B Percentage of Available Interest and Available Principal and (b) the Reserve Fund) (l) to the Class A Certificateholders of record, from Available Interest, an amount equal to the Class A Interest Distributable Amount for such Payment Date and, if such Available Interest is insufficient, the Class A Certificateholders will receive such shortfall first, from the Class B Percentage of Available Principal and second, if such amounts are still insufficient, from monies on deposit in the Reserve Fund; (2) to the Class B Certificateholders of record, from Available Interest, an amount equal to the Class B Interest Distributable Amount for such Payment Date and, if such Available Interest is insufficient, the Class B Certificateholders will receive such shortfall from monies on deposit in the Reserve Fund; (3) to the Class A Certificateholders of record, from Available Principal, an amount equal to the Class A Principal Distributable Amount for such Payment Date and, if such Available Principal is insufficient, the Class A - 78 - Certificateholders will receive such shortfall first, from Available Interest, and second, if such amounts are still insufficient, from monies on deposit in the Reserve Fund; and (4) to the Class B Certificateholders of record, from Available Principal, an amount equal to the Class B Principal Distributable Amount for such Payment Date and, if such Available Principal is insufficient, the Class B Certificateholders will receive such shortfall first, from Available Interest, and second, if such amounts are still insufficient, from monies on deposit in the Reserve Fund. Any Available Funds remaining in the Collection Account after such distributions will be paid to the Trust Depositor subject to the conditions of the Reserve Fund Agreement. The Seller will repurchase a Contract by depositing the Repurchase Price for such Contract into the Collection Account no later than two Business Days prior to the Determination Date which is more than ninety days after the Trust Depositor becomes aware, or should have become aware or receives written notice from the Trustee, of breach of a warranty of the Seller set forth in Article III of the Transfer and Sale Agreement that materially adversely affects the Trust's interest in such Contract, which breach has not been cured (the Seller's obligation to repurchase such Contract constituting the Certificateholders' sole remedy with respect to such a breach of a representation and warranty set forth in the Transfer and Sale Agreement). The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights of the Certificateholders under the Agreement at any time by the Servicer, the Back-up Servicer, the Trust Depositor, and the Trustee with the consent of the holders of Class A Certificates evidencing Fractional Interests representing 66-2/3% or more of such Class voting as a separate Class and holders of Class B Certificates evidencing Fractional Interests representing 66-2/3% or more of the Class B Certificates voting as a separate Class. Any such consent by the holder of this Class A Certificate shall be conclusive and binding on such holder and upon all future holders of this Class A Certificate and of any Class A Certificate issued upon the transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent is made upon this Class A Certificate. The Agreement also permits the amendment thereof, in certain limited circumstances, without the consent of any of the Certificateholders. As provided in the Agreement and subject to the limitations set forth therein, the transfer of this Class A Certificate is registrable in the Certificate Register of the Certificate Registrar upon surrender of this Class A Certificate for registration of transfer at the office or agency maintained by the Trustee in Chicago, Illinois as previously described, accompanied by a written instrument of transfer in form satisfactory to the Trustee and the Certificate Registrar duly executed by the holder thereof or his or her attorney duly authorized in writing, and upon receipt by the Trustee of either (i) evidence of the effectiveness or continued effectiveness of a registration statement under the Securities Act of 1933, as amended, with respect to this Class A Certificate, and registration under the applicable state laws, or (ii) a certificate in writing of the transferee satisfactory to the Trust Depositor regarding the facts surrounding such disposition; PROVIDED, HOWEVER, at the election of the Trust Depositor, the Trust Depositor may, in addition, if such certification is not substantially in the form of Exhibit H-2 to the Agreement, require the delivery of an opinion of counsel satisfactory to the Trustee (which shall not be at the expense of the Trust Depositor or the Trustee) that no such registration is required, and thereupon one or - 79 - more new Class A Certificates evidencing the same aggregate Fractional Interest will be issued to the designated transferee or transferees. As provided in the Agreement and subject to certain limitations therein set forth, Class A Certificates are exchangeable for new Class A Certificates of authorized denominations evidencing the same aggregate Fractional Interest as requested by the holder surrendering the same. No service charge will be made for any such registration of transfer or exchange, but the Certificate Registrar may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. The Trust Depositor, the Servicer, the Back-up Servicer, the Trustee, the Paying Agent and the Certificate Registrar and any agent of the Trust Depositor, the Servicer, the Back-up Servicer, the Trustee, the Paying Agent or the Certificate Registrar may treat the person in whose name this Certificate is registered as the owner hereof for all purposes, and neither the Trust Depositor, the Servicer, the Back-up Servicer, the Trustee, the Paying Agent, the Certificate Registrar nor any such agent shall be affected by any notice to the contrary. The obligations and responsibilities created by the Agreement and the Trust created thereby shall terminate (after distribution of all Class A Distributable Amounts and Class B Distributable Amounts) on the Payment Date on which the Class A Certificate Balance and Class B Certificate Balance is reduced to zero; PROVIDED, that in no event shall the trust created thereby continue beyond the expiration of 21 years from the death of the last survivor of the descendants of Joseph P. Kennedy, the late Ambassador of the United States to the Court of St. James, living on the date hereof. - 80 - IN WITNESS WHEREOF, Harley-Davidson Motorcycle Trust _____ has caused this Class A Certificate to be duly executed by the manual signature of a duly authorized officer of the Trustee or of a duly appointed Authenticating Agent. HARLEY-DAVIDSON MOTORCYCLE TRUST ______ DATED: __________ [_________________], NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS TRUSTEE BY________________________________ AUTHORIZED OFFICER - 81 - FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto _____________________________________________ the within ___% Certificate, Class A for Harley-Davidson Motorcycle Contracts, Harley-Davidson Motorcycle Trust _____, and does hereby irrevocably constitute and appoint _____________________________________ Attorney to transfer the said certificate on the Certificate Register maintained by the Trustee, with full power of substitution in the premises. -------------------------------- Signature - 82 - EXHIBIT A-2 CERTIFICATE FOR HARLEY-DAVIDSON MOTORCYCLE CONTRACTS Harley-Davidson Motorcycle Trust ____ _____% Certificate, Class B This Class B Certificate does not represent an obligation of or an interest in Harley-Davidson Customer Funding Corp., Harley-Davidson Credit Corp. or any affiliate thereof, except to the extent set forth in the Agreement. This Class B Certificate has not been registered under the Securities Act of 1933 or any state securities laws and may not be sold, transferred or pledged in the absence of an effective Registration Statement under such Act and laws or unless the conditions set forth in Section 9.02 of the Agreement have been complied with. Distributions on this Class B Certificate are subordinate to distributions on the Class A Certificates as described in the Agreement. The principal represented by this Class B Certificate is payable in installments, as described herein and in the Agreement. Accordingly, the unpaid Class B Certificate Balance of this Class B Certificate may be less than that set forth below. Anyone acquiring this Class B Certificate may ascertain the current unpaid Class B Certificate Balance represented by this certificate by inquiry of the Trustee. No. Class B Initial Certificate Principal Balance:$________ Fractional Interest: _______% This certifies that ______________________________ is the registered owner of the undivided Fractional Interest represented by the Class B Initial Certificate Principal Balance set forth above in Harley-Davidson Motorcycle Trust _____ (the "TRUST"), which includes among its assets a pool of fixed-rate, simple interest Harley-Davidson motorcycle conditional sales contracts (including, without limitation, all security interests and any and all rights to receive payments which are collected pursuant thereto on or after the Initial Cutoff Date or the related Subsequent Cutoff Date in respect of Subsequent Contracts as described below) (the "CONTRACTS") and rights under the Deposit Agreement described herein. The Trust has been created pursuant to a Pooling and Servicing Agreement (the "AGREEMENT"), dated as of ________, by and among Harley-Davidson Customer Funding Corp., as trust depositor (the "TRUST DEPOSITOR"), Harley-Davidson Credit Corp., as servicer (in such capacity, the "SERVICER"), and [_______________], as Trustee of the Trust (the "TRUSTEE"). This Class B Certificate is one of the Class B Certificates described in the Agreement and is issued, together with the Class A Certificates, pursuant and subject to the Agreement. By acceptance of this Class B Certificate the holder assents to and becomes bound by the Agreement. The Agreement provides that the holder of a Class B Certificate agrees to report the income on the Class B Certificate in a manner consistent with the intended characterization of the Trust as a grantor trust. To the extent not defined herein, all - 83 - capitalized terms have the meanings assigned to such terms in the Agreement and all Section references, unless otherwise specified, are to Sections of the Agreement. It is contemplated by the Transaction Documents that the proceeds from the issuance of the Certificates will be used in their entirety to purchase Contracts, including the Subsequent Contracts. To the extent that proceeds from the Certificates are intended to purchase Subsequent Contracts, those proceeds shall be deposited at Closing in the Pre-Funding Account and will be withdrawn therefrom from time to time during the Funding Period only to purchase Subsequent Contracts. Any funds remaining in the Pre-Funding Account at the end of the Funding Period shall be distributed as a Special Distribution of the Class B percentage of principal to the Class B Certificateholders in an amount equal to the Class B Percentage multiplied by the amount on deposit in the Special Distribution Account. The Pre-Funding Account and the funds therein are not a part of the Trust but will be held by the Collateral Agent for the benefit of the Trustee pursuant to the Security Agreement. The Agreement contemplates, subject to its terms, payment on the fifteenth day (or if such day is not a Business Day, the next succeeding Business Day) (each, a "PAYMENT DATE") of each calendar month commencing __________, so long as the Agreement has not been terminated, by check from funds drawn from the Collection Account (or in certain instances the Special Distribution Account) to the registered Class B Certificateholder at the address appearing on the Certificate Register (or by wire transfer, if the Class B Certificateholder delivers written instructions to the Trustee at least ten days prior to such Payment Date) as of the last Business Day of the immediately preceding calendar month (each such month during the term of the Agreement constituting a "DUE PERIOD"), an amount equal to the Class B Certificateholder's Fractional Interest of the Class B Principal Distributable Amount and the Class B Interest Distributable Amount (as well as, in certain instances, the Fractional Interest of Special Distributions). The final scheduled Payment Date of this Certificate is ____________, which relates to the month following the latest maturity date of the Contracts (including any Subsequent Contracts). This Class B Certificate does not represent an obligation of or an interest in the Trust Depositor, the Servicer, the Back-up Servicer or the Trustee and the Trustee in its individual capacity is not personally liable to the Class B Certificateholder for any amounts payable under this Class B Certificate or the Agreement or, except as expressly provided in the Agreement, subject to any liability under the Agreement. This Class B Certificate does not purport to summarize the Agreement and reference is made to the Agreement for information with respect to the interests, rights, benefits, obligations, proceeds and duties evidenced hereby and the rights, duties and immunities of the Trustee. Copies of the Agreement and all amendments thereto will be provided to any Class B Certificateholder free of charge upon a written request to the Trustee, at its Corporate Trust Department, 311 West Monroe Street, 12th Floor, Chicago, Illinois 60606. "CLASS B INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any Payment Date (other than the first Payment Date), the sum of (i) the product of (A) one-twelfth (or, with respect to the first Payment Date, a fraction, the numerator of which equals the number of days from and - 84 - including the Closing Date to but excluding the first Payment Date and the denominator of which equals 360) of the Class B Pass-Through Rate and (B) the Class B Certificate Balance as of the immediately preceding Payment Date (after giving effect to distributions of principal made on such immediately preceding Payment Date) or, in the case of the first Payment Date, the Class B Initial Certificate Balance plus (ii) the Class B Interest Carryover Shortfall for such Payment Date. "CLASS B PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any Payment Date, the sum of (i) the product of (a) the Class B Percentage and (b) the Monthly Principal for such Payment Date plus (ii) the Class B Principal Carryover Shortfall for such Payment Date. "AVAILABLE INTEREST" means, with respect to any Payment Date, the total (without duplication) of the following amounts received by the Servicer on or in respect of the Contracts during the related Due Period: (i) all amounts received in respect of interest on the Contracts (as well as Late Payment Penalty Fees and Extension Fees), (ii) the interest component of all Net Liquidation Proceeds, (iii) the interest component of the aggregate of the Repurchase Prices for Contracts repurchased by the Seller pursuant to Section 8.06, (iv) all Advances made by the Servicer pursuant to Section 8.03, (v) the interest component of all amounts paid by the Seller in connection with an optional repurchase of the Contracts pursuant to Section 8.08, (vi) all amounts received in respect of Carrying Charges transferred from the Interest Reserve Account pursuant to Section 8.03, and (vii) all amounts received in respect of interest, dividends, gains, income and earnings on investment of funds in the Trust Accounts as contemplated in the last sentence of Section 5.05(d). "AVAILABLE PRINCIPAL" means, with respect to any Payment Date, the total (without duplication) of the following amounts received by the Servicer on or in respect of the Contracts during the related Due Period: (i) all amounts received in respect of principal on the Contracts, (ii) the principal component of all Net Liquidation Proceeds, (iii) the principal component of the aggregate of the Repurchase Prices for Contracts repurchased by the Seller pursuant to Section 8.06, and (iv) the principal component of all amounts paid by the Seller in connection with an optional repurchase of the Contracts pursuant to Section 8.08. "CLASS B INTEREST CARRYOVER SHORTFALL" means, with respect to any Payment Date, (i) the excess of the Class B Interest Distributable Amount for the preceding Payment Date over the amount of interest that was actually distributed to Class B Certificateholders on such preceding Payment Date, plus (ii) 30 days of interest on the amount specified in clause (i), to the extent permitted by law, at the Class B Pass-Through Rate. "CLASS B PRINCIPAL CARRYOVER SHORTFALL" means, with respect to any Payment Date, (i) the excess of the Class B Principal Distributable Amount over (ii) the amount of principal that was actually distributed to Class B Certificateholders on such preceding Payment Date. "PRINCIPAL BALANCE" means (a) with respect to any Contract as of any date, an amount equal to the unpaid principal balance of such Contract as of the opening of business on the Initial Cutoff Date or related Subsequent Cutoff Date, as applicable, reduced by the sum of (x) all payments received by the Servicer as of such date allocable to principal and (y) any Cram Down Loss in respect of such Contract; PROVIDED, HOWEVER, that (i) if (x) a Contract is repurchased by the Seller pursuant to Section 5.01 of the Transfer and Sale Agreement and Section 8.06 because of a breach of representation or warranty or if (y) the Seller gives notice of its intent to purchase the Contracts in connection with an optional termination of the Trust pursuant to Section 5.02 of the Transfer and Sale Agreement and Section 8.08, in each case the Principal Balance of such Contract or Contracts shall be deemed as of the related Determination - 85 - Date to be zero for the Due Period in which such event occurs and for each Due Period thereafter, (ii) from and after the third Due Period succeeding the final Due Period in which the Obligor is required to make the final scheduled payment on a Contract, the Principal Balance, if any, of such Contract shall be deemed to be zero, and (iii) from and after the Due Period in which a Contract becomes a Liquidated Contract, the Principal Balance of such Contract shall be deemed to be zero; and (b) where the context requires, the aggregate of the Principal Balances described in clause (a) for all such Contracts. "MONTHLY PRINCIPAL" means, as to any Payment Date, the following amount calculated as of the related Determination Date: the difference between (i) the sum of (A) the Principal Balance of the Contracts as of the first day of the Due Period preceding the Due Period in which such Payment Date occurs (or, in the case of the first Payment Date, the Principal Balance of the Contracts as of the Initial Cutoff Date), plus (B) the Pre-Funded Amount on such date (or, in the case of the first Payment Date, the Pre-Funded Amount on the Closing Date) and (ii) the sum of (A) the Principal Balance of the Contracts as of the first day of the Due Period in which such Payment Date occurs, plus (B) the Pre-Funded Amount on such day, plus (C) the amount of any Special Distribution occurring from the day referred to in clause (i)(A) above to the day referred to in clause (ii)(A) above; provided, that on the Final Scheduled Payment Date, Monthly Principal shall equal the aggregate of the Class A Certificate Balance and the Class B Certificate Balance. For purposes of determining the amount in clause (ii)(C) above as to any particular Payment Date and with respect to the Due Period preceding such Payment Date, if the Funding Period ends during such Due Period and Liquidated Damages (as defined in the Security Agreement) are consequently paid from the Pre-Funding Account during such Due Period but will not be distributed as a Special Distribution until the Payment Date occurring in the following Due Period (i.e., the particular Payment Date referred to above), then the amount calculated in clause (ii)(C) for such preceding Due Period shall be deemed to include such Special Distribution in such amount (although paid as a Special Distribution on the Payment Date occurring during the following Due Period) will not be included in the next calculation of clause (ii)(C) to be made with respect to the following Due Period On each Payment Date, the Trustee will cause to be distributed from Available Funds, Available Interest and Available Principal for such Payment Date in the Collection Account to the Certificateholders the following amounts (after the payment of the Reimbursement Amount, the Servicing Fee, the Trustee's Fee and the Back-up Servicer Fee) in the following priorities (subject to the subordination of the Class B Certificates as described below but including the benefit of the Reserve Fund) (l) to the Class A Certificateholders of record, from Available Interest, an amount equal to the Class A Interest Distributable Amount for such Payment Date and, if such Available Interest is insufficient, the Class A Certificateholders will receive such shortfall first, from the Class B Percentage of Available Principal and second, if such amounts are still insufficient, from monies on deposit in the Reserve Fund; (2) to the Class B Certificateholders of record, from Available Interest, an amount equal to the Class B Interest Distributable Amount for such Payment Date and, if such Available Interest is insufficient, the Class B Certificateholders will receive such shortfall from monies on deposit in the Reserve Fund; (3) to the Class A Certificateholders of record, from Available Principal, an amount equal to the Class A Principal Distributable Amount for such Payment Date and, if such Available - 86 - Principal is insufficient, the Class A Certificateholders will receive such shortfall first, from Available Interest, and second, if such amounts are still insufficient, from monies on deposit in the Reserve Fund; and (4) to the Class B Certificateholders of record, from Available Principal, an amount equal to the Class B Principal Distributable Amount for such Payment Date and, if such Available Principal is insufficient, the Class B Certificateholders will receive such shortfall first, from Available Interest, and second, if such amounts are still insufficient, from monies on deposit in the Reserve Fund. Any Available Funds remaining in the Collection Account after such distributions will be paid to the Trust Depositor subject to the conditions of the Reserve Fund Agreement. The Seller will repurchase a Contract by depositing the Repurchase Price for such Contract into the Collection Account no later than two Business Days prior to the Determination Date which is more than ninety days after the Trust Depositor becomes aware, or should have become aware or receives written notice from the Trustee, of breach of a warranty of the Seller set forth in Article III of the Transfer and Sale Agreement that materially adversely affects the Trust's interest in such Contract, which breach has not been cured (the Seller's obligation to repurchase such Contract constituting the Certificateholders' sole remedy with respect to such a breach of a representation and warranty set forth in the Transfer and Sale Agreement). The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights of the Certificateholders under the Agreement at any time by the Servicer, the Back-up Servicer, the Trust Depositor and the Trustee with the consent of the holders of Class B Certificates evidencing Fractional Interests representing 66-2/3% or more of such Class voting as a separate Class and holders of Class A Certificates evidencing Fractional Interests representing 66-2/3% or more of the Class A Certificates voting as a separate Class. Any such consent by the holder of this Class B Certificate shall be conclusive and binding on such holder and upon all future holders of this Class B Certificate and of any Class B Certificate issued upon the transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent is made upon this Class B Certificate. The Agreement also permits the amendment thereof, in certain limited circumstances, without the consent of any of the Certificateholders. As provided in the Agreement and subject to the limitations set forth therein, the transfer of this Class B Certificate is registrable in the Certificate Register of the Certificate Registrar upon surrender of this Class B Certificate for registration of transfer at the office or agency maintained by the Trustee in Chicago, Illinois as previously described, accompanied by a written instrument of transfer in form satisfactory to the Trustee and the Certificate Registrar duly executed by the holder thereof or his or her attorney duly authorized in writing, and upon receipt by the Trustee of either (i) evidence of the effectiveness or continued effectiveness of a registration statement under the Securities Act of 1933, as amended, with respect to this Class B Certificate, and registration under the applicable state laws, or (ii) a certificate in writing of the transferee satisfactory to the Trust Depositor regarding the facts surrounding such disposition; PROVIDED, HOWEVER, at the election of the Trust Depositor, the Trust Depositor may, in addition, if such certification is not substantially in the form of Exhibit H-2 to the Agreement, require the delivery of an opinion of counsel satisfactory to the Trustee (which shall not be at the expense of - 87 - the Trust Depositor or the Trustee) that no such registration is required, and thereupon one or more new Class B Certificates evidencing the same aggregate Fractional Interest will be issued to the designated transferee or transferees. As provided in the Agreement and subject to certain limitations therein set forth, Class B Certificates are exchangeable for new Class B Certificates of authorized denominations evidencing the same aggregate Fractional Interest as requested by the holder surrendering the same. No service charge will be made for any such registration of transfer or exchange, but the Certificate Registrar may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. The Trust Depositor, the Servicer, the Back-up Servicer, the Trustee, the Paying Agent and the Certificate Registrar and any agent of the Trust Depositor, the Servicer, the Back-up Servicer, the Trustee, the Paying Agent or the Certificate Registrar may treat the person in whose name this Certificate is registered as the owner hereof for all purposes, and neither the Trust Depositor, the Servicer, the Back-up Servicer, the Trustee, the Paying Agent, the Certificate Registrar nor any such agent shall be affected by any notice to the contrary. The obligations and responsibilities created by the Agreement and the Trust created thereby shall terminate (after distribution of all Class A Distributable Amounts and Class B Distributable Amounts on the Payment Date on which the Class A Certificate Balance and Class B Certificate Balance is reduced to zero; PROVIDED, that in no event shall the trust created thereby continue beyond the expiration of 21 years from the death of the last survivor of the descendants of Joseph P. Kennedy, the late Ambassador of the United States to the Court of St. James, living on the date hereof. - 88 - IN WITNESS WHEREOF, Harley-Davidson Motorcycle Trust _____ has caused this Class B Certificate to be duly executed by the manual signature of a duly authorized officer of the Trustee or of a duly appointed Authenticating Agent. HARLEY-DAVIDSON MOTORCYCLE TRUST _________ DATED:__________ [__________________], NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS TRUSTEE BY________________________________ AUTHORIZED OFFICER - 89 - FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto _____________________________________________ the within ___% Certificate, Class B for Harley-Davidson Motorcycle Contracts, Harley-Davidson Motorcycle Trust _____, and does hereby irrevocably constitute and appoint _____________________________________ Attorney to transfer the said certificate on the Certificate Register maintained by the Trustee, with full power of substitution in the premises. -------------------------------- Signature - 90 - EX-10.4 12 EXHIBIT 10.4 EXHIBIT 10.4 ================================================================================ FORM OF ADMINISTRATION AGREEMENT among HARLEY-DAVIDSON MOTORCYCLE TRUST [______], as Issuer, HARLEY-DAVIDSON CREDIT CORP., as Administrator HARLEY-DAVIDSON CUSTOMER FUNDING CORP., as Trust Depositor, and [_________________], as Indenture Trustee Dated as of [_________] ================================================================================ TABLE OF CONTENTS
SECTION 1. DUTIES OF THE ADMINISTRATOR..........................................2 SECTION 2. RECORDS..............................................................7 SECTION 3. COMPENSATION.........................................................7 SECTION 4. ADDITIONAL INFORMATION TO BE FURNISHED TO THE ISSUER.................7 SECTION 5. INDEPENDENCE OF THE ADMINISTRATOR....................................8 SECTION 6. NO JOINT VENTURE.....................................................8 SECTION 7. OTHER ACTIVITIES OF ADMINISTRATOR....................................8 SECTION 8. TERM OF AGREEMENT; RESIGNATION AND REMOVAL OF ADMINISTRATOR..........8 SECTION 9. ACTION UPON TERMINATION, RESIGNATION OR REMOVAL......................9 SECTION 10. NOTICES.............................................................10 SECTION 11. AMENDMENTS..........................................................10 SECTION 12. SUCCESSORS AND ASSIGNS..............................................11 SECTION 13. GOVERNING LAW.......................................................12 SECTION 14. HEADINGS............................................................12 SECTION 15. COUNTERPARTS........................................................12 SECTION 16. SEVERABILITY........................................................12 SECTION 17. NOT APPLICABLE TO HARLEY-DAVIDSON CREDIT IN OTHERCAPACITIES.........12 SECTION 18. LIMITATION OF LIABILITY OF OWNER TRUSTEE AND INDENTURE TRUSTEE......12 SECTION 19. THIRD-PARTY BENEFICIARY.............................................13 SECTION 20. SURVIVABILITY.......................................................13 SECTION 21. NO PETITION.........................................................13
-i- This Administration Agreement, dated as of [_________], among Harley-Davidson Motorcycle Trust [______] (the "ISSUER"), Harley-Davidson Credit Corp. (together with its successors and assigns "HARLEY-DAVIDSON CREDIT") in its capacity as administrator, the "ADMINISTRATOR"), Harley-Davidson Customer Funding Corp. (the "TRUST DEPOSITOR") and [_______________], not in its individual capacity but solely as Indenture Trustee (together with its successors and assigns, the "INDENTURE TRUSTEE"). W I T N E S S E T H: WHEREAS, the Issuer is issuing [____]% Harley-Davidson Motorcycle Contract, Class A-1 Notes, [____]% Harley-Davidson Motorcycle Contract, Class A-2 Notes and [____]% Harley-Davidson Motorcycle Contract, Class B Notes (collectively, the "NOTES") pursuant to the Indenture, dated as of the date hereof (the "INDENTURE"), between the Issuer and the Indenture Trustee (capitalized terms used herein that are not otherwise defined shall have the meanings ascribed thereto in the Indenture) [and the ___% Harley-Davidson Motorcycle Contract Certificates (the "CERTIFICATES") pursuant to the Trust Agreement (the "TRUST AGREEMENT") dated as of the date hereof between the Depositor and [_______________], as owner trustee (the "OWNER TRUSTEE")]; WHEREAS, the Issuer has entered into certain agreements in connection with the issuance of the Notes and Certificates, including (i) a Sale and Servicing Agreement, dated as of the date hereof (the "SALE AND SERVICING AGREEMENT"), among the Issuer, [______________], not in its individual capacity but as Indenture Trustee, the Trust Depositor and Harley-Davidson Credit Corp., as servicer (in such capacity, the "SERVICER"), and (ii) the Indenture (collectively referred to hereinafter as the "TRANSACTION DOCUMENTS"); WHEREAS, pursuant to the Transaction Documents, the Issuer and the Owner Trustee are required to perform certain duties in connection with (i) the Notes and the collateral therefor pledged pursuant to the Indenture (the "COLLATERAL") and (ii) the Certificates (the registered holders of the Certificates being referred to herein as the "OWNERS"); WHEREAS, the Issuer and the Owner Trustee desire to have the Administrator perform certain of the duties of the Issuer and the Owner Trustee referred to in the preceding clause and to provide such additional services consistent with the terms of this Agreement and the Transaction Documents as the Issuer and the Owner Trustee may from time to time request; and WHEREAS, the Administrator has the capacity to provide the services required hereby and is willing to perform such services for the Issuer and the Owner Trustee on the terms set forth herein; NOW, THEREAFTER, in consideration of the mutual covenants contained herein, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. DUTIES OF THE ADMINISTRATOR. (a) Duties with respect to the Indenture. (i) The Administrator agrees to perform all its duties as Administrator and the duties of the Issuer and the Owner Trustee under the Transaction Documents. In addition, the Administrator shall consult with the Owner Trustee regarding the duties of the Issuer or the Owner Trustee under the Indenture. The Administrator shall monitor the performance of the Issuer and shall advise the Owner Trustee when action is necessary to comply with the respective duties of the Issuer and the Owner Trustee under the Indenture. The Administrator shall prepare for execution by the Issuer or shall cause the preparation by other appropriate persons of, all such documents, reports, filings, instruments, certificates and opinions that it shall be the duty of the Issuer or the Owner Trustee to prepare, file or deliver pursuant to the Indenture. In furtherance of the foregoing, the Administrator shall take all appropriate action that the Issuer or the Owner Trustee is required to take pursuant to the Indenture including, without limitation, such of the foregoing as are required with respect to the following matters under the Indenture (references are to Sections of the Indenture): (A) the duty to cause the Note Register to be kept and to give the Indenture Trustee notice of any appointment of a new Note Registrar and the location, or change in location, of the Note Register (Section 2.04); (B) the notification of Noteholders of the final principal payment on their Notes (Section 2.07(b)); (C) the fixing or causing to be fixed of any special record date and the notification of the Indenture Trustee and Noteholders with respect to special payment dates, if any (Section 2.07(c)); (D) the preparation of or obtaining of the documents and instruments required for execution and authentication of the Notes and delivery of the same to the Indenture Trustee (Section 2.02); (E) the preparation, obtaining or filing of the instruments, opinions and certificates and other documents required for the release of Collateral (Section 2.12); (F) the maintenance of an office in the City of Chicago, Illinois, for registration of transfer or exchange of Notes (Section 3.02); (G) the duty to cause newly appointed Paying Agents, if any, to deliver to the Indenture Trustee the instrument specified in the Indenture regarding funds held in trust (Section 3.03); -2- (H) the direction to the Indenture Trustee to deposit monies with Paying Agents, if any, other than the Indenture Trustee (Section 3.03); (I) the obtaining and preservation of the Issuer's qualification to do business in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of the Indenture, the Notes, the collateral and each other instrument and agreement included in the Collateral (Section 3.04); (J) the preparation of all supplements and amendments to the Indenture and all financing statements, continuation statements, instruments of further assurance and other instruments and the taking of such other action as is necessary or advisable to protect the Collateral other than as prepared by the Servicer (Section 3.05); (K) the delivery of the Opinion of Counsel on the Closing Date and certain other statements as to compliance with the Indenture (Sections 3.06 and 3.09); (L) the identification to the Indenture Trustee in an Officer's Certificate of a Person with whom the Issuer has contracted to perform its duties under the Indenture (Section 3.07(b)); (M) the notification of the Indenture Trustee and each Rating Agency of a Servicer Default under the Sale and Servicing Agreement; (N) the duty to cause the Servicer to comply with Sections 4.09, 4.10, 4.11 and 5.07 and Article Five and Article Nine of the Sale and Servicing Agreement (Section 3.14); (O) the preparation and obtaining of documents and instruments required for the release of the Issuer from its obligations under the Indenture (Section 3.10(b) and Section 3.11(b)); (P) the delivery of written notice to the Indenture Trustee and each Rating Agency of each Event of Default under the Indenture and each Servicer Default by the Servicer under the Sale and Servicing Agreement (Section 3.18); (Q) the monitoring of the Issuer's obligations as to the satisfaction and discharge of the Indenture and the preparation of an Officer's Certificate and the obtaining of the Opinion of Counsel and the Independent Certificate relating thereto (Section 4.01); (R) the compliance with any written directive of the Indenture Trustee with respect to the sale of the Collateral in a commercially reasonable manner if an Event of Default shall have occurred and be continuing (Section 5.04); -3- (S) the preparation and delivery of notice to Noteholders of the removal of the Indenture Trustee and the appointment of a successor Indenture Trustee (Section 6.08); (T) the preparation of any written instruments required to confirm more fully the authority of any co-trustee or separate trustee and any written instruments necessary in connection with the resignation or removal of the Indenture Trustee or any co-trustee or separate trustee (Sections 6.08 and 6.10); (U) the furnishing of the Indenture Trustee with the names and addresses of Noteholders during any period when the Indenture Trustee is not the Note Registrar (Section 7.01); (V) the opening of one or more accounts in the Indenture Trustee's name, the preparation and delivery of Issuer Orders, Officer's Certificates and Opinions of Counsel and all other actions necessary with respect to investment and reinvestment of funds in the Trust Accounts (Sections 8.02 and 8.03); (W) the preparation of an Issuer Request and Officer's Certificate and the obtaining of an Opinion of Counsel and Independent Certificates, if necessary, for the release of the Collateral (Sections 8.04 and 8.05); (X) the preparation of Issuer Orders and the obtaining of Opinions of Counsel with respect to the execution of supplemental indentures and the mailing to the Noteholders of notices with respect to such supplemental indentures (Sections 9.01, 9.02 and 9.03); (Y) the execution and delivery of new Notes conforming to any supplemental indenture (Section 9.06); (Z) the duty to notify Noteholders of redemption of the Notes or to cause the Indenture Trustee to provide such notification (Section 10.02); (AA) the preparation and delivery of all Officer's Certificates, Opinions of Counsel and Independent Certificates with respect to any requests by the Issuer to the Indenture Trustee to take any action under the Indenture (Section 11.01(a)); (BB) the preparation and delivery of Officer's Certificates and the obtaining of Independent Certificates, if necessary, for the release of property from the lien of the Indenture (Section 11.01(b)); (CC) the notification of the Rating Agencies, upon the failure of the Issuer, the Owner Trustee or the Indenture Trustee to provide notification; -4- (DD) the preparation and delivery to Noteholders and the Indenture Trustee of any agreements with respect to alternate payment and notice provisions (Section 11.06); (EE) the recording of the Indenture, if applicable (Section 11.14); and (FF) the appointment of a successor Indenture Trustee. (ii) The Administrator will: (A) except as otherwise expressly provided in the Indenture, pay the Indenture Trustee's Fees and reimburse the Indenture Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Indenture Trustee in accordance with any provision of the Indenture (including the reasonable compensation, expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; (B) indemnify the Indenture Trustee and its agents for, and hold them harmless against, any loss, liability or expense incurred without negligence or bad faith on their part, arising out of or in connection with the acceptance or administration of the transactions contemplated by the Indenture, including the reasonable costs and expenses of defending themselves against any claim or liability in connection with the exercise or performance of any of their powers or duties under the Indenture; and (C) indemnify the Owner Trustee and its agents for, and hold them harmless against, any loss, liability or expense incurred without negligence or bad faith on their part, arising out of or in connection with the acceptance or administration of the transactions contemplated by the Trust Agreement, including the reasonable costs and expenses of defending themselves against any claim or liability in connection with the exercise or performance of any of their powers or duties under the Trust Agreement. (b) ADDITIONAL DUTIES. (i) In addition to the duties set forth in Section 1(a)(i), the Administrator shall perform such calculations and shall prepare or shall cause the preparation by other appropriate persons of, and shall execute on behalf of the Issuer or the Owner Trustee, all such documents, reports, filings, instruments, certificates and opinions that the Issuer or the Owner Trustee are required to prepare, file or deliver pursuant to the Transaction Documents or Section 5.05 of the Trust Agreement, and at the request of the Owner Trustee shall take all appropriate action that the Issuer or the Owner Trustee are required to take pursuant to the Transaction Documents. In furtherance thereof, the Owner Trustee shall, on behalf of itself and of the Issuer, execute and deliver to the Administrator and to each successor Administrator appointed pursuant to the terms hereof, one or more powers of attorney substantially in the form of EXHIBIT A hereto, -5- appointing the Administrator the attorney-in-fact of the Owner Trustee and the Issuer for the purpose of executing on behalf of the Owner Trustee and the Issuer all such documents, reports, filings, instruments, certificates and opinions. Subject to Section 5, and in accordance with the directions of the Issuer, the Administrator shall administer, perform or supervise the performance of such other activities in connection with the Collateral (including the Transaction Documents) as are not covered by any of the foregoing provisions and as are expressly requested by the Issuer and are reasonably within the capability of the Administrator. (ii) Notwithstanding anything in this Agreement or the Transaction Documents to the contrary, the Administrator shall be responsible for promptly notifying the Owner Trustee in the event that any withholding tax is imposed on the Trust's payments (or allocations of income) to an Owner as contemplated in Section 5.02(c) of the Trust Agreement. Any such notice shall specify the amount of any withholding tax required to be withheld by the Owner Trustee pursuant to such provision. (iii) Notwithstanding anything in this Agreement or the Transaction Documents to the contrary, the Administrator shall be responsible for performance of the duties of the Owner Trustee set forth in Section 5.05(a), (b), (c) and (d), the penultimate sentence of Section 5.05 and Section 5.06(a) of the Trust Agreement with respect to, among other things, accounting and reports to Owners; PROVIDED, HOWEVER, that the Owner Trustee shall retain responsibility for the distribution of the Schedule K-1s necessary to enable each Owner to prepare its federal and state income tax returns. (iv) The Administrator shall satisfy its obligations with respect to clauses (ii) and (iii) above by retaining, at the expense of the Trust payable by the Administrator, a firm of independent public accountants (the "ACCOUNTANTS") acceptable to the Owner Trustee, which shall perform the obligations of the Administrator thereunder. (v) The Administrator shall perform the duties of the Administrator specified in Section 10.02 of the Trust Agreement required to be performed in connection with the resignation or removal of the Owner Trustee, and any other duties expressly required to be performed by the Administrator under the Trust Agreement. (vi) In carrying out the foregoing duties or any of its other obligations under this Agreement, the Administrator may enter into transactions or otherwise deal with any of its Affiliates; PROVIDED, HOWEVER, that the terms of any such transactions or dealings shall be in accordance with any directions received from the Issuer and shall be, in the Administrator's opinion, no less favorable to the Issuer than would be available from unaffiliated parties. (c) Non-Ministerial Matters. -6- (i) With respect to matters that in the reasonable judgment of the Administrator are non-ministerial, the Administrator shall not take any action unless within a reasonable time before the taking of such action, the Administrator shall have notified the Owner Trustee of the proposed action and the Owner Trustee shall not have withheld consent or provided an alternative direction. For the purpose of the preceding sentence, "NON-MINISTERIAL MATTERS" shall include, without limitation: (A) the amendment of or any supplement to the Indenture; (B) the initiation of any claim or lawsuit by the Issuer and the compromise of any action, claim or lawsuit brought by or against the Issuer (other than in connection with the collection of the Contracts); (C) the amendment, change or modification of the Transaction Documents; (D) the appointment of successor Note Registrars, successor Paying Agents and successor Indenture Trustees pursuant to the Indenture or the appointment of successor Administrators or a successor Servicer, or the consent to the assignment by the Note Registrar, Paying Agent or Indenture Trustee of its obligations under the Indenture; and (E) the removal of the Indenture Trustee. (ii) Notwithstanding anything to the contrary in this Agreement, the Administrator shall not be obligated to, and shall not, (A) make any payments to the Noteholders under the Transaction Documents, (B) sell the Collateral pursuant to clause (iv) of Section 5.04 of the Indenture, (C) take any other action that the Issuer directs the Administrator not to take on its behalf or (D) take any other action which may be construed as having the effect of varying the investment of the Holders. SECTION 2. RECORDS. The Administrator shall maintain appropriate books of account and records relating to services performed hereunder, which books of account and records shall be accessible for inspection by the Issuer and the Owner Trustee at any time during normal business hours. SECTION 3. COMPENSATION. As compensation for the performance of the Administrator's obligations under this Agreement and as reimbursement for its expenses related thereto, the Administrator shall be entitled to a monthly fee which shall be solely an obligation of the Trust Depositor and shall be agreeable to the Trust Depositor and the Administrator. SECTION 4. ADDITIONAL INFORMATION TO BE FURNISHED TO THE ISSUER. The Administrator shall furnish to the Issuer from time to time such additional information regarding the Collateral as the Issuer shall reasonably request. -7- SECTION 5. INDEPENDENCE OF THE ADMINISTRATOR. For all purposes of this Agreement, the Administrator shall be an independent contractor and shall not be subject to the supervision of the Issuer or the Owner Trustee with respect to the manner in which it accomplishes the performance of its obligations hereunder. Unless expressly authorized by the Issuer, the Administrator shall have no authority to act for or represent the Issuer or the Owner Trustee in any way and shall not otherwise be deemed an agent of the Issuer or the Owner Trustee. SECTION 6. NO JOINT VENTURE. Nothing contained in this Agreement (i) shall constitute the Administrator and either of the Issuer or the Owner Trustee as members of any partnership, joint venture, association, syndicate, unincorporated business or other separate entity, (ii) shall be construed to impose any liability as such on any of them or (iii) shall be deemed to confer on any of them any express, implied or apparent authority to incur any obligation or liability on behalf of the others. SECTION 7. OTHER ACTIVITIES OF ADMINISTRATOR. Nothing herein shall prevent the Administrator or its Affiliates from engaging in other business or, in its sole discretion, from acting in a similar capacity as an administrator for any other Person or entity even though such person or entity may engage in business activities similar to those of the Issuer, the Owner Trustee or the Indenture Trustee. SECTION 8. TERM OF AGREEMENT; RESIGNATION AND REMOVAL OF ADMINISTRATOR. This Agreement shall continue in force until the dissolution of the Issuer, upon which event this Agreement shall automatically terminate. (a) Subject to Section 8(d) and Section 8(e), the Administrator may resign its duties hereunder by providing the Issuer with at least 60 days' prior written notice. (b) Subject to Section 8(d) and Section 8(e), the Issuer may remove the Administrator without cause by providing the Administrator with at least 60 days' prior written notice. (c) Subject to Section 8(d) and Section 8(e), at the sole option of the Issuer, the Administrator may be removed immediately upon written notice of termination from the Issuer to the Administrator if any of the following events shall occur: (i) the Administrator shall default in the performance of any of its duties under this Agreement and, after notice of such default, shall not cure such default within ten days (or, if such default cannot be cured in such time, shall not give within ten days such assurance of cure as shall be reasonably satisfactory to the Issuer); (ii) a court having jurisdiction in the premises shall enter a decree or order for relief, and such decree or order shall not have been vacated within 60 days, in respect of the Administrator in any involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect or appoint a receiver, liquidator, assignee, custodian, -8- trustee, sequestrator or similar official for the Administrator or any substantial part of its property or order the winding-up or liquidation of its affairs; or (iii) the Administrator shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of a receiver, liquidator, assignee, trustee, custodian, sequestrator or similar official for the Administrator or any substantial part of its property, shall consent to the taking of possession by any such official of any substantial part of its property, shall make any general assignment for the benefit of creditors or shall fail generally to pay its debts as they become due. The Administrator agrees that if any of the events specified in clauses (ii) or (iii) above shall occur, it shall give written notice thereof to the Issuer and the Indenture Trustee within seven days after the occurrence of such event. (d) No resignation or removal of the Administrator pursuant to this Section shall be effective until (i) a successor Administrator shall have been appointed by the Issuer and (ii) such successor Administrator shall have agreed in writing to be bound by the terms of this Agreement in the same manner as the Administrator is bound hereunder. (e) The appointment of any successor Administrator shall be effective only after the satisfaction of the Rating Agency Condition with respect to the proposed appointment. (f) Subject to Section 8(d) and 8(e), the Administrator acknowledges that upon the appointment of a Successor Servicer pursuant to the Sale and Servicing Agreement, the Administrator shall immediately resign and such Successor Servicer shall automatically become the Administrator under this Agreement. SECTION 9. ACTION UPON TERMINATION, RESIGNATION OR REMOVAL. Promptly upon the effective date of termination of this Agreement pursuant to Section 8 or the resignation or removal of the Administrator pursuant to Section 8(a), (b) or (c) respectively, the Administrator shall be entitled to be paid all fees and reimbursable expenses accruing to it to the date of such termination, resignation or removal. The Administrator shall forthwith upon such termination pursuant to Section 8 deliver to the Issuer all property and documents of or relating to the Collateral then in the custody of the Administrator. In the event of the resignation or removal of the Administrator pursuant to Section (a), (b) or (c), respectively, the Administrator shall cooperate with the Issuer and take all reasonable steps requested to assist the Issuer in making an orderly transfer of the duties of the Administrator. SECTION 10. NOTICES. All notices, demands, certificates, requests and communications hereunder ("notices") shall be in writing and shall be effective (a) upon receipt when sent through the U.S. mails, registered or certified mail, return receipt requested, postage prepaid, with such receipt to be effective the date of delivery indicated on the return receipt, or -9- (b) one Business Day after delivery to an overnight courier, or (c) on the date personally delivered to an Authorized Officer of the party to which sent, or (d) on the date transmitted by legible telecopier transmission with a confirmation of receipt, in all cases addressed to the recipient as follows: (i) If to the Administrator: Harley-Davidson Credit Corp. 150 South Wacker Drive, Suite 3100 Chicago, Illinois 60606 Attention: Perry A. Glassgow Telecopier No.: (312) 368-4372 (ii) If to the Trust Depositor: Harley-Davidson Customer Funding Corp. 4150 Technology Way Carson City, Nevada 89706 Telecopier No.: (775) 884-4469 (iii) If to the Indenture Trustee: ________________________________ ________________________________ ________________________________ Telecopier No.: ______________ (iv) If to the Issuer or the Owner Trustee: ________________________________ ________________________________ ________________________________ Telecopier No.: ______________ Each party hereto may, by notice given in accordance herewith to each of the other parties hereto, designate any further or different address to which subsequent notices shall be sent. SECTION 11. AMENDMENTS.(a) This Agreement may be amended from time to time by a written amendment duly executed and delivered by the parties hereto, with the written consent of the Owner Trustee but without the consent of the Securityholders, to correct manifest error, to cure any ambiguity, to correct or supplement any provisions herein which may be ambiguous or inconsistent with any other provision herein or in any other Transaction Document, as the case may be, or to add any other provisions with respect to matters or questions arising under -10- this Agreement that shall not be inconsistent with the provisions of this Agreement; PROVIDED, HOWEVER that any such action shall not, as evidenced by an Opinion of Counsel, materially and adversely affect the interests of any Securityholder. (b) This Agreement may also be amended from time to time with the consent of the Owner Trustee and the Noteholders of more than 50% of the aggregate principal amount of the Class A-1 Notes and Class A-2 Notes, voting together as a single class, or, if there are no Class A-1 Notes or Class A-2 Notes outstanding, with the consent of the Noteholders of more than 50% of the aggregate principal amount of the Class B Notes, [or, if there are no Notes outstanding, the consent of Certificateholders of more than 50% of the Certificate Balance], for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of the Noteholders or the Certificateholders; PROVIDED, HOWEVER, that no such amendment shall (x) increase or reduce in any manner the amount of, or accelerate or delay the timing of, collections of payments on the Contracts or distributions which are required to be made on any Note or Certificate, (y) change the interest rate on any Notes or Certificates which such change adversely affects the priority of payment of principal or interest made to the Noteholders or Certificateholders or (z) reduce the aforesaid percentage required to consent to any such amendment, without the consent of the Noteholders and Certificateholders then outstanding; and PROVIDED, FURTHER, that no such amendment or consent shall be effective unless each Rating Agency delivers written confirmation that such amendment or consent will not cause its then-current rating on any Class of Notes or Certificates to be qualified, reduced or withdrawn. (c) Notwithstanding the foregoing, the Administrator may not amend this Agreement without the permission of the Trust Depositor, which permission shall not be unreasonably withheld. SECTION 12. SUCCESSORS AND ASSIGNS. This Agreement may not be assigned by the Administrator unless such assignment is previously consented to in writing by the Issuer, the Indenture Trustee and the Owner Trustee and subject to the satisfaction of the Rating Agency Condition in respect thereof. An assignment with such consent and satisfaction, if accepted by the assignee, shall bind the assignee hereunder in the same manner as the Administrator is bound hereunder. Notwithstanding the foregoing, this Agreement may be assigned by the Administrator without the consent of the Issuer or the Owner Trustee to a corporation or other organization that is a successor (by merger, consolidation or purchase of assets) to the Administrator; provided that such successor organization executes and delivers to the Issuer, the Owner Trustee and the Indenture Trustee an agreement, in form and substance reasonably satisfactory to the Owner Trustee and the Indenture Trustee, in which such corporation or other organization agrees to be bound hereunder by the terms of said assignment in the same manner as the Administrator is bound hereunder. Subject to the foregoing, this Agreement shall bind any successors or assigns of the parties hereto. -11- SECTION 13. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. SECTION 14. HEADINGS. The section and subsection headings hereof have been inserted for convenience of reference only and shall not be construed to affect the meaning, construction or effect of this Agreement. SECTION 15. COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same agreement. SECTION 16. SEVERABILITY. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. SECTION 17. NOT APPLICABLE TO HARLEY-DAVIDSON CREDIT IN OTHER CAPACITIES. Nothing in this Agreement shall affect any obligation Harley-Davidson Credit may have in any other capacity. SECTION 18. LIMITATION OF LIABILITY OF OWNER TRUSTEE AND INDENTURE TRUSTEE. (a) Notwithstanding anything contained herein to the contrary, this instrument has been countersigned by [_______________] not in its individual capacity but solely in its capacity as Owner Trustee of the Issuer and in no event shall [_______________] in its individual capacity or any beneficial owner of the Issuer have any liability for the representations, warranties, covenants, agreements or other obligations of the Issuer hereunder, as to all of which recourse shall be had solely to the assets of the Issuer. For all purposes of this Agreement, in the performance of any duties or obligations of the Issuer hereunder, the Owner Trustee shall be subject to, and entitled to the benefits of, the terms and provisions of Articles Six, Seven and Eight of the Trust Agreement. (b) Notwithstanding anything contained herein to the contrary, this Agreement has been countersigned by [_______________] not in its individual capacity but solely as Indenture Trustee and in no event shall [_______________] have any liability for the representations, warranties, covenants, agreements or other obligations of the Issuer hereunder or in any of the certificates, notices or agreements delivered pursuant hereto, as to all of which recourse shall be had solely to the assets of the Issuer. -12- SECTION 19. THIRD-PARTY BENEFICIARY. The Owner Trustee is a third-party beneficiary to this Agreement and is entitled to the rights and benefits hereunder and may enforce the provisions hereof as if it were a party hereto. SECTION 20. SURVIVABILITY. The obligations of the Administrator described in Section 1(a)(ii) hereof shall survive termination of this Agreement. SECTION 21. NO PETITION. (a) The Administrator will not at any time institute against the Issuer or the Trust Depositor any bankruptcy proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Trust Certificates, the Notes, this Agreement or any of the other Transaction Documents. [signature page follows] -13- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first above written. HARLEY-DAVIDSON MOTORCYCLE TRUST [______] By: [__________________], not in its individual capacity but solely as Owner Trustee By: _____________________________________ Printed Name: _____________________ Title: ___________________________________ HARLEY-DAVIDSON CUSTOMER FUNDING CORP., as Trust Depositor By: _____________________________________ Printed Name: Perry A. Glassgow Title: Treasurer [_______________], not in its individual capacity but solely as Indenture Trustee By: _____________________________________ Printed Name: ______________________ Title: __________________________________ HARLEY-DAVIDSON CREDIT CORP., as Administrator By: _____________________________________ Printed Name: Perry A. Glassgow Title: Treasurer Signature Page to Administration Agreement EXHIBIT A LIMITED POWER OF ATTORNEY State of Illinois ) ) SS. County of Cook ) KNOW ALL PERSONS BY THESE PRESENTS, that [______________], a Delaware banking corporation (the "OWNER TRUSTEE"), whose principal executive office is located at [__________________________________] Attention: [_______________], by and through its duly elected and authorized officer, ________________________, a ___________________, on behalf of itself and of Harley-Davidson Motorcycle Trust [______] (the "TRUST") as Issuer under the Administration Agreement, dated as of [_________] (the "ADMINISTRATION AGREEMENT"), among the Trust, Harley-Davidson Customer Funding Corp., [_______________], as Indenture Trustee, and Harley-Davidson Credit Corp., as Administrator, does hereby nominate, constitute and appoint Harley-Davidson Credit Corp., a Nevada corporation, each of its officers from time to time and each of its employees authorized by it from time to time to act hereunder, jointly and each of them severally, together or acting alone, its true and lawful attorney-in-fact, for the Owner Trustee and the Issuer in their name, place and stead, in the sole discretion of such attorney-in-fact, to perform such calculations and prepare or cause the preparation by other appropriate persons of, and to execute on behalf of the Issuer or the Owner Trustee, all such documents, reports, filings, instruments, certificates and opinions that the Issuer or the Owner Trustee is required to prepare, file or deliver pursuant to the Administration Agreement, and to take any and all other action, as such attorney-in-fact may deem necessary or desirable in accordance with the directions of the Owner Trustee and in connection with its duties as Administrator or successor Administrator under the Administration Agreement. Capitalized terms used herein that are not otherwise defined shall have the meanings ascribed thereto in the Administration Agreement. The Owner Trustee hereby ratifies and confirms the execution, delivery and performance (whether before or after the date hereof) of the above-mentioned documents, reports, filings, instruments, certificates and opinions, by the attorney-in-fact and all that the attorney-in-fact shall lawfully do or cause to be done by virtue hereof. The Owner Trustee hereby agrees that no person or other entity dealing with the attorney-in-fact shall be bound to inquire into such attorney-in-fact's power and authority hereunder and any such person or entity shall be fully protected in relying on such power of authority. This Limited Power of Attorney may not be assigned without the prior written consent of the Owner Trustee. It is effective immediately and will continue until it is revoked. A-1 This Limited Power of Attorney shall be governed and construed in accordance with the laws of the State of Illinois without reference to principles of conflicts of law. Executed as of this _____ day of [_______________]. [________________], not in its individual capacity but solely as Owner Trustee By: _______________________________ Printed Name: _______________________ Title: ______________________________ CERTIFICATE OF ACKNOWLEDGMENT OF NOTARY PUBLIC State of Delaware ) ) SS. County of New Castle ) On _____________, ______ before me, __________________________________ [Insert name and title of notary] personally appeared ________________________. / / personally known to me, or / / proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ties), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature: ________________________________________ [SEAL] EX-99.1 13 EXHIBIT 99.1 EXHIBIT 99.1 FORM OF HARLEY-DAVIDSON MOTORCYCLE TRUST [___] ______________________________ AGREEMENT TO DEPOSIT CONTRACTS Between HARLEY-DAVIDSON CUSTOMER FUNDING CORP. AS TRUST DEPOSITOR AND [_________________] As Trustee dated as of [______] ________________________________ AGREEMENT TO DEPOSIT CONTRACTS TABLE OF CONTENTS
ARTICLE I DEFINITIONS..................................................1 Section 1.01. ......................................................1 ARTICLE II AGREEMENT TO DEPOSIT CONTRACTS...............................2 Section 2.01. Deposit of Contracts..................................2 Section 2.02. Remedy for Breach.....................................2 ARTICLE III CARRYING CHARGES.............................................2 Section 3.01. Payment of Carrying Charges...........................2 Section 3.02. Demand on Collateral Agent............................2 ARTICLE IV MISCELLANEOUS PROVISIONS.....................................3 Section 4.01. Amendments; Waivers...................................3 Section 4.02. Severability..........................................3 Section 4.03. Nonpetition Covenant..................................3 Section 4.04. Notices...............................................3 Section 4.05. Governing Law.........................................4 Section 4.06. Limitation of Trustee Responsibility..................5 Section 4.07. Counterparts..........................................5 Section 4.08. Headings..............................................5
i AGREEMENT TO DEPOSIT CONTRACTS dated as of [_____], between Harley-Davidson Customer Funding Corp., as Trust Depositor (the "TRUST DEPOSITOR"), and [_________________], as Trustee (the "TRUSTEE"). WITNESSETH that: WHEREAS, the Trust Depositor has acquired and, concurrently with the execution and delivery hereof and pursuant to a Pooling and Servicing Agreement, dated as of [_____] (the "POOLING AND SERVICING AGREEMENT"), has deposited, transferred, assigned and set over in trust to the Trustee certain Contract Assets in partial consideration of the Trust's issuance of the Certificates, which the Trust Depositor has sold to investor(s); and WHEREAS, the Trust Depositor has applied certain of the proceeds of such sale to pay for its purchase of Contract Assets on the Closing Date from the Seller, but will retain the remainder of the proceeds pending their application for the purchase of Subsequent Contracts from the Seller; and WHEREAS, the Trustee for the benefit of the Trust and the Certificateholders has issued the Certificates to or upon the order of the Trust Depositor, in consideration of the Trust Depositor's conveyance pursuant to the Pooling and Servicing Agreement of the Contract Assets and in consideration of the Trust Depositor's agreement hereunder to purchase and transfer the Subsequent Contracts and related assets to the Trust, and to pay certain Carrying Charges (as defined below); and WHEREAS, the Trust Depositor has agreed pursuant to the Security Agreement to secure the payment and performance of its obligations hereunder in accordance with the terms thereof; NOW, THEREFORE, in consideration of the premises and of the mutual agreements herein contained, the Trust Depositor and the Trustee agree as follows: ARTICLE I DEFINITIONS Section 1.01. Capitalized terms used in this Agreement (including in the recitals above) and not specifically defined shall have the meaning given such terms in the Pooling and Servicing Agreement. Whenever used in this Agreement, the following words and phrases shall have the following meanings: "CARRYING CHARGES" means the amount which the Trust Depositor is obligated to pay to the Trust hereunder in accordance with Section 3.01 below. "LIQUIDATED DAMAGES" means the amount which is payable as liquidated damages to the Trust hereunder in the event of the Trust Depositor's failure to timely transfer Subsequent Contracts to the Trust in accordance with Section 2.02 below. -1- ARTICLE II AGREEMENT TO DEPOSIT CONTRACTS Section 2.01. Deposit of Contracts. The Trust Depositor hereby undertakes and agrees, not later than the end of the Funding Period, to acquire from the Seller by purchase for cash pursuant to one or more Subsequent Purchase Agreements, and thereupon transfer to the Trust pursuant to one or more Subsequent Transfer Agreements, Subsequent Contracts in an aggregate Principal Balance, as of the respective Subsequent Cutoff Dates, equal to $[____] which is equal to the amount deposited with the Collateral Agent on the Closing Date in respect of the Pre-Funded Amount. The Trust Depositor shall effect such purchases from the Seller using the funds on deposit in the Pre-Funding Account in accordance with the terms of the Security Agreement. Section 2.02. Remedy for Breach. If the Trust Depositor fails to perform the obligation described in Section 2.01 in its entirety by the end of the Funding Period, the Trustee shall take remedial action upon the expiration of the Funding Period by giving written notice of non-performance to the Trust Depositor, accompanied by written demand upon the Trust Depositor for the payment of liquidated damages ("LIQUIDATED DAMAGES") hereunder in respect of such non-performance. Such Liquidated Damages shall be payable immediately upon demand. Liquidated Damages shall in all events equal the amount then on deposit in the Pre-Funding Account, and such written demand shall concurrently be made upon the Collateral Agent as provided in Section 3.03 of the Security Agreement. The Trustee shall deposit all amounts received from the Collateral Agent in respect of Liquidated Damages into the Special Distribution Subaccount established under the Pooling and Servicing Agreement. The right to payment of Liquidated Damages from the Pre-Funding Account shall be the sole remedy of the Trustee for the Trust Depositor's failure to perform its obligations as described above. ARTICLE III CARRYING CHARGES Section 3.01. Payment of Carrying Charges. The Trust Depositor hereby agrees to pay to the Trustee for the benefit of the Trust, immediately upon demand, Carrying Charges to the extent that the Trustee demands payment of such Carrying Charges in accordance with, and subject to the limitations of, Section 8.03(b) of the Pooling and Servicing Agreement. No such Carrying Charges shall be payable on or after the second Payment Date succeeding the date on which the Pre-Funded Amount shall be zero. Section 3.02. Demand on Collateral Agent. The Trust Depositor agrees that the Trustee may effect demand for payment of Carrying Charges by making demand directly upon the Collateral Agent instead of the Trust Depositor, and consents to the Collateral Agent's payment of such Carrying Charges from amounts on deposit in the Interest Reserve Account. -2- ARTICLE IV MISCELLANEOUS PROVISIONS Section 4.01. Amendments; Waivers. No amendment, modification, waiver or supplement to this Agreement or any provision of this Agreement shall in any event be effective unless the same shall have been made or consented to in writing by each of the parties hereto and the Rating Agencies shall have received written notification of such amendment modification, waiver or supplement. Section 4.02. Severability. In the event that any provision of this Agreement or the application thereof to any party hereto or to any circumstance or in any jurisdiction governing this Agreement shall, to any extent, be invalid or unenforceable under any applicable statute, regulation or rule of law, then such provision shall be deemed inoperative to the extent that it is invalid or unenforceable and the remainder of this Agreement, and the application of any such invalid or unenforceable provision to the parties, jurisdictions or circumstances other than to whom or to which it is held invalid or unenforceable, shall not be affected thereby nor shall the same affect the validity or enforceability of any other provision of this Agreement. Section 4.03. Nonpetition Covenant. Notwithstanding any prior termination of this Agreement, each of the parties hereto agrees that it shall not, prior to one year and one day after the Payment Date first occurring following the final disbursement of funds under the Security Agreement, acquiesce, petition or otherwise invoke or cause the Trust Depositor to invoke the process of the United States of America, any State or other political subdivision thereof or any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government for the purpose of commencing or sustaining a case by or against the Trust Depositor or the Trust under a Federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Trust Depositor or the Trust or all or any part of its property or assets or ordering the winding up or liquidation of the affairs of the Trust Depositor or the Trust. The parties agree that damages will be an inadequate remedy for breach of this covenant and that this covenant may be specifically enforced. Section 4.04. Notices. All notices, demands, certificates, requests and communications hereunder ("NOTICES") shall be in writing and shall be effective (a) upon receipt when sent through the U.S. mails, registered or certified mail, return receipt requested, postage prepaid, with such receipt to be effective the date of delivery indicated on the return receipt, or (b) one Business Day after delivery to an overnight courier, or (c) on the date personally delivered to the party to which sent, or (d) on the date transmitted by legible telecopier transmission with a confirmation of receipt, in all cases addressed to the recipient as follows: (i) If to the Trust Depositor: Harley-Davidson Customer Funding Corp. 4150 Technology Way Carson City, Nevada 89706 Attention: President -3- Telecopier No.: (775) 884-4469 (ii) If to the Trustee: __________________________ __________________________ __________________________ Telecopier No.: ________________ (iii) If to the Collateral Agent: __________________________ __________________________ Telecopier No.: ________________ (iv) If to Moody's: Moody's Investor's Service, Inc. 99 Church Street New York New York 10007 Attention: ABS Monitoring Department Telecopier No.: (212) 553-0344 (v) If to Standard & Poor's: Standard & Poor's Ratings Group, a division of The McGraw Hill Companies 26 Broadway - 15th Floor New York, New York 10004 Attention: Asset-Backed Securities Surveillance Telecopier No.: (212) 208-1582 A copy of each notice given hereunder to any party hereto shall also be given to (without duplication), the Trust Depositor, the Trustee and the Collateral Agent. Each party hereto may, by notice given in accordance herewith to each of the other parties hereto, designate any further or different address to which subsequent notices shall be sent. Section 4.05. Governing Law. This Agreement shall be governed by and construed, and the obligations, rights and remedies of the parties hereunder shall be determined, in accordance with, the laws of the State of Illinois. -4- Section 4.06. Limitation of Trustee Responsibility. It is expressly understood and agreed by the parties hereto that (a) [_______________] is executing this Agreement not in its individual capacity but solely in its capacity as Trustee of the Trust pursuant to the Pooling and Servicing Agreement, and (b) in no case whatsoever shall [_______________] be personally liable on, or for any loss in respect of, any of the statements, representations, warranties, covenants, agreements or obligations of the Trust (if any) hereunder, all such liability, if any, being expressly waived by the parties hereto, except and to the extent such loss is caused by gross negligence, bad faith or willful misconduct of the Trustee. Section 4.07. Counterparts. This Agreement may be executed in two or more counterparts by the parties hereto, and each such counterpart shall be considered an original and all such counterparts shall constitute one and the same instrument. Section 4.08. Headings. The headings of sections and paragraphs and the Table of Contents contained in this Agreement are provided for convenience only. They form no part of this Agreement and shall not affect its construction or interpretation. -5- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date set forth on the first page hereof. HARLEY-DAVIDSON CUSTOMER FUNDING CORP. By _______________________________ Printed Name:_____________________ Title: ___________________________ [___________________], as Trustee By ______________________________ Printed Name:____________________ Title:___________________________ -6- EX-99.2 14 EXHIBIT 99.2 EXHIBIT 99.2 FORM OF SECURITY AGREEMENT dated as of [_____] between HARLEY-DAVIDSON CUSTOMER FUNDING CORP., and [________________], as Trustee and as Collateral Agent
TABLE OF CONTENTS Security Agreement................................................................1 SECURITY AGREEMENT................................................................3 RECITALS..........................................................................3 AGREEMENTS........................................................................3 ARTICLE I.........................................................................4 DEFINITIONS.......................................................................4 ARTICLE II........................................................................6 THE COLLATERAL....................................................................6 ARTICLE III.......................................................................8 THE ACCOUNTS......................................................................8 ARTICLE IV.......................................................................12 COLLATERAL AGENT.................................................................12 ARTICLE V........................................................................16 COVENANTS OF THE TRUST DEPOSITOR.................................................16 Section 5.06. Trust Depositor Changes......................................17 ARTICLE VI.......................................................................18 [RESERVED].......................................................................18 ARTICLE VII......................................................................18 REMEDIES UPON DEFAULT............................................................18 ARTICLE VIII.....................................................................19 MISCELLANEOUS....................................................................19
-2- SECURITY AGREEMENT THIS SECURITY AGREEMENT, dated as of [_____] (the "AGREEMENT"), is by and between HARLEY-DAVIDSON CUSTOMER FUNDING CORP., a Nevada corporation (the "TRUST DEPOSITOR"), and [_______________], an Illinois banking corporation in its capacities as Trustee under the [_____] Pooling and Servicing Agreement referred to below (the "TRUSTEE") and as Collateral Agent (as defined below). RECITALS 1. [________________] (the "TRUST") is being formed contemporaneously herewith pursuant to a Pooling and Servicing Agreement, dated as of [_____] (the "POOLING AND SERVICING AGREEMENT"), by and among the parent and sole shareholder of the Trust Depositor, Harley-Davidson Credit Corp. ("HDCC") (in its capacity as Servicer), the Trust Depositor and the Trustee. 2. Pursuant to the Pooling and Servicing Agreement, the Trust Depositor is transferring to the Trust all of its right, title and interest in and to the Initial Contracts, certain related assets and certain other assets including an Agreement to Deposit Contracts, dated as of [_____] between the Trust Depositor and the Trustee for the benefit of the Trust (the "DEPOSIT AGREEMENT") in exchange for the Certificates. 3. Upon sale of the Certificates to investor(s), the Trust Depositor is applying part of the proceeds thereof to the purchase of Contract Assets relating to the Initial Contracts from HDCC (in an aggregate Principal Balance of $[____] as of the related Cutoff Date) to be concurrently transferred to the Trust on the Closing Date, but is retaining the remainder of the proceeds of such sale (in the amount of $[____]) to use for purchases of Subsequent Contracts from HDCC (or to pay Liquidated Damages) in order to satisfy its obligations to the Trust under the Deposit Agreement. 4. In order to secure the payment and performance of the Secured Obligations (as defined below) of the Trust Depositor under the Deposit Agreement, and in consideration of the Trust's issuance of the Class A Certificates and the Class B Certificates (collectively, the "SERIES CERTIFICATES") to or upon the order of the Trust Depositor, the Trust Depositor has agreed to pledge the Collateral (as defined below) to the Collateral Agent for the benefit of the Secured Party (as defined below). AGREEMENTS In consideration of the premises, and for other good and valuable consideration, the adequacy, receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: -3- ARTICLE I DEFINITIONS Section 1.01. Definitions. Unless defined in this Agreement, capitalized terms used in this Agreement (including in the recitals above) shall have the meaning given such terms in the Pooling and Servicing Agreement. The following terms shall have the following respective meanings: "Accounts" means, collectively, the Pre-Funding Account and the Interest Reserve Account, or either of them as the context requires. "Authorized Officer" means, (i) with respect to the Trustee or the Collateral Agent, any Vice President or Trust Officer thereof, (ii) with respect to HDCC, the President or any Vice President thereof, and (iii) with respect to the Trust Depositor, the President or any Vice President thereof. "COLLATERAL" has the meaning specified in Section 2.01(a) hereof. "COLLATERAL AGENT" means, initially, [_______________], in its capacity as collateral agent on behalf of the Secured Party, including its successors in interest, until a successor Person shall have become the Collateral Agent pursuant to Section 4.05 hereof, and thereafter "COLLATERAL AGENT" shall mean such successor Person. "DEFAULT" means, at any time, any failure by the Trust Depositor to make payment or render performance when due hereunder or under the Deposit Agreement. "ELIGIBLE INVESTMENTS" has the meaning given such term in the Pooling and Servicing Agreement, but with references, respectively, to the Trustee and the Trust in the definition thereof contained therein being deemed, for purposes of this Agreement, to be references to, respectively, the Collateral Agent and (collectively) the Interest Reserve Account and Pre-Funding Account. "HDCC" means Harley Davidson Credit Corp., a Nevada corporation. "Interest Reserve Account" has the meaning given such term in Section 3.01 below. "LIEN" means, as applied to the property or assets (or the income, proceeds, products, rents or profits therefrom) of any Person, in each case whether the same is consensual or nonconsensual or arises by contract, operation of law, legal process or otherwise: (a) any mortgage, lien, pledge, attachment, charge, lease, conditional sale or other title retention agreement, or other security interest or encumbrance of any kind; or (b) any arrangement, express or implied, under which such property or assets (and/or such income, proceeds, products, rents or profits) are transferred, sequestered or otherwise identified for the purpose of subjecting or making available the same for payment of debt or performance of any other obligation in priority to the payment of the general, unsecured creditors of such Person. -4- "PRE-FUNDING ACCOUNT" has the meaning given such term in Section 3.01 below. "PRINCIPAL BALANCE" with respect to a Contract or Contracts in the aggregate, has the meaning given such term in the [_____] Pooling and Servicing Agreement. "SECURED OBLIGATIONS" means all obligations and amounts of the Trust Depositor owed or owing at any time hereunder or under the Deposit Agreement. "SECURED PARTY" means the Trustee for the benefit of the Trust. "SECURITY INTERESTS" means the security interest and Lien in the Collateral granted pursuant to Section 2.01 hereof. "QUALIFIED ELIGIBLE INVESTMENTS" means Eligible Investments acquired by the Collateral Agent in its name and in the capacity of Collateral Agent hereunder, which are held by the Collateral Agent in the Pre-Funding Account or the Interest Reserve Account and with respect to which (a) the Collateral Agent has noted the Secured Party's interest therein on its books and records, and (b) the Collateral Agent has purchased such investments for value without notice of any adverse claim thereto (and, if such investments are securities or other financial assets or interests therein, within the meaning of Section 8-102 of the UCC as enacted in Illinois, without acting in collusion with a securities intermediary in violating such securities intermediary's obligations to entitlement holders in such assets, under Section 8-504 of such UCC, to maintain a sufficient quantity of such assets in favor of such entitlement holders), and (c) either (i) such investments are in the possession of the Collateral Agent, or (ii) such investments, (A) if certificated securities and in bearer form, have been delivered to the Collateral Agent, or in registered form, have been delivered to the Collateral Agent and either registered by the issuer in the name of the Collateral Agent or endorsed by effective endorsement to the Collateral Agent or in blank; (B) if uncertificated securities, the ownership of which has been registered to the Collateral Agent on the books of the issuer thereof (or another person, other than a securities intermediary, either becomes the registered owner of the uncertified security on behalf of the Collateral Agent or, having previously become the registered owner, acknowledges that it holds for the Collateral Agent); or (C) if securities entitlements (within the meaning of Section 8-102 of the UCC as enacted in Illinois) representing interests in securities or other financial assets (or interests therein) held by a securities intermediary (within the meaning of said Section 8-102), a securities intermediary indicates by book entry that a security or other financial asset has been credited to the Collateral Agent's securities account with such securities intermediary. Any such Qualified Eligible Investment may be purchased by or through the Collateral Agent or any of its affiliates. "TRUSTEE TERMINATION DATE" means the date on which the Trustee shall have received, as Trustee for the holders of the Certificates, payment and performance in full of all Secured Obligations hereunder. "UNIFORM COMMERCIAL CODE" or "UCC" means the Uniform Commercial Code in effect in the relevant jurisdiction, as the same may be amended from time to time. Section 1.02. Rules of Interpretation. The terms "HEREOF," "HEREIN" or "HEREUNDER," unless otherwise modified by more specific reference, shall refer to this Agreement in its -5- entirety. Unless otherwise indicated in context, the terms "ARTICLE," "SECTION," "APPENDIX," "EXHIBIT" or "ANNEX" shall refer to an Article or Section of, or Appendix, Exhibit or Annex to, this Agreement. The definition of a term shall include the singular, the plural, the past, the present, the future, the active and the passive forms of such term. ARTICLE II THE COLLATERAL Section 2.01. Grant of Security Interest by the Trust Depositor. (a) In order to secure the performance of the Secured Obligations, the Trust Depositor hereby pledges, assigns, grants, transfers and conveys to the Collateral Agent, on behalf of and for the benefit of the Secured Party to secure such Secured Obligations, a lien on and security interest in (which lien and security interest is intended to be prior to all other Liens), all of its right, title and interest in and to the following (all being collectively referred to herein as the "COLLATERAL"): (i) the Pre-Funding Account established pursuant to Section 3.01 hereof (including, without limitation, the initial deposit of $[____] (the "INITIAL PRE-FUNDED AMOUNT") therein on the Closing Date, and all additional monies, checks, securities, investments and other items or documents at any time held in or evidencing the Pre-Funding Account); (ii) the Interest Reserve Account established pursuant to Section 3.01 hereof (including, without limitation, the initial deposit of $[____] therein by the Trust Depositor on the Closing Date, and all additional monies, checks, securities, investments and other items or documents at any time held in or evidencing the Interest Reserve Account); (iii) all of the Trust Depositor's right, title and interest in and to investments made with proceeds of the property described in clauses (i) and (ii) above; and (iv) all distributions, revenues, products, substitutions, benefits, profits and proceeds, in whatever form, of any of the foregoing. (b) In order to effectuate the provisions and purposes of this Agreement, including for the purpose of perfecting the security interests granted hereunder, the Trust Depositor represents and warrants that it has, prior to (or coterminously with) the execution of this Agreement, executed and filed (or submitted for filing) an appropriate Uniform Commercial Code financing statement in Nevada and Illinois sufficient to assure that the Collateral Agent, as agent for the Secured Party, has a first priority perfected security interest in all Collateral which can be perfected by the filing of a financing statement. The Trust Depositor agrees and acknowledges that the Collateral Agent is to have "control" (within the meaning of Section 8-102 of the UCC as enacted in Illinois) of Collateral comprised of "Investment Property" (within the meaning of Section 9-115 of the UCC as enacted in Illinois) for all purposes of this Agreement. Section 2.02. Priority. The Trust Depositor intends the security interests in favor of the Secured Party to be prior to all other Liens in respect of the Collateral, and the Trust Depositor -6- shall take all actions necessary to obtain and maintain, in favor of the Collateral Agent, for the benefit of the Secured Party's, a first lien on and a first priority, perfected security interest in the Collateral. Subject to the provisions hereof, the Collateral Agent for the benefit of the Secured Party shall have all of the rights, remedies and recourse with respect to the Collateral afforded a secured party under the Uniform Commercial Code, and all other applicable law in addition to, and not in limitation of, the other rights, remedies and recourse granted to the Collateral Agent for the benefit of the Secured Party by this Agreement or any other law relating to the creation and perfection of liens on, and security interests in, the Collateral. Section 2.03. Trust Depositor Remains Liable. The Security Interest is granted as security only and shall not (i) transfer or in any way affect or modify, or relieve the Trust Depositor from, any obligation to perform or satisfy any term, covenant, condition or agreement to be performed or satisfied by the Trust Depositor under or in connection with this Agreement or any other Transaction Document to which it is a party or (ii) impose any obligation on any of the Secured Party or the Collateral Agent to perform or observe any such term, covenant, condition or agreement or impose any liability on any of the Secured Party or the Collateral Agent for any act or omission on its part relative thereto or for any breach of any representation or warranty on its part contained therein or made in connection therewith, except, in each case, to the extent provided herein and in the other Transaction Documents. Section 2.04. Maintenance of Collateral. (a) SAFEKEEPING. The Collateral Agent on behalf of and for the benefit of the Secured Party agrees to maintain the Collateral received by it (or evidence thereof, in the case of book-entry securities in the name of the Collateral Agent) and all records and documents relating thereto at the office of the Collateral Agent specified in Section 8.06 hereof or such other address within the State of Illinois (unless all filings have been made or other action taken to continue the perfection of the security interest in the Collateral to the extent such security interest can be perfected by filing a financing statement or taking such other action, as evidenced by an Opinion of Counsel delivered to the Trustee). The Collateral Agent shall keep all Collateral and related documentation in its possession separate and apart from all other property that it is holding in its possession and from its own general assets and shall maintain accurate records pertaining to the initial deposits to the Accounts, the Accounts themselves and the Qualified Eligible Investments therein included in the Collateral in such a manner as shall enable the Collateral Agent and the Secured Party to verify the accuracy of such record-keeping. The Collateral Agent's books and records shall at all times show that the Collateral is held by the Collateral Agent as agent of the Secured Party and is not the property of the Collateral Agent. The Collateral Agent will promptly report to the Secured Party and the Trust Depositor any failure on its part to hold the Collateral as provided in this Section 2.04(a) and will promptly take appropriate action to remedy any such failure. (b) ACCESS. The Collateral Agent shall permit the Secured Party, or its duly authorized representatives, attorneys, auditors or designees, to inspect the Collateral in the possession of or otherwise under the control of the Collateral Agent pursuant hereto at such reasonable times during normal business hours as any such Secured Party may reasonably request upon not less than one Business Day's prior written notice. The costs and expenses associated with any such inspection will be paid by the party making such inspection. -7- Section 2.05. Termination and Release of Rights. Upon the occurrence of both (i) the termination of the Funding Period and the payment (and receipt by the Trust) of all associated Liquidated Damages or, if earlier, upon the exhaustion of the Pre-Funding Account in its entirety for the purpose of acquiring Subsequent Contracts from HDCC at or prior to the termination of the Funding Period, (ii) the elapsing of a Payment Date following the event described in clause (i), and (iii) the application of such funds as provided under the Pooling and Servicing Agreement, the rights, remedies, powers, duties, authority and obligations conferred upon the Collateral Agent for the benefit of the Secured Party pursuant to this Agreement in respect of the Collateral shall terminate and be of no further force and effect and all rights, remedies, powers, duties, authority and obligations of the Collateral Agent for the benefit of the Secured Party with respect to such Collateral shall be automatically released. The Secured Party in such event agrees, at the expense of the Trust Depositor, to execute and deliver such instruments as the Trust Depositor may reasonably request to effectuate such release, and any such instruments so executed and delivered shall be fully binding on the Secured Party. Section 2.06. Non-Recourse Obligations of Trust Depositor. Notwithstanding anything herein or in the other Transaction Documents to the contrary, the parties hereto agree that the obligations of the Trust Depositor hereunder (without limiting the obligation to apply distributions from the respective Accounts hereunder in accordance with Section 3.03) shall be recourse only to the extent of the Collateral available hereunder. The Trust Depositor agrees that it shall not declare or make payment of (i) any dividend or other payment on or in respect of any shares of its capital stock or (ii) any payment on account of the purchase, redemption, retirement or acquisition of (x) any shares of its capital stock or (y) any option, warrant or other right to acquire shares of its capital stock, unless (in each case) at the time of such declaration or payment (and after giving effect thereto) no amount payable by the Trust Depositor under any Transaction Document is then due and owing but unpaid. Nothing contained herein shall be deemed to limit the rights of the Certificateholders under any other Transaction Document. ARTICLE III THE ACCOUNTS Section 3.01......Establishment of Accounts; Initial Deposits into Accounts. (a) On or prior to the Closing Date, the Trust Depositor shall direct the Collateral Agent to establish, and the Collateral Agent shall establish, in its name and at its office or at another depository institution or trust company, separate Eligible Accounts, designated respectively the "Harley-Davidson Customer Funding Corp. Pre-Funding Account - [ ] - [_______________], as Collateral Agent for the benefit of the Secured Party" (such account being the "PRE-FUNDING ACCOUNT") and the "Harley-Davidson Customer Funding Corp. Interest Reserve Account - [ ] - [_______________], as Collateral Agent for the Secured Party" (such account being the "INTEREST RESERVE ACCOUNT"). All Accounts established under this Agreement shall be -8- maintained at the same depository institution (which depository institution may be changed by the Collateral Agent from time to time in accordance with Section 3.04 of this Agreement). (b) No withdrawals may be made of funds in any Account except as provided in Section 3.03 of this Agreement. Except as specifically provided in this Agreement, funds in any Account shall not be commingled with funds in any other account or accounts established with respect to the Certificates, another of trust certificates, or with any other moneys. All moneys deposited from time to time in such Accounts and all investments made with such moneys shall be held by the Collateral Agent as part of the Collateral hereunder. (c) On the Closing Date, the Collateral Agent shall deposit the initial Pre-Funded Amount, if any, received from the Trust Depositor into the Pre-Funding Account, and shall deposit any amounts received from the Trust Depositor in respect of the Interest Reserve Amount in the Interest Reserve Account. (d) Each Account shall be separate from the Trust and amounts on deposit therein will not constitute a part of the Trust Corpus. The Accounts shall be maintained by the Collateral Agent at all times separate and apart from any other account of the Trust Depositor, HDCC, the Servicer or the Trust. All income or loss on investments of funds in any Account shall be reported by the Trust Depositor as taxable income or loss of the Trust Depositor. Section 3.02. Investments. (a) The Collateral Agent shall invest and reinvest funds which may at any time be held in any Account established hereunder, at the written direction (which may include, subject to the provisions hereof, general standing instructions) of the Trust Depositor or its designee received by the Collateral Agent by 1:00 P.M. New York City time on the Business Day prior to the date on which such investment shall be made, in one or more Qualified Eligible Investments. If no written direction with respect to any portion of such Account is received by the Collateral Agent, the Collateral Agent shall invest such funds overnight in such Qualified Eligible Investments as the Collateral Agent may select, provided that the Collateral Agent shall not be liable for any loss or absence of income resulting from such investment. (b) Each investment made pursuant to this Section 3.02 on any date shall mature not later than (i) in the case of the Interest Reserve Account, the Business Day immediately preceding the Payment Date next succeeding the day such investment is made, and (ii) in the case of the Pre-Funding Account, the Business Day immediately preceding a Subsequent Transfer Date or the end of the Funding Period; PROVIDED that any investment of funds held in any Account maintained with the Collateral Agent (which shall be qualified as a Qualified Eligible Investment) in any investment as to which the Collateral Agent in its individual capacity is the obligor (including any repurchase agreement on which the Collateral Agent in its commercial capacity is liable as principal) may mature upon the succeeding Payment Date, Subsequent Transfer Date or end of the Funding Period, as the case may be, rather than on the Business Day immediately preceding such dates. (c) Subject to the other provisions hereof, the Collateral Agent shall have sole control over each Qualified Eligible Investment and the income thereon, and any certificate or other instrument evidencing any such investment, if any, shall be delivered directly to the Collateral -9- Agent or its agent, together with each document of transfer, if any, necessary to transfer title to such investment to the Collateral Agent in a manner which complies with Section 2.04 and the requirements of the definition of "Qualified Eligible Investments" herein. (d) If amounts on deposit in any Account are at any time invested in a Qualified Eligible Investment payable on demand, the Collateral Agent shall (i) consistent with any notice required to be given thereunder, demand that payment thereon be made on the last day such Qualified Eligible Investment is permitted to mature under the provisions hereof and (ii) demand payment of all amounts due thereunder promptly upon receipt of written notice from the Trustee to the effect that such investment does not constitute a Qualified Eligible Investment. (e) Subject to Section 4.03 hereof, the Collateral Agent shall not be liable by reason of any insufficiency in any Account resulting from any loss on any Qualified Eligible Investment included therein except for losses attributable to the Collateral Agent's failure to make payments on Qualified Eligible Investments as to which the Collateral Agent, in its individual capacity, is obligated. Section 3.03. Distributions from Accounts. All investment earnings realized in respect of amounts in the Pre-Funding Account shall be deposited when and as received in the Interest Reserve Account, such that the Pre-Funded Amount shall never exceed the amount initially deposited into the Pre-Funding Account on the Closing Date. Following receipt from the Trust Depositor of an Addition Notice, and upon further receipt of a written demand from the Trust Depositor for a disbursement of funds from the Pre-Funding Account to be made on or before the date on which the Funding Period terminates (which written demand must be delivered not later than one Business Day prior to the requested date of funding, and must be accompanied by the written consent of the Trustee), the Collateral Agent will disburse the amount demanded from the Pre-Funding Account to HDCC upon the order of the Trust Depositor for the purpose of purchasing Subsequent Contracts from HDCC pursuant to a Subsequent Purchase Agreement. With respect to amounts still remaining on deposit in the Pre-Funding Account on the date upon which the Funding Period ends (and provided a timely written demand for funding as described above has not been received requesting funding on such date), and upon receipt from the Trustee of a written demand for payment in respect of Liquidated Damages, the Collateral Agent shall immediately disburse all funds remaining in the Pre-Funding Account to the Trustee for deposit in the Special Distribution Account maintained by the Trustee. With respect to amounts on deposit in the Interest Reserve Account, the Collateral Agent shall disburse from such funds to the Trustee immediately upon receipt of the Trustee's written demand therefor, the amount specified in such demand in respect of Carrying Charges in accordance with Section 8.03(b) of the Pooling and Servicing Agreement. In addition, on the Payment Date with respect to which such disbursement of Carrying Charges was made, and following such disbursement and the distribution thereof pursuant to the [_____] Pooling and Servicing Agreement, the Collateral Agent shall release to the Trust Depositor, free and clear of the Lien and security interest established hereunder, an amount equal to the excess (if any) of the Interest Reserve Amount at such time over the Requisite Interest Reserve Amount for such Payment Date. In the event that (i) the Funding Period has terminated, (ii) all amounts on deposit in the Pre-Funding Account have been disbursed, (iii) a Payment Date has elapsed following the occurrence of both (i) and (ii), and (iv) all amounts referred to in clause (ii) have been applied in accordance with the Pooling and Servicing Agreement, then any amounts remaining in the Interest Reserve Account -10- shall be distributed to the Trust Depositor free and clear of the Lien and security interest established hereunder. Section 3.04. General Provisions Regarding Accounts. (a) Promptly upon the establishment (initially or upon any relocation) of an Account hereunder, the Collateral Agent shall advise the Trust Depositor and the Secured Party in writing of the name and address of the depository institution or trust company where such Account has been established (if not [_______________] or any successor Collateral Agent in its commercial banking capacity), the name of the officer of the depository institution who is responsible for overseeing such Account, the account number and the individuals whose names appear on the signature cards for such Account. The Trust Depositor shall cause each such depository institution or trust company to execute a written agreement, in form and substance satisfactory to the Trustee, waiving, and the Collateral Agent by its execution of this Agreement hereby waives (except to the extent expressly provided herein), except for amounts or fees due the Collateral Agent hereunder in each case to the extent permitted under applicable law, (i) any banker's or other statutory or similar Lien, and (ii) any right of set-off or other similar right under applicable law with respect to such Account and any other Account and agreeing, and the Collateral Agent by its execution of this Agreement hereby agrees, to notify the Trust Depositor, the Collateral Agent, and the Secured Party of any charge or claim against or with respect to such Account. The Collateral Agent shall give the Trust Depositor and the Secured Party at least ten Business Days' prior written notice of any change in the location of such Account or in any related account information. If the Collateral Agent changes the location of any Account, it shall change the location of each other Account, so that all Accounts shall at all times be located at the same depository institution. Anything herein to the contrary notwithstanding, unless otherwise consented (not to be unreasonably withheld) to by the Secured Party in writing, the Collateral Agent shall have no right to change the location of any Account. (b) Upon the written request of the Secured Party or the Trust Depositor and at the expense of the Trust Depositor, the Collateral Agent shall cause, at the expense of the Trust Depositor, the depository institution at which any Account is located to forward to the requesting party copies of all monthly account statements for such Account. (c) If at any time any Account ceases to be an Eligible Account, the Collateral Agent shall, upon obtaining actual knowledge of such event, notify the Secured Party of such fact and shall establish within ten Business Days of such determination, in accordance with paragraph (a) of this Section, a successor Account thereto, which shall be an Eligible Account, at another depository institution acceptable to the Secured Party and shall establish successor Accounts with respect to all other Accounts, each of which shall be an Eligible Account, at the same depository institution. (d) No passbook, certificate of deposit or other similar instrument evidencing an Account shall be issued, and all contracts, receipts and other papers, if any, governing or evidencing an Account shall be held by the Collateral Agent. Section 3.05. Reports by the Collateral Agent. The Collateral Agent shall report to the Trust Depositor, the Trustee and the Servicer on a monthly basis no later than each Payment Date with respect to the amount on deposit in each Account and the identity of the investments -11- included therein as of the last day of the related Due Period. The Collateral Agent shall provide accountings of deposits into and withdrawals from the Accounts, and of the investments made therein, upon the written request of the Trustee, Servicer and the Trust Depositor. ARTICLE IV COLLATERAL AGENT Section 4.01......Appointment and Powers. Subject to the terms and conditions hereof, the Secured Party hereby appoints [_______________] as the Collateral Agent with respect to the Collateral, and [_______________] hereby accepts such appointment and agrees to act as Collateral Agent with respect to the Collateral for the Secured Party, to maintain custody and possession of such Collateral (except as otherwise provided hereunder) and to perform the other duties of the Collateral Agent in accordance with the provisions of this Agreement, and the Collateral Agent in accepting such appointment affirms that it is not acting as an agent for HDCC or the Trust Depositor for such purposes. The Secured Party hereby authorizes the Collateral Agent to take such action on its behalf, and to exercise such rights, remedies, powers and privileges hereunder, as the Secured Party may in writing direct and as are specifically authorized to be exercised by the Collateral Agent by the terms hereof, together with such actions, rights, remedies, powers and privileges as are reasonably incidental thereto. The Collateral Agent shall act upon and in compliance with the written instructions of the Secured Party delivered pursuant to this Agreement promptly following receipt of such written instructions; provided that the Collateral Agent shall not act in accordance with any instructions (i) which are not authorized by, or in violation of the provisions of, this Agreement, (ii) which are in violation of any applicable law, rule or regulation or (iii) for which the Collateral Agent has not received reasonable indemnity. Section 4.02. Performance of Duties. The Collateral Agent shall have no duties or responsibilities except those expressly set forth in this Agreement and the other Transaction Documents to which the Collateral Agent is a party or, subject to Section 4.01 above, as directed in writing by the Secured Party in accordance with this Agreement. The Collateral Agent shall not be required to take any discretionary actions hereunder except at the written direction and with the indemnification of the Secured Party. Section 4.03. Limitation on Liability. Neither the Collateral Agent nor any of its directors, officers or employees, shall be liable for any action taken or omitted to be taken by it or them hereunder, or in connection herewith, except that the Collateral Agent shall be liable for its negligence, bad faith or willful misconduct; nor shall the Collateral Agent be responsible for the validity, effectiveness, value, sufficiency or enforceability against the Trust Depositor of this Agreement or any of the Collateral (or any part thereof). Notwithstanding any term or provision of this Agreement, the Collateral Agent shall incur no liability to the Trust Depositor or the Secured Party for any action taken or omitted by the Collateral Agent in connection with the Collateral, except for the negligence or willful misconduct on the part of the Collateral Agent, and, further, shall incur no liability to the Secured Party except for negligence or willful misconduct in carrying out its duties to the Secured Party. Subject to Section 4.04, the Collateral Agent shall be protected and shall incur no liability to any such party in relying upon the -12- accuracy, acting in reliance upon the contents, and assuming the genuineness of any notice, demand, certificate, signature, instrument or other document reasonably believed by the Collateral Agent to be genuine and to have been duly executed by the appropriate signatory, and (absent actual knowledge to the contrary) the Collateral Agent shall not be required to make any independent investigation with respect thereto. The Collateral Agent shall at all times be free independently to establish to its reasonable satisfaction, but shall have no duty to independently verify, the existence or nonexistence of facts that are a condition to the exercise or enforcement of any right or remedy hereunder or under any of the Transaction Documents. The Collateral Agent may consult with counsel, and shall not be liable for any action taken or omitted to be taken by it hereunder in good faith and in accordance with the written advice of such counsel. The Collateral Agent shall not be under any obligation to exercise any of the remedial rights or powers vested in it by this Agreement or to follow any direction from the Secured Party unless it shall have received reasonable security or indemnity satisfactory to the Collateral Agent against the costs, expenses and liabilities which might be incurred by it. Section 4.04. Reliance upon Documents. In the absence of bad faith or negligence on its part, the Collateral Agent shall be entitled to rely on any communication, instrument, paper or other document reasonably believed by it to be genuine and correct and to have been signed or sent by the proper Person or Persons and shall have no liability in acting, or omitting to act, where such action or omission to act is in reasonable reliance upon any statement or opinion contained in any such document or instrument. Section 4.05. Successor Collateral Agent. (a) MERGER. Any Person into which the Collateral Agent may be converted or merged, or with which it may be consolidated, or to which it may sell or transfer its trust business and assets as a whole or substantially as a whole, or any Person resulting from any such conversion, merger, consolidation, sale or transfer to which the Collateral Agent is a party, shall (provided it is otherwise qualified to serve as the Collateral Agent hereunder) be and become a successor Collateral Agent hereunder and be vested with all of the title to and interest in the Collateral and all of the trusts, powers, discretions, immunities, privileges and other matters as was its predecessor without the execution or filing of any instrument or any further act, deed or conveyance on the part of any of the parties hereto, anything herein to the contrary notwithstanding, except to the extent, if any, that any such action is necessary to perfect, or continue the perfection of, the security interest of the Secured Party in the Collateral. (b) RESIGNATION. The Collateral Agent and any successor Collateral Agent may resign only (i) upon a determination that by reason of a change in legal requirements the performance of its duties under this Agreement would cause it to be in violation of such legal requirements in a manner which would result in a material adverse effect on the Collateral Agent, and the Secured Party does not elect to waive the Collateral Agent's obligation to perform those duties which render it legally unable to act or elect to delegate those duties to another Person, or (ii) with the prior written consent of the Secured Party not to be unreasonably withheld. The Collateral Agent shall give not less than 60 days' prior written notice of any such permitted resignation by registered or certified mail to the Secured Party and the Trust Depositor; PROVIDED, that such resignation shall take effect only upon the date which is the latest of (i) the effective date of the appointment of a successor Collateral Agent and the acceptance in writing by such successor Collateral Agent of such appointment and of its obligation to perform its duties hereunder in -13- accordance with the provisions hereof, (ii) delivery of the Collateral to such successor to be held in accordance with the procedures specified in Article II hereof, and (iii) receipt by the Secured Party of an Opinion of Counsel to the effect described in Section 5.02. Notwithstanding the preceding sentence, if by the contemplated date of resignation specified in the written notice of resignation delivered as described above no successor Collateral Agent or temporary successor Collateral Agent has been appointed Collateral Agent or becomes the Collateral Agent pursuant to subsection (d) hereof, the resigning Collateral Agent may petition a court of competent jurisdiction in New York, New York for the appointment of a successor. (c) REMOVAL. The Collateral Agent may be removed by the Secured Party at any time, with or without cause, by an instrument or concurrent instruments in writing delivered to the Collateral Agent and the Trust Depositor. A temporary successor may be removed at any time to allow a successor Collateral Agent to be appointed pursuant to subsection (d) below. Any removal pursuant to the provisions of this subsection (c) shall take effect only upon the date which is the latest of (i) the effective date of the appointment of a successor Collateral Agent and the acceptance in writing by such successor Collateral Agent of such appointment and of its obligation to perform its duties hereunder in accordance with the provisions hereof, (ii) delivery of the Collateral to such successor to be held in accordance with the procedures specified in Article II hereof and (iii) receipt by the Secured Party of an Opinion of Counsel to the effect described in Section 5.02. (d) ACCEPTANCE BY SUCCESSOR. The Secured Party shall have the sole right to appoint each successor Collateral Agent. Every temporary or permanent successor Collateral Agent appointed hereunder shall execute, acknowledge and deliver to its predecessor and to the Secured Party and the Trust Depositor an instrument in writing accepting such appointment hereunder and the relevant predecessor shall execute, acknowledge and deliver such other documents and instruments as will effectuate the delivery of all Collateral to the successor Collateral Agent to be held in accordance with the procedures specified in Article II hereof, whereupon such successor, without any further act, deed or conveyance, shall become fully vested with all the estates, properties, rights, powers, duties and obligations of its predecessor and such predecessor shall be relieved and released of its obligations hereunder. Such predecessor shall, nevertheless, on the written request of either the Secured Party or the Trust Depositor, execute and deliver an instrument transferring to such successor all the estates, properties, rights and powers of such predecessor hereunder. In the event that any instrument in writing from the Trust Depositor or the Secured Party is reasonably required by a successor Collateral Agent to more fully and certainly vest in such successor the estates, properties, rights, powers, duties and obligations vested or intended to be vested hereunder in the Collateral Agent, any and all such written instruments shall, at the request of the temporary or permanent successor Collateral Agent, be forthwith executed, acknowledged and delivered by the Trust Depositor. The designation of any successor Collateral Agent and the instrument or instruments removing any Collateral Agent and appointing a successor hereunder, together with all other instruments provided for herein, shall be maintained with the records relating to the Collateral and, to the extent required by applicable law, filed or recorded by the successor Collateral Agent in each place where such filing or recording is necessary to effect the transfer of the Collateral to the successor Collateral Agent or to protect or continue the perfection of the security interests granted hereunder. -14- Section 4.06. Indemnification. The Trust Depositor shall indemnify the Collateral Agent, its directors, officers, employees and agents for, and hold the Collateral Agent, its directors, officers, employees and agents harmless against, any loss, liability or expense (including the costs and expenses of defending against any claim of liability) arising out of or in connection with the Collateral Agent's acting as Collateral Agent hereunder, except such loss, liability or expense as shall result from the negligence, bad faith or willful misconduct of the Collateral Agent or its officers or agents. The obligation of the Trust Depositor under this Section shall survive the termination of this Agreement and the resignation or removal of the Collateral Agent. The Collateral Agent covenants and agrees that the obligations of the Trust Depositor hereunder and under Section 4.07 shall be limited to the extent provided in Section 2.06, and further covenants not to take any action to enforce its rights to indemnification hereunder with respect to the Trust Depositor and to payment under Section 4.07 except in accordance with the provisions of Section 8.05, or otherwise to assert any Lien or take any other action in respect of the Collateral or the Trust Corpus. Section 4.07. Compensation and Reimbursement. The Trust Depositor agrees for the benefit of the Secured Party and as part of the Secured Obligations (a) to pay to the Collateral Agent, from time to time, reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a collateral trustee); and (b) to reimburse the Collateral Agent upon its request for all reasonable expenses, disbursements and advances incurred or made by the Collateral Agent in accordance with any provision of, or carrying out its duties and obligations under, this Agreement (including the reasonable compensation and fees and the expenses and disbursements of its agents, any independent certified public accountants and counsel), except any expense, disbursement or advances as may be attributable to negligence, bad faith or willful misconduct on the part of the Collateral Agent. Section 4.08. Representations and Warranties of the Collateral Agent. The Collateral Agent represents and warrants to the Trust Depositor and to the Secured Party in its capacity as Collateral Agent as follows: (a) DUE ORGANIZATION. The Collateral Agent is an Illinois banking corporation, duly organized, validly existing and in good standing under the laws of the United States and is duly authorized and licensed under applicable law to conduct its business as presently conducted. (b) CORPORATE POWER. The Collateral Agent has all requisite right, power and authority to execute and deliver this Agreement and to perform all of its duties as Collateral Agent hereunder. (c) DUE AUTHORIZATION. The execution and delivery by the Collateral Agent of this Agreement and the other Transaction Documents to which it is a party, and the performance by the Collateral Agent of its duties hereunder and thereunder, have been duly authorized by all necessary corporate proceedings and no further approvals or filings, including any governmental approvals, are required for the valid execution and delivery by the Collateral Agent, or the performance by the Collateral Agent, of this Agreement and such other Transaction Documents. -15- (d) VALID AND BINDING AGREEMENT. The Collateral Agent has duly executed and delivered this Agreement and each other Transaction Document to which it is a party, and each of this Agreement and each such other Transaction Document constitutes the legal, valid and binding obligation of the Collateral Agent, enforceable against the Collateral Agent in accordance with its terms, except as (i) such enforceability may be limited by bankruptcy, insolvency, reorganization and similar laws relating to or affecting the enforcement of creditors' rights generally and (ii) the availability of equitable remedies may be limited by equitable principles of general applicability. SECTION 4.09. WAIVER OF SETOFFS. The Collateral Agent hereby expressly waives any and all rights of setoff that the Collateral Agent may otherwise at any time have under applicable law with respect to any Account and agrees that amounts in the Accounts shall at all times be held and applied solely in accordance with the provisions hereof. Section 4.10. Control by the Secured Party. The Collateral Agent shall comply with notices and instructions given by the Trust Depositor only if accompanied by the written consent of the Secured Party, except that if any Default shall have occurred and be continuing, the Collateral Agent shall act upon and comply with written notices and instructions given by the Secured Party alone in the place and stead of the Trust Depositor. ARTICLE V COVENANTS OF THE TRUST DEPOSITOR SECTION 5.01. PRESERVATION OF COLLATERAL. Subject to the rights, powers and authorities granted to the Collateral Agent and the Secured Party in this Agreement, the Trust Depositor shall take such action as is necessary and proper with respect to the Collateral in order to preserve and maintain such Collateral and to cause (subject to the rights of the Secured Party) the Collateral Agent to perform its obligations with respect to such Collateral as provided herein. The Trust Depositor will do, execute, acknowledge and deliver, or cause to be done, executed, acknowledged and delivered, such instruments of transfer or take such other steps or actions as may be necessary, or required by the Secured Party, to perfect the Security Interests granted hereunder in the Collateral, to ensure that such Security Interests rank prior to all other Liens and to preserve the priority of such Security Interests and the validity and enforceability thereof. Upon any delivery or substitution of Collateral, the Trust Depositor shall be obligated to execute such documents and perform such actions as are necessary to create in the Collateral Agent for the benefit of the Secured Party a valid first Lien on, and valid and perfected, first priority security interest in, the Collateral so delivered and to deliver such Collateral to the Collateral Agent, free and clear of any other Lien, together with satisfactory assurances thereof, and to pay any reasonable costs incurred by any of the Secured Party or the Collateral Agent (including its agents) or otherwise in connection with such delivery. Section 5.02. Opinions as to Collateral. Not less than 10 days prior to each date on which the Trust Depositor proposes to take any action contemplated by Section 5.06, the Trust Depositor shall, at its own cost and expense, furnish to the Secured Party and the Collateral Agent an Opinion of Counsel reasonably acceptable to such parties stating either (a) that, in the opinion of such counsel, such action has been taken with respect to the execution and filing of -16- any financing statements and continuation statements and other actions as are necessary to perfect, maintain and protect the lien and security interest of the Collateral Agent (and the priority thereof), on behalf of the Secured Party, with respect to such Collateral against all creditors of and purchasers from the Trust Depositor and reciting the details of such action, or (b) stating that, in the opinion of such counsel, no such action is necessary to maintain such perfected lien and security interest. Such Opinion of Counsel shall further describe each execution and filing of any financing statements and continuation statements and such other actions as will, in the opinion of such counsel, be required to perfect, maintain and protect the lien and security interest of the Collateral Agent, on behalf of the Secured Party, with respect to such Collateral against all creditors of and purchasers from the Trust Depositor for a period, specified in such Opinion, continuing until a date not earlier than eighteen months from the date of such Opinion. Section 5.03. Notices. In the event that the Trust Depositor acquires knowledge of the occurrence and continuance of any event of default or like event, howsoever described or called, under any of the Transaction Documents, the Trust Depositor shall immediately give notice thereof to the Collateral Agent and the Secured Party. Section 5.04. Waiver of Stay or Extension Laws; Marshalling of Assets. The Trust Depositor covenants, to the fullest extent permitted by applicable law, that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any appraisement, valuation, stay, extension or redemption law wherever enacted, now or at any time hereafter in force, in order to prevent or hinder the enforcement of this Agreement or any absolute sale of the Collateral or any part thereof, or the possession thereof by any purchaser at any sale under Article VII of this Agreement; and the Trust Depositor, to the fullest extent permitted by applicable law, for itself and all who may claim under it, hereby waives the benefit of all such laws, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Collateral Agent, but will suffer and permit the execution of every such power as though no such law had been enacted. The Trust Depositor, for itself and all who may claim under it, waives, to the fullest extent permitted by applicable law, all right to have the Collateral marshalled upon any foreclosure or other disposition thereof. Section 5.05. Noninterference, etc. The Trust Depositor shall not (i) waive or alter any of its rights under the Collateral (or any agreement or instrument relating thereto) without the prior written consent of the Collateral Agent and the Secured Party; or (ii) fail to pay any tax, assessment, charge or fee levied or assessed against the Collateral, or to defend any action, if such failure to pay or defend may adversely affect the priority or enforceability of the Trust Depositor's right, title or interest in and to the Collateral or the Collateral Agent's lien on, and security interest in, the Collateral for the benefit of the Secured Party; or (iii) take any action, or fail to take any action, if such action or failure to take action will interfere with the enforcement of any rights under the Transaction Documents. Section 5.06. Trust Depositor Changes. (a) CHANGE IN NAME, STRUCTURE, ETC. The Trust Depositor shall not change its name, identity or corporate structure unless it shall have given the Secured Party and the Collateral Agent at least 10 days' prior written notice thereof, shall have effected any necessary or -17- appropriate assignments or amendments thereto and filings of financing statements or amendments thereto, and shall have delivered to the Collateral Agent and the Secured Party an Opinion of Counsel of the type described in Section 5.02. (b) RELOCATION OF THE TRUST DEPOSITOR. The Trust Depositor shall not change its principal executive office unless it gives the Secured Party and the Collateral Agent at least 10 days' prior written notice of any relocation of its principal executive office. If the Trust Depositor relocates its principal executive office or principal place of business from Nevada, the Trust Depositor shall give prior notice thereof to the Secured Party and the Collateral Agent and shall effect whatever appropriate recordations and filings are necessary and shall provide an Opinion of Counsel to the Secured Party and the Collateral Agent, to the effect that, upon the recording of any necessary assignments or amendments to previously-recorded assignments and filing of any necessary amendments to the previously filed financing or continuation statements or upon the filing of one or more specified new financing statements, and the taking of such other actions as may be specified in such opinion, the security interests in the Collateral shall remain, after such relocation, valid and perfected. ARTICLE VI [RESERVED] ARTICLE VII REMEDIES UPON DEFAULT Section 7.01. Remedies upon a Default. If a Default has occurred and is continuing, the Collateral Agent shall, at the written direction of the Secured Party, take whatever action at law or in equity as may appear necessary or desirable in the judgment of the Secured Party to collect and satisfy all outstanding Secured Obligations including, but not limited to, foreclosure upon the Collateral and all other rights available to Secured Party under applicable law or to enforce performance and observance of any obligation, agreement or covenant under any of the Transaction Documents. Section 7.02. Waiver of Default. The Secured Party shall have the sole right, to be exercised in its complete discretion, to waive any Default in respect of a failure to pay Carrying Charges under the Deposit Agreement, but no waiver is permitted with respect to the Trust Depositor's obligation, on or prior to the end of the Funding Period, either to transfer to the Trust Subsequent Contracts with an aggregate Principal Balance equal to the initial Pre-Funded Amount or to pay Liquidated Damages in the event of a failure to do so. Any waiver permitted hereunder shall be binding upon the Collateral Agent. Unless such writing expressly provides to the contrary, any waiver so granted shall extend only to the specific event or occurrence which gave rise to the Default so waived and not to any other similar event or occurrence which occurs subsequent to the date of such waiver. -18- Section 7.03. Restoration of Rights and Remedies. If the Collateral Agent has instituted any proceeding to enforce any right or remedy under this Agreement, and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to such Collateral Agent, then and in every such case the Trust Depositor, the Collateral Agent and the Secured Party shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Collateral Agent and the Secured Party shall continue as though no such proceeding had been instituted. Section 7.04. No Remedy Exclusive. No right or remedy herein conferred upon or reserved to the Collateral Agent or the Secured Party is intended to be exclusive of any other right or remedy, and every right or remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law, in equity or otherwise (but, in each case, shall be subject to the provisions of this Agreement limiting such remedies), and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by the Secured Party, and the exercise of or the beginning of the exercise of any right or power or remedy shall not be construed to be a waiver of the right to exercise at the same time or thereafter any other right, power or remedy. ARTICLE VIII MISCELLANEOUS Section 8.01. Further Assurances. Each party hereto shall take such action and deliver such instruments to any other party hereto, in addition to the actions and instruments specifically provided for herein, as may be reasonably requested or required to effectuate the purpose or provisions of this Agreement or to confirm or perfect any transaction described or contemplated herein. Section 8.02. Waiver. Any waiver by any party of any provision of this Agreement or any right, remedy or option hereunder shall only prevent and stop such party from thereafter enforcing such provision, right, remedy or option if such waiver is given in writing and only as to the specific instance and for the specific purpose for which such waiver was given. The failure or refusal of any party hereto to insist in any one or more instances, or in a course of dealing, upon the strict performance of any of the terms or provisions of this Agreement by any party hereto or the partial exercise of any right, remedy or option hereunder shall not be construed as a waiver or relinquishment of any such term or provision, but the same shall continue in full force and effect. Section 8.03. Amendments, Waivers in Writing. No amendment, modification, waiver or supplement to this Agreement or any provision of this Agreement shall in any event be effective unless the same shall have been made or consented to in writing by each of the parties hereto and each Rating Agency shall have confirmed in writing that such amendment will not cause a reduction or withdrawal of a rating on the Certificates. -19- Section 8.04. Severability. In the event that any provision of this Agreement or the application thereof to any party hereto or to any circumstance or in any jurisdiction governing this Agreement shall, to any extent, be invalid or unenforceable under any applicable statute, regulation or rule of law, then such provision shall be deemed inoperative to the extent that it is invalid or unenforceable and the remainder of this Agreement, and the application of any such invalid or unenforceable provision to the parties, jurisdictions or circumstances other than to whom or to which it is held invalid or unenforceable, shall not be affected thereby nor shall the same affect the validity or enforceability of any other provision of this Agreement. The parties hereto further agree that the holding by any court of competent jurisdiction that any remedy pursued by the Collateral Agent or the Secured Party, hereunder is unavailable or unenforceable shall not affect in any way the ability of the Collateral Agent or the Secured Party to pursue any other remedy available to it or them (subject, however, to the provisions of this Agreement limiting such remedies). Section 8.05. Nonpetition Covenant. Notwithstanding any prior termination of this Agreement, each of the parties hereto agrees that it shall not, prior to one year and one day after the Final Scheduled Payment Date with respect to the Certificates, acquiesce, petition or otherwise invoke or cause the Trust Depositor to invoke the process of the United States of America, any State or other political subdivision thereof or any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government for the purpose of commencing or sustaining a case by or against the Trust Depositor or the Trust under a Federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Trust Depositor or the Trust or all or any part of its property or assets or ordering the winding up or liquidation of the affairs of the Trust Depositor or the Trust. The parties agree that damages will be an inadequate remedy for breach of this covenant and that this covenant may be specifically enforced. Section 8.06. Notices. All notices, demands, certificates, requests and communications hereunder ("NOTICES") shall be in writing and shall be effective (a) upon receipt when sent through the U.S. mails, registered or certified mail, return receipt requested, postage prepaid, with such receipt to be effective the date of delivery indicated on the return receipt, or (b) one Business Day after delivery to an overnight courier, or (c) on the date personally delivered to an Authorized Officer of the party to which sent, or (d) on the date transmitted by legible telecopier transmission with a confirmation of receipt, in all cases addressed to the recipient as follows: (i) If to the Trust Depositor: Harley-Davidson Customer Funding Corp. 4150 Technology Way Carson City, Nevada 89706 Attention: President Telecopier No.: (775) 884-4469 (iii) If to the Trustee: [______________________] ___________________________________ ___________________________________ -20- Telecopier No.: __________________ (iv) If to the Collateral Agent: [______________________] ___________________________________ ___________________________________ Telecopier No:_____________________ (v) If to Moody's: Moody's Investor's Service, Inc. 99 Church Street New York New York 10007 Attention: ABS Monitoring Department Telecopier No.: (212) 553-0344 (vi) If to Standard & Poor's: Standard & Poor's Ratings Services, a division of The McGraw Hill Companies 25 Broadway New York, New York 10004 Telecopier No.: (212) 208-1582 A copy of each notice given hereunder to any party hereto shall also be given to (without duplication), the Trust Depositor, the Trustee and the Collateral Agent. Each party hereto may, by notice given in accordance herewith to each of the other parties hereto, designate any further or different address to which subsequent notices shall be sent. SECTION 8.07. TERM OF THIS AGREEMENT;. This Agreement shall take effect on the Closing Date of the Certificates and shall continue in effect until the Trustee Termination Date. On such date, this Agreement shall terminate, all obligations of the parties hereunder shall cease and terminate and the Collateral, if any, held hereunder and not to be used or applied in discharge of any obligations of the Trust Depositor in respect of the Secured Obligations or otherwise under this Agreement, shall be released to and in favor of the Trust Depositor, PROVIDED that the provisions of Sections 4.06, 4.07 and 8.05 shall survive any termination of this Agreement and the release of any Collateral upon such termination. SECTION 8.08. ASSIGNMENTS. This Agreement shall be a continuing obligation of the parties hereto and shall (i) be binding upon the parties and their respective successors and assigns, and (ii) inure to the benefit of the Secured Party and be enforceable by the Secured Party and the Collateral Agent, and by their respective successors, transferees and assigns. The Trust Depositor may not assign this Agreement, or delegate any of its duties hereunder, without the prior written consent of the Secured Party. -21- Section 8.09. Consent of Secured Party. In the event that the Secured Party's consent is required under the terms hereof or under the terms of any Transaction Document, it is understood and agreed that, except as otherwise provided expressly herein, the determination whether to grant or withhold such consent shall be made solely by the Secured Party in its sole discretion. Section 8.10. Trial by Jury Waived. Each of the parties hereto waives, to the fullest extent permitted by law, any right it may have to a trial by jury in respect of any litigation arising directly or indirectly out of, under or in connection with this Agreement, any of the other Transaction Documents or any of the transactions contemplated hereunder or thereunder. Each of the parties hereto (a) certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing waiver and (b) acknowledges that it has been induced to enter into this Agreement and the other Transaction Documents to which it is a party, by among other things, this waiver. Section 8.11. Governing Law. This Agreement shall be governed by and construed, and the obligations, rights and remedies of the parties hereunder shall be determined, in accordance with, the laws of the State of Illinois. Section 8.12. Consents to Jurisdiction. Each of the parties hereto irrevocably submits to the jurisdiction of the United States District Court for the Northern District of Illinois, any court in the state of Illinois located in the city of Chicago, and any appellate court from any thereof, in any action, suit or proceeding brought against it and related to or in connection with this Agreement, the other Transaction Documents or the transactions contemplated hereunder or thereunder or for recognition or enforcement of any judgment and each of the parties hereto irrevocably and unconditionally agrees that all claims in respect of any such suit or action or proceeding may be heard or determined in such Illinois state court or, to the extent permitted by law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action, suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. To the extent permitted by applicable law, each of the parties hereby waives and agrees not to assert by way of motion, as a defense or otherwise in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such courts, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or any of the other Transaction Documents or the subject matter hereof or thereof may be litigated in or by such courts. The Trust Depositor hereby irrevocably appoints and designates [_______________], as its true and lawful attorney and duly authorized agent for acceptance of service of legal process. The Trust Depositor agrees that service of such process upon such Person shall constitute personal service of such process upon it. Subject to Section 8.05 hereof, nothing contained in this Agreement shall limit or affect the rights of any party hereto to serve process in any other manner permitted by law or to start proceedings relating to any of the Transaction Documents against the Trust Depositor or their respective property in the courts of any jurisdiction. Section 8.13. Limitation of Trustee Responsibility. It is expressly understood and agreed by the parties hereto that (a) [_______________] is entering into and executing this Agreement solely in its capacity as Trustee of the Trust pursuant to the Pooling and Servicing -22- Agreement and as Collateral Agent, and (b) in no case whatsoever shall [_______________] be personally liable on, or for any loss in respect of, any of the statements, representations, warranties, covenants, agreements or obligations of the Trust (if any) hereunder, all such liability, if any, being expressly waived by the parties hereto. Section 8.14. Counterparts. This Agreement may be executed in two or more counterparts by the parties hereto, and each such counterpart shall be considered an original and all such counterparts shall constitute one and the same instrument. Section 8.15. Headings. The headings of sections and paragraphs and the Table of Contents contained in this Agreement are provided for convenience only. They form no part of this Agreement and shall not affect its construction or interpretation. -23- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date set forth on the first page hereof. HARLEY-DAVIDSON CUSTOMER FUNDING CORP. By ______________________________________ Printed Name: ___________________________ Title: __________________________________ [___________________], as Trustee By ______________________________________ Printed Name: ___________________________ Title: __________________________________ [__________________], as Collateral Agent By ______________________________________ Printed Name: ____________________________ Title: ___________________________________ -24- -----END PRIVACY-ENHANCED MESSAGE-----