Document:

Exhibit 10.1

 

 

TRANSFER AND SALE AGREEMENT

 

 

by and between

 

 

HARLEY-DAVIDSON CREDIT CORP.,

as Seller

 

 

and

 

 

HARLEY-DAVIDSON CUSTOMER FUNDING CORP.,

 

 

as Purchaser

 

 

Dated as of August 1, 2006

 

 

 

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

  	
  3

  
	
   

  	
   

  	
   

  
	
  ARTICLE III REPRESENTATIONS AND WARRANTIES

  	
  5

  
	
   

  	
   

  	
   

  
	
  SECTION 3.01.

  	
  REPRESENTATIONS
  AND WARRANTIES REGARDING SELLER

  	
  5

  
	
  SECTION 3.02.

  	
  REPRESENTATIONS
  AND WARRANTIES REGARDING EACH CONTRACT

  	
  6

  
	
  SECTION 3.03.

  	
  REPRESENTATIONS
  AND WARRANTIES REGARDING THE CONTRACTS IN THE AGGREGATE

  	
  9

  
	
  SECTION 3.04.

  	
  REPRESENTATIONS
  AND WARRANTIES REGARDING THE CONTRACT FILES

  	
  10

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV PERFECTION OF TRANSFER AND PROTECTION OF
  SECURITY INTERESTS

  	
  11

  
	
   

  	
   

  	
   

  
	
  SECTION 4.01.

  	
  CUSTODY OF
  CONTRACTS

  	
  11

  
	
  SECTION 4.02.

  	
  FILING

  	
  11

  
	
  SECTION 4.03.

  	
  NAME CHANGE OR
  RELOCATION

  	
  11

  
	
  SECTION 4.04.

  	
  COSTS AND
  EXPENSES

  	
  12

  
	
  SECTION 4.05

  	
  SALE TREATMENT

  	
  12

  
	
  SECTION 4.06

  	
  SEPARATENESS
  FROM TRUST DEPOSITOR

  	
  12

  
	
  SECTION 4.07

  	
  PROTECTION OF
  SECURITY INTERESTS

  	
  12

  
	
   

  	
   

  	
   

  
	
  ARTICLE V REMEDIES UPON MISREPRESENTATION

  	
  12

  
	
   

  	
   

  	
   

  
	
  SECTION 5.01.

  	
  REPURCHASES OF
  CONTRACTS FOR BREACH OF REPRESENTATIONS AND WARRANTIES

  	
  12

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI INDEMNITIES

  	
  13

  
	
   

  	
   

  	
   

  
	
  SECTION 6.01.

  	
  SELLER
  INDEMNIFICATION

  	
  13

  
	
  SECTION 6.02.

  	
  LIABILITIES TO
  OBLIGORS

  	
  13

  
	
  SECTION 6.03.

  	
  TAX
  INDEMNIFICATION

  	
  13

  
	
  SECTION 6.04.

  	
  OPERATION OF
  INDEMNITIES

  	
  13

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII MISCELLANEOUS

  	
  14

  
	
   

  	
   

  	
   

  
	
  SECTION 7.01.

  	
  PROHIBITED
  TRANSACTIONS WITH RESPECT TO THE TRUST

  	
  14

  
	
  SECTION 7.02.

  	
  MERGER OR
  CONSOLIDATION

  	
  14

  
	
  SECTION 7.03.

  	
  TERMINATION

  	
  14

  
	
  SECTION 7.04.

  	
  ASSIGNMENT OR
  DELEGATION BY SELLER

  	
  14

  
	
  SECTION 7.05.

  	
  AMENDMENT

  	
  14

  
	
  SECTION 7.06.

  	
  NOTICES

  	
  15

  
	
  SECTION 7.07.

  	
  MERGER AND
  INTEGRATION

  	
  15

  
	
  SECTION 7.08.

  	
  HEADINGS

  	
  16

  
	
  SECTION 7.09.

  	
  GOVERNING LAW

  	
  16

  

 

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 August 1, 2006, 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 (i) motorcycle conditional sales contracts from
Harley-Davidson motorcycle retailers and (ii) motorcycle promissory note and
security agreements from Eaglemark Savings Bank, 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 the related 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 2006-3 (the “Trust”)
pursuant to the Sale and Servicing Agreement dated as of August 1, 2006 by and
among Trust Depositor, Harley-Davidson Credit, as Servicer, the Trust, as
issuer (the “Issuer”) and The Bank of New York Trust
Company, N.A., as Indenture Trustee (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
$545,413,804.93 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 after the Initial Cutoff Date, including any liquidation
proceeds therefrom, but excluding any rights to receive payments which were
collected pursuant thereto on or 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),
any debt insurance policy or any

 

1

 

debt cancellation
agreement 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.
originators of certain Contracts) and the Seller, (vii) all rights of Seller to
certain rebates of premiums and other amounts relating to insurance policies,
debt cancellation agreements, extended service contracts or other repair
agreements and other items financed under such Contracts and (viii) all
proceeds and products of the foregoing (items (i) - (viii), 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.

 

(d)           A letter
or letters from Ernst & Young 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

 

2

 

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 office in Nevada of a UCC financing
statement naming Seller as debtor, naming Trust Depositor as assignor secured
party and the Issuer as secured party, and listing the Contract Assets as
collateral as well as evidence of proper filing with the appropriate office in
Delaware of a UCC financing statement naming the Issuer as debtor, naming the
Indenture Trustee, as secured party, and listing the Contract Assets as
collateral.

 

(h)           An Officer’s
Certificate from Seller certifying that the Seller, on or prior to the Closing
Date, has indicated in its computer files, in accordance with its customary
standards, policies and procedures, that the Contracts have been conveyed to
the Trust Depositor pursuant to this Agreement.

 

(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 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 shall succeed to such of the rights of Trust Depositor hereunder as
shall be so assigned.  Seller
acknowledges that, pursuant to the Sale and Servicing Agreement, Trust
Depositor will assign all of its right, title and interest in and to the
Contract Assets and its right to exercise the remedies created by Section 5.01
hereof for breaches of representations and warranties of Seller contained in
Sections 3.01, 3.02, 3.03 and 3.04 hereof to the Issuer and the Indenture
Trustee for the benefit of the Noteholders. 
Seller agrees that, upon such assignment to the Issuer and the Indenture
Trustee, such representations 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 Trust Depositor, the obligations of 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 after the applicable Subsequent Cutoff
Date, including any liquidation proceeds therefrom, but excluding any rights to
receive payments which were collected pursuant thereto on or 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), any debt insurance policy or any debt
cancellation agreement relating to any such Subsequent Contract , an Obligor or
a Motorcycle securing such Subsequent 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 Subsequent Contracts, (vi) all
rights (but not

 

3

 

the obligations)
of the Seller under any motorcycle dealer agreements between the dealers (i.e. originators of certain Subsequent Contracts) and the
Seller, (vii) all rights of Seller to certain rebates of premiums and other
amounts relating to insurance policies, debt cancellation agreements, extended
service contracts or other repair agreements and other items financed under
such Subsequent Contracts and (viii) all proceeds and products of the foregoing
(items (i) - (viii), 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;

 

(iii)          the
Seller shall have delivered to the Trust Depositor a duly executed Purchase
Agreement 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 that
following such transfer, and the transfer immediately thereafter of the
Subsequent Contracts to the Trust, the Notes will be rated at least their
respective ratings as of the Closing Date by such Rating Agency;

 

(vi)          such
addition will not result in a material adverse tax consequence to the Issuer or
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 (or bring-downs of opinions of counsel delivered on
the Closing Date) 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

 

4

 

(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 Indenture Trustee and the
Noteholders will rely under the Sale and Servicing Agreement.  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 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.

 

5

 

(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.

 

(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)            State of
Incorporation; Name; No Changes. 
Seller’s state of incorporation is the State of Nevada.  Seller’s exact legal name is as set forth in
the first paragraph of this Agreement. 
Seller has not changed its name whether by amendment of its Articles of
Incorporation, by reorganization or otherwise, and has not changed its state of
incorporation, within the four months preceding the Closing Date.

 

(g)           Operations. 
Approximately 5.00% of the aggregate principal balance of contracts
financed from time to time by the Seller are secured by motorcycles
manufactured by Buell.

 

(h)           Solvency.  The Seller,
after giving effect to the conveyances made by it hereunder, is Solvent.

 

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 or under a debt insurance policy or debt cancellation agreement.

 

6

 

(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.

 

(d)           Binding Obligation.  Each Contract is a legal, valid and binding
payment 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.  The Seller, in accordance with its policies
and procedures, has determined that, as of the date of origination of each
Contract, the related Obligor had obtained or agreed to obtain physical damage
insurance covering the Motorcycle.  The
terms of each Contract require that for the term of such Contract the
Motorcycle securing such Contract will be covered by physical damage insurance.

 

(g)           Origination.  Each Contract (i) was originated by a Harley-Davidson
motorcycle dealer or by Eaglemark Savings Bank, in each case, in the regular course
of its business, (ii) was fully and properly executed by the parties thereto,
and (iii) has been purchased by Seller in the regular course of its
business.  Each Contract was sold by such
motorcycle dealer or Eaglemark Savings Bank, as the case may be, to the Seller
without any fraud or misrepresentation on the part of such motorcycle dealer or
Eaglemark Savings Bank.

 

(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 Harley-Davidson motorcycle dealers or Eaglemark Savings Bank, 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 at the time of origination or as of the
Closing Date or as of any Subsequent Transfer Date, as applicable, in any
material respect 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.

 

(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.

 

7

 

(k)           Valid Security Interest.  Each Contract creates a valid, subsisting and
enforceable first priority perfected security interest in favor of Seller or
Eaglemark Savings Bank (as the case may be) in the Motorcycle covered thereby,
and such security interest has been validly assigned by Eaglemark Savings Bank
to Seller (where applicable) and by Seller to the Trust Depositor.  Seller’s security interest has been validly
assigned by the Seller to the Trust Depositor pursuant to this Agreement and by
the Trust Depositor to the Issuer pursuant to the Sale and Servicing
Agreement.  Immediately prior to the
transfer, assignment and conveyance thereof, each Contract is secured by a
first priority, validly perfected security interest in the Motorcycle covered
thereby in favor of the Seller or Eaglemark Savings Bank as secured party or
all necessary and appropriate actions have been commenced that would result in
a first priority, validly perfected security interest in the Motorcycle covered
thereby in favor of the Seller or Eaglemark Savings Bank as secured party,
except, in each case, as to priority for any lien for taxes, labor, materials
or of any state law enforcement agency affecting a Motorcycle.

 

(l)            Good Title.  Each Contract was purchased by Seller for
value and taken into possession prior to the Initial 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 Issuer 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 full
right to transfer the Contract to Trust Depositor, and, immediately upon the
transfer of each Contract by the Seller, the Trust Depositor shall have good
and marketable title to each Contract free and clear of any encumbrance,
equity, loan, pledge, charge, claim or security interest, and, immediately upon
the transfer of each Contract by the Trust Depositor, the Issuer shall have
good and marketable title to each Contract free and clear of any encumbrance,
equity, loan, pledge, charge, claim or security interest.

 

(m)          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.

 

(n)           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
liens prior to, or equal with, the lien of such Contract.

 

(o)           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.

 

8

 

(p)           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.

 

(q)           One Original.  Each Contract is evidenced by only one
original executed Contract, which original has been delivered to the Issuer or
its designee on or before the Closing Date (or the applicable Subsequent
Transfer Date in the case of Subsequent Contracts).

 

(r)            No Government Obligors.  No Obligor is the United States government or
an agency, authority, instrumentality or other political subdivision of the
United States government.

 

(s)           Lockbox Bank.  The Lockbox Bank is the only institution
holding any Lockbox Account for receipt of payments from Obligors, and all
Obligors have been instructed to make payments to the Lockbox Account (either
directly by remitting payments to the Lockbox, or indirectly by making payments
through direct debit, the telephone or the internet to an account of the Servicer
which payments will be subsequently transferred from such account to one or
more Lockbox Banks), 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.

 

(t)            Obligor Bankruptcy.  At the Initial Cutoff Date (or the applicable
Subsequent Cutoff Date in the case of Subsequent Contracts), no Obligor was
subject to a bankruptcy proceeding (according to the records of the Seller)
within the one year preceding such Cutoff Date.

 

(u)           Chattel Paper.  The Contracts constitute tangible chattel
paper within the meaning of the UCC.

 

(v)           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.

 

(w)          Selection Criteria. 
Each Contract is secured by a new or used Motorcycle.  No Contract has a Contract Rate less than 3.987%.  Each Contract amortizes the amount financed
over an original term no greater than 84 months.  Each Contract has a Principal Balance of at
least $624.01 as
of the related Cutoff Date.

 

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, if applicable,
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 or exceeds the sum of the
principal balance of the Notes on the Closing Date or the related Subsequent
Transfer Date, as applicable.

 

9

 

(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 84 months; and (iii) the
final scheduled payment on the Initial Contract with the latest maturity is due
no later than January
2014.    Approximately 82.63% 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 17.37% 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 3.987%.  The last scheduled payment date of the
Contracts (including any Subsequent Contracts) is due no later than April 2014.  Approximately 99.04% of the Principal Balance of the Initial
Contracts as of the Initial Cutoff Date is attributable to loans for purchases
of Motorcycles manufactured by Harley-Davidson or Buell and approximately 0.96%
of the Principal Balance of the Initial Contracts as of the Initial Cutoff Date
is attributable to loans for purchases of Motorcycles not manufactured by
Harley-Davidson or Buell.

 

(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 File 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, are owned by the
Trust and constitute security for the Notes.

 

(d)           No Adverse Selection.  No selection procedures adverse to
Noteholders have been employed in selecting the Contracts.

 

(e)           True Sale.  The transactions contemplated by this
Agreement and the Sale and Servicing Agreement constitute valid sales,
transfers and assignments 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 Indenture 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 11.00% 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, or its custodian, will have possession
of each original Contract and the related complete Contract File.  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 or its custodian.

 

10

 

(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. 
The contents of each Contract File shall be held by the Servicer, or its
custodian, for the benefit of the Trust as the owner thereof in accordance with
the Sale and Servicing Agreement.

 

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 Trust may reasonably request to perfect and protect the Trust
Depositor’s and the Trust’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.  The
Seller authorizes the Trust Depositor to file financing statements describing
the Contract Assets as collateral.  All
financing statements filed or to be filed against the Seller in favor of the
Trust Depositor or the Trust in connection herewith describing the Contract
Assets as collateral shall contain a statement to the following effect: “A
purchase of or security interest in any collateral described in this financing
statement, except as permitted in the Transfer and Sale Agreement or Sale and
Servicing Agreement, will violate the rights of the Secured Party.”

 

Section 4.03.        Name Change or Relocation. 
(a) During the term of this Agreement, Seller shall not change its name,
identity or structure or state of incorporation 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 days after the effective date of such
change, shall file such amendments as may be required to preserve and protect
the Trust Depositor’s and the Trust’s interests in the Contract Assets and
proceeds thereof.  In addition, Seller
shall not change its state of incorporation unless it has first taken such
action as is advisable or necessary to preserve and protect the Trust Depositor’s
and the Trusts’ 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 Trust
Depositor and the Trust in the Contract Assets have been filed, and reciting
the details of such filing.

 

Section 4.04.        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, the Issuer’s and the Indenture
Trustee’s 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.

 

11

 

Section 4.05         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
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.

 

Section 4.06         Separateness from Trust
Depositor.  The Seller agrees to take or refrain from
taking or engaging in with respect to the Trust Depositor each of the actions
or activities specified in the “substantive consolidation” opinion of Winston
& Strawn LLP (or in any related certificate of Seller) delivered on the
Closing Date, upon which the conclusions expressed therein are based.

 

Section 4.07         Protection of Security Interests. 
The Seller agrees to deliver an Officer’s Certificate to the Owner
Trustee and the Indenture Trustee, as promptly as practicable after the Closing
Date (or Subsequent Transfer Date, as the case may be), and in any event within
60 days thereof, certifying that the 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 and
that each document required be an original. 

 

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 Issuer, the Indenture Trustee 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 described on the List of Contracts with
respect to an incorrect 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 any
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 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.

 

12

 

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 Noteholders 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, (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), and (iii) any untrue
statement or alleged untrue statement of a material fact contained in the
Prospectus or in any amendment thereto or the omission or alleged omission to
state therein a material fact necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement was made in conformity with information furnished to
Trust Depositor by Seller specifically for use therein.  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 or the
Noteholders under or as a result of this Agreement and the transactions
contemplated hereby.

 

Section 6.03.        Tax Indemnification. 
Seller covenants and agrees to pay, and to indemnify, defend and hold
harmless the Trust Depositor, the Trust, the Trustees or the Noteholders from,
any taxes that may at any time be asserted against any such Person as a result
of or relating to the transactions contemplated herein and in the other
Transaction Documents, including any sales, gross receipts, gross margin,
general corporation, tangible personal property, Illinois personal property
replacement 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 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 Depositor, the Trust, a Noteholder 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.

 

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.

 

13

 

ARTICLE VII

 

MISCELLANEOUS

 

Section 7.01.        Prohibited Transactions with
Respect to the Trust.  Seller shall not:

 

(a)           Provide
credit to any Noteholder for the purpose of enabling such Noteholder to
purchase Notes;

 

(b)           Purchase
any Notes 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 due pursuant to Section 7.05 of the Sale and Servicing
Agreement) on the Distribution Date on which the principal balance of the Notes
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 Noteholders 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, therein or in the Prospectus,
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 or the Prospectus; provided,
however, that such action shall not, as evidenced by an Opinion of
Counsel for Seller acceptable to the Trustees, adversely affect the interests
of any Noteholder.

 

14

 

(b)           This Agreement may also be amended from
time to time by Seller and Trust Depositor, with the consent of the Required
Holders, 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 Indenture Trustee for the benefit of Noteholders; provided, however, that no such amendment or waiver 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
Note or (b) reduce the aforesaid percentage required to consent to any such
amendment, without the consent of the holders of all Notes then outstanding.

 

(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 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 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 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 at the address for such recipient set
forth in the Sale and Servicing Agreement.

 

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 Noteholders shall be in writing and delivered or
mailed at the address shown in the Note Register.

 

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.

 

15

 

Section 7.10.        No Bankruptcy Petition. 
The Seller covenants and agrees that, prior to the date that is one year
and one day after the payment in full of all amounts owing in respect of all
outstanding Securities, as well as any other amounts distributable or payable
from the Trust Estate, together with any other amounts owing in respect of
obligations of the Trust Depositor, it will not institute against, or solicit
or join in or cooperate with or encourage any Person to institute against, the
Trust Depositor or the Trust, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings or other similar proceedings under the
laws of the United States or any State of the United States.  This Section 7.10 shall survive termination
of this Agreement.

 

[signature page
follows]

 

16

 

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:

  	
  /s/ Perry A. Glassgow

  	
   

  
	
   

  	
   

  	
   Printed Name: Perry A. Glassgow

  	
   

  
	
   

  	
   

  	
   Title: Vice President and Treasurer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HARLEY-DAVIDSON
  CREDIT CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Perry A. Glassgow

  	
   

  
	
   

  	
   

  	
  Printed Name: Perry A. Glassgow

  	
   

  
	
   

  	
   

  	
  Title: Vice President and 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 August 1, 2006 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 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 after the Initial Cutoff Date, including any liquidation
proceeds therefrom, but excluding any rights to receive payments which were
collected pursuant thereto on or 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),
any debt insurance policy or any debt cancellation agreement 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. originators of certain
Contracts) and the Seller, (vii) all rights of Seller to certain rebates of
premiums and other amounts relating to insurance policies, debt cancellation
agreements, extended service contracts or other repair agreements and other
items financed under such Contracts and (viii) 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 August 1, 2006 made by and
among the undersigned, as servicer, the Trust Depositor, Harley-Davidson
Motorcycle Trust 2006-3, as issuer, and The Bank of New York Trust Company,
N.A., as indenture trustee.

 

A-1

 

IN WITNESS WHEREOF, the
undersigned has caused this Assignment to be duly executed this [        ]
day of August, 2006.

 

	
   

  	
  HARLEY-DAVIDSON
  CREDIT CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Printed Name:
  Perry A. Glassgow

  
	
   

  	
  Title: Vice
  President and Treasurer

  

 

A-2

 

Exhibit B

Transfer and Sale

Agreement

 

FORM OF OFFICER’S CERTIFICATE

 

 

(See Exhibit C to the Sale and Servicing Agreement)

 

B-1

 

Exhibit C

Transfer and 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 August 1, 2006 (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 August 1, 2006 among the Seller
(in the capacity of Servicer thereunder), the Issuer as defined therein, the
Trust Depositor and the Indenture 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 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,

 

C-1

 

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 related Subsequent List of Contracts (including, without
limitation, all security interests and all rights to receive payments which are
collected pursuant thereto after the applicable Subsequent Cutoff Date,
including any liquidation proceeds therefrom, but excluding any rights to
receive payments which were collected pursuant thereto on or 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), any debt insurance policy or any debt
cancellation agreement relating to any such Subsequent Contract, an Obligor or
a Motorcycle securing such Subsequent Contract, (iii) all security interests in
each such Motorcycle, (iv) all documents contained in the related Subsequent
Contract Files, (v) all rights of Seller in the Lockbox, Lockbox Account and
related Lockbox Agreement to the extent they relate to the Subsequent
Contracts, (vi) all rights (but not the obligations) of the Seller under any
motorcycle dealer agreements between the dealers (i.e.
originators of certain Subsequent Contracts) and the Seller, (vii) all rights
of Seller to certain rebates of premiums and other amounts relating to
insurance policies, debt cancellation agreements, extended service contracts or
other repair agreements and other items financed under such Subsequent
Contracts and (viii) 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.

 

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.

 

C-2

 

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: Vice President and Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HARLEY-DAVIDSON
  CREDIT CORP.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Printed Name: Perry A. Glassgow

  
	
   

  	
  Title: Vice President and TreasurerExhibit 10.2

 

 

SALE AND SERVICING AGREEMENT

 

among

 

HARLEY-DAVIDSON MOTORCYCLE TRUST 2006-3,

as Issuer,

 

HARLEY-DAVIDSON CUSTOMER FUNDING CORP.,

as Trust Depositor,

 

HARLEY-DAVIDSON CREDIT CORP.,

as Servicer

 

and

 

THE BANK OF NEW YORK TRUST COMPANY, N.A.,

as Indenture Trustee

 

 

Dated as of August 1, 2006

 

 

 

	
   

  	
   

  	
  Page

  
	
   

  	
  Table of Contents

  	
   

  
	
  ARTICLE  One
  DEFINITIONS

  	
  1

  
	
  Section 1.01.

  	
  Definitions

  	
  1

  
	
  Section 1.02.

  	
  Usage of Terms

  	
  19

  
	
  Section 1.03.

  	
  Section References

  	
  19

  
	
  Section 1.04.

  	
  Calculations

  	
  19

  
	
  Section 1.05.

  	
  Accounting Terms

  	
  19

  
	
  ARTICLE  Two
  TRANSFER OF CONTRACTS

  	
  19

  
	
  Section 2.01.

  	
  Closing

  	
  19

  
	
  Section 2.02.

  	
  Conditions to the
  Closing

  	
  20

  
	
  Section 2.03.

  	
  Conveyance of
  Subsequent Contracts

  	
  21

  
	
  ARTICLE  Three
  REPRESENTATIONS AND WARRANTIES

  	
  24

  
	
  Section 3.01.

  	
  Representations and
  Warranties Regarding the Trust Depositor

  	
  24

  
	
  Section 3.02.

  	
  Representations and
  Warranties Regarding the Servicer

  	
  26

  
	
  ARTICLE  Four
  PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS

  	
  27

  
	
  Section 4.01.

  	
  Custody of Contracts

  	
  27

  
	
  Section 4.02.

  	
  Filing

  	
  28

  
	
  Section 4.03.

  	
  Name Change or
  Relocation

  	
  29

  
	
  Section 4.04.

  	
  Costs and Expenses

  	
  29

  
	
  ARTICLE  Five
  SERVICING OF CONTRACTS

  	
  29

  
	
  Section 5.01.

  	
  Responsibility for
  Contract Administration

  	
  29

  
	
  Section 5.02.

  	
  Standard of Care

  	
  29

  
	
  Section 5.03.

  	
  Records

  	
  30

  
	
  Section 5.04.

  	
  Inspection

  	
  30

  
	
  Section 5.05.

  	
  Trust Accounts

  	
  30

  
	
  Section 5.06.

  	
  Enforcement

  	
  32

  
	
  Section 5.07.

  	
  Trustees to Cooperate

  	
  33

  
	
  Section 5.08.

  	
  Costs and Expenses

  	
  33

  
	
  Section 5.09.

  	
  Maintenance of Security
  Interests in Motorcycles

  	
  33

  
	
  Section 5.10.

  	
  Successor
  Servicer/Lockbox Agreements

  	
  34

  
	
  Section 5.11.

  	
  Separate Entity
  Existence

  	
  34

  
	
  ARTICLE  Six
  THE TRUST DEPOSITOR

  	
  34

  
	
  Section 6.01.

  	
  Covenants of the Trust
  Depositor

  	
  34

  
	
  Section 6.02.

  	
  Liability of Trust
  Depositor; Indemnities

  	
  36

  
	
  Section 6.03.

  	
  Merger or Consolidation
  of, or Assumption of the Obligations of, Trust Depositor; Certain Limitations

  	
  37

  
	
  Section 6.04.

  	
  Limitation on Liability
  of Trust Depositor and Others

  	
  38

  
	
  Section 6.05.

  	
  Trust Depositor Not to
  Resign

  	
  38

  
	
  ARTICLE  Seven
  DISTRIBUTIONS; RESERVE FUND

  	
  39

  
	
  Section 7.01.

  	
  Monthly Distributions

  	
  39

  
	
  Section 7.02.

  	
  Fees

  	
  39

  
	
  Section 7.03.

  	
  Advances; Realization
  of Carrying Charge

  	
  39

  
	
  Section 7.04.

  	
  Interest Reserve
  Account

  	
  40

  
	
  Section 7.05.

  	
  Distributions;
  Priorities

  	
  40

  
	
  Section 7.06.

  	
  Reserve Fund

  	
  43

  
	
  Section 7.07.

  	
  Establishment of
  Pre-Funding Account

  	
  44

  
				

 

i

 

	
  Section 7.08.

  	
  Purchase of Contracts
  for Breach of Representations and Warranties

  	
  45

  
	
  Section 7.09.

  	
  Reassignment of
  Reacquired Contracts

  	
  45

  
	
  Section 7.10.

  	
  Servicer’s Purchase
  Option

  	
  45

  
	
  Section 7.11.

  	
  Purchase of Contracts
  for Breach of Servicing Obligations

  	
  46

  
	
  ARTICLE  Eight
  EVENTS OF TERMINATION; SERVICE TRANSFER

  	
  46

  
	
  Section 8.01.

  	
  Events of Termination

  	
  46

  
	
  Section 8.02.

  	
  Waiver of Event of
  Termination

  	
  47

  
	
  Section 8.03.

  	
  Service Transfer

  	
  47

  
	
  Section 8.04.

  	
  Successor Servicer to
  Act; Appointment of Successor Servicer

  	
  48

  
	
  Section 8.05.

  	
  Notification to
  Securityholders

  	
  48

  
	
  Section 8.06.

  	
  Effect of Transfer

  	
  48

  
	
  Section 8.07.

  	
  Database File

  	
  49

  
	
  Section 8.08.

  	
  Successor Servicer
  Indemnification

  	
  49

  
	
  Section 8.09.

  	
  Responsibilities of the
  Successor Servicer

  	
  49

  
	
  Section 8.10.

  	
  Limitation of Liability
  of Servicer

  	
  49

  
	
  Section 8.11.

  	
  Merger or Consolidation
  of Servicer

  	
  50

  
	
  Section 8.12.

  	
  Servicer Not to Resign

  	
  50

  
	
  Section 8.13.

  	
  Appointment of
  Subservicer

  	
  50

  
	
  ARTICLE  Nine
  REPORTS

  	
  50

  
	
  Section 9.01.

  	
  Monthly Reports

  	
  50

  
	
  Section 9.02.

  	
  Officer’s Certificate

  	
  51

  
	
  Section 9.03.

  	
  Other Data

  	
  51

  
	
  Section 9.04.

  	
  Report on Assessment of
  Compliance with Servicing Criteria and Attestation; Annual Officer’s
  Certificate

  	
  51

  
	
  Section 9.05.

  	
  Monthly Reports to
  Noteholders

  	
  52

  
	
  ARTICLE  Ten
  TERMINATION

  	
  55

  
	
  Section 10.01.

  	
  Sale of Trust Assets

  	
  55

  
	
  ARTICLE  Eleven
  MISCELLANEOUS

  	
  55

  
	
  Section 11.01.

  	
  Amendment

  	
  55

  
	
  Section 11.02.

  	
  Protection of Title to
  Trust

  	
  56

  
	
  Section 11.03.

  	
  Governing Law

  	
  58

  
	
  Section 11.04.

  	
  Notices

  	
  58

  
	
  Section 11.05.

  	
  Severability of
  Provisions

  	
  59

  
	
  Section 11.06.

  	
  Assignment

  	
  60

  
	
  Section 11.07.

  	
  Third Party
  Beneficiaries

  	
  60

  
	
  Section 11.08.

  	
  Counterparts

  	
  60

  
	
  Section 11.09.

  	
  Headings

  	
  60

  
	
  Section 11.10.

  	
  No Bankruptcy Petition;
  Disclaimer and Subordination

  	
  60

  
	
  Section 11.11.

  	
  Limitation of Liability
  of Owner Trustee and Indenture Trustee

  	
  61

  

 

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
  Attestation Report

  	
  D-1

  
	
  Exhibit E

  	
  Servicing
  Criteria to be Addressed in Indenture Trustee’s Assessment of Compliance

  	
  E-1

  
	
  Exhibit F

  	
  Form of Indenture
  Trustee’s Annual Certification

  	
  F-1

  
	
  Exhibit G

  	
  Form of
  Certificate Regarding Reacquired Contracts

  	
  G-1

  
	
  Exhibit H

  	
  List of
  Contracts

  	
  H-1

  
	
  Exhibit I

  	
  Form of Monthly
  Report to Noteholders and the Certificateholder

  	
  I-1

  
	
  Exhibit J

  	
  Seller’s
  Representations and Warranties

  	
  J-1

  
	
  Exhibit K

  	
  Lockbox Bank and
  Lockbox Account

  	
  K-1

  
	
  Exhibit L

  	
  Form of
  Subsequent Transfer Agreement

  	
  L-1

  

 

iii

 

SALE AND SERVICING
AGREEMENT, dated as of August 1, 2006, among Harley-Davidson Motorcycle
Trust 2006-3 (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”), The Bank of New York Trust Company, N.A. (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 acquire from the Trust Depositor an initial and one or more
subsequent pools of fixed-rate, simple interest motorcycle conditional sales
contracts and promissory note and security agreements relating to
Harley-Davidson and Buell motorcycles and motorcycles not manufactured by
Harley-Davidson or Buell (collectively, the “Contracts”)
purchased by Harley-Davidson Credit and subsequently sold by Harley-Davidson
Credit to the Trust Depositor;

 

WHEREAS the Trust
Depositor is willing to transfer and assign 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 2.03
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.

 

“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, “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.

 

“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.

 

1

 

“Aggregate
Principal Balance Decline” means, with respect to any Distribution Date, the
amount by which the Aggregate Principal Balance as of the close of business on
the last day of the Due Period relating to the Distribution Date immediately
preceding such Distribution Date (or as of the Initial Cutoff Date in the case
of the first Distribution Date) exceeds the Aggregate Principal Balance as of
the close of business on the last day of the Due Period relating to such
Distribution Date.

 

“Agreement” 
means this Sale and Servicing Agreement, as amended, supplemented or
otherwise modified from time to time in accordance with the terms hereof.

 

“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 Purchase
Prices for Contracts reacquired 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 Servicer in connection with an
optional purchase of the Contracts pursuant to Section 7.10, (vi) the
interest component of the aggregate of the Purchase Prices for Contracts
purchased by the Servicer pursuant to Section 7.11, (vii) all amounts
received in respect of Carrying Charges transferred from the Interest Reserve
Account pursuant to Section 7.03, and (viii) 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 Purchase Prices for Contracts reacquired by the Trust Depositor pursuant to
Section 7.08, (iv) the principal component of all amounts paid by the
Servicer in connection with an optional purchase of the Contracts pursuant to Section 7.10,
and (v) the principal component of the aggregate of the Purchase Prices
for Contracts purchased by the Servicer pursuant to Section 7.11.

 

“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 August 16, 2006 relating to the Harley-Davidson
Motorcycle Trusts.

 

“Buell”
means Buell Motorcycle Company, LLC.

 

“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.

 

2

 

“Calculation
Day” means the last day of each calendar month.

 

“Carrying
Charges” means,
with respect to any Distribution Date, the sum of (i) the product of (x)
the weighted average of the Class A-1 Rate, the Class A-2 Rate, the Class A-3
Rate, the Class A-4 Rate and the Class B Rate for the related
Interest Period 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 with respect to such Distribution Date.

 

“Certificate”
means the Trust
Certificate (as such term is defined in the Trust Agreement), representing 100%
of the beneficial equity interest in the Trust and issued pursuant to the Trust
Agreement.

 

“Certificate
Register” shall
have the meaning specified in the Trust Agreement.

 

“Certificateholder”
shall have the
meaning specified in the Trust Agreement.

 

“Class” means all Notes whose form is
identical except for variation in denomination, principal amount or owner.

 

“Class A
Noteholder” means
the Person in whose name a Class A Note is registered in the Note
Register, as such term is defined in the Indenture.

 

“Class A
Notes” means,
collectively, the Class A-1 Notes, the Class A-2 Notes, the Class A-3
Notes and the Class A-4 Notes.

 

“Class A-1
Final Distribution Date” means the September 2007 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 5.37% per annum (computed on the basis of the
actual number of days elapsed and a 360-day year).

 

 “Class A-2 Final Distribution Date” means the February 2010
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 5.42% per annum (computed on the basis of a
360-day year of twelve 30-day months).

 

“Class A-3
Final Distribution Date” means the January 2012 Distribution Date.

 

“Class A-3
Noteholder” means
the Person in whose name a Class A-3 Note is registered in the Note
Register.

 

3

 

“Class A-3
Rate” means 5.24% per annum (computed on the basis of a
360-day year of twelve 30-day months).

 

“Class A-4
Final Distribution Date” means the June 2013 Distribution Date.

 

“Class A-4
Noteholder” means
the Person in whose name a Class A-4 Note is registered in the Note
Register.

 

“Class A-4
Rate” means 5.22% per annum (computed on the basis of a
360-day year of twelve 30-day months).

 

“Class B
Final Distribution Date” means the November 2014 Distribution Date.

 

“Class B
Noteholder” means
the Person in whose name a Class B Note is registered in the Note
Register, as such term is defined in the Indenture.

 

 “Class B Rate” means
5.43% per annum (computed on the basis of a 360-day year of twelve 30-day
months).

 

“Clearing
Agency” shall have the meaning specified in the Indenture.

 

“Closing
Date” means August 25, 2006.

 

“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
File” means the
computer file 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) and transferred to the Trust by the Trust
Depositor pursuant 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 2.03, 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 promissory note and security agreement
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.

 

4

 

“Contract
Rate” means, as
to any Contract, the annual rate of interest with respect to such Contract.

 

“Contracts” 
means the motorcycle conditional sales contracts or promissory note and
security agreements 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 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 on or 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 related 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 Initial Cutoff Date plus (B) the Principal Balance
of any Subsequent Contracts as of the related Subsequent Cutoff Date plus (C) the
Pre-Funded Amount.

 

“Cutoff
Date” means
either or both (as the context may require) the Initial Cutoff Date and
any Subsequent Cutoff Date.

 

“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 in 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 before the 30th day after the
scheduled payment dated therefor (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.

 

5

 

“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 Business Day, with the first such
Distribution Date hereunder being September 15, 2006.

 

“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 August 31, 2006.

 

“Eligible
Account” means a
segregated 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.

 

“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, master notes, promissory notes, demand notes or other short term debt
obligations 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);

 

6

 

(e)                                  notes
or bankers’ acceptances issued by any depository institution or trust company
referred to in clause (b);

 

(f)                                    Repurchase and reverse repurchase agreements
collateralized by securities issued or guaranteed by the United States
government or any agency, instrumentality or establishment of the United States
government (“Government Securities”),
in either case entered into with a depository institution or trust company
(acting as principal) described in clause (b), or entered into with an
entity (acting as principal) which has, or whose parent has, a credit rating
from the Rating Agency in the highest credit category granted thereby; and

 

(g)                                 any
other investment with respect to which the Issuer or the Servicer has received
written notification from the Rating Agencies that the acquisition of such
investment as an Eligible Investment will not result in a withdrawal or
downgrading of the ratings on the Notes.

 

“Event of
Termination” means an event specified in Section 8.01.

 

“Excess
Amounts” shall
mean Available Monies after distributions made in accordance with Section 7.05.

 

“Exchange
Act” means the Securities Exchange Act of 1934, as amended.

 

“Final
Distribution Date”
means the Class A-1 Final Distribution Date, the Class A-2 Final
Distribution Date, the Class A-3 Final Distribution Date, the Class A-4
Final Distribution Date or the Class B Final Distribution Date, as the
case may be.

 

“First
Priority Principal Distributable Amount” means, with respect to any Distribution Date, an
amount, not less than zero, equal to the result of (a) the aggregate
outstanding principal amount of the Class A Notes as of the preceding
Distribution Date (after giving effect to any principal payments made on the Class A
Notes on that preceding Distribution Date), minus (b) the Aggregate Principal Balance at the
end of Due Period related to that Distribution Date; provided, however,
that the First Priority Principal Distributable Amount shall not exceed the
outstanding principal amount of the Class A Notes.

 

“Form 10-D
Disclosure Item” means with respect to any Person, any litigation
or governmental proceedings pending against such Person, or any of the Issuer,
the Seller, the Indenture Trustee, the Owner Trustee or the Servicer of such
Person, or in the case of the Owner Trustee or Indenture Trustee, a Responsible
Officer of such Person, has actual knowledge thereof, in each case that would
be material to the Noteholders.

 

“Form 10-K
Disclosure Item” means with respect to any Person, (a) any Form 10-D
Disclosure Item, (b) any affiliations between such Person and the Seller,
the Servicer, the Trust Depositor, the Owner Trustee and the Indenture Trustee
(each, an “Item 1119
Party”), to the extent such Person, or in the case of the Owner Trustee or
Indenture Trustee, a Responsible Officer of such Person, has actual knowledge
thereof and (c) any relationships or transactions between such Person and
any Item 1119 Party that are outside the ordinary course of business or on
terms other than would be obtained in an arm’s-length transaction with an
unrelated third party, apart from the transactions contemplated under the
Transaction Documents, and that are material to the investors’ understanding of
the Notes, but only to the extent such Person, or in the case of the Owner
Trustee or Indenture Trustee, a Responsible Officer of such Person, has actual
knowledge of such relationships or transactions.

 

7

 

“Funding
Period” means the
period beginning on the Closing Date and ending on the first to occur of (a) the
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 date) is less than $150,000, (b) the date
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” means
Harley-Davidson Financial Services, Inc., a Delaware corporation.

 

“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
0.00215% 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 $100,000,000.

 

“Initial Class A-2
Note Balance” means $228,000,000.

 

“Initial Class A-3
Note Balance” means $264,000,000.

 

“Initial Class A-4
Note Balance” means $160,000,000.

 

“Initial Class B
Note Balance” means $48,000,000.

 

“Initial
Contracts” means
those Contracts conveyed to the Trust on the Closing Date.

 

“Initial
Cutoff Date” means as of the close of business on August 14,
2006.

 

8

 

“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 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 (i) with
respect to any Distribution Date and the Class A-1 Notes, the period from
and including the Distribution Date immediately preceding such Distribution
Date (or, in the case of the first Distribution Date, from and including the
Closing Date) to but excluding such Distribution Date and (ii) with
respect to any Distribution Date and the Class A-2 Notes, the Class A-3
Notes, the Class A-4 Notes and the Class B Notes, 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, from and including 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, the Class A-3 Rate, the Class A-4 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 $2,016,860.12.

 

“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 2006-3.

 

“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.

 

9

 

“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) the receipt of proceeds by the Servicer from the sale
of a repossessed Motorcycle securing a Contract, (iii) the Servicer has
determined in good faith that all amounts expected to be recovered have been
received with respect to such Contract, or (iv) all or any portion of any
payment is delinquent 150 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 a
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 Fifth Amended and Restated Lockbox Administration Agreement dated as of November 1,
2000 by and among the Lockbox Bank, the Servicer, the Trust Depositor,
Eaglemark Customer Funding Corporation-IV, The Bank of New York
(successor-in-interest to the corporate trust business of Harris Trust and
Savings Bank), BNY Midwest Trust Company, Bank One, National Association and
The Bank of New York Trust Company, National Association, 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.

 

“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
Redemption” means
the prepayment, in part, made to the 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 on deposit in the Pre-Funding
Account after giving effect to the acquisition of all Subsequent Contracts,
including any such acquisition on such date.

 

“Mandatory
Redemption Subaccount” means the subaccount of the Note Distribution Account into which
deposits from the Pre-Funding Account for any Mandatory Redemption are made.

 

“Modified
Required Holders”
means (i) prior to the payment in full of the Class A Notes
outstanding, Class A-1 Noteholders, Class A-2 Noteholders, Class A-3
Noteholders and/or Class A-4 Noteholders evidencing at least 66 2/3% of
the aggregate outstanding principal balance of the Class A

 

10

 

Notes and (ii) from and after the payment in full of the Class A
Notes outstanding, Class B Noteholders evidencing at least 66 2/3% of the
aggregate outstanding principal balance of the Class B Notes.

 

“Monthly
Report” shall have the meaning specified in Section 9.05.

 

“Monthly
Servicing Fee”
means, as to any Distribution Date, one-twelfth of the product of 1.00% and the
Principal Balance of the Contracts as of the beginning of the related Due
Period or, with respect to the first Distribution Date after the Closing Date,
as of the Initial Cutoff Date.

 

“Moody’s”
means Moody’s Investors Service, Inc. or any successor thereto.

 

“Motorcycle” means a motorcycle manufactured by a
subsidiary of Harley-Davidson, Inc. (or in certain limited instances Buell
or certain other manufacturers) securing a Contract.

 

“Net
Liquidation Losses”
means, as of any Distribution Date, with respect to all Liquidated Contracts on
an aggregate basis, the amount, if any, by which (a) the outstanding
Principal Balance of all Liquidated Contracts exceeds (b) the Net
Liquidation Proceeds for such Liquidated Contracts.

 

“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 or other amounts in respect of a Liquidated Contract received by the
Servicer.

 

“Noteholder” shall have the meaning specified in the
Indenture.

 

“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, with respect to any Distribution Date and a Class of
Notes, the excess, if any, of the sum of the Note Interest Distributable Amount
for such Class for the immediately preceding Distribution Date plus any outstanding
Note Interest Carryover Shortfall for such Class on such 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.

 

11

 

“Note
Monthly Interest Distributable Amount” means, with respect to any Distribution Date for any Class of
Notes, interest accrued for the related Interest Period at the applicable
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
Pool Factor”
means with 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, as of the close of any Distribution Date, the
excess of the Note Principal Distributable Amount with respect to such
Distribution Date over the amount in respect of principal that is actually
deposited in the Note Distribution Account on such Distribution Date.

 

“Note
Principal Distributable Amount” means, with respect to any Distribution Date, the sum
of (x) the Principal Distributable Amount with respect to such Distribution
Date and (y) the Note Principal Carryover Shortfall as of the close of the
immediately preceding Distribution Date, minus the First Priority Distributable
Amount distributed on 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 Final 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 for payment on the Class A-1 Notes 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
Final 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 for payment on the Class A-2 Notes on such Distribution Date and
allocable to principal) to reduce the outstanding principal amount of the Class A-2
Notes to zero, (iii) on the Class A-3 Final 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 for payment on the Class A-3
Notes on such Distribution Date and allocable to principal) to reduce the
outstanding principal amount of the Class A-3 Notes to zero, (iv) on
the Class A-4 Final 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 for payment on the Class A-4 Notes on such
Distribution Date and allocable to principal) to reduce the outstanding
principal amount of the Class A-4 Notes to zero, and (v) on the Class B
Final Distribution Date shall not be less than the amount that is necessary
(after giving effect to the other amounts to be deposited in the Note Distribution
Account for payment on the Class B Notes on such Distribution Date and
allocable to principal) to reduce the outstanding principal amount on the Class B
notes to zero.

 

“Notes” means the Class A-1 Notes, the Class A-2
Notes, the Class A-3 Notes, the Class A-4 Notes and the Class B
Notes, in each case as executed and authenticated in accordance with 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.

 

12

 

“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.

 

“Outstanding
Amount” shall have
the meaning specified in the Indenture.

 

“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.

 

“Paying
Agent” means as
described in Section 1.01 of the Indenture and Section 3.10 of the
Trust Agreement.

 

“Person” means any individual, corporation,
estate, limited liability company, 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 close 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 reacquired 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 is purchased by the
Servicer pursuant to Section 7.11 hereof, or if (y) the Servicer gives
notice of its intent to purchase the Contracts in connection with an optional
termination of the Trust pursuant to 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 and (ii) 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.

 

13

 

“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.

 

“Purchase Price” means, with respect to a Contract to be
reacquired or purchased hereunder as of the last day of any Due Period an
amount equal to (a) the Principal Balance of such Contract as of such day,
plus (b) accrued and unpaid interest at the Contract Rate on such Contract
through the end of such Due Period.

 

“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 any Trust Account 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 thereof 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.

 

“Rating
Agency” means
each of Moody’s and Standard & Poor’s, so long as such Persons
maintain a rating on the Notes; and if either Moody’s or Standard &
Poor’s no longer maintains a rating on the Notes, such other nationally
recognized statistical rating organization selected by the Trust Depositor.

 

“Record
Date” means, with
respect to any Distribution Date, the close of business on the day immediately
preceding such Distribution Date.

 

“Regulation
AB” means Subpart 229.1100 - Asset Backed Securities (Regulation AB),
17 C.F.R. Sections 229.1100-229.1123, as amended from time to time and as
clarified and interpreted by the Securities and Exchange Commission or its
staff from time to time.

 

“Reimbursement Amount” has the meaning assigned in Section 7.03
hereof.

 

14

 

“Required
Holders” means (i) prior
to the payment in full of the Class A Notes outstanding, Class A-1
Noteholders, Class A-2 Noteholders, Class A-3 Noteholders and Class A-4
Noteholders evidencing more than 50% of the aggregate outstanding principal
balance of the Class A Notes and (ii) from and after the payment in
full of the Class A Notes outstanding, Class B Noteholders evidencing
more than 50% of the aggregate outstanding principal balance of the Class B
Notes.

 

“Reportable Event” means any event required
to be reported on Form 8-K.

 

“Reserve
Fund” means the
Reserve Fund established and maintained pursuant to Section 7.06 hereof.

 

“Reserve
Fund Initial Deposit” means $4,090,603.54.

 

“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(a), 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) 2.50%
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) 3.00%
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) 3.50% 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) 4.00% 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) 3.50%
with respect to any Distribution Date which occurs within the period from the
Closing Date to, and inclusive of, the second anniversary of the Closing Date
or (b) 3.25% with respect to any Distribution Date which occurs following
the second anniversary of the Closing Date; 
or (iii) the Cumulative Loss Ratio for such Distribution Date is
equal to or greater than (a) 1.75% 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) 2.50% 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) 3.00% 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) 3.25% with respect to any Distribution Date occurring after the
third anniversary of the Closing Date.

 

A Reserve Fund
Trigger Event shall be deemed to have terminated with respect to a Distribution
Date if no Reserve Fund Trigger Event shall exist with respect to three
consecutive Distribution Dates (inclusive of the respective Distribution 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

 

15

 

or assistant controller, the treasurer, every assistant treasurer,
every trust officer, assistant trust officer and every other authorized officer
or assistant officer of the Indenture 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, or any of them.

 

“Securities
Act” means the
Securities Act of 1933, as amended.

 

“Securityholders”
means the Holders of the Notes.

 

“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.

 

“Service
Transfer” has the meaning assigned in Section 8.03(a).

 

“Servicing Criteria” means the “servicing
criteria” set forth in Item 1122(d) of Regulation AB.

 

“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, an amount equal to the excess (if any) of (a) the sum of the amounts
payable pursuant to (1) clauses (v) through (viii) of Section 7.05(a),
(2) clauses (i) through (iv) of Section 7.05(b) or (3) clauses
(i) through (iv) of Section 7.05(c), as applicable, over (b) Available
Monies for such Distribution Date minus the amounts payable pursuant to clauses
(i) through (iv) of Section 7.05(a) on such Distribution
Date.

 

“Solvent” means, as to any Person at any time,
that (a) the fair value of the property of such Person is greater than the
amount of such Person’s liabilities (including disputed, contingent and
unliquidated liabilities) as such value is established and liabilities
evaluated for purposes of Section 101(31) of the Bankruptcy Code; (b) the
present fair saleable value of the property of such Person in an orderly
liquidation of such Person is not less than the amount that will be required to
pay the probable liability of such Person on its debts as they become absolute
and matured; (c) such Person is able to realize upon its property and pay
its debts and other liabilities (including disputed, contingent and
unliquidated liabilities) as they mature in the normal course of business; (d) such
Person does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person’s ability to pay as such

 

16

 

debts and liabilities mature; and (e) such Person is not engaged
in business or a transaction, and is not about to engage in a business or a
transaction, for which such Person’s property would constitute unreasonably
small capital.

 

“Specified
Reserve Fund Balance” means, with respect to any Distribution Date, an amount equal to the
greater of:

 

(a)                                  2.00% of the Principal Balance of the
Contracts in the Trust as of the last day of the related Due Period; provided, however, in the event a Reserve Fund Trigger Event
occurs and is continuing for three consecutive Distribution Dates (inclusive of
the respective Distribution Date), the Specified Reserve Fund Balance shall be
equal to 6.00% of the Principal Balance of the Contracts in the Trust as of the
last day of the immediately preceding Due Period; and

 

(b)                                 1.00% of the aggregate of the Initial Class A-1
Note Balance, Initial Class A-2 Note Balance, Initial Class A-3 Note
Balance, Initial Class A-4 Note Balance and Initial Class B Note
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, Inc., or any successor thereto.

 

“Subsequent
Contracts” means
all Contracts transferred to the Trust pursuant to Section 2.03.

 

“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 0.75% of the
aggregate balance of the Subsequent Contracts conveyed to the Trust.

 

“Subsequent
Transfer Agreement”
means the agreement described in Section 2.03(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 8.03(b).

 

17

 

“Supplement”
means the Prospectus Supplement dated August 17, 2006.

 

“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, 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” means the trust created by the Trust
Agreement, comprised of the Trust Corpus.

 

“Trust
Accounts” means,
collectively, the Collection Account, the Pre-Funding Account, the Note
Distribution Account, the Reserve Fund and the Interest Reserve Account, 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 August 1, 2006, between the Trust
Depositor and the Owner Trustee.

 

“Trust
Corpus” has the meaning
given to such term in Section 2.01(a) hereof (and in Section 2.03(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 in effect on the date hereof and from time to time in the State of
Illinois, provided that if by reason of mandatory provisions of law, the
perfection or the effect of perfection or non-perfection or priority of the
security interests in any collateral or the availability of any remedy
hereunder is governed by the Uniform Commercial Code as in effect on or
after the date hereof in any other jurisdiction, “UCC”
means the Uniform Commercial Code as in effect in such other jurisdiction
for purposes of the provisions hereof relating to such perfection or effect of
perfection or non-perfection or priority or availability of such remedy.

 

“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,

 

18

 

or, that any Advance proposed to be made would be an Uncollectible
Advance, shall be evidenced by an Officer’s Certificate delivered to the
Trustees.

 

“Underwriters” has the meaning set forth in the
Underwriting Agreement.

 

“Underwriting
Agreement” means
the Underwriting Agreement, dated August 17, 2006, by and among the Trust
Depositor, the Seller and the Underwriters.

 

“United
States” means the United States of America.

 

“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.

 

“WTC”
means Wilmington Trust Company, 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

TRANSFER OF CONTRACTS

 

Section 2.01.                         Closing. (a)  On the Closing Date, the Trust
Depositor shall 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 after the Initial Cutoff Date, including any liquidation
proceeds therefrom, but excluding any rights to receive payments which were
collected pursuant thereto on or prior to the Initial Cutoff Date), (ii) all
rights of the Trust Depositor under any physical damage or

 

19

 

other individual
insurance policy (and rights under a “forced placed”
policy, if any), any debt insurance policy or any debt cancellation agreement
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 certain Contracts) and the
Seller, (vi) all rights of the Trust Depositor in the Lockbox, the Lockbox
Account and the related Lockbox Agreement to the extent they relate to the
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), (ix) all rights of the Trust Depositor to certain
rebates of premiums and other amounts relating to insurance policies, debt
cancellation agreements, extended service contracts or other repair agreements
and other items financed under such Contracts and (x) all proceeds and products
of the foregoing (the property in clauses (i)-(x) above, being the “Trust Corpus”). Although the Trust Depositor and the Owner
Trustee agree that such transfer is intended to be a transfer 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 Trust a perfected first priority security interest in such Trust
Corpus and this Agreement shall constitute a security agreement under
applicable law.

 

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 in form and substance
reasonably satisfactory to the Underwriters (and including as an addressee
thereof each Rating Agency).

 

(d)                                 A
letter or letters from Ernst & Young 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,

 

20

 

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 office in Nevada of a UCC financing
statement naming the Seller, as debtor, naming the Trust Depositor as assignor
secured party (and the Trust as secured party) and identifying the Contract
Assets as collateral; and evidence of proper filing with the appropriate office
in Nevada of a UCC financing statement naming the Trust Depositor, as debtor,
naming the Trust as assignor secured party (and the Indenture Trustee as
secured party) and identifying the Trust Corpus as collateral; and evidence of
proper filing with the appropriate office in Delaware of a UCC financing
statement naming the Trust, as debtor, and naming the Indenture Trustee, as
secured party and identifying the Collateral 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 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 Owner
Trustee.

 

(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.                         Conveyance of Subsequent
Contracts. (a) Subject
to the conditions set forth in paragraph (b) below, the Trust Depositor
shall 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 after the related Subsequent Cutoff Date, including
any liquidation proceeds therefrom, but excluding any rights to receive
payments which were collected pursuant thereto on or prior to such Subsequent
Cutoff Date), (ii) all rights of the Trust Depositor under any physical
damage or other individual insurance policy (including a “forced
placed” policy, if any), any debt insurance policy or any debt
cancellation agreement relating to any such Subsequent Contract, an Obligor or
a Motorcycle securing such Subsequent 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

 

21

 

any related
motorcycle dealer agreements between dealers (i.e., the originators of certain
Subsequent Contracts) and the Seller, (vi) all rights of the Trust
Depositor in the Lockbox, the Lockbox Account and the related Lockbox Agreement
to the extent they relate to such Subsequent Contracts, (vii) all rights
(but not the obligations) of the Trust Depositor under the Transfer and Sale
Agreement related to such Subsequent Contracts (to the extent not already
conveyed under Section 2.01(a)), 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 Subsequent 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 Subsequent
Contracts (to the extent not already conveyed under Section 2.01(a)) (and
any investments of such amounts), (ix) all rights of the Trust Depositor
to certain rebates of premiums and other amounts relating to insurance
policies, debt cancellation agreements, extended service contracts or other
repair agreements and other items financed under such Subsequent Contracts and
(x) all proceeds and products of the foregoing (the property in clauses (i)-(x)
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 transfer 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 L 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 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;

 

22

 

(vii)                           each Rating Agency shall
have notified the Trust Depositor, the Owner Trustee and the Indenture Trustee
that following such transfer the Notes will be rated at least their respective
ratings as of the Closing Date by such Rating Agency;

 

(viii)                        such addition will not result
in a material adverse tax consequence to the Trust or the Certificateholder 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 confirmed 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 (or bring-downs of opinions of
counsel delivered on the Closing Date) 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 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 contract
rate of the Contracts collectively, following the transfer of the Subsequent
Contracts, is not less than 11.98% 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 76 months;

 

(xiii)                          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 Contracts 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;

 

(xiv)                         the Seller or the Servicer
shall, at its own expense, on or prior to the Subsequent Transfer Date indicate
in its Computer File that the Subsequent Contracts identified on the Subsequent
List of Contracts in the Subsequent Transfer Agreement have been transferred to
the Issuer pursuant to this Agreement and the Transfer and Sale Agreement; and

 

(xv)                            the
Seller shall have taken any action required to maintain the first perfected
ownership interest of the Issuer in the 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
$254,586,195.07; 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 transfer 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,

 

23

 

however, that the foregoing shall be the sole remedy of the
Trust, the Owner Trustee, the Indenture Trustee and 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 transfer
and assignment of the Contracts to the Trust. Pursuant to Section 2.01 of
this Agreement, the Trust Depositor has 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 reacquire
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 Trust 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 Trust all rights of the
Trust Depositor to cause the Seller under the Transfer and Sale Agreement to
reacquire 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 Trust,
the Indenture Trustee and the Noteholders 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.

 

24

 

(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 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.

 

(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 Notes (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 Certificate or Notes.

 

(g)                                 State
of Incorporation; Name; No Changes. The Trust Depositor’s state of
incorporation is the State of Nevada. The Trust Depositor’s exact legal name is
as set forth in the first paragraph of this Agreement. The Trust Depositor has
not changed its name, whether by

 

25

 

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)                                 Solvency. The Trust Depositor, after giving effect to the
conveyances made by it hereunder, is Solvent.

 

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
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 Trust, the Indenture
Trustee and the Noteholders 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
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 or on the ability of the Servicer to perform its
obligations hereunder.

 

(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

 

26

 

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 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 by the Servicer, or its custodian, for the benefit of, and as agent
for, the Trust as the owner thereof and the Indenture Trustee.

 

(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 9-313 of the Uniform Commercial
Code of the State in which the Contract Files are located.

 

(c)                                  As custodian, the Servicer shall have the
following powers and perform the following duties:

 

(i)                                     hold,
or cause the Servicer’s custodian to hold, the Contract Files on behalf of the
Trust, 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 and certify to the Owner Trustee and the Indenture Trustee
annually that it, or its custodian, 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;

 

27

 

(iii)                               attend to all details in
connection with maintaining custody of the Contract Files on behalf of the
Trust;

 

(iv)                              at
all times maintain, or cause the Servicer’s custodian to maintain, the original
of the fully executed Contract in accordance with its customary practices and
procedures, except as may be necessary to conduct collection and servicing
activities in accordance with its customary practices and procedures; and

 

(v)                                 as
promptly as practicable after the Closing Date (or Subsequent Transfer Date, as
the case may be), and in any event within 60 days thereof, 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.

 

(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 and promissory notes and security
agreements. The Servicer shall promptly report to the Owner Trustee and the
Indenture Trustee any failure by it, or its custodian, 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 Certificateholder, 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
Certificateholder, 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 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. All financing statements filed
or to be filed against the Seller in favor of the Trust Depositor or the Trust
in connection herewith describing the Contract Assets as collateral shall
contain a statement to the following effect: “A purchase of or security
interest in any collateral described in this financing statement, except as permitted
in the Transfer and Sale Agreement or Sale and Servicing Agreement, will
violate the rights of the Secured Party.”

 

28

 

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 change its state of incorporation 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 state of incorporation 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 Trust in
the Trust Corpus and the Indenture Trustee in the Collateral have been filed,
and reciting the details of such filing.

 

Section 4.04.                         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 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
and promissory note and security agreements; provided,
however, that notwithstanding the foregoing, the Servicer shall not
release or waive the right to collect the unpaid balance of any Contract except
that with respect to a Contract that has become a Defaulted Contract, the
Servicer, consistent with its collection policies, may release or waive
the right to collect the unpaid balance of such Defaulted Contract in an effort
to maximize collections thereon.

 

29

 

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 File 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 the Trustees.

 

Section 5.05.                         Trust Accounts. (a) On or before the Closing Date,
the Trust Depositor shall establish the Trust Accounts, each with and in the
name of the Indenture Trustee for the benefit of the Noteholders. 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 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 received 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 Owner Trustee or Servicer;

 

(ii)                                  All
Net Liquidation Proceeds related to the Contracts;

 

(iii)                               The aggregate of the
Purchase Prices for Contracts reacquired 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 Servicer in connection with an optional purchase of the
Contracts described in Section 7.10;

 

(vi)                              The
aggregate of the Purchase Prices for Contracts purchased by the Servicer as
described in Section 7.11;

 

30

 

(vii)                           All amounts realized in
respect of Carrying Charges transferred from the Interest Reserve Account as
contemplated in Section 7.03(b); and

 

(viii)                        All amounts received in respect
of interest, dividends, gains, income and earnings on investments of funds in
the Trust Accounts (except the Reserve Fund and the Pre-Funding Account) 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, cause to be deposited into the Note Distribution Account the amount
then on deposit in the Pre-Funding Account.

 

(d)                                 The Servicer shall direct the Indenture
Trustee, and 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 and the Pre-Funding
Account) 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 9-106
of the UCC) of collateral comprised of “Investment Property”
(within the meaning of Section 9-102 of the UCC) for all purposes of this
Agreement.

 

(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 10:00 a.m., Central time, on the Business
Day prior to the next succeeding Distribution Date, but only for so long as the
short-term debt security rating of the Servicer is at least “P-1” by Moody’s
and “A-1” by Standard & Poor’s.

 

(f)                                    The Servicer shall apply collections
received in respect of a Contract as follows:

 

(i)                                     First, to accrued interest with respect
to such Contract;

 

(ii)                                  Second, to pay any expenses and unpaid
late charges or extension fees (if any) due and owing under such Contract; and

 

(iii)                               Third, to principal to the extent due and
owing under such Contract.

 

(g)                                 Any collections on a Contract remaining
after application by the Servicer in accordance with the provisions of Section 5.05(f) shall
constitute an excess payment (an “Excess Payment”).
Excess

 

31

 

Payments constituting prepayments of principal shall be applied as a
prepayment of the Principal Balance of such Contract. All other Excess Payments
shall be permitted to be retained by the Servicer.

 

(h)                                 The Servicer will, from time to time as
provided herein, be permitted to withdraw or request the withdrawal from the
Collection Account any amount deposited therein that, based on the Servicer’s
good-faith determination, was deposited in error.

 

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 shall use its best efforts to cause Obligors to make
all payments on the Contracts to the Lockbox Account (either directly by remitting
payments to the Lockbox, or indirectly by making payments through direct debit,
the telephone or the internet to an account of the Servicer which payments will
be subsequently transferred from such account to the Lockbox Account). 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
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 Certificateholder as owner 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 Trust’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 reacquired
by the Seller pursuant to the Transfer and Sale Agreement or (ii) was
required to be reacquired by the Seller and the Seller has defaulted on such
reacquisition 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)                                  Subject to Section 5.02, the
Servicer may grant extensions, rebates or adjustments on a Contract;
provided, however, that if the Servicer extends the date for final payment by
the Obligor of any

 

32

 

Contract beyond the Class B Final Distribution Date, it shall
promptly purchase such Contract pursuant to Section 7.11.

 

(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.                         Trustees to Cooperate. Upon payment in full on any Contract,
the Servicer shall (if the Servicer is not then in possession of the Contracts
and Contract Files) notify the Trustees and request delivery of the Contract
and Contract File to the Servicer. Upon receipt of such notice 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 reacquired 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 Certificateholder’s 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 reacquired 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 and the Indenture Trustee
hereby

 

33

 

authorize 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 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.

 

Section 5.11.                         Separate Entity Existence. The Servicer agrees to take or refrain
from taking or engaging in with respect to the Trust Depositor, as applicable,
each of the actions or activities specified in the “substantive consolidation”
opinion of Winston & Strawn LLP (or in any related Certificate of the
Servicer) delivered on the Closing Date, upon which the conclusions expressed
therein are based.

 

ARTICLE SIX

THE TRUST DEPOSITOR

 

Section 6.01.                         Covenants of the Trust Depositor.

 

(a)                                  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; provided,
however, that the Trust Depositor may purchase and transfer (or
grant Liens in respect of) contracts and/or other related assets similar to the
Contracts to other Persons in securitization or other non-recourse financing
transactions involving the Seller or any of its Affiliates (or with respect to
the Contract Assets themselves, following a release and reconveyance thereof
from the Trust), on terms and conditions (with respect to the

 

34

 

liabilities imposed upon the Trust Depositor by virtue of such
transactions, as well as in respect of agreements or restrictions concerning
activities of the Trust Depositor and its relations or interactions with the
Seller or the Servicer or other applicable Affiliate relevant to “bankruptcy
remoteness” or “substantive consolidation” analysis), in each case
substantially similar to such terms and conditions applicable to the Trust
Depositor hereunder and under the other Transaction Documents.

 

(d)                                 No Borrowing. The Trust Depositor shall not issue,
incur, assume, guarantee or otherwise become liable, directly or indirectly,
for (i) any Indebtedness except for any Indebtedness permitted by or arising
under the Transaction Documents or (ii) obligations in connection with
transactions described in the proviso of Section 6.01(c), as limited
thereby. The proceeds of the Notes 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 or in connection with
transactions described in Section 6.01(c), as limited thereby, 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 or contemplated 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 any owner of an equity interest in the Trust Depositor, (ii) redeem,
purchase, retire or otherwise acquire for value any such equity interest or (iii) set
aside or otherwise segregate any amounts for any such purpose; it being
understood that the Trust Depositor shall at all times have the right to
distribute funds received pursuant to the Transaction Documents to its equity
owner.

 

(h)                                 Separate Entity Existence. The Trust Depositor shall:

 

(i)                                     Maintain its own deposit account or
accounts, separate from those of any Affiliate, with commercial banking
institutions. The funds of the Trust Depositor will not be diverted to any
other Person or for other than authorized uses of the Trust Depositor.

 

(ii)                                  Ensure that, to the extent that it shares
the same officers or other employees as any of its members or Affiliates, the
salaries of and the expenses related to providing benefits to such officers and
other employees shall be fairly allocated among such entities, and each such
entity shall bear its fair share of the salary and benefit costs associated
with all such common officers and employees.

 

(iii)                               Ensure that, to the extent that it
jointly contracts with any of its members or Affiliates to do business with
vendors or service providers or to share overhead expenses, the costs incurred
in so doing shall be allocated fairly among such entities, and each such entity
shall

 

35

 

bear its fair
share of such costs. To the extent that the Trust Depositor contracts or does
business with vendors or service providers when the goods and services provided
are partially for the benefit of any other Person, the costs incurred in so doing
shall be fairly allocated to or among such entities for whose benefit the goods
and services are provided, and each such entity shall bear its fair share of
such costs. All material transactions between Trust Depositor and any of its
Affiliates shall be only on an arm’s length basis.

 

(iv)                              To the extent that the Trust Depositor
and any of its members or Affiliates have offices in the same location, there
shall be a fair and appropriate allocation of overhead costs among them, and
each such entity shall bear its fair share of such expenses.

 

(v)                                 Conduct its affairs strictly in
accordance with its By-laws and Articles of Incorporation, and observe all
necessary, appropriate and customary limited liability company formalities,
including, but not limited to, holding all regular and special members’ and
directors’ meetings appropriate to authorize all entity action, keeping
separate and accurate records of such meetings and its actions, passing all
resolutions or consents necessary to authorize actions taken or to be taken,
and maintaining accurate and separate books, records and accounts, including,
but not limited to, payroll and intercompany transaction accounts.

 

(vi)                              Take or refrain from taking or engaging
in, as applicable, each of the actions or activities specified in the “true
sale” and “substantive consolidation” opinions of Winston & Strawn LLP
delivered on the Closing Date (or in any related certificate delivered in
connection therewith), upon which the conclusions expressed therein are based.

 

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, WTC, the Indenture Trustee and the Servicer from and against any taxes
that may at any time be asserted against any such Person as a result of or
relating to the transactions contemplated herein and in the other Transaction
Documents, including any sales, gross receipts, gross margin, 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 transfer of the
Contracts to the Issuer or the issuance and original sale of the Securities, or
federal or other income taxes arising out of distributions on the Certificate
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, WTC, 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, WTC
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

 

36

 

liability in the case of (i) the Owner Trustee or WTC, as the case
may be, shall be due to the willful misfeasance, bad faith or negligence
of the Owner Trustee or WTC, as the case may be, or shall arise from the
breach by the Owner Trustee or WTC, 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 Certificate 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 Certificate described in the Trust
Agreement.

 

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.

 

Notwithstanding
anything to the contrary herein, the obligations of the Trust Depositor under
this Section are solely the corporate obligations of the Trust Depositor
and shall be payable by it solely as provided in this Section. The Trust
Depositor shall only be required to make such contributions required under this
Section, (y) from funds available to it pursuant to, and in accordance with the
payment priorities set forth in Section 7.05 and (z) only to the extent
that it receives additional funds designated for such purposes or to the extent
that it has additional funds available (other than funds described in the
preceding clause (y)) that would be in excess of amounts that would be
necessary to pay the debt and other obligations of such entity incurred in
accordance with its certificate of incorporation and all financing documents to
which it is a party as they come due. In addition , no amount owing by the
Trust Depositor hereunder in excess of the liabilities that it is required to
pay in accordance with the preceding sentence shall constitute a “claim” (as
defined in Section 101(5) of the Bankruptcy Code) against it. No
recourse shall be had for the payment of any amount owing hereunder or any
other obligation of, or claim against the Trust Depositor arising out of or
based up on this Section against any stockholder, employee, officer,
agent, director or authorized person of the Trust Depositor or Affiliate
thereof; provided, however, that the foregoing shall not relieve any such
person or entity of any liability they might otherwise have as a result of
fraudulent actions or omissions taken by them.

 

Section 6.03.                         Merger or Consolidation of, or
Assumption of the Obligations of, Trust Depositor; Certain Limitations. Notwithstanding any other provision in
this Section and any provision of law, the Trust Depositor shall not do
any of the following:

 

(a)                                  engage in any business or activity other
than as set forth in its Articles of Incorporation;

 

37

 

(b)                                 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) (i) dissolve or liquidate, in whole or in
part, or 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) 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, (v) make a general assignment for the benefit of creditors, (vi) admit
in writing its inability to pay its debts generally as they become due, or (vii) take
any corporate action in furtherance of the actions set forth in clauses (i) through
(vi) 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

 

(c)                                  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
unless the Person 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; provided that 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.

 

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.

 

38

 

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 the
Certificateholder 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 the Certificateholder.

 

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 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’s 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 Distribution Date, the Servicer shall advance (each, an “Advance”) an amount equal to the Delinquent Interest for
such Determination Date by depositing such amount 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 the
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 shall be
entitled 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 11:00 a.m., Chicago, Illinois time, on the second Business Day prior
to a Distribution Date (or, in the case of the termination of the Funding
Period pursuant to clause (a) of the definition thereof, on the Business
Day prior to the date of such termination) 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

 

39

 

Account (solely to the extent of the amount then on deposit in such
account) into the Collection Account as contemplated in Section 5.05(b)(vii) 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 2006-3 – The Bank of New York Trust Company,
N.A., 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, the Certificate or with any other monies.

 

(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(b) 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; provided that,
notwithstanding the foregoing, on the date on which the Funding Period
terminates pursuant to clause (a) of the definition thereof, any amounts
remaining in the Interest Reserve Account (other than the amount specified in
respect of Carrying Charges in accordance with Section 7.03(b)) shall be
released to the Trust Depositor on such date.

 

Section 7.05.                         Distributions; Priorities.

 

(a)                                  Except as provided in Section 7.05(b) or
(c), on each Distribution Date, the Indenture Trustee, at the Servicer’s
direction, will make the following allocations and distributions of Available
Monies in the following order of priority:

 

(i)                                     to the Mandatory Redemption Subaccount in
the Note Distribution Account to the Noteholders, the amount of any Mandatory
Redemption (which amounts are available for payment of such Mandatory
Redemptions and not for any other purpose) which amount shall be paid in the
following order of priority: first, to the Class A-1 Noteholders until the
Class A-1 Notes are paid in full, second, any remaining amount shall be
paid to the Class A-2 Noteholders until the Class A-2 Notes are paid
in full, third, any remaining amount shall be paid to the Class A-3
Noteholders until the Class A-3 Notes are paid in full, fourth, any
remaining amount shall be paid to the Class A-4 Noteholders until the Class A-4
Notes are paid in full, and fifth, any remaining amount shall be paid to the Class B
Noteholders until the Class B Notes are paid in full;

 

40

 

(ii)                                  to
the Servicer, the Reimbursement Amount to the Servicer for Advances previously
made;

 

(iii)                               to the Servicer, the Servicing Fee, including any
unpaid Servicing Fee with respect to one or more prior Due Periods;

 

(iv)                              to the Indenture Trustee, any accrued and
unpaid Indenture Trustee Fee with respect to one or more prior Due Periods;

 

(v)                                 to the Note Distribution Account,
together with any amounts deposited therein pursuant to Section 7.06, the
applicable Note Interest Distributable Amount with respect to such Distribution
Date to the Class A Noteholders; provided, however,
that if there are insufficient funds on deposit in the Note Distribution
Account to pay the entire amount of the Note Interest Distributable Amount for
the Class A Notes, then the amount in the Note Distribution Account shall
be applied to the Class A-1 Notes, the Class A-2 Notes, the Class A-3
Notes and the Class A-4 Notes, pro rata, on the basis of the Note Interest
Distributable Amount for each such Class of Notes;

 

(vi)                              to the Note Distribution Account,
together with any amounts deposited therein pursuant to Section 7.06, the
First Priority Principal Distributable Amount with respect to such Distribution
Date first, to the Class A-1 Noteholders until the Class A-1 Notes
have been paid in full, second, to the Class A-2 Noteholders until the Class A-2
Notes have been paid in full, third, to the Class A-3 Noteholders until
the Class A-3 Notes have been paid in full and, fourth, to the Class A-4
Noteholders until the Class A-4 Notes have been paid in full;

 

(vii)                           to the Note Distribution Account, together with any
amounts deposited therein pursuant to Section 7.06, the Note Interest
Distributable Amount with respect to such Distribution Date to the Class B
Noteholders;

 

(viii)                        to the Note Distribution Account, together with any
amounts deposited therein pursuant to Section 7.06, the Note Principal
Distributable Amount with respect to such Distribution Date, first, to the Class A-1
Noteholders until the Class A-1 Notes have been paid in full, second, to
the Class A-2 Noteholders until the Class A-2 Notes have been paid in
full, third, to the Class A-3 Noteholders until the Class A-3 Notes
have been paid in full, fourth, to the Class A-4 Noteholders until the Class A-4
Notes have been paid in full and, fifth, to the Class B Noteholders until
the Class B Notes have been paid in full;

 

(ix)                                any Excess Amounts to the Reserve Fund up
to the Specified Reserve Fund Balance; and

 

(x)                                   to the Holder of the Certificate.

 

(b)                                 If the Notes have been declared
immediately due and payable as provided in Section 5.02 of the Indenture
following the occurrence of an Event of Default under Section 5.01(iii) of
the Indenture, then, until such time as the Notes have been paid in full,
Available Monies shall be allocated and distributed in the following order of
priority after payment of the amounts set forth in Section 7.05(a)(i),
(ii), (iii) and (iv):

 

41

 

(i)                                     to the Note Distribution Account,
together with any amounts deposited therein pursuant to Section 7.06, the
applicable Note Interest Distributable Amount with respect to such Distribution
Date to the Class A Noteholders; provided, however,
that if there are insufficient funds on deposit in the Note Distribution
Account to pay the entire amount of the Note Interest Distributable Amount for
the Class A Notes, then the amount in the Note Distribution Account shall
be applied to the Class A-1 Notes, the Class A-2 Notes, Class A-3
Notes and the Class A-4 Notes, pro rata, on
the basis of the Note Interest Distributable Amount for each such Class of
Notes;

 

(ii)                                  to the Note Distribution Account,
together with any amounts deposited therein pursuant to Section 7.06, the
First Priority Principal Distributable Amount with respect to such Distribution
Date first, to the Class A-1 Noteholders until the Class A-1 Notes
have been paid in full and, second, to the Class A-2 Noteholders, Class A-3
Noteholders and Class A-4 Noteholders, pro
rata, based on the
outstanding principal amount of the related Classes of Notes, until such
Classes of Notes have been paid in full;

 

(iii)                               to the Note Distribution Account, together with any
amounts deposited therein pursuant to Section 7.06, the Note Interest
Distributable Amount with respect to such Distribution Date to the Class B
Noteholders;

 

(iv)                              to the Note Distribution Account,
together with any amounts deposited therein pursuant to Section 7.06, all
amounts remaining after distribution of amounts in clauses (i), (ii) and (iii) above
to each Class of Notes shall be allocated in the following order of
priority:

 

(1)                                  to the Class A Notes, first, to the Class A-1
Noteholders, until the outstanding principal balance of the Class A-1
Notes has been paid in full and, second, to the Class A-2 Noteholders, Class A-3
Noteholders and Class A-4 Noteholders, pro
rata, based on the
outstanding principal amount of the related Classes of Notes, until the
outstanding principal balance of each such Class of the Notes has been
paid in full; and

 

(2)                                  to the Class B Notes, until the
outstanding principal balance of the Class B Notes has been paid in full;
and

 

(v)                                 to the Holder of the Certificate.

 

(c)                                  If the Notes have been declared
immediately due and payable as provided in Section 5.02 of the Indenture
following the occurrence of an Event of Default under Section 5.01(i),
(ii), (iv) or (v) of the Indenture, then, until such time as the
Notes have been paid in full, Available Monies shall be allocated and
distributed in the following order of priority after payment of amounts set
forth in Section 7.05(a)(i), (ii), (iii) and (iv):

 

(i)                                     to the Note Distribution Account,
together with any amounts deposited therein pursuant to Section 7.06, the
applicable Note Interest Distributable Amount with respect to such Distribution
Date to the Class A Noteholders; provided, however,
that if there are insufficient funds on deposit in the Note Distribution
Account to pay the entire amount of the Note Interest Distributable Amount for
the Class A Notes, then the amount in the Note Distribution Account shall
be applied to the Class A-1 Notes, the Class A-2 Notes, the Class A-3
Notes and the Class

 

42

 

A-4 Notes, pro rata, on the basis of the Note Interest Distributable
Amount for each such Class of Notes;

 

(ii)                                  to the Note Distribution Account,
together with any amounts deposited therein pursuant to Section 7.06, the
Note Principal Distributable Amount for distribution to the Class A
Noteholders first, to the Class A-1 Noteholders until the Class A-1
Notes have been paid in full and, second, to the Class A-2 Noteholders, Class A-3
Noteholders and Class A-4 Noteholders, pro
rata, based on the outstanding principal amount of the related
Classes of Notes, until such Classes of Notes have been paid in full;

 

(iii)                               to the Note Distribution Account, together with any
amounts deposited therein pursuant to Section 7.06, the Note Interest
Distributable Amount with respect to such Distribution Date for distribution to
the Class B Noteholders;

 

(iv)                              to the Note Distribution Account,
together with any amounts deposited therein pursuant to Section 7.06, the
remaining Note Principal Distributable Amount with respect to such Distribution
Date after the aggregate outstanding principal balance of the Class A
Notes has been paid in full, for distribution to the Class B Noteholders
in reduction of the outstanding principal balance of the Class B Notes
until the outstanding principal balance of the Class B Notes has been paid
in full; and

 

(v)                                 to the Holder of the Certificate.

 

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.

 

(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 and second, to the Note Distribution Account, the
amount of such Shortfall relating to the Note Principal Distributable Amount.

 

(c)                                  The Indenture Trustee shall at the
written direction of the Servicer 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 Trustee shall, consistent with the
definition of Qualified Eligible Investment herein, make an appropriate
notation of the 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,

 

43

 

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. Neither
the Trust Depositor nor the Indenture Trustee shall 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, the Indenture Trustee shall release its
lien on any remaining amounts 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 2006-3 – The Bank of New York Trust Company, N.A., 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 the
Seller upon the order of the Trust Depositor for the purpose of purchasing
Subsequent Contracts from the Seller 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 after giving effect to any reductions in the Pre-Funded
Amount on such Distribution Date or Determination Date pursuant to
paragraph (b) 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, on the Determination Date,
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,
then for payment of principal of the Class A-2 Notes up to the Outstanding
Amount thereof, then for payment of principal of the Class A-3 Notes up to
the Outstanding Amount thereof, then for payment of principal of the Class A-4
Notes up to the Outstanding Amount thereof, and then for payment of principal
of the Class B Notes up to the Outstanding Amount thereof.

 

44

 

Section 7.08.                         Purchase 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 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 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 reacquire a
Contract at its Purchase 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 Trustees, 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 described on the List of Contracts with
respect to an incorrect unpaid Principal Balance which the Seller would
otherwise be required to reacquire under the Transfer and Sale Agreement, the
Seller may, in lieu of reacquiring such Contract, deposit in the Collection
Account not later than one Business Day after such Determination Date cash in
an amount sufficient to cure any 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 reacquire 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
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 VIII.
The reacquisition obligation described in this Section 7.08 is in no way
to be satisfied with monies in the Reserve Fund. The sole remedy of the Issuer,
the Trustees or the Noteholders against the Seller with respect to a breach of
a representation or warranty of the Seller shall be to require the Seller to
reacquire the related Contract pursuant to this Section 7.08.

 

Section 7.09.                         Reassignment of Reacquired
Contracts. Upon
receipt by the Indenture Trustee for deposit in the Collection Account of the
Purchase Price as described in Section 7.08, Section 7.10 or Section 7.11,
and upon receipt of a certificate of a Servicing Officer in the form attached
hereto as Exhibit G, the Indenture Trustee
shall release its lien on and the Trust shall assign to the Seller or the
Servicer, as applicable, all of the Trust’s right, title and interest in the
reacquired or purchased 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 Trustees.

 

Section 7.10.                         Servicer’s Purchase Option. On written notice to the Owner Trustee
and Indenture Trustee at least 20 days prior to a Distribution Date, and
provided that the Pool Balance is then less than 10% of the sum of the Pool
Balance as of the Initial Cutoff Date plus the Pre-Funded Amount as of the
Closing Date, the Servicer may (but is not required to) purchase on that
Distribution Date all outstanding Contracts (and related Contract Assets) at a
price equal to the aggregate unpaid principal balance of the Notes on the
previous Distribution Date plus the aggregate of the Note 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 Fee to the date of such purchase.

 

45

 

Such price shall
be deposited in the Collection Account not later than one (1) Business Day
before such Distribution Date, against the Owner Trustee’s and Indenture
Trustee’s release of the Contracts and the Contract Files to the Servicer.

 

Section 7.11.                         Purchase of Contracts
for Breach of Servicing Obligations. Upon a discovery by the Servicer or the Trustees of a
breach of any of the covenants of the Servicer set forth in Section 5.02,
5.06 or 5.09 that materially adversely affects the Trust’s interest in a
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 Servicer of any of such
covenants. The Servicer, in accordance with this Section 7.11, shall
purchase such Contract at its Purchase Price, two Business Days prior to the
first Determination Date after the Servicer becomes aware, or should have
become aware, or receives written notice from the Trustees of any breach
described in the preceding sentence which breach has not been cured; provided, however, that with respect to a breach of any of
the covenants of the Servicer set forth in Section 5.02, 5.06 or 5.09
relating to the Contracts in the aggregate and not to any particular Contract
the Servicer may select Contracts (without adverse selection) to purchase
such that had such Contracts not been included as part of the Trust Corpus
there would have been no breach of such covenant. Notwithstanding any other
provision of this Agreement, the obligation of the Servicer described in this Section 7.11
shall not terminate or be deemed released by any party hereto upon a Service
Transfer pursuant to Article VIII. The purchase obligation described in
this Section 7.11 is in no way to be satisfied with monies in the Reserve
Fund. Upon Servicer’s payment of the Purchase Price of the Contract, any Event
of Termination pursuant to Section 8.01(b) arising as a result of the
Servicer’s breach of any of the covenants set forth in Section 5.02, 5.06
or 5.09 with respect to such Contract shall be deemed not to have occurred.

 

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 or the Seller
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 four
Business Days after the date on which such payment or deposit was due;

 

(b)                                 Failure on the Servicer’s or the Seller’s
part to observe or perform in any material respect any covenant or
agreement in this Agreement or in the Transfer and Sale Agreement (or in any
Subsequent Purchase Agreement or Subsequent Transfer Agreement) (other than a
covenant or agreement, the breach of which is specifically addressed elsewhere
in this Section) which continues unremedied for 30 days after the date on which
such failure commences;

 

(c)                                  Any assignment by the Servicer or the
Seller 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;

 

46

 

(d)                                 An involuntary case under any applicable
bankruptcy, insolvency or other similar law shall have been commenced in
respect of the Servicer or Trust Depositor 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 or Trust
Depositor 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 Trust Depositor, or for any substantial liquidation or
winding up of their respective affairs;

 

(e)                                  The Servicer or Trust Depositor 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 Trust Depositor, as the case may be, or for
any substantial part of their respective property, or shall have made any
general assignment for the benefit of their respective 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 or the Trust Depositor by
the Indenture Trustee, the circumstances or condition in respect of which such
representation, warranty or statement was incorrect shall not have been
eliminated or otherwise cured.

 

Section 8.02.                         Waiver of Event of Termination. The Required Noteholders may, by written
notice delivered to the parties hereto, waive any Event of Termination other
than an Event of Termination described in Section 8.01(a).

 

Section 8.03.                         Service Transfer. (a)  If an Event of Termination
has occurred and is continuing and has not been waived pursuant to Section 8.02,
(x) the Required Holders or (y) the Indenture 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
hereunder (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 

 

47

 

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 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 8.08 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, the Required
Holders 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; provided, however, that the Indenture
Trustee shall not be required to make payment for compensation or any other
payment in order to effectuate 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 Event of Termination, 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 hereof and to the Noteholders at
their respective addresses appearing on the Note Register.

 

(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.

 

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 8.04 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.

 

48

 

(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.

 

Section 8.07.                         Database File. The Servicer will provide the Successor
Servicer with a magnetic tape (in a format reasonably acceptable to the
Indenture Trustee and the Servicer) containing the database file for each
Contract (i) as of the Initial 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 Service Transfer 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 Service
Transfer.

 

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.                         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 Trust, the Owner Trustee, the
Indenture Trustee 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

 

49

 

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
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 8.11.                         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 all or substantially all of 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.

 

Section 8.12.                         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 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
the Indenture Trustee shall have assumed the responsibilities and rights of the
predecessor Servicer in accordance with Section 8.04.

 

Section 8.13.                         Appointment of Subservicer. So long as Harley-Davidson Credit Corp.
acts as the Servicer, the Servicer may at any time without notice or
consent perform specific duties as servicer under this Agreement through
other subcontractors; provided, however, that,
in each case, 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, two Business Days prior to each Distribution Date, the Servicer
shall deliver to the Trustees and each Rating Agency a Monthly
Report.

 

50

 

Section 9.02.                         Officer’s Certificate. Each Monthly Report delivered pursuant
to Section 9.01 shall be accompanied by a certificate of a Servicing
Officer substantially in the form of Exhibit C,
certifying the accuracy of the Monthly Report and that no Event of Termination
or event that with notice or lapse of time or both would become an Event of
Termination 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.                         Report on Assessment of
Compliance with Servicing Criteria and Attestation; Annual Officer’s
Certificate.

 

(a)                                  The Servicer will:

 

(i)                                     deliver to the Indenture Trustee and each
Rating Agency within 90 days after the end of each calendar year a report on
its assessment of compliance with the servicing criteria applicable to it
during the preceding calendar year, including disclosure of any material
instance of non-compliance identified by the Servicer, as required by Rule 13a-18
and 15d-18 of the Exchange Act and Item 1122 of Regulation AB under the
Securities Act;

 

(ii)                                  cause a firm of registered public
accountants that is qualified and independent within the meaning of Rule 2-01
of Regulation S-X under the Securities Act to deliver to the Indenture Trustee
and each Rating Agency within 90 days after the end of each calendar year an
attestation report that satisfies the requirements of Rule 13a-18 or Rule 15d-18
under the Exchange Act and Item 1122 of Regulation AB, as applicable, on the
Servicer’s assessment of compliance with servicing criteria with respect to the
prior calendar year. Such attestation report will be addressed to the board of
directors of the Servicer and to the Trust, the Trust Depositor and the
Indenture Trustee. Such attestation report will be in accordance with Rules 1-02(a)(3) and
2-02(g) of Regulation S-X under the Securities Act and the Exchange Act. Such
registered public accounting firm may render other services to the
Servicer, the Depositor or the Seller, but such firm must indicate in each
attestation report that it is qualified and independent within the meaning of Rule 2-01
of Regulation S-X under the Securities Act; and

 

(iii)                               deliver to the Indenture
Trustee and each Rating Agency within 90 days after the end of each calendar
year, an Officer’s Certificate to the effect that (i) a review of the
Servicer’s activities during the immediately preceding calendar year (or, in
the case of the first certificate, since the Closing Date) and of its
performance under this Agreement has been made under the supervision of the
officer signing such certificate and (ii) to the best of such officer’s
knowledge, based on such review, the Servicer has fulfilled in all material
respects all of its obligations under this Agreement throughout such calendar
year (or applicable portion of such calendar year), or, if there has been a
failure to fulfill any such obligation in any material respect, specifying each
such failure known to such officer and the nature and status of such failure.

 

(b)                                 If the Trust is not required to file
periodic reports under the Exchange Act, or otherwise required by law to file
the reports described in clause (a) above, such reports may be
delivered on or before April 30 of each calendar year. A copy of such
reports may be obtained by any Noteholder by a request in writing to the
Indenture Trustee.

 

51

 

Section 9.05.                         Monthly Reports to Noteholders. (a)  On or before two Business
Days prior to each Distribution Date, the Servicer shall prepare and,
concurrently with each distribution to Noteholders pursuant to Article VII,
deliver to the Indenture Trustee, in its capacity as Note Registrar and Paying
Agent, shall cause to be delivered and mailed to each Noteholder at the
addresses appearing on the Note Register a statement as of the related
Distribution Date substantially in the form of Exhibit I
hereto (the “Monthly Report”) setting forth at least
the following information:

 

(i)                                     the
amount of Noteholder’s principal distribution;

 

(ii)                                  the
amount of Noteholder’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 and Note 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
Note Pool Factor for each Class of Notes, in each case of such Distribution
Date;

 

(vi)                              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 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
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;

 

(x)                                   the
remaining Principal Balance after giving effect to the distribution of
principal (and Mandatory Redemption, if any) to each class of Notes to be
made on such Distribution Date;

 

(xi)                                the
number and aggregate principal balance of Contracts delinquent 30-59 days, 60-89
days and 90 or more days, computed as of the end of the related Due Period;

 

(xii)                             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;

 

52

 

(xiii)                          the Loss Ratio, Average Loss
Ratio, Cumulative Loss Ratio, the Delinquency Ratio and the Average Delinquency
Ratio as of such Distribution Date;

 

(xiv)                         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);

 

(xv)                            the
aggregate Principal Balance and number of Contracts that were reacquired by the
Seller pursuant to the Agreement with respect to the related Due Period,
identifying the Purchase Price for such Contracts;

 

(xvi)                         the aggregate Principal
Balance and number of Contracts that were purchased by the Servicer pursuant to
the Agreement with respect to the related Due Period, identifying the Purchase
Price for such Contracts;

 

(xvii)                      the amount otherwise
distributable on the Class B Notes that has instead been distributed to
one or more senior Classes of Notes on such Distribution Date;

 

(xviii)                   the amount of Advances made by the
Servicer in respect of the related Contracts and the related Due Period and the
amount of unreimbursed Advances in respect of the related Contracts determined
by the Servicer to be Defaulted Contracts; and

 

(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 the Noteholders and
the Certificateholder to prepare their tax returns.

 

(b)                                 Within the prescribed period of time for
tax reporting purposes after the end of each calendar year, the Servicer shall
prepare and the Note Registrar shall mail to each Noteholder 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.

 

(c)                                  The Indenture Trustee shall send 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 and (ii) each
Securityholder or party to this Agreement.

 

Section 9.06.                         Regulation AB.

 

The parties hereto
acknowledge that interpretations of the requirements of Regulation AB may change
over time, whether due to interpretive guidance provided by the Securities and
Exchange Commission or its staff, consensus among participants in the asset
backed securities markets, advice of counsel, or otherwise, and agree to comply
with reasonable requests (which are practical from a timing perspective) made
by the Trust Depositor or the Servicer in good faith for delivery of
information under these provisions on the basis of evolving interpretations of
Regulation AB. In connection therewith, the Owner Trustee and the Indenture
Trustee shall reasonably cooperate with the Servicer in connection with the
satisfaction of the Trust Depositor’s and the Trust’s reporting requirements
under the Exchange Act, subject to reimbursement of expenses in accordance with
the Transaction Documents.

 

53

 

Section 9.07.                         Information
to Be Provided by the Indenture Trustee.

 

(a)                                  As soon as available but no later than March 15
of each calendar year for so long as the Issuer is required to report under the
Exchange Act, commencing in 2007, the Indenture Trustee shall:

 

(i)                                     deliver
to the Servicer a report regarding the Indenture Trustee’s assessment of
compliance with the Servicing Criteria during the immediately preceding
calendar year, as required under paragraph (b) of Rule 13a-18, Rule 15d-18
of the Exchange Act and Item 1122 of Regulation AB substantially in the form attached
hereto as Exhibit D, or such
other form as mutually agreed upon by the Servicer and the Indenture
Trustee. Such report shall be signed by an authorized officer of the Indenture
Trustee, and shall address each of the Servicing Criteria specified in Exhibit E or such criteria as
mutually agreed upon by the Servicer and the Indenture Trustee;

 

(ii)                                  deliver to the Servicer a report of a registered public accounting firm that attests
to, and reports on, the assessment of compliance made by the Indenture Trustee
and delivered pursuant to the preceding paragraph. Such attestation shall be in
accordance with Rules 1-02(a)(3) and 2-02(g) of Regulation S-X
under the Securities Act and the Exchange Act; and

 

(iii)                               deliver to the Servicer and any other Person
that will be responsible for signing the certification required by Rules 13a-14(d) and
15d-14(d) under the Exchange Act (pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002) (a “Sarbanes
Certification”) on behalf of the Issuer or the Servicer a
certification substantially in the form attached hereto as Exhibit F or such form as
mutually agreed upon by the Servicer and the Indenture Trustee.

 

The Indenture Trustee
acknowledges that the parties identified in clause (iii) above may rely
on the certification provided by the Indenture Trustee pursuant to such clause
in signing a Sarbanes Certification and filing such with the Securities and
Exchange Commission.

 

Section 9.08.                         Exchange
Act Reporting.

 

(a)                                  Form 10-D Filings. So long as the Issuer is required to report
under the Exchange Act, no later than each Distribution Date, each of the
Indenture Trustee and the Owner Trustee shall notify the Servicer of any Form 10-D
Disclosure Item with respect to such Person, together with a description of any
such Form 10-D Disclosure Item in form and substance reasonably
acceptable to the Servicer.

 

(b)                                 Form 8-K Filings. So long as the Issuer
is required to report under the Exchange Act, each of the Indenture Trustee and
the Owner Trustee shall promptly notify the Servicer, but in no event later
than one (1) Business Day after its occurrence, of any Reportable Event of
which such Person (or in the case of the Owner Trustee and the Indenture
Trustee, a Responsible Officer of such Person) has actual knowledge. Each
Person shall have actual knowledge of any such event only to the extent that it
relates to such Person or any action or failure to act by such Person.

 

(c)                                  Form 10-K Filings. So long as the Issuer is required to report
under the Exchange Act, no later than March 15 of each year, commencing in
2007, the Indenture Trustee and the Owner Trustee shall notify the Servicer of
any Form 10-K Disclosure Item, together with

 

54

 

a description of any such Form 10-K Disclosure
Item in form and substance reasonably acceptable to the Servicer.

 

ARTICLE TEN

TERMINATION

 

Section 10.01.                  Sale of Trust Assets.

 

(a)                                  [Intentionally Omitted].

 

(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 Certificateholder 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.

 

ARTICLE ELEVEN

MISCELLANEOUS

 

Section 11.01.                  Amendment.

 

(a)                                  This Agreement may be amended by the
Trust Depositor, the Servicer, the Indenture Trustee and the Owner Trustee on
behalf of the Issuer, collectively, without the consent of any Securityholders,
(i) to cure any ambiguity, to correct or supplement any provisions in this
Agreement which are inconsistent with the provisions herein or in the
Prospectus, 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 or the Prospectus, (ii) to add or provide any credit
enhancement for any Class of Notes 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,
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 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 Required
Holders, 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 Certificateholder; provided, however, that no such amendment shall increase or
reduce in any manner

 

55

 

the amount of, or accelerate or delay the timing of (i)(a) collections
of payments on the Contracts or distributions that shall be required to be made
on any Note or any Interest Rate, (b) except as otherwise provided in Section 11.01(a),
the Specified Reserve Fund Balance or the manner in which the Reserve Fund is
funded or (ii) reduce the aforesaid percentage of the Outstanding Amount
of the Notes, the Holders of which are required to consent to any such
amendment, without the consent of the Holders of all Notes of the relevant Class then
outstanding and the Certificate.

 

(c)                                  Prior to the execution of any such
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 Noteholder. It shall not be necessary for the consent of
Noteholders 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 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)                                    Notwithstanding anything to the contrary
in this Section 11.01, the Trust Depositor or the Servicer, acting on
behalf of the Trust Depositor, may request each Rating Agency to approve a
formula for determining the Specified Reserve Fund Balance that is different
from the formula or result determined from the current definition thereof
contained herein so as to result in a decrease in the amount of the Specified
Reserve Fund Balance or the manner by which such Reserve Fund is funded. If
each Rating Agency delivers to the Indenture Trustee and Owner Trustee a
written notice or letter stating that such action will not result in a
reduction or withdrawal of the rating of any outstanding Class with
respect to which a Rating Agency has previously issued a rating as a result or
such action, then the Specified Reserve Fund Balance will be theretofore
determined in accordance with such changed formula or manner of funding, and an
amendment to this Agreement effecting such change may be executed without
the consent of any Securityholder.

 

Section 11.02.                  Protection of Title to Trust.

 

(a)                                  The Servicer shall file such financing
statements and cause to be 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 and the
Indenture 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. The Trust Depositor
authorizes the Trust to file financing statements describing the Trust Corpus
as collateral.

 

56

 

(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 seriously misleading
within the meaning of § 9-507 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.

 

(c)                                  The Seller and the Trust Depositor shall
give the Issuer, the Owner Trustee and the Indenture Trustee at least 30 days’
prior written notice of any change in its state of incorporation. 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 transfer
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 reacquired 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 motorcycle conditional sales contracts or promissory
note and security agreements 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 transferred 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 List 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, all financing statements and continuation statements have been
executed and filed that are necessary fully to preserve and protect the

 

57

 

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 or electronic mail 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.

3850
Arrowhead Drive

Carson
City, Nevada 89706

Attention:  Perry A. Glassgow

 

Telecopier
No.: (775) 886-3490

 

with a
copy to:

 

Harley-Davidson
Credit Corp.

150
South Wacker Drive, Suite 3100

Chicago,
Illinois 60606

Attention:  Perry A. Glassgow

Telecopier
No.:   (312) 368-4372

 

(iii)                               If
to the Indenture Trustee:

 

The Bank of New York
Trust Company, N.A.

2 North LaSalle Street

Suite 1020

 

58

 

Chicago, Illinois 60602

Attention:  Corporate Trust Administration

 

Telecopier
No.:  (312) 827-8562

 

(iv)                              If
to the Owner Trustee:

 

Wilmington
Trust Company

Rodney
Square North

1100
North Market Street

Wilmington,
Delaware 19890-0001

Attention:
Corporate Trust Administration

 

Telecopier
No.: (302) 636-4140

 

(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, Inc.

55
Water Street

New
York, New York 10004

 

Telecopier
No.: (212) 438-2657

 

(vii)                           If to
the Underwriters:

 

At the
address set forth in the Underwriting Agreement

 

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 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 the
Certificate or the rights of the Holders thereof.

 

59

 

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 Securityholders aggregating not less than
66-2/3% of each Class.

 

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.                  No Bankruptcy Petition;
Disclaimer and Subordination. (a) Each of the Seller, the Indenture Trustee,
the Servicer, the Owner Trustee and each Holder (by acceptance of the
applicable Securities) covenants and agrees that, prior to the date that is one
year and one day after the payment in full of all amounts owing in respect of
all outstanding Securities, it will not institute against the Trust Depositor,
or the Trust, or join any other Person in instituting against the Trust
Depositor or the Trust, any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceedings or other similar proceedings under the laws of the
United States or any state of the United States. This Section 11.10 will
survive the termination of this Agreement.

 

(b)                                 The Trust acknowledges and agrees that
the Certificate represents a beneficial interest in the Trust and Trust Corpus
only and the Securities do not represent an interest in any assets (other than
the Trust Corpus) of the Trust Depositor (including by virtue of any deficiency
claim in respect of obligations not paid or otherwise satisfied from the Trust
Assets and proceeds thereof). In furtherance of and not in derogation of the
foregoing, to the extent that the Trust Depositor enters into other
securitization transactions, the Trust acknowledges and agrees that it shall
have no right, title or interest in or to any assets (or interests therein)
other than the Trust Assets conveyed or purported to be conveyed (whether by
way of a sale, capital contribution or by the granting of a Lien) by the Trust
Depositor to any Person other than the Trust (the “Other Assets”).

 

To the extent that
notwithstanding the agreements contained in this Section, the Trust or any
Securityholder, either (i) asserts an interest in or claim to, or benefit
from any Other Assets, whether asserted against or through the Trust Depositor
or any other Person owned by the Trust Depositor, or (ii) is deemed to
have any interest, claim or benefit in or from any Other Assets, whether by
operation of law, legal process, pursuant to applicable provisions of
Insolvency Laws or otherwise (including without limitation pursuant to Section 1111(b) of
the federal Bankruptcy Code, as amended) and whether deemed asserted against or
through the Trust Depositor or any other Person owned by the Trust Depositor,
then the Trust and each Securityholder by accepting a Note or Certificate
further acknowledges and agrees that any such interest, claim or benefit in or
from the Other Assets is and shall be expressly subordinated to the
indefeasible payment in full of all obligations and liabilities of the Trust
Depositor which, under the terms of the documents relating to the
securitization of the Other Assets, are entitled to be paid from, entitled to
the benefits of, or otherwise secured by such Other Assets (whether or not any
such entitlement or security interest is legally perfected or otherwise
entitled to a priority of distribution under applicable law, including
Insolvency Laws, and whether asserted against the Trust Depositor or any other
Person

 

60

 

owned by the Trust Depositor) including, without limitation, the
payment of post-petition interest on such other obligations and liabilities. This
subordination agreement shall be deemed a subordination agreement within the
meaning of Section 510(a) of the Bankruptcy Code. Each Securityholder
is deemed to have acknowledged and agreed that no adequate remedy at law exists
for a breach of this Section 11.10 and that the terms and provisions of
this Section 11.10 may be enforced by an action for specific
performance.

 

(c)                                  The provisions of this Section 11.10
shall be for the third party benefit of those entitled to rely thereon and
shall survive the termination of this Agreement.

 

Section 11.11.                  Limitation of Liability of Owner
Trustee and Indenture Trustee.

 

(a)                                  Notwithstanding anything contained herein
to the contrary, this Agreement has been executed by Wilmington Trust Company,
not in its individual capacity but solely in its capacity as Owner Trustee of
the Issuer, and in no event shall Wilmington Trust Company 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 executed by The Bank of New York Trust
Company, N.A., not in its individual capacity but solely as Indenture Trustee,
and in no event shall The Bank of New York Trust Company, N.A. 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.

 

[signature page follows]

 

61

 

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 2006-3

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Wilmington Trust
  Company, not in its

  individual capacity but solely as Owner Trustee on behalf of the Trust

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Robert J.
  Perkins

  	
   

  
	
   

  	
   

  	
   

  	
  Printed Name: 

  	
  Robert J.
  Perkins

  	
   

  
	
   

  	
   

  	
   

  	
  Title: 

  	
  Sr. Financial
  Services Officer

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  HARLEY-DAVIDSON
  CUSTOMER FUNDING CORP., as

  Trust Depositor

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Perry A.
  Glassgow

  	
   

  
	
   

  	
   

  	
   

  	
  Printed Name:
  Perry A. Glassgow

  
	
   

  	
   

  	
   

  	
  Title: Vice
  President and Treasurer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  HARLEY-DAVIDSON
  CREDIT CORP., as Servicer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Perry A.
  Glassgow

  	
   

  
	
   

  	
   

  	
   

  	
  Printed Name:
  Perry A. Glassgow

  
	
   

  	
   

  	
   

  	
  Title: Vice
  President and Treasurer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  THE BANK OF NEW
  YORK TRUST COMPANY, N.A.,

  
	
   

  	
  not in its
  individual capacity but solely as Indenture Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Cynthia L.
  Davis

  	
   

  
	
   

  	
   

  	
   

  	
  Printed
  Name:  Cynthia L. Davis

  
	
   

  	
   

  	
   

  	
  Title:  Vice President

  
										

 

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 August 1, 2006 made by and between the
undersigned, as Trust Depositor (“Trust Depositor”),
Harley-Davidson Credit Corp., as Servicer (“HDCC”),
The Bank of New York Trust Company, N.A., as Indenture Trustee and
Harley-Davidson Motorcycle Trust 2006-3 (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 after the Initial Cutoff
Date, including any liquidation proceeds therefrom, but excluding any rights to
receive payments which were collected pursuant thereto on or 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), any debt insurance policy or
any debt cancellation agreement 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 certain Contracts) and HDCC, (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), (ix) all rights of the Trust
Depositor to certain rebates of premiums and other amounts relating to
insurance policies, debt cancellation agreements, extended service contracts or
other repair agreements and other items financed under such Contracts, and (x)
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 Agreement.

 

IN WITNESS
WHEREOF, the undersigned has caused this Assignment to be duly executed this      
day of August, 2006.

 

	
   

  	
  HARLEY-DAVIDSON
  CUSTOMER FUNDING

  
	
   

  	
  CORP.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Printed Name:   Perry A. Glassgow

  
	
   

  	
  Title:

  	
  Vice President
  and Treasurer

  
					

 

A-1

 

Exhibit B

 

[Form of Closing Certificate of Trust Depositor]

 

Harley-Davidson
Customer Funding Corp.

 

Officer’s
Certificate

 

The undersigned
certifies that he is Vice President, Treasurer and Assistant Secretary 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 August 1, 2006 (the “Effective Date”)
by and among the Trust Depositor, The Bank of New York Trust Company, N.A. (the
“Indenture Trustee”), as Indenture
Trustee,  Harley-Davidson Credit Corp. (“Harley-Davidson Credit”), as Servicer, and Harley-Davidson
Motorcycle Trust 2006-3 (“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 May 12, 2000, 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 as of a recent date 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, which are in full force and effect
on the date hereof.

 

(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, the Trust
Agreement; the Administration Agreement and the Underwriting Agreement
(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

 

B-1

 

dates
as of which information is given in the Preliminary Prospectus (as defined in
the Underwriting Agreement) or 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 Certificate.

 

(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 pledge of the Collateral by
the Trust to the Indenture Trustee nor the issuance and sale of the Certificate
and the Notes, nor the execution and delivery of the Program Agreements, nor
the consummation of any other of the 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-2

 

In
Witness Whereof, I have affixed my signature hereto this    
day of August, 2006.

 

 

	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Printed Name:  Perry A. Glassgow

  
	
   

  	
  Title: 

  	
  Vice President,
  Treasurer and

  Assistant Secretary

  
					

 

 

Exhibit C

 

[Form of Closing Certificate of Servicer/Seller]

 

HARLEY-DAVIDSON
CREDIT CORP.

 

Officer’s
Certificate

 

The undersigned
certifies that he is Vice President, Treasurer and Assistant Secretary 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 August 1, 2006 (the “Effective Date”) by and among Harley-Davidson Credit, as
Servicer, Harley-Davidson Customer Funding Corp. (“CFC”),
The Bank of New York Trust Company, N.A., as Indenture Trustee and
Harley-Davidson Motorcycle Trust 2006-3 (“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 August 9, 1999, 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 as of a recent date, 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 as of August 1999 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 and the 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

 

C-1

 

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 Preliminary Prospectus (as
defined in the Underwriting Agreement) or 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
the Certificate.

 

(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 pledge by the Trust of the Collateral to the Indenture Trustee,
nor the issuance and sale of the Notes or the Certificate or the entering into
of the Program Agreements, nor the consummation of any other of the transactions
contemplated therein, will violate or 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

 

C-2

 

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 authorized the filing of 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 August, 2006.

 

 

	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Printed Name:  Perry A. Glassgow

  
	
   

  	
  Title: Vice President, Treasurer and Assistant
  Secretary

  

 

 

Exhibit D

 

FORM OF REPORT ON ASSESSMENT OF COMPLIANCE WITH APPLICABLE
SERVICING

CRITERIA PURSUANT TO ITEM 1122 OF REGULATION AB UNDER THE

SECURITIES EXCHANGE ACT OF 1934

 

Date:              

 

Re:                               Harley-Davidson
Motorcycle Trust 2006-3

 

[Servicer][Indenture
Trustee] (the “Company”) hereby certifies that it is responsible for the
assessment of its compliance with the servicing criteria set forth in Item 1122
of Regulation AB applicable to it, as described on Schedule I attached
hereto (the “Applicable Servicing Criteria”), and further certifies as follows:

 

1.                                       The
Company used the criteria set forth in paragraph (d) of Item 1122 of
Regulation AB to assess compliance with the Applicable Servicing Criteria; and

 

2.                                       The
Company is in compliance with the Applicable Servicing Criteria as of and for
the period ending December 31,
         [except as described below:].

 

[Accountant],
an independent registered public accounting firm has issued an attestation
report on our assessment of compliance with the Applicable Servicing Criteria
as of and for the period ending December 31,
        , a copy of which is attached
hereto.

 

 

	
   

  	
  [                                               ]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						

 

D-1

 

Exhibit E

 

SERVICING
CRITERIA TO BE ADDRESSED IN

INDENTURE
TRUSTEE’S ASSESSMENT OF COMPLIANCE

 

The assessment of compliance to be delivered by the
Indenture Trustee shall address, at a minimum, the criteria identified as below
as “Applicable Servicing Criteria” (1):

 

	
  Servicing
  Criteria

  	
    

  	
  Applicable

  Servicing

  
	
  Reference

  	
    

  	
  Criteria

  	
    

  	
  Criteria

  
	
   

  	
    

  	
  General
  Servicing Considerations

  	
    

  	
   

  
	
  1122(d)(1)(i)

  	
    

  	
  Policies and procedures are instituted to monitor any performance or
  other triggers and events of default in accordance with the transaction
  agreements.

  	
    

  	
   

  
	
   

  	
   

  	
   

  
	
  1122(d)(1)(ii)

  	
    

  	
  If any material servicing activities are outsourced to third parties,
  policies and procedures are instituted to monitor the third party’s
  performance and compliance with such servicing activities.

  	
    

  	
   

  
	
   

  	
   

  	
   

  
	
  1122(d)(1)(iii)

  	
    

  	
  Any requirements in the transaction agreements to maintain a back-up
  servicer for the pool assets are maintained.

  	
    

  	
   

  
	
   

  	
   

  	
   

  
	
  1122(d)(1)(iv)

  	
    

  	
  A fidelity bond and errors and omissions policy is in effect on the
  party participating in the servicing function throughout the reporting period
  in the amount of coverage required by and otherwise in accordance with the
  terms of the transaction agreements.

  	
    

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
    

  	
  Cash
  Collection and Administration

  	
    

  	
   

  
	
   

  	
   

  	
   

  
	
  1122(d)(2)(i)

  	
    

  	
  Payments on pool assets are deposited into the appropriate custodial
  bank accounts and related bank clearing accounts no more than two business
  days following receipt, or such other number of days specified in the
  transaction agreements.

  	
    

  	
  x(2)

  
	
   

  	
   

  	
   

  
	
  1122(d)(2)(ii)

  	
    

  	
  Disbursements made via wire transfer on behalf of an obligor or to an
  investor are made only by authorized personnel.

  	
    

  	
  x   

  
	
   

  	
   

  	
   

  
	
  1122(d)(2)(iii)

  	
    

  	
  Advances of funds or guarantees regarding collections, cash flows or
  distributions, and any interest or other fees charged for such advances, are
  made, reviewed and approved as specified in the transaction agreements.

  	
    

  	
   

  
	
   

  	
   

  	
   

  
	
  1122(d)(2)(iv)

  	
    

  	
  The related accounts for the transaction, such as cash reserve accounts
  or accounts established as a form of overcollateralization, are
  separately maintained (e.g., with respect to commingling of cash) as set
  forth in the transaction agreements.

  	
    

  	
  x   

  

 

E-1

 

	
  (1)

  	
  Each Assessment
  of compliance delivered by the Indenture Trustee shall be made only toward
  such portion(s) of servicing criteria applicable to the Indenture Trustee and
  not such other portion(s) applicable to other persons.

  
	
  (2)

  	
  Solely with
  regard to deposits made by the Indenture Trustee.

  

 

E-2

 

	
  Servicing
  Criteria

  	
    

  	
  Applicable

  Servicing

  Criteria

  
	
   

  	
   

  	
   

  
	
  1122(d)(2)(v)

  	
    

  	
  Each custodial account is maintained at a federally insured depository
  institution as set forth in the transaction agreements. For purposes of this
  criterion, “federally insured depository institution” with respect to a
  foreign financial institution means a foreign financial institution that
  meets the requirements of Rule 13k-1(b)(1) of the Securities
  Exchange Act.

  	
    

  	
  x(3)

  
	
   

  	
   

  	
   

  
	
  1122(d)(2)(vi)

  	
    

  	
  Unissued checks are safeguarded so as to prevent unauthorized access.

  	
    

  	
   

  
	
   

  	
   

  	
   

  
	
  1122(d)(2)(vii)

  	
    

  	
  Reconciliations are prepared on a monthly basis for all asset-backed
  securities related bank accounts, including custodial accounts and related
  bank clearing accounts. These reconciliations are (A) mathematically
  accurate; (B) prepared within 30 calendar days after the bank statement
  cutoff date, or such other number of days specified in the transaction agreements;
  (C) reviewed and approved by someone other than the person who prepared
  the reconciliation; and (D) contain explanations for reconciling items.
  These reconciling items are resolved within 90 calendar days of their
  original identification, or such other number of days specified in the
  transaction agreements.

  	
    

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Reference

  	
    

  	
  Criteria

  	
    

  	
   

  
	
   

  	
    

  	
  Investor
  Remittances and Reporting

  	
    

  	
   

  
	
   

  	
   

  	
   

  
	
  1122(d)(3)(i)

  	
    

  	
  Reports to investors, including those to be filed with the Commission,
  are maintained in accordance with the transaction agreements and applicable
  Commission requirements. Specifically, such reports (A) are prepared in
  accordance with timeframes and other terms set forth in the transaction
  agreements; (B) provide information calculated in accordance with the
  terms specified in the transaction agreements; (C) are filed with the
  Commission as required by its rules and regulations; and (D) agree
  with investors’ or the trustee’s records as to the total unpaid principal
  balance and number of pool assets serviced by the Servicer.

  	
    

  	
   

  
	
   

  	
   

  	
   

  
	
  1122(d)(3)(ii)

  	
    

  	
  Amounts due to investors are allocated and remitted in accordance with
  timeframes, distribution priority and other terms set forth in the
  transaction agreements.

  	
    

  	
  x

  
	
   

  	
   

  	
   

  
	
  1122(d)(3)(iii)

  	
    

  	
  Disbursements made to an investor are posted within two business days
  to the Servicer’s investor records, or such other number of days specified in
  the transaction agreements.

  	
    

  	
   

  
	
   

  	
   

  	
   

  
	
  1122(d)(3)(iv)

  	
    

  	
  Amounts remitted to investors per the investor reports agree with
  cancelled checks, or other form of payment, or custodial bank
  statements.

  	
    

  	
  x

  

 

E-3

 

	
  (3)

  	
  Assessment to be
  given by Indenture Trustee shall be only with respect to trust accounts maintained
  by the Indenture Trustee under the Sale and Servicing Agreement

  

 

E-4

 

	
   

  	
    

  	
  Pool Asset
  Administration

  	
    

  	
   

  
	
   

  	
   

  	
   

  
	
  1122(d)(4)(i)

  	
    

  	
  Collateral or security on pool assets is maintained as required by the
  transaction agreements or related asset pool documents.

  	
    

  	
   

  
	
   

  	
   

  	
   

  
	
  1122(d)(4)(ii)

  	
    

  	
  Pool assets and related documents are safeguarded as required by the
  transaction agreements

  	
    

  	
   

  
	
   

  	
   

  	
   

  
	
  1122(d)(4)(iii)

  	
    

  	
  Any additions, removals or substitutions to the asset pool are made,
  reviewed and approved in accordance with any conditions or requirements in
  the transaction agreements.

  	
    

  	
   

  
	
   

  	
   

  	
   

  
	
  1122(d)(4)(iv)

  	
    

  	
  Payments on pool assets, including any payoffs, made in accordance
  with the related pool asset documents are posted to the Servicer’s obligor
  records maintained no more than two business days after receipt, or such
  other number of days specified in the transaction agreements, and allocated
  to principal, interest or other items (e.g., escrow) in accordance with the
  related asset pool documents.

  	
    

  	
   

  
	
   

  	
   

  	
   

  
	
  1122(d)(4)(v)

  	
    

  	
  The Servicer’s records regarding the accounts and the accounts agree
  with the Servicer’s records with respect to an obligor’s unpaid principal
  balance.

  	
    

  	
   

  
	
   

  	
   

  	
   

  
	
  1122(d)(4)(vi)

  	
    

  	
  Changes with respect to the terms or status of an obligor’s account
  (e.g., loan modifications or re-agings) are made, reviewed and approved by
  authorized personnel in accordance with the transaction agreements and
  related pool asset documents.

  	
    

  	
   

  
	
   

  	
   

  	
   

  
	
  1122(d)(4)(vii)

  	
    

  	
  Loss mitigation or recovery actions (e.g., forbearance plans,
  modifications and deeds in lieu of foreclosure, foreclosures and
  repossessions, as applicable) are initiated, conducted and concluded in
  accordance with the timeframes or other requirements established by the
  transaction agreements.

  	
    

  	
   

  
	
   

  	
   

  	
   

  
	
  1122(d)(4)(viii)

  	
    

  	
  Records documenting collection efforts are maintained during the
  period a pool asset is delinquent in accordance with the transaction
  agreements. Such records are maintained on at least a monthly basis, or such
  other period specified in the transaction agreements, and describe the entity’s
  activities in monitoring delinquent pool assets including, for example, phone
  calls, letters and payment rescheduling plans in cases where delinquency is
  deemed temporary (e.g., illness or unemployment).

  	
    

  	
   

  
	
   

  	
   

  	
   

  
	
  1122(d)(4)(ix)

  	
    

  	
  Adjustments to interest rates or rates of return for pool assets with
  variable rates are computed based on the related pool asset documents.

  	
    

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Reference

  	
    

  	
  Criteria

  	
    

  	
   

  
	
  1122(d)(4)(x)

  	
    

  	
  Regarding any funds held in trust for an obligor (such as escrow
  accounts): 

  	
    

  	
   

  

 

E-5

 

	
   

  	
   

  	
  (A) such funds are analyzed, in accordance with the obligor’s
  Account documents, on at least an annual basis, or such other period
  specified in the transaction agreements; (B) interest on such funds is
  paid, or credited, to obligors in accordance with applicable Account
  documents and state laws; and (C) such funds are returned to the obligor
  within 30 calendar days of full repayment of the related Accounts, or such
  other number of days specified in the transaction agreements.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  1122(d)(4)(xi)

  	
    

  	
  Payments made on behalf of an obligor (such as tax or insurance
  payments) are made on or before the related penalty or expiration dates, as
  indicated on the appropriate bills or notices for such payments, provided
  that such support has been received by the servicer at least 30 calendar days
  prior to these dates, or such other number of days specified in the
  transaction agreements.

  	
    

  	
   

  
	
   

  	
   

  	
   

  
	
  1122(d)(4)(xii)

  	
    

  	
  Any late payment penalties in connection with any payment to be made
  on behalf of an obligor are paid from the servicer’s funds and not charged to
  the obligor, unless the late payment was due to the obligor’s error or
  omission.

  	
    

  	
   

  

 

	
  Servicing
  Criteria

  	
    

  	
  Applicable

  Servicing

  Criteria

  
	
  1122(d)(4)(xiii)

  	
    

  	
  Disbursements made on behalf of an obligor are posted within two
  business days to the obligor’s records maintained by the servicer, or such
  other number of days specified in the transaction agreements.

  	
    

  	
   

  
	
   

  	
   

  	
   

  
	
  1122(d)(4)(xiv)

  	
    

  	
  Delinquencies, charge-offs and uncollectible accounts are recognized
  and recorded in accordance with the transaction agreements.

  	
    

  	
   

  
	
   

  	
   

  	
   

  
	
  1122(d)(4)(xv)

  	
    

  	
  Any external enhancement or other support, identified in Item 1114(a)(1) through
  (3) or Item 1115 of Regulation AB, is maintained as set forth in the
  transaction agreements.

  	
    

  	
   

  

 

E-6

 

Exhibit F

 

FORM OF
INDENTURE TRUSTEE’S ANNUAL CERTIFICATION

 

Re:                               Harley-Davidson Motorcycle Trust 2006-3

 

The Bank of New York Trust Company, N.A., not in its
individual capacity but solely as indenture trustee (the “Indenture Trustee”),
certifies to Harley-Davidson Credit Corp. (the “Servicer”), and its
officers, with the knowledge and intent that they will rely upon this
certification, that:

 

(1)                                  It has reviewed the report on assessment of
the Indenture Trustee’s compliance provided in accordance with Rules 13a-18
and 15d-18 under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”) and Item 1122 of Regulation AB (the “Servicing Assessment”),
and the registered public accounting firm’s attestation report provided in
accordance with Rules 13a-18 and 15d-18 under the Exchange Act and Section 1122(b) of
Regulation AB (the “Attestation Report”) that were delivered by the
Indenture Trustee to the Seller pursuant to the Sale and Servicing Agreement
(the “Agreement”), dated as of August 1, 2006, by and between
Harley-Davidson Customer Funding Corp., the Servicer, the Indenture Trustee and
Harley-Davidson Motorcycle Trust 2006-3 (collectively, the “Indenture
Trustee Information”);

 

(2)                                             To the best of its knowledge, the Indenture
Trustee Information, taken as a whole, does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in the light of the circumstances under which such statements
were made, not misleading with respect to the period of time covered by the
Indenture Trustee Information; and

 

(3)                                             To the best of its knowledge, all of the
Indenture Trustee Information required to be provided by the Indenture Trustee
under the Agreement has been provided to the Servicer.

 

 

	
   

  	
  THE BANK OF NEW
  YORK TRUST COMPANY, N.A.,

  
	
   

  	
  not in its
  individual capacity but solely as Indenture Trustee

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Printed Name:

  
	
   

  	
   

  	
  Title:

  

 

F-1

 

Exhibit G

 

[Form of Certificate Regarding Reacquired Contracts]

 

Harley-Davidson Credit Corp.

 

Certificate Regarding Reacquired 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 August 1,
2006 by and among Harley-Davidson Customer Funding Corp., as Trust Depositor,
the Servicer, The Bank of New York Trust Company, N.A., as Indenture Trustee,
and Harley-Davidson Motorcycle Trust 2006-3 (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 reacquired by the
[Seller/Servicer] on the date hereof pursuant to [Section 7.08 of the
Agreement and Section 5.01 of the Transfer and Sale Agreement/Section 7.10
of the Agreement/Section 7.11 of the Agreement.]

 

2.                                       Upon
deposit of the Purchase Price for such Contracts, such Contracts may, pursuant
to Section 7.09 of the Agreement, be assigned by the Trustee to the
Seller[/Servicer].

 

IN WITNESS
WHEREOF, I have affixed hereunto my signature this       
day of              .

 

	
   

  	
  Harley-Davidson
  Credit Corp.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Printed Name: Perry A. Glassgow

  
	
   

  	
  Title: Vice President and Treasurer

  

 

G-1

 

Exhibit H

 

[List of Contracts]

 

H-1

 

Exhibit I

 

[Form of Monthly Report to Noteholders and the Certificateholder]

 

 

Harley-Davidson
Motorcycle Trust 2006-3

$100,000,000  5.37% Motorcycle Contract Backed Notes, Class A-1

$228,000,000   5.42% Motorcycle Contract Backed Notes, Class A-2

$264,000,000   5.24% Motorcycle Contract Backed Notes, Class A-3

$160,000,000   5.22% Motorcycle Contract Backed Notes, Class A-4

$48,000,000   5.43% Motorcycle Contract Backed Notes, Class B

Monthly
Report

For the
                
Distribution Date

 

Capitalized terms are defined in the Sale and
Servicing Agreement dated as of August 1, 2006.

 

 

Beginning
of Due Period

End
of Due Period

Determination
Date

Record
Date

Distribution
Date

 

I-1

 

Number
of days in Interest Period (On 30/360 basis)

Number
of days in Interest Period (On Actual/360 basis)

 

	
   

  	
   

  	
  Number

  	
   

  	
  Cut-Off

  	
   

  	
   

  	
   

  	
  Initial

  	
   

  
	
  Purchases

  	
   

  	
  of Contracts

  	
   

  	
  Date

  	
   

  	
  Closing Date

  	
   

  	
  Pool Balance

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Initial Contracts

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Subsequent Contracts

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

I-2

 

I.
POOL BALANCE CALCULATION

 

Principal Balance of
Contracts at beginning of Due Period

Pre-Funded
Amount at beginning of Due Period

 

Purchase
of Subsequent Contracts

Reduction of Pre-Funded
Amount at end of Due Period

Mandatory
Redemption amount

 

Monthly
principal amounts

 

Principal
collections on Contracts outstanding at end of Due Period

Principal
collections on Contracts paid off in full during Due Period

Balance
of Contracts liquidated during Due Period

Balance
of Contracts purchased by Seller or Servicer during Due Period

Other adjustments

Mandatory Redemption amount

 

Aggregate Principal Balance Decline

 

Aggregate
Principal Balance at end of Due Period

 

Pool
factor

 

I-3

 

II.
NOTE PRINCIPAL BALANCE CALCULATION:

 

	
  Original Note Balance

  	
   

  	
  Class A-1

  	
   

  	
  Class A-2

  	
   

  	
  Class A-3

  	
   

  	
  Class A-4

  	
   

  	
  Class B

  	
   

  	
  Total

  	
   

  
	
   

  	
   

  	
  $

  	
   

  	
  $

  	
   

  	
  $

  	
   

  	
  $

  	
   

  	
  $

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Note balance at
  beginning of Due Period

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Principal
  Distributable Amount

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Amounts otherwise distributable to Class B that
  have been distributed to Class A

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Mandatory
  Redemption Amount

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Note Principal
  Carryover Shortfall

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total principal
  paid

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Note balance at
  end of Due Period

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Note factor at
  begininning of Due Period

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Note factor at
  end of Due Period

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

I-4

 

III. NOTE INTEREST
DISTRIBUTABLE CALCULATION

 

	
   

  	
   

  	
   

  	
   

  	
  Interest Carryover

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Note Monthly

  	
   

  	
  Interest Carryover

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Note Balance

  	
   

  	
  Shortfall

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Interest

  	
   

  	
  Interest

  	
   

  	
  Shortfall

  	
   

  	
  Note Interest

  	
   

  
	
   

  	
   

  	
  at Beginning of

  	
   

  	
  at Beginning of

  	
   

  	
  Interest

  	
   

  	
   

  	
   

  	
  Accrual

  	
   

  	
  Distributable

  	
   

  	
  at End of

  	
   

  	
  Distributable

  	
   

  
	
  Class

  	
   

  	
  Due Period

  	
   

  	
  Due Period

  	
   

  	
  Rate

  	
   

  	
  Days

  	
   

  	
  Basis

  	
   

  	
  Amount

  	
   

  	
  Due Period

  	
   

  	
  Amount

  	
   

  
	
  A-1

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  A-2

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  A-3

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  A-4

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  B

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Totals

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

I-5

 

IV.CALCULATION OF AVAILABLE
MONIES AND DISTRIBUTIONS

 

Available Monies:

Principal
collections on Contracts during Due Period

Interest
collections on Contracts during Due Period

Net Liquidation Proceeds

Aggregate of Purchase Price
for Contracts required to be purchased by Seller or Servicer

Advances made by Servicer

Amounts paid by Seller in
connection with the optional repurchase of the Contracts

Carrying
Charges from the Interest Reserve Account

Mandatory Redemption amount

Investment
Earnings - Collection Account

Investment
Earnings - Interest Reserve Account

 

Total Available Monies

 

Distribution
of Available Monies in order of priority:

Mandatory
Redemption amount to the Noteholders

Return
of previous month’s Advances made by Servicer

Monthly
Servicing Fee to the Servicer, including any unpaid Servicing Fees

Monthly Indenture Trustee Fee, including any unpaid Indenture Trustee
fees

Class A
Note Interest Distributable Amount

First
Priority Principal Distributable Amount

 

I-6

 

Class B
Note Interest Distributable Amount

Class A
Note Principal Distributable Amount

Class B
Note Principal Distributable Amount

 

Total
distribution of fees, interest and principal

 

Excess Amounts (Shortfall)

 

Amount
withdrawn from Reserve Fund to cover Shortfall

 

Excess Amounts to Reserve Fund

Excess Amounts to Certificateholder

 

Total distribution of Available Monies

 

I-7

 

V.
ACCOUNT BALANCE INFORMATION

 

Calculation
of Specified Reserve Fund Balance:

The greater of:

a)
[      ]% of the Principal Balance of the
Contracts at the end of the Due Period

b)
[      ]% of the aggregate initial note balance

c)
If Reserve Fund Trigger Event has occurred,
[      ]% of the Principal Balance of the
Contracts at the end of the Due Period

Specified Reserve Fund Balance

 

Reserve
Fund balance at beginning of Due Period

 

Additions to Reserve Fund:

Additional
deposit - Subsequent Reserve Fund Amount deposit

Additional
deposit - Excess Amounts to Reserve Fund

Investment Earnings - Reserve Fund

 

Total additions

 

Withdrawals
from Reserve Fund:

Amount withdrawn to cover Shortfall

 

I-8

 

Excess
Reserve Fund balance to Servicer

 

Total withdrawals

 

Reserve
Fund balance at end of Due Period

 

Pre-Funding Account balance
at beginning of Due Period

 

Withdrawals
from Pre-Funding Account:

Subsequent Contracts purchased

Mandatory Redemption amount

 

Pre-Funding
Account balance at end of Due Period

 

Interest Reserve Account
balance at beginning of Due Period

 

Additions
to the Interest Reserve Account:

Investment
Earnings - Interest Reserve Account

 

 

Withdrawals
from the Interest Reserve Account:

Carrying Charges

Transfer
of Investment Earnings to Collection Account

Excess
Interest Reserve Amount to Depositor

 

I-9

 

Interest Reserve Account
balance at end of Due Period

 

I-10

 

VI. CONTRACT PERFORMANCE
INFORMATION

 

	
   

  	
   

  	
  Number of months since Closing Date

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Trigger Status?  Yes or No

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Monthly Losses

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Number of

  	
   

  	
   

  	
   

  	
  % of Principal Balance at

  	
   

  
	
   

  	
   

  	
  Monthly
  Losses

  	
   

  	
  Contracts

  	
   

  	
  Amount

  	
   

  	
  beginning of Due Period

  	
   

  
	
   

  	
   

  	
  Principal Balance of Liquidated Contracts for the Due Period

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Less:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Net Liquidation Proceeds for the Due Period

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Net Liquidation Losses for the Due Period

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Annualized Net Liquidation Losses

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Average Loss Ratio

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Annualized Net Liquidation
  Losses - current Distribution Date

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Annualized Net Liquidation
  Losses - prior Distribution Date

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Annualized Net Liquidation
  Losses - second prior Distribution Date

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Three-month Average Loss
  Ratio

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Exceeds Reserve Fund
  Trigger Event threshold? Yes or No

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

I-11

 

	
   

  	
   

  	
  Months

  	
   

  	
  Trigger Threshold

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  1-24

  	
   

  	
  %

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  25 or greater

  	
   

  	
  %

  	
   

  	
   

  	
   

  

 

Cumulative Losses

 

	
   

  	
   

  	
   

  	
   

  	
  Number of

  Contracts

  	
   

  	
  Amount

  	
   

  	
  %of Initial

  Principal Balance

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Cumulative Liquidated Contracts

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Cumulative Net Liquidation Proceeds

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Cumulative Net Liquidation Losses

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Average net loss (amount
  of cumulative Net Liquidation Losses / number of cumulative Liquidated
  Contracts)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Cumulative Loss Ratio

  	
   

  	
  Cumulative Loss Ratio

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Exceeds Reserve Fund Trigger Event threshold?  Yes or No

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Months

  	
   

  	
  Trigger Threshold

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  1-12

  	
   

  	
  %

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  13-24

  	
   

  	
  %

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  25-36

  	
   

  	
  %

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  37 or greater

  	
   

  	
  %

  	
   

  	
   

  	
   

  

 

I-12

 

	
  Delinquencies

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Days

  	
   

  	
  Number of

  	
   

  	
  Principal

  	
   

  	
  Delinquent

  	
   

  	
  % of Principal Balance at

  	
   

  
	
   

  	
   

  	
  Delinquent

  	
   

  	
  Contracts

  	
   

  	
  Balance

  	
   

  	
  Interest Amount

  	
   

  	
  Beginning of Due Period

  	
   

  
	
   

  	
   

  	
  30-59

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  60-89

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  90-119

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  120+

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Totals

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  60+ Delinquency Amount

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Average Delinquency Ratio

  	
  Delinquency Ratio - current Distribution Date

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Delinquency Ratio - prior Distribution Date

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Delinquency Ratio - second prior Distribution Date

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Three-month Average
  Delinquency Ratio

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Exceeds Reserve Fund Trigger Event threshold? Yes or No

  	
   

  	
   

  	
   

  

 

	
   

  	
   

  	
  Months

  	
   

  	
  Trigger Threshold %

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  1-12

  	
   

  	
  %

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  13-24

  	
   

  	
  %

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  25-36

  	
   

  	
  %

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  37 or greater

  	
   

  	
  %

  	
   

  	
   

  	
   

  

 

I-13

 

VII. ADDITIONAL CONTRACT
INFORMATION

 

	
   

  	
   

  	
  Contract
  Data

  	
   

  	
  Beginning of Due Period

  	
   

  	
  End of Due Period

  	
   

  
	
   

  	
   

  	
  Number of Contracts

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Principal Balance of Contracts

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Weighted average original term

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Weighted average remaining term

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Weighted average life

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  One month prepayments (ABS)

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Weighted average Contract Rate

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Principal Balance

  	
   

  	
  % of Principal Balance

  	
   

  
	
   

  	
   

  	
  Contract
  Rate

  	
   

  	
  of Contracts

  	
   

  	
  at End of Due Period

  	
   

  
	
   

  	
   

  	
  0.000% - 5.000%

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  5.001% - 10.000%

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  10.001% - 15.000%

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  15.001% - 20.000%

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  20.001% or greater

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Advances made by Servicer
  in current Due Period

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Unreimbursed Advances due
  to Servicer

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Number of Contracts
  purchased by Seller or Servicer

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Principal Balance of
  Contracts purchased by Seller or Servicer

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Purchase Price of
  Contracts purchased by Seller or Servicer

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

I-14

 

VIII. OTHER
INFORMATION FOR NOTEHOLDERS

 

1.               Information
regarding material changes to the definition or determination of delinquencies,
charge-offs and uncollectible accounts:

 

2.               Information
regarding any material modifications, extensions or waivers to contract terms,
fees, penalties or payments during the distribution period or that have
cumulatively become material over time:

 

3.               Information
regarding material breaches of contract representations or warranties or
transaction covenants:

 

4.               Information
regarding any new issuance of asset-backed securities backed by the same
contracts:

 

5.               Information
regarding any contract changes (other than in connection with a contract
converting into cash in accordance with its terms), such as additions or
removals in connection with a prefunding period, including any material changes
in the solicitation, credit-granting, underwriting, origination, acquisition or
pool selection criteria or procedures, as applicable, used to originate,
acquire or select the new pool of contracts:

 

6.               During
the pre-funding period, if applicable, information regarding originators, pool
contracts or significant obligors pursuant to Item 1121(b) of Regulation
AB:

]

 

7.               Information
regarding derivatives:

 

I-15

 

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.

 

(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

 

J-1

 

other)
of Seller or the transactions contemplated by this Agreement or any other
Transaction Document to which the Seller is a party.

 

(f)                                    State
of Incorporation; Name; No Changes. Seller’s state of incorporation is the
State of Nevada. Seller’s exact legal name is as set forth in the first
paragraph of this Agreement. Seller has not changed its name whether by
amendment of its Articles of Incorporation, by reorganization or otherwise, and
has not changed its state of incorporation within the four months preceding the
Closing Date.

 

(g)                                 Buell. 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.

 

(h)                                 Solvency. The Seller, after giving effect to the conveyances
made by it hereunder, is Solvent.

 

(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 or under a debt insurance policy or debt cancellation
agreement.

 

(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.

 

(d)                                 Binding
Obligation. Each Contract is a legal, valid and binding payment 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.

 

J-2

 

(f)                                    Insurance.
The Seller, in accordance with its policies and procedures, has determined
that, as of the date of origination of each Contract, the related Obligor had
obtained or agreed to obtain physical damage insurance covering the Motorcycle.
The terms of each Contract require that for the term of such Contract the
Motorcycle securing such Contract will be covered by physical damage insurance.

 

(g)                                 Origination.
Each Contract (i) was originated by a Harley-Davidson motorcycle dealer or
by Eaglemark Savings Bank, in each case, in the regular course of its business,
(ii) was fully and properly executed by the parties thereto, and (iii) has
been purchased by Seller in the regular course of its business. Each Contract
was sold by such motorcycle dealer or Eaglemark Savings Bank, as the case may be,
to the Seller without any fraud or misrepresentation on the part of such
motorcycle dealer or Eaglemark Savings Bank.

 

(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
Harley-Davidson motorcycle dealers or Eaglemark Savings Bank, 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 at the time of origination or as of the Closing Date or
as of any Subsequent Transfer Date, as applicable, in any material respect 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.

 

(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 or
Eaglemark Savings Bank (as the case may be) in the Motorcycle covered
thereby, and such security interest has been validly assigned by Eaglemark
Savings Bank to Seller (where applicable) and by Seller to the Trust Depositor.
Seller’s security interest has been validly assigned by the Seller to the Trust
Depositor pursuant to this Agreement and by the Trust Depositor to the Issuer
pursuant to the Sale and Servicing Agreement. Immediately prior to the
transfer, assignment and conveyance thereof, each Contract is secured by a
first priority, validly perfected security interest in the Motorcycle covered
thereby in favor of the Seller or Eaglemark Savings Bank as secured party or
all necessary and appropriate actions have been commenced that would result in
a first priority, validly perfected security interest in the Motorcycle covered
thereby in favor of the Seller or Eaglemark Savings Bank as secured party,
except, in each case, as to priority for any lien for taxes, labor, materials
or of any state law enforcement agency affecting a Motorcycle.

 

(1)                                  Good
Title. Each Contract was purchased by Seller for value and taken into
possession prior to the Initial Cutoff Date (or the applicable Subsequent
Cutoff Date in the case

 

J-3

 

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
Issuer 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 full right to
transfer the Contract to Trust Depositor, and, immediately upon the transfer of
each Contract by the Seller, the Trust Depositor shall have good and marketable
title to each Contract free and clear of any encumbrance, equity, loan, pledge,
charge, claim or security interest, and, immediately upon the transfer of each
Contract by the Trust Depositor, the Issuer shall have good and marketable
title to each Contract free and clear of any encumbrance, equity, loan, pledge,
charge, claim or security interest.

 

(m)                               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.

 

(n)                                 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 liens prior
to, or equal with, the lien of such Contract.

 

(o)                                 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.

 

(p)                                 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.

 

(q)                                 One
Original. Each Contract is evidenced by only one original executed
Contract, which original has been delivered to the Issuer or its designee on or
before the Closing Date (or the applicable Subsequent Transfer Date in the case
of Subsequent Contracts).

 

(r)                                    No
Government Obligors. No Obligor is the United States government or an
agency, authority, instrumentality or other political subdivision of the United
States government.

 

(s)                                  Lockbox
Bank. The Lockbox Bank is the only institution holding any Lockbox Account
for receipt of payments from Obligors, and all Obligors have been instructed to
make payments to the Lockbox Account (either directly by remitting payments to
the Lockbox, or indirectly by making payments through direct debit, the
telephone or the internet to an account of the Servicer which payments will be
subsequently transferred from such account to one or more Lockbox Banks), 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

 

J-4

 

defined
in the Lockbox Agreement) shall have an interest in certain other collections
therein not related to the Contracts.

 

(t)                                    Obligor
Bankruptcy. At the Initial Cutoff Date (or the applicable Subsequent Cutoff
Date in the case of Subsequent Contracts), no Obligor was subject to a
bankruptcy proceeding (according to the records of the Seller) within the one
year preceding such Cutoff Date.

 

(u)                                 Chattel
Paper. The Contracts constitute tangible chattel paper within the meaning
of the UCC.

 

(v)                                 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.

 

(w)                               Selection Criteria. Each Contract is
secured by a new or used Motorcycle. No Contract has a Contract Rate less than 3.987%. Each Contract
amortizes the amount financed over an original term no greater than 84 months. Each
Contract has a Principal Balance of at least $624.01 as of the related Cutoff Date.

 

(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 or exceeds the sum of the principal balance of the Class A-1
Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4
Notes and the Class B Notes 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 84 months; and (iii) the
final scheduled payment on the Initial Contract with the latest maturity is due
not later than January 2014. Approximately 82.63% 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 17.37%
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 3.987%.
The last scheduled payment date of the Contracts (including any Subsequent
Contracts) is due no later than April 2014.
Approximately 99.04%
of the Principal Balance of the Initial Contracts as of the Initial Cutoff Date
is attributable to loans for purchases of Motorcycles manufactured by
Harley-Davidson or Buell and approximately 0.96% of the Principal Balance of
the Initial Contracts as of the Initial Cutoff Date is attributable to loans to
purchase Motorcycles not manufactured by Harley-Davidson or Buell.

 

(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 File
relating to the

 

J-5

 

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.

 

(d)                                 No
Adverse Selection. No selection procedures adverse to Noteholders have been
employed in selecting the Contracts.

 

(e)                                  True
Sale. The transactions contemplated by the Transfer and Sale Agreement and
this Agreement constitute valid sales, transfers and assignments 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 11.00% 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, or its custodian, will have possession of each original Contract and
the related complete Contract File. 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, or its custodian.

 

(b)                                 Bulk
Transfer Laws. The transfer, assignment and conveyance of the Contracts and
the Contract Files by Seller pursuant to the Transfer and Sale 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.

 

J-6

 

Exhibit K

 

[Lockbox Bank and Lockbox Account]

 

Lockbox

 

Harley-Davidson
Credit Corp.

8529
Innovation Way

Chicago,
Illinois 60682-0085

 

Lockbox Bank

 

LaSalle
Bank National Association

135
South LaSalle Street

Chicago,
Illinois 60674

 

K-1

 

Exhibit L

 

FORM OF SUBSEQUENT TRANSFER AGREEMENT

 

SUBSEQUENT TRANSFER
AGREEMENT (the “Agreement”), dated as of 

              ,
by and among Harley-Davidson Motorcycle Trust [    ] (the “Trust”), Harley-Davidson Customer Funding Corp., a Nevada
corporation (the “Trust Depositor”), The Bank of
New York Trust Company, N.A., as Indenture Trustee (the “Indenture
Trustee”) and Harley-Davidson Credit Corp., a Nevada corporation
(the “Servicer”), pursuant to the Sale and
Servicing Agreement referred to below.

 

WITNESSETH:

 

WHEREAS, the
Trust, the Trust Depositor, the Servicer and the Indenture Trustee, are parties
to the Sale and Servicing Agreement, dated as of              
(the “Sale and Servicing Agreement”);

 

WHEREAS, pursuant
to the Sale and Servicing Agreement, the Trust Depositor wishes to sell the
Subsequent Contracts to the Trust, and the Trust wishes to purchase the same,
for the consideration described in the Sale and Servicing Agreement; and

 

WHEREAS, the
Seller, on behalf of the Trust Depositor, has delivered an Addition Notice
related to such conveyance as required by Section 2.03(b) of the Sale
and Servicing Agreement;

 

NOW,
THEREFORE, the parties hereto 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 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 2.03(b) of the Sale and Servicing
Agreement and this Agreement, the Trust Depositor hereby sells, transfers,
assigns, sets over and otherwise conveys to the Trust (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 after the Subsequent Cutoff Date, including any liquidation
proceeds therefrom, but excluding any rights to receive payments which were
collected pursuant thereto on or prior to the

 

L-1

 

Subsequent Cutoff Date), (ii) all rights of the Trust Depositor
under any physical damage or other individual insurance policy (including a “forced
placed” policy, if any), any debt insurance policy or any debt cancellation
agreement relating to any such Subsequent Contract, an Obligor or a Motorcycle
securing such Subsequent 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 motorcycle dealer agreements between the dealers (i.e., the
originators of certain Subsequent 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 Subsequent Contracts, (vii) all
rights (but not the obligations) of the Trust Depositor under the Transfer and
Sale Agreement related to such Subsequent Contracts (to the extent not already
conveyed under Section 2.01(a) of the Sale and Servicing Agreement),
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 Subsequent 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
Subsequent Contracts (to the extent not already conveyed under Section 2.01(a) of
the Sale and Servicing Agreement) (and any investments of such amounts), (ix) all
rights of the Trust Depositor to certain rebates of premiums and other amounts
relating to insurance policies, debt cancellation agreements, extended service
contracts or other repair agreements and other items financed under such
Subsequent Contracts and (x) all proceeds and products of the foregoing. It is
the intention of the Trust Depositor and Owner Trustee that the transfer
contemplated by this Agreement shall constitute a sale of the Subsequent
Contracts from the Trust Depositor to the Trust, conveying good title thereto
free and clear of any Liens.

 

Section 4.                                          Representations and Warranties of
the Trust Depositor. (a) The Trust Depositor hereby represents and warrants to the
Trust, the Indenture Trustee and the Noteholders that the representations and
warranties of the Trust Depositor set forth in Section 3.01 of the Sale
and Servicing Agreement are true and correct as of the Subsequent Transfer
Date.

 

(b)                                 The Trust Depositor hereby repeats and
remakes with respect to the Subsequent Contracts as of the Subsequent Transfer
Date the representations and warranties of the Servicer, as Seller of the
Subsequent Contracts, set forth in Exhibit J to the Sale and Servicing
Agreement, except that no representation or warranty is made herein with
respect to paragraph 3(b) thereof (other than with respect to clause (i) of
paragraph 3(b)).

 

(c)                                  The Trust Depositor 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
pursuant to this Agreement is $          
as of the Subsequent Cutoff Date, and (b) the conditions set forth in Section 2.03(b) of
the Sale and Servicing Agreement have been satisfied as of the Subsequent
Transfer Date.

 

Section 5.                                          Representations and Warranties of
the Servicer. (a) The
Servicer hereby represents and warrants to the Trust that the representations
and warranties of the Servicer set forth in Section 3.02 of the Sale and
Servicing Agreement are true and correct as of the Subsequent Transfer Date.

 

Section 6.                                          Ratification of Agreement. As supplemented by this Agreement, the
Sale and Servicing 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 7.                                          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.

 

L-2

 

Section 8.                                          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 9.                                          Authorization of Trustee. By its execution hereof, the Trust
Depositor hereby authorizes and directs the Owner Trustee to execute and
deliver this Agreement on behalf of the Trust.

 

[signature page follows]

 

L-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: Vice
  President and Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HARLEY-DAVIDSON
  CREDIT CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Printed Name:
  Perry A. Glassgow

  
	
   

  	
  Title: Vice
  President and Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HARLEY-DAVIDSON

  
	
   

  	
  MOTORCYCLE TRUST
  2006-3

  
	
   

  	
   

  
	
   

  	
  By:      Wilmington
  Trust Company, not in its

  individual capacity but solely as Owner Trustee on

  behalf of the
  Trust

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Printed Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  THE BANK OF NEW
  YORK TRUST COMPANY,

  N.A.

  
	
   

  	
  not in its
  individual capacity but solely

  
	
   

  	
  as Indenture
  Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Printed Name:

  
	
   

  	
  Title:

  
							

 

L-1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00109-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00109-of-00352.parquet"}]]