1
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-31093
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED SEPTEMBER 10, 1997)
$1,304,375,000
PREMIER AUTO TRUST 1998-5
$640,000,000 CLASS A-2, 5.07% ASSET BACKED NOTES, DUE APRIL 2001
$450,000,000 CLASS A-3, 5.07% ASSET BACKED NOTES, DUE JULY 2002
$214,375,000 CLASS A-4, 5.19% ASSET BACKED NOTES, DUE APRIL 2003
[CHRYSLER FINANCIAL CORPORATION LOGO], SELLER AND SERVICER
------------------------------
- ------------------------------------------------
GENERAL:
BEFORE YOU DECIDE TO INVEST IN ANY OF THE
OFFERED NOTES, PLEASE READ THIS PROSPECTUS - Premier Auto Trust 1998-5 will issue the above Notes to
SUPPLEMENT AND PROSPECTUS, ESPECIALLY THE obtain funds for the purchase of a pool of motor vehicle
SPECIAL CONSIDERATIONS BEGINNING ON PAGE retail installment contracts. The securities represent
S-8 OF THIS PROSPECTUS SUPPLEMENT AND PAGE 10 obligations of the Trust, and the Trust's main source of
OF THE PROSPECTUS. funds for making payments on the securities is
collections on the retail installment contracts.
The Notes will be obligations only of the
Trust, and neither the Notes nor the assets - Interest and principal will be payable on the 8th of each
of the Trust will be obligations of Chrysler month. If the 8th is not a Business Day, then the payment
Financial Corporation or any of its will be made on the following Business Day. The first
successors or affiliates. payment will be due November 9, 1998.
- ------------------------------------------------ - Principal will be paid on the notes in sequence. All
principal will be paid on the Class A-1 Notes until they are
fully paid, then on Class A-2 until fully paid, etc.
TOTAL SECURITIES ISSUED:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ORIGINAL UNDERWRITING PROCEEDS TO
PRINCIPAL AMOUNT PRICE TO PUBLIC(2) DISCOUNT SELLER(2)(3)
- -----------------------------------------------------------------------------------------------------------------------------------
Class A-1 Notes(1)................... $380,000,000.00 n/a n/a n/a
- -----------------------------------------------------------------------------------------------------------------------------------
Class A-2 Notes...................... $640,000,000.00 99.9982% 0.1625% 99.8357%
- -----------------------------------------------------------------------------------------------------------------------------------
Class A-3 Notes...................... $450,000,000.00 99.9996% 0.1875% 99.8121%
- -----------------------------------------------------------------------------------------------------------------------------------
Class A-4 Notes...................... $214,375,000.00 99.9921% 0.2500% 99.7421%
- -----------------------------------------------------------------------------------------------------------------------------------
Certificates (Subordinated)(1)....... $65,625,000.00 n/a n/a n/a
- -----------------------------------------------------------------------------------------------------------------------------------
Total................................ $1,750,000,000.00 $1,304,344,744.38 $2,419,687.50 $1,301,925,056.88
- -----------------------------------------------------------------------------------------------------------------------------------
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(1) Not being offered hereby.
(2) Plus accrued interest, if any from October 23, 1998.
(3) Before deducting expenses, estimated to be $781,000.00.
INITIAL CREDIT ENHANCEMENT(1):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INITIAL CERTIFICATES CASH
OVERCOLLATERALIZATION (SUBORDINATED) RESERVE FUND
- ---------------------------------------------------------------------------------------------------------------------------
Amount......................................... $52,523,447.71 $65,625,000.00 $4,375,000.00
- ---------------------------------------------------------------------------------------------------------------------------
Percent of Initial Securities Amount........... 3.00% 3.75% 0.25%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
(1) Excess Spread, if any, may also provide credit enhancement.
------------------------------
We expect that delivery of the Offered Notes will be made in book-entry form
only through the facilities of The Depository Trust Company and Cedel Bank,
societe anonyme and the Euroclear System on or about October 23, 1998.
Neither the SEC nor any state securities commission has approved or
disapproved the Offered Notes or determined that this Prospectus Supplement and
Prospectus are accurate or complete. Any representation to the contrary is a
criminal offense.
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BEAR, STEARNS & CO. INC.
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY
------------------------------
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS OCTOBER 20, 1998.
2
Application will be made to list the Offered Notes on the Luxembourg Stock
Exchange.
CONTENT OF PROSPECTUS SUPPLEMENT AND PROSPECTUS
You should rely only on the information contained in this document. We have
not authorized anyone to provide you with different information. You should not
assume that the information in the Prospectus Supplement or the Prospectus is
accurate as of any date other than the date at the bottom of the front page of
this document.
We provide information to you about the Offered Notes in two separate
documents that progressively provide more detail: (a) this Prospectus
Supplement, which describes the specific terms of the Offered Notes, and (b) the
Prospectus, which provides general information, some of which may not apply to
the Offered Notes.
If the terms of the Offered Notes vary between this Prospectus Supplement
and the accompanying Prospectus, you should rely on the information in this
Prospectus Supplement.
We include cross-references in this Prospectus Supplement and the
Prospectus to captions in these documents where you can find further related
discussions. The Table of Contents on the back cover of this document provides
the pages on which these captions are located.
You can find a listing of the pages where capitalized terms used in this
Prospectus Supplement and the Prospectus are defined under the caption "Index of
Terms" on page S-28 in this Prospectus Supplement and under the caption "Index
of Terms" beginning on page 63 in the Prospectus.
LIMITATIONS ON OFFERS OR SOLICITATIONS
We do not intend this document to be an offer or solicitation:
(A) if used in a jurisdiction in which such offer or solicitation is not
authorized;
(B) if the person making such offer or solicitation is not qualified to do
so; or
(C) if such offer or solicitation is made to anyone to whom it is unlawful
to make such offer or solicitation.
TRANSACTIONS THAT MAY AFFECT THE PRICE OF THE OFFERED NOTES
The Underwriters may engage in transactions that stabilize, maintain, or
otherwise affect the price of the Offered Notes. Such transactions may include
stabilizing and the purchase of Offered Notes to cover syndicate short
positions. For a description of these activities, see "Underwriting" herein.
S-2
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REPORTS TO NOTEHOLDERS
If and when Definitive Notes are issued, Chrysler Financial Corporation, as
servicer, will send monthly and annual unaudited reports containing information
concerning the Receivables to the Indenture Trustee to be delivered to Cede &
Co. ("Cede"), as nominee of The Depository Trust Company ("DTC") and registered
holder of the Offered Notes. See "Certain Information Regarding the
Securities -- Book-Entry Registration" and "-- Reports to Securityholders" in
the Prospectus. Such reports will not constitute financial statements prepared
in accordance with generally accepted accounting principles. Chrysler Financial
Corporation, as originator of the Trust, will file with the SEC such periodic
reports as are required under the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC thereunder.
S-3
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TABLE OF CONTENTS
PAGE
----
REPORTS TO NOTEHOLDERS............... S-3
SUMMARY OF TERMS..................... S-5
Issuer............................. S-5
Seller of the Receivables to the
Trust........................... S-5
Servicer of the Receivables........ S-5
Indenture Trustee.................. S-5
Owner Trustee...................... S-5
Offered Notes...................... S-5
The Certificates................... S-5
The Receivables.................... S-5
Closing Date....................... S-5
Terms of the Notes................. S-5
Payment Date.................... S-5
Per Annum Interest Rates........ S-5
Interest Accrual Period for the
Notes......................... S-6
Principal....................... S-6
Credit Enhancement................. S-7
Initial Overcollateralization;
Use of Excess Spread to
Increase
Overcollateralization......... S-7
Reserve Account................. S-7
Priority of Payments;
Subordination of
Certificates.................. S-7
Tax Status......................... S-7
ERISA Considerations............... S-7
Rating of the Offered Notes........ S-7
SPECIAL CONSIDERATIONS............... S-8
Limited Liquidity.................. S-8
Servicing.......................... S-8
Sources of Funds................... S-8
Ratings of the Offered Notes....... S-8
Financial Information for Chrysler
Corporation and Chrysler
Financial
Corporation..................... S-8
THE TRUST............................ S-11
General............................ S-11
Capitalization of the Trust........ S-11
The Owner Trustee.................. S-11
PAGE
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THE RECEIVABLES POOL................. S-12
Delinquencies, Repossessions and
Net Losses...................... S-15
CHRYSLER FINANCIAL CORPORATION....... S-17
WEIGHTED AVERAGE LIFE OF THE NOTES... S-17
DESCRIPTION OF THE NOTES............. S-18
General............................ S-18
Payments of Interest............... S-18
Payments of Principal.............. S-18
Optional Redemption................ S-19
Book-Entry Registration............ S-19
DESCRIPTION OF THE CERTIFICATES...... S-20
DESCRIPTION OF THE TRANSFER AND
SERVICING AGREEMENTS............... S-20
Sale and Assignment of
Receivables..................... S-20
Accounts........................... S-20
No Advances........................ S-20
Servicing Compensation and Payment
of Expenses..................... S-20
Distributions...................... S-20
Deposits to Collection
Account....................... S-20
Allocations and Distributions... S-21
Payments to Noteholders......... S-23
Overcollateralization and Release
of the Initial
Overcollateralization Amount.... S-23
Reserve Account.................... S-24
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES....................... S-25
ERISA CONSIDERATIONS................. S-25
UNDERWRITING......................... S-26
LEGAL OPINIONS....................... S-27
INDEX OF TERMS....................... S-28
ANNEX I.............................. A-1
S-4
5
SUMMARY OF TERMS
The following summary is a short, concise description of the main terms of
the Offered Notes. For this reason, the summary does not contain all the
information that may be important to you. You will find a detailed description
of the terms of the Offered Notes following this summary and in the Prospectus.
Issuer....................... Premier Auto Trust 1998-5 (the "Trust" or the
"Issuer"), a Delaware business trust.
Seller of the Receivables to
the Trust.................... Chrysler Financial Corporation (the "Seller" or
"CFC").
Servicer of the
Receivables.................. CFC (in such capacity, the "Servicer").
Indenture Trustee............ The First National Bank of Chicago (the
"Indenture Trustee").
Owner Trustee................ Chase Manhattan Bank Delaware (the "Owner
Trustee").
Offered Notes................ The "Offered Notes" include only the Class A-2
Notes, the Class A-3 Notes and the Class A-4
Notes, as described on the cover page. The Trust
will also issue $380,000,000.00 principal amount
of Class A-1 5.14% Asset Backed Notes. The
"Notes" include the Offered Notes and the Class
A-1 Notes.
The Certificates............. The Trust will also issue $65,625,000.00
principal amount of Asset Backed Certificates
(the "Certificates"). The Certificates will
represent fractional undivided interests in the
Trust. The Certificates are not being offered
hereby. The Certificates will not bear interest.
No principal will be paid on the Certificates
until the Notes have been paid in full. The
"Securities" include the Notes and the
Certificates.
The Receivables.............. The Trust's main source of funds for making
payments on the Securities will be collections on
its motor vehicle retail installment sales
contracts (the "Receivables"). Initially, the
Trust will acquire Receivables with a total
principal balance of $1,802,523,447.71 (the
"Initial Pool Balance") as of October 14, 1998
(the "Cutoff Date"). As of the Cutoff Date, the
weighted average annual percentage rate of the
Receivables was approximately 9.09%, the weighted
average remaining maturity of the Receivables was
approximately 49.77 months, and the weighted
average original maturity of the Receivables was
approximately 54.03 months. No Receivable has a
scheduled maturity later than October 31, 2004.
See "The Receivables Pool" herein.
Closing Date................. The "Closing Date" is October 23, 1998.
Terms of the Notes
A. Payment Date............ Payments of interest and principal on the Notes
will be made on the eighth day of each month. If
the eighth is not a Business Day, then the
payment will be made on the following Business
Day (each, a "Payment Date"). The first Payment
Date will be November 9, 1998.
B. Per Annum Interest
Rates................... Class A-1 Rate 5.14%
Class A-2 Rate 5.07%
Class A-3 Rate 5.07%
Class A-4 Rate 5.19%
S-5
6
C. Interest Accrual Period
for the Notes........... Monthly, as described under "Description of the
Notes -- Payments of Interest". However, interest
will begin to accrue on the Closing Date.
D. Principal
(i) Sequential Payment
among Classes...... No principal payments will be made (i) on the
Class A-2 Notes until the Class A-1 Notes have
been paid in full; (ii) on the Class A-3 Notes
until the Class A-2 Notes have been paid in full
and; (iii) on the Class A-4 Notes until the Class
A-3 Notes have been paid in full.
(ii) Final Scheduled
Payment Date...... The Trust must pay the outstanding principal
amount of a Class of Notes, to the extent not
previously paid, by the following date:
CLASS FINAL SCHEDULED PAYMENT DATE
----- ----------------------------
A-1 July 8, 1999
A-2 April 9, 2001
A-3 July 8, 2002
A-4 April 8, 2003
(iii) Amount of
Principal Payable
on Each Payment
Date............. In general, the Trust will make payments of
principal of the Notes on each Payment Date in an
amount equal to the excess of the total amount
collected on the Receivables over Servicing Fees
and interest on the Notes. If certain conditions
are met, amounts that would otherwise be paid as
principal on the Notes will instead be released
to the Company until the Company has received
$52,523,447.71 (the "Initial
Overcollateralization Amount"), which is the
amount of the initial overcollateralization
supporting the Securities. Once the Company has
received the Initial Overcollateralization
Amount, the Trust will resume making principal
payments in the manner described above.
For a description of the amounts to be released
to the Company and the timing of such releases,
see "Description of the Transfer and Servicing
Agreements -- Overcollateralization and Release
of Initial Overcollateralization Amount" herein.
(iv) Optional
Redemption........ The Trust may, but is not obligated to, redeem at
par the outstanding Class A-4 Notes in whole, but
not in part, on any Payment Date on which the
Servicer exercises its option to purchase the
Receivables. The Servicer may purchase the
Receivables once the aggregate principal balance
of the Receivables has declined to 10% or less of
the Initial Pool Balance.
S-6
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Credit Enhancement
A. Initial
Overcollateralization;
Use of Excess
Spread to Increase
Overcollateralization... The Initial Pool Balance of $1,802,523,447.71
will exceed the $1,750,000,000.00 initial
aggregate principal amount of the Securities (the
"Initial Securities Principal Balance") by the
Initial Overcollateralization Amount of
$52,523,447.71, which is approximately 3.00% of
the Initial Securities Principal Balance. Unless
offset by losses on the Receivables or the
release of cash to the Company as described
above, the use of Excess Spread to pay principal
of the Notes will cause the outstanding principal
amount of the Notes to decrease faster than the
principal balance of the Receivables decreases,
thereby increasing overcollateralization and the
overcollateralization percentage.
"Excess Spread" is the excess of interest
collections on the Receivables (exclusive of
certain amounts) over Servicing Fees and interest
on the Notes. This amount will be used first to
offset net losses on the Receivables, then, if
necessary, to increase the Reserve Account to the
required amount and finally to pay principal on
the Notes or, in certain circumstances, release
cash to the Company.
B. Reserve Account......... The initial amount in the "Reserve Account" will
be $4,375,000.00, which is 0.25% of the Initial
Securities Principal Balance. The Indenture
Trustee will apply funds in the Reserve Account
to make payments due on the Notes that are not
covered by collections on the Receivables. The
Reserve Account will be reinstated to its
required amount with Excess Spread, if available.
C. Priority of Payments;
Subordination of
Certificates............ On each Payment Date, the Indenture Trustee will
apply the Trust's available funds (as described
in this document), first, to pay interest on the
Notes and, second, to pay the outstanding
principal amount of the Notes in the order
described herein or to release cash to the
Company as described above. This subordination of
payments on the Certificates is intended to
decrease the likelihood that the Trust will
default in making payments due on the Notes.
Tax Status................... In the opinion of Brown & Wood LLP, for federal
income tax purposes, the Offered Notes will be
characterized as debt, and the Trust will not be
characterized as an association (or a publicly
traded partnership) taxable as a corporation. See
"Certain Federal Income Tax Consequences" herein
and "Certain Federal Income Tax Consequences" and
"Certain State Tax Consequences with Respect to
Trusts Which Issue One or More Classes of Notes"
in the Prospectus.
ERISA Considerations......... Subject to the considerations discussed under
"ERISA Considerations" herein and in the
Prospectus, the Offered Notes are eligible for
purchase by employee benefit plans.
Rating of the Offered
Notes........................ At the Closing Date, at least two nationally
recognized rating agencies will rate the Offered
Notes in the highest investment rating category.
S-7
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SPECIAL CONSIDERATIONS
LIMITED LIQUIDITY: - There is currently no secondary market for the Offered
Notes. Each Underwriter currently intends to participate
in making a secondary market in the Offered Notes, but it
is under no obligation to do so. There is no assurance
that a secondary market will develop. If a secondary
market does develop, there is no assurance that it will
continue or that you will be able to resell your Offered
Notes.
SERVICING: - CFC is not obligated to make any payments in respect of
the Notes or the Receivables. However, if CFC were to
cease acting as Servicer, delays in processing payments on
the Receivables and information in respect of the
Receivables could occur and result in delays in payments
to you.
SOURCES OF FUNDS: - The Trust will not have any significant assets or sources
of funds to make payments on the Notes other than the
Receivables and the Reserve Account. You must rely for
repayment of your Notes upon payments on the Receivables
and amounts, if any, in the Reserve Account. Although
funds in the Reserve Account may be available on each
Payment Date to cover shortfalls in distributions of
interest and principal on the Notes, the amounts available
in the Reserve Account are limited. If the Reserve Account
becomes depleted, the Trust will depend solely on current
collections on the Receivables to make payments on the
Notes.
RATINGS OF THE - On the Closing Date at least two nationally recognized
OFFERED NOTES: rating agencies (the "Rating Agencies") will rate the
Offered Notes in the highest investment rating category.
A rating is not a recommendation to purchase, hold or
sell Notes, and it does not comment as to market price or
suitability for a particular investor. The ratings of the
Offered Notes address the likelihood of the payment of
principal and interest on the Offered Notes pursuant to
their terms. There is no assurance that a rating will
remain for any given period of time or that a Rating
Agency will not lower or withdraw its rating if in its
judgment circumstances in the future so warrant.
FINANCIAL INFORMATION - Chrysler Corporation and its consolidated subsidiaries
FOR CHRYSLER ("Chrysler") reported earnings before income taxes of $1.1
CORPORATION AND billion for the third quarter of 1998 compared with $726
CHRYSLER FINANCIAL million for the third quarter of 1997. For the first nine
CORPORATION: months of 1998, Chrysler reported earnings before income
taxes of $4.4 billion, compared with $3.2 billion for the
first nine months of 1997. Net earnings for the third
quarter of 1998 were $682 million, or $1.05 per common
share ($1.02 per diluted common share), compared with
$441 million, or $0.66 per common share ($0.65 per
diluted common share), for the third quarter of 1997. Net
earnings for the first nine months of 1998 were $2.7
billion, or $4.23 per common share ($4.14 per diluted
common share), compared with $2.0 billion, or $2.86 per
common share ($2.82 per diluted common share), for the
first nine months of 1997.
- The increase in earnings for the third quarter of 1998
compared with the third quarter of 1997 primarily reflects
an increase in vehicle shipments, partially offset by an
increase in depreciation and special tools amortization.
The increase in earnings for the first nine months of
1998 compared with the first nine months of 1997
primarily reflect an increase in vehicle shipments and
decreased warranty costs, partially offset by an increase
in average sales incentives and depreciation and special
tools amortization. Vehicle shipments for the first nine
months of 1997 were negatively impacted by the 29-day
strike at an engine plant
S-8
9
in Detroit, Michigan. The decrease in warranty costs was
primarily related to several voluntary customer service
actions and recalls which occurred in 1997. The increase
in average sales incentives was attributable to an
increasingly competitive automotive market environment.
Earnings for the third quarter and first nine months of
1997 also included a $41 million charge ($25 million
after taxes) for costs related to discontinuing
Chrysler's Eagle brand at the end of the 1998 model year.
- Earnings decreased for calendar-year 1997 as compared
with calendar-year 1996 primarily as a result of an
increase in average sales incentives per vehicle, a
decrease in vehicle shipments and an increase in warranty
costs, partially offset by lower profit-based employee
compensation costs. The increase in average sales
incentives per vehicle reflects an increasingly
competitive automotive environment in 1997 resulting
primarily from new product offerings from competitors and
greater flexibility in vehicle pricing by Japanese
manufacturers who have benefited from currency exchange
rate changes between the Japanese yen and U.S. dollar.
The decrease in shipments for calendar-year 1997 was
primarily due to the changeover to Chrysler's all-new
Dodge Intrepid and Chrysler Concorde sedans and the
unfavorable impact of a 29-day strike. The increase in
warranty costs was primarily related to customer service
and recall actions, partially offset by lower average
warranty costs on 1997 and 1998 model-year vehicles.
- Earnings before income taxes, extraordinary item and the
cumulative effect of a change in accounting principle for
1997 reflected the unfavorable impact of a 29-day strike
which reduced earnings by an estimated $590 million ($364
million after taxes) after considering partial recovery
of production losses from the strike, and a $41 million
charge ($25 million after taxes) for costs related to the
decision to discontinue Chrysler's Eagle brand at the end
of the 1998 model year. The effect of these unfavorable
items was partially offset by the recognition of $97
million ($60 million after taxes) of previously deferred
profits from the sale of vehicles from Chrysler to Dollar
Thrifty Automotive Group, Inc. ("DTAG") (formerly
Pentastar Transportation Group, Inc.) as a result of the
December 1997 initial public offering ("IPO") of
Chrysler's common stock interest in DTAG.
- Earnings before income taxes, extraordinary item and the
cumulative effect of a change in accounting principle for
1996 included a charge of $97 million ($61 million after
taxes) for costs associated with a voluntary early
retirement program for certain salaried employees, a
charge of $77 million ($51 million after taxes) related
to a write-down of Pentastar Electronics, Inc. ("PEI"), a
charge of $65 million ($100 million after taxes) related
to a write-down of Thrifty Rent-A-Car System, Inc.
("Thrifty"), a charge of $50 million ($31 million after
taxes) for lump-sum retiree pension costs related to the
1996 UAW collective bargaining agreement, and a gain of
$101 million ($87 million after taxes) from the sale of
Electrospace Systems, Inc. ("ESI") and Chrysler
Technologies Airborne Systems, Inc. ("CTAS"). In
addition, in 1996, Chrysler extinguished $550 million, or
50 percent, of the outstanding principal amount of its
Auburn Hills Trust Guaranteed Exchangeable Certificates
Due 2020 (the "Guaranteed Exchangeable Certificates") at
a cost of $859 million. The extinguishment of the
Guaranteed Exchangeable Certificates resulted in an
extraordinary after-tax loss of $191 million (net of
income tax benefit of $118 million).
S-9
10
- On May 7, 1998, the Company's parent, Chrysler
Corporation, Daimler-Benz Aktiengesellschaft ("Daimler")
and DaimlerChrysler Aktiengesellschaft ("DaimlerChrysler")
entered into a Business Combination Agreement (the
"Business Combination Agreement") providing for (i) the
merger of a newly created Delaware corporation with and
into Chrysler Corporation (the "Chrysler Merger"); (ii)
an offer by DaimlerChrysler to exchange DaimlerChrysler
ordinary shares for Daimler ordinary shares, and (iii)
the merger of Daimler with and into DaimlerChrysler. In
the Chrysler Merger, each share of outstanding Chrysler
Corporation common stock will be converted into the right
to receive DaimlerChrysler shares. As a result of these
transactions, DaimlerChrysler will be owned by the former
shareholders of Chrysler Corporation and Daimler, and
Chrysler Corporation will be a wholly owned subsidiary of
DaimlerChrysler. Both Chrysler Corporation's and
Daimler's shareholders voted to approve the proposed
Business Combination at separate Special Shareholders'
Meetings held on September 18, 1998. The initial period
for the exchange of Daimler shares for DaimlerChrysler
shares occurs from September 24, 1998 through October 23,
1998.
- Chrysler Financial Corporation plans to convert from a
corporation to a limited liability company ("LLC") on or
about October 25, 1998. Conversion to an LLC will have no
effect on the day-to-day operations of Chrysler Financial
Corporation. The new LLC will be the surviving legal
entity of a merger between Chrysler Financial Company
L.L.C., a newly created Michigan limited liability
company, and Chrysler Financial Corporation. Chrysler
Corporation, which currently owns all of the capital
stock of Chrysler Financial Corporation, will be the sole
member (owner) of Chrysler Financial Company L.L.C. Upon
the merger, Chrysler Financial Company L.L.C. will
succeed to the operations of Chrysler Financial
Corporation and will acquire its assets and assume its
debt and other obligations.
- Chrysler Financial Corporation and its consolidated
subsidiaries' net earnings were $116 million and $344
million for the three and nine months ended September 30,
1998, compared to $111 million and $307 million for the
three and nine months ended September 30, 1997. The
increase in net earnings primarily reflects higher gains
and servicing fees from sales of automotive receivables,
a decrease in provision for credit losses, and gains from
sales of certain nonautomotive assets. Net earnings for
the first nine months of 1997 reflect a one-time benefit
from the adoption of Statement of Financial Accounting
Standards No. 125.
S-10
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THE TRUST
GENERAL
The Issuer, Premier Auto Trust 1998-5, is a business trust formed under the
laws of the State of Delaware pursuant to an Amended and Restated Trust
Agreement dated as of October 1, 1998 (as amended and supplemented from time to
time, the "Trust Agreement"), among the Seller, the Owner Trustee and Premier
Receivables L.L.C. (the "Company"), a Michigan limited liability company that is
indirectly wholly-owned by the Seller, for the transactions described in this
Prospectus Supplement. The Trust will not engage in any activity other than (i)
acquiring, holding and managing the Receivables and the other assets of the
Trust and proceeds therefrom, (ii) issuing the Notes and the Certificates, (iii)
making payments on the Notes and the Certificates and (iv) engaging in other
activities that are necessary or suitable to accomplish the foregoing or are
incidental thereto or connected therewith.
The Trust will initially be capitalized with equity (exclusive of the
amounts allocated in the Reserve Account) equal to $118,148,447.71, which is the
difference between the aggregate principal amount of the Receivables as of the
Cutoff Date and the initial aggregate principal amount of the Notes. The equity
in the Trust (including the right to receive distributions from the Reserve
Account) will be evidenced by the Certificates and additional certificates
issued by the Trust to the Company, which may thereafter hold such equity or
sell or otherwise transfer it. In the case of any such sale or transfer to
another entity, such entity may become the "Company" with respect to the Trust.
The net proceeds from the sale of the Notes will be used by the Trust to
purchase the Receivables from the Seller pursuant to the Sale and Servicing
Agreement.
If the protection provided to the investment of the Noteholders by the
Reserve Account is insufficient, the Trust will look only to the Obligors on the
Receivables and the proceeds from the repossession and sale of Financed Vehicles
which secure defaulted Receivables. In such event, certain factors, such as the
Trust's not having first priority perfected security interests in some of the
Financed Vehicles, may affect the Trust's ability to realize on the collateral
securing the Receivables, and thus may reduce the proceeds to be distributed to
Noteholders with respect to the Notes. See "Description of the Transfer and
Servicing Agreements -- Distributions" and "-- Reserve Account" herein and
"Certain Legal Aspects of the Receivables" in the Prospectus.
The Trust's principal offices are in Wilmington, Delaware, in care of Chase
Manhattan Bank Delaware, as Owner Trustee, at the address listed below under
"-- The Owner Trustee".
CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the Trust as of the
Closing Date, as if the issuance and sale of the Notes had taken place on such
date:
Class A-1 Notes.................................. $ 380,000,000.00
Class A-2 Notes.................................. 640,000,000.00
Class A-3 Notes.................................. 450,000,000.00
Class A-4 Notes.................................. 214,375,000.00
Certificates..................................... 65,625,000.00
Equity........................................... 52,523,447.71
-----------------
Total......................................... $1,802,523,447.71
=================
THE OWNER TRUSTEE
Chase Manhattan Bank Delaware is the Owner Trustee under the Trust
Agreement. Chase Manhattan Bank Delaware is a Delaware banking corporation and
its principal offices are located at 1201 Market Street, Wilmington, Delaware
19801. The Seller and its affiliates may maintain normal commercial banking
relations with the Owner Trustee and its affiliates.
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THE RECEIVABLES POOL
The pool of Receivables (the "Receivables Pool") will include only the
Receivables purchased on the Closing Date having an Initial Pool Balance of
approximately $1,802,523,447.71 as of the Cutoff Date. The Receivables were
purchased, directly or indirectly, by the Seller from Dealers in the ordinary
course of business and were selected from the Seller's portfolio for inclusion
in the Receivables Pool by several criteria, some of which are set forth in the
Prospectus under "The Receivables Pools", as well as the requirement that, as of
the Cutoff Date, each Receivable (i) had a principal balance of at least $300.00
and (ii) was not more than 30 days past due (an account is not considered past
due if the amount past due is less than 10.00% of the scheduled monthly
payment). As of the Cutoff Date, no Obligor on any Receivable was noted in the
related records of the Seller as being the subject of a bankruptcy proceeding,
and no Obligor on any Receivable financed a Financed Vehicle under the Seller's
"New-Finance Buyer Plan" program. No selection procedures believed by the Seller
to be adverse to Noteholders were used in selecting the Receivables. No
Receivable has a scheduled maturity later than October 31, 2004.
Set forth in the following tables is information concerning the
composition, distribution by annual percentage rate ("APR") and the geographic
distribution of the Receivables Pool as of the Cutoff Date.
PREMIER AUTO TRUST 1998-5
COMPOSITION OF THE RECEIVABLES POOL
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AGGREGATE AVERAGE AVERAGE AVERAGE
APR OF PRINCIPAL NUMBER OF REMAINING ORIGINAL PRINCIPAL
RECEIVABLES BALANCE RECEIVABLES TERM TERM BALANCE
----------- ----------------- ----------- ------------ ------------ ----------
9.09% $1,802,523,447.71 152,211 49.77 months 54.03 months $11,842.27
Approximately 80.54% of the Initial Pool Balance, constituting 77.18% of
the number of the Receivables, represent new vehicles, and approximately 19.46%
of the Initial Pool Balance, constituting 22.82% of the number of the
Receivables, represent used vehicles. Approximately 86.07% of the Initial Pool
Balance represents financing of vehicles manufactured or distributed by Chrysler
and approximately 13.93% of the Initial Pool Balance represents financing of
vehicles manufactured or distributed by vehicle manufacturers other than
Chrysler.
All of the Receivables are Simple Interest Receivables. Approximately
21.24% of the Receivables are Fixed Value Receivables. See "The Receivables
Pools" in the Prospectus for a further description of the characteristics of
Simple Interest Receivables and Fixed Value Receivables. Collections of finance
charges on a Fixed Value Receivable will be allocated, first, to the finance
charges accrued on its principal other than its fixed value payment and then to
the finance charges accrued on its fixed value payment. Collections of finance
charges on the fixed value payment will not be applied to payments on the Notes
and will be released to the Company. Liquidation proceeds in respect of a
liquidated Fixed Value Receivable will be applied, first, to payments due in
respect of its principal other than its fixed value payment, which proceeds will
be available for payments on the Notes. Any remaining liquidation proceeds will
be applied to payments due in respect of the fixed value payment and will be
released to the Company.
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PREMIER AUTO TRUST 1998-5
DISTRIBUTION BY APR OF THE RECEIVABLES POOL
PERCENT OF
AGGREGATE
NUMBER OF AGGREGATE PRINCIPAL
APR RANGE RECEIVABLES PRINCIPAL BALANCE BALANCE(1)
--------- ----------- ----------------- ----------
0.00% to 5.00%......................................... 15,048 $ 210,882,511.84 11.7%
5.01% to 6.00%......................................... 9,081 144,648,601.98 8.0
6.01% to 7.00%......................................... 6,032 52,320,294.71 2.9
7.01% to 8.00%......................................... 16,429 207,213,981.65 11.5
8.01% to 9.00%......................................... 23,472 279,842,504.59 15.5
9.01% to 10.00%........................................ 28,532 304,375,421.01 16.9
10.01% to 11.00%........................................ 16,373 188,863,023.76 10.5
11.01% to 12.00%........................................ 11,582 133,974,521.40 7.4
12.01% to 13.00%........................................ 8,114 92,407,018.50 5.1
13.01% to 14.00%........................................ 5,561 62,550,145.03 3.5
14.01% to 15.00%........................................ 3,516 37,373,000.86 2.1
15.01% to 16.00%........................................ 2,164 23,180,101.52 1.3
16.01% to 17.00%........................................ 1,781 19,401,637.83 1.1
17.01% to 18.00%........................................ 2,363 26,069,123.43 1.4
18.01% to 19.00%........................................ 514 4,461,675.04 0.2
19.01% to 20.00%........................................ 1,581 14,302,648.86 0.8
Greater than 20.00%..................................... 68 657,235.70 0.0
------- ----------------- -----
Totals............................................... 152,211 $1,802,523,447.71 100.0%
======= ================= =====
- ---------------
(1) Percentages may not add to 100.0% because of rounding.
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PREMIER AUTO TRUST 1998-5
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES POOL(1)(2)
PERCENT OF AGGREGATE
STATE PRINCIPAL BALANCE
----- --------------------
Alabama.................... 0.9%
Alaska..................... 0.3
Arizona.................... 1.2
Arkansas................... 2.7
California................. 4.8
Colorado................... 1.3
Connecticut................ 1.2
Delaware................... 0.6
District of Columbia....... 0.0
Florida.................... 5.8
Georgia.................... 2.0
Hawaii..................... 0.4
Idaho...................... 0.2
Illinois................... 4.9
Indiana.................... 1.9
Iowa....................... 1.3
Kansas..................... 1.3
Kentucky................... 0.8
Louisiana.................. 1.3
Maine...................... 0.5
Maryland................... 7.2
Massachusetts.............. 1.9
Michigan................... 3.0
Minnesota.................. 1.9
Mississippi................ 0.4
Missouri................... 2.7
PERCENT OF AGGREGATE
STATE PRINCIPAL BALANCE
----- --------------------
Montana.................... 0.1%
Nebraska................... 0.7
Nevada..................... 0.5
New Hampshire.............. 1.1
New Jersey................. 5.2
New Mexico................. 0.6
New York................... 7.5
North Carolina............. 2.5
North Dakota............... 0.2
Ohio....................... 1.3
Oklahoma................... 1.4
Oregon..................... 1.0
Pennsylvania............... 4.8
Rhode Island............... 0.3
South Carolina............. 1.4
South Dakota............... 0.3
Tennessee.................. 1.2
Texas...................... 11.6
Utah....................... 0.2
Vermont.................... 0.3
Virginia................... 4.0
Washington................. 1.2
West Virginia.............. 0.6
Wisconsin.................. 1.5
Wyoming.................... 0.1
-----
Total................... 100.0%
=====
- ---------------
(1) Based on physical addresses of the dealers originating the receivables.
(2) Percentages may not add to 100.0% because of rounding.
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DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Set forth below is certain information concerning the experience of the
Seller and its United States subsidiaries pertaining to retail new and used
automobile and light duty truck receivables, including those previously sold
which CFC continues to service. Fixed Value Receivables were first originated in
July 1991. There can be no assurance that the delinquency, repossession and net
loss experience on the Receivables will be comparable to that set forth below.
DELINQUENCY EXPERIENCE(1)
(DOLLARS IN MILLIONS)
AT SEPTEMBER 30, AT DECEMBER 31,
----------------------------------------- -----------------------------------------
1998 1997 1997 1996
------------------- ------------------- ------------------- -------------------
NUMBER NUMBER NUMBER NUMBER
OF OF OF OF
CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT
--------- ------ --------- ------ --------- ------ --------- ------
Portfolio............................... 1,786,809 $24,700 1,700,645 $21,749 1,697,755 $21,879 1,679,880 $21,197
Period of Delinquency
31-60 Days............................ 41,473 $ 484 52,839 $ 656 58,421 $ 708 65,297 $ 843
61 Days or More....................... 3,935 51 8,202 119 7,360 102 8,175 118
--------- ------- --------- ------- --------- ------- --------- -------
Total Delinquencies..................... 45,408 $ 535 61,041 $ 775 65,781 $ 810 73,472 $ 961
========= ======= ========= ======= ========= ======= ========= =======
Total Delinquencies as a Percent of
the Portfolio......................... 2.54% 2.17% 3.59% 3.56% 3.87% 3.70% 4.37% 4.53%
AT DECEMBER 31,
---------------------------------------------------------------
1995 1994 1993
------------------- ------------------- -------------------
NUMBER NUMBER NUMBER
OF OF OF
CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT
--------- ------ --------- ------ --------- ------
Portfolio.................................................. 1,653,533 $20,913 1,444,736 $16,977 1,352,218 $14,116
Period of Delinquency
31-60 Days............................................... 55,507 $ 720 25,888 $ 293 16,350 $ 153
61 Days or More.......................................... 6,792 100 2,085 27 1,383 15
--------- ------- --------- ------- --------- -------
Total Delinquencies........................................ 62,299 $ 820 27,973 $ 320 17,733 $ 168
========= ======= ========= ======= ========= =======
Total Delinquencies as a Percent of
the Portfolio............................................ 3.77% 3.92% 1.94% 1.88% 1.31% 1.19%
- ---------------
(1) All amounts and percentages are based on the gross amount scheduled to be
paid on each contract, including estimated unearned finance and other
charges. The information in the table includes an immaterial amount of
retail installment sale contracts on vehicles other than automobiles and
light duty trucks and includes previously sold contracts which CFC
continues to service.
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CREDIT LOSS/REPOSSESSION EXPERIENCE(1)
(DOLLARS IN MILLIONS)
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------------- ---------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
--------- --------- --------- --------- --------- --------- ---------
Average Amount Outstanding During the
Period...................................... $ 23,214 $ 21,394 $ 21,485 $ 21,062 $ 19,486 $ 15,517 $ 12,882
Average Number of Contracts Outstanding During
the Period.................................. 1,736,375 1,686,274 1,688,525 1,671,405 1,572,963 1,396,497 1,341,084
Percent of Contracts Acquired During the
Period with Recourse to the Dealer.......... 8.98% 10.14% 10.91% 9.05% 14.8% 17.0% 16.2%
Repossessions as a Percent of Average Number
of Contracts Outstanding(2)................. 2.82% 3.32% 3.40% 3.82% 3.05% 2.36% 2.15%
Net Losses as a Percent of
Liquidations(3)(4).......................... 2.80% 2.98% 3.36% 3.17% 2.25% 1.38% 1.34%
Net Losses as a Percent of Average Amount
Outstanding(2)(3)........................... 1.41% 1.64% 1.80% 1.68% 1.16% 0.73% 0.75%
- ---------------
(1) Except as indicated, all amounts and percentages are based
on the gross amount scheduled to be paid on each contract, including
estimated unearned finance and other charges. The information in the table
includes an immaterial amount of retail installment sales contracts on
vehicles other than automobiles and light duty trucks and includes
previously sold contracts that CFC continues to service.
(2) Percentages have been annualized for the nine months ended September 30,
1998 and 1997 and are not necessarily indicative of the experience for the
year.
(3) Net losses are equal to the aggregate of the balances of all contracts which
are determined to be uncollectible in the period, less any recoveries on
contracts charged off in the period or any prior periods, including any
losses resulting from disposition expenses and any losses resulting from the
failure to recover commissions to dealers with respect to contracts that are
prepaid or charged off.
(4) Liquidations represent a reduction in the outstanding balances of the
contracts as a result of monthly cash payments and charge-offs.
Notwithstanding the improvement in credit losses for the nine months ended
September 30, 1998, higher credit losses could be experienced in the near term.
No assurance can be given as to future results.
The net loss figures above reflect the fact that the Seller had recourse to
Dealers on a portion of its retail installment sale contracts. By aggregate
principal balance, approximately 1.64% of the Receivables represent contracts
with recourse to Dealers. The Seller applies underwriting standards to the
purchase of contracts without regard to whether recourse to Dealers is provided.
Based on its experience, the Seller believes that there is no material
difference between the rates of delinquency and repossession on contracts with
recourse against Dealers as compared to contracts without recourse against
Dealers. However, the net loss experience of contracts without recourse against
Dealers is higher than that of contracts with recourse against Dealers because,
under its recourse obligation, the Dealer is responsible to the Seller for
payment of the unpaid balance of the contract, provided that the Seller
repossesses the vehicle from the retail buyer and returns it to the Dealer
within a specified time. In the event of a Dealer's bankruptcy, a bankruptcy
trustee might attempt to characterize recourse sales of contracts as loans to
the Dealer secured by the contracts. Such an attempt, if successful, could
result in payment delays or losses on the affected Receivables.
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CHRYSLER FINANCIAL CORPORATION
Certain information regarding the Seller is set forth under "Chrysler
Financial Corporation" in the Prospectus. In addition, as of September 30, 1998,
the Seller had nearly 3,400 employees and was managing $46.8 billion in finance
receivables and leases. During the first nine months of 1998, the Seller
financed or leased approximately 738,000 vehicles at retail, including
approximately 563,000 new Chrysler passenger cars and light duty trucks
representing 30% of Chrysler's U.S. retail and fleet deliveries. The Seller also
financed at wholesale approximately 1,338,000 new Chrysler passenger cars and
light duty trucks representing 69% of Chrysler's U.S. factory unit sales for the
nine months ended September 30, 1998. Wholesale vehicle financing accounted for
69% of the total automotive financing volume of the Seller in the first nine
months of 1998 and represented 22% of net automotive finance receivables and
leases outstanding at September 30, 1998.
WEIGHTED AVERAGE LIFE OF THE NOTES
Information regarding certain maturity and prepayment considerations with
respect to the Securities is set forth under "Weighted Average Life of the
Securities" in the Prospectus. No principal payments will be made on the Class
A-2 Notes until all Class A-1 Notes have been paid in full; no principal
payments will be made on the Class A-3 Notes until all Class A-2 Notes have been
paid in full; and no principal payments will be made on the Class A-4 Notes
until all Class A-3 Notes have been paid in full. See "Description of the
Notes -- Payments of Principal" herein. As the rate of payment of principal of
each class of Notes depends primarily on the rate of payment (including
prepayments) of the principal balance of the Receivables, final payment of any
class of the Notes could occur significantly earlier than their respective final
scheduled Payment Dates. In addition, the rate of payment of principal of each
class of Notes will be affected by the Accelerated Principal Distribution
Amounts applied to the payment of the principal of the Notes and, during the
Release Period, the reduction in the amount that is applied to the payment of
principal of the Notes. Noteholders will bear the risk of being able to reinvest
principal payments on the Notes at yields at least equal to the yields on their
respective Notes.
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DESCRIPTION OF THE NOTES
GENERAL
The Notes will be issued pursuant to an Indenture to be dated as of October
1, 1998 (as amended and supplemented from time to time, the "Indenture"), a form
of which has been filed as an exhibit to the Registration Statement. A copy of
the Indenture will be filed with the Securities and Exchange Commission (the
"Commission") following the issuance of the Notes. The following summary
describes certain terms of the Notes and the Indenture. The summary does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all the provisions of the Notes and the Indenture. The following
summary supplements, and to the extent inconsistent therewith, replaces the
description of the general terms and provisions of the Notes of any given series
and the related Indenture set forth in the Prospectus, to which description
reference is hereby made. The First National Bank of Chicago, a national banking
association, will be the Indenture Trustee under the Indenture.
PAYMENTS OF INTEREST
Each class of Notes will constitute Fixed Rate Securities, as such term is
defined under "Certain Information Regarding the Securities -- Fixed Rate
Securities" in the Prospectus. Interest on the principal balances of the classes
of the Notes will accrue at their respective per annum Interest Rates and will
be payable to holders of record of the Notes (the "Noteholders") monthly on each
Payment Date, commencing November 9, 1998. Payments will be made to the
Noteholders as of the day immediately preceding such Payment Date or, if
Definitive Notes are issued, as of the 15th day of the preceding month. Interest
on the outstanding principal amount of the Notes, other than the Class A-1
Notes, will accrue at the applicable Interest Rate from the Closing Date (in the
case of the first Payment Date) or from the eighth day of the month preceding
the month of a Payment Date to and including the seventh day of the month of the
Payment Date (each, an "Interest Accrual Period"). Interest on the outstanding
principal amount of the Class A-1 Notes will accrue at the Class A-1 Rate from
the Closing Date (in the case of the first Payment Date) or from the most recent
Payment Date on which interest has been paid to but excluding the following
Payment Date (each, a "Class A-1 Interest Accrual Period"). Interest on each
class of the Notes, other than the Class A-1 Notes, will be calculated on the
basis of a 360-day year consisting of twelve 30-day months. Interest on the
Class A-1 Notes will be calculated on the basis of the actual number of days in
the Class A-1 Interest Accrual Period divided by 360. Interest payments on the
Notes will generally be derived from the Total Distribution Amount remaining
after the payment of the Servicing Fee and amounts from the Reserve Account. See
"Description of the Transfer and Servicing Agreements -- Distributions" and
"-- Reserve Account" herein.
Interest payments to all classes of Noteholders will have the same
priority. Under certain circumstances, the amount available for interest
payments could be less than the amount of interest payable on the Notes on any
Payment Date, in which case each class of Noteholders will receive their ratable
share (based upon the aggregate amount of interest due to such class of
Noteholders) of the aggregate amount available to be distributed in respect of
interest on the Notes.
PAYMENTS OF PRINCIPAL
Principal payments will be made to the Noteholders on each Payment Date in
an amount generally equal to the sum of (i) the Regular Principal Distribution
Amount (during the Release Period, the Release Period Noteholders' Principal
Distributable Amount) plus (ii) except during the Release Period, the
Accelerated Principal Distribution Amount. The "Regular Principal Distribution
Amount" with respect to any Payment Date will generally equal the sum of
principal payments received with respect to the Receivables during the calendar
month (the "Collection Period") preceding such Payment Date (in the case of the
first Payment Date, the period from and including October 14, 1998 to and
including October 31, 1998), plus the principal balances of defaulted
Receivables written off in respect of such Collection Period, subject to certain
limitations. The "Accelerated Principal Distribution Amount" with respect to any
Payment Date will equal the portion, if any, of the Total Distribution Amount
for the related Collection Period that remains after payment of (a) the
Servicing Fee, (b) the Noteholders' Interest Distributable Amount, (c) the
Regular
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Principal Distribution Amount, and (d) the amount, if any, required to be
allocated to the Reserve Account on such Payment Date. During the Release
Period, the only principal payable on the Notes on each Payment Date will be the
Release Period Noteholders' Principal Distributable Amount. Principal payments
on the Notes will generally be derived from the Total Distribution Amount and
the amount, if any, in the Reserve Account remaining after the payment of the
Servicing Fee and the Noteholders' Interest Distributable Amount and, in the
case of any Accelerated Principal Distribution Amount, the amount, if any,
required to be allocated to the Reserve Account. See "Description of the
Transfer and Servicing Agreements -- Distributions" and "-- Reserve Account"
herein.
On the Business Day immediately preceding each Payment Date (a
"Determination Date"), the Indenture Trustee shall determine the amount in the
Collection Account for the related Collection Period allocable to interest and
the amount allocable to principal on an actual basis, and payments to
Noteholders on the following Payment Date will be based on such allocation. A
"Business Day" is a day other than a Saturday, a Sunday or a day on which
banking institutions or trust companies in the City of New York are authorized
by law, regulation or executive order to be closed.
On each Payment Date, principal payments on the Notes will be applied in
the following order of priority: (i) to the principal balance of the Class A-1
Notes until the principal balance of the Class A-1 Notes is reduced to zero;
(ii) to the principal balance of the Class A-2 Notes until the principal balance
of the Class A-2 Notes is reduced to zero; (iii) to the principal balance of the
Class A-3 Notes until the principal balance of the Class A-3 Notes is reduced to
zero; and (iv) to the principal balance of the Class A-4 Notes until the
principal balance of the Class A-4 Notes is reduced to zero. It is expected that
some or all of the Class A-1 Notes, which are not being offered hereby, will be
held or sold by CFC. The principal balance of the Class A-1 Notes, to the extent
not previously paid, will be due on the July, 1999 Payment Date (the "Class A-1
Final Scheduled Payment Date"); the principal balance of the Class A-2 Notes, to
the extent not previously paid, will be due on the April, 2001 Payment Date (the
"Class A-2 Final Scheduled Payment Date"); the principal balance of the Class
A-3 Notes, to the extent not previously paid, will be due on the July 2002
Payment Date (the "Class A-3 Final Scheduled Payment Date"); and the principal
balance of the Class A-4 Notes, to the extent not previously paid, will be due
on the April 2003 Payment Date (the "Class A-4 Final Scheduled Payment Date").
The actual date on which the aggregate outstanding principal amount of any class
of Notes is paid in full may be earlier than the respective Final Scheduled
Payment Dates set forth above based on a variety of factors, including those
described under "Weighted Average Life of the Securities" herein and in the
Prospectus.
OPTIONAL REDEMPTION
The outstanding Class A-4 Notes will be subject to redemption in whole, but
not in part, on any Payment Date on which the Servicer exercises its option to
purchase the Receivables. The Servicer may purchase the Receivables when the
Pool Balance shall have declined to 10% or less of the Initial Pool Balance, as
described in the Prospectus under "Description of the Transfer and Servicing
Agreements -- Termination". The redemption price of the Class A-4 Notes will be
equal to the unpaid principal amount of such Notes plus accrued and unpaid
interest thereon (the "Redemption Price"). The "Pool Balance" will represent the
aggregate principal balance of the Receivables at the end of a Collection
Period, after giving effect to all payments received from Obligors, Purchase
Amounts to be remitted by the Servicer or Seller, as the case may be, all for
such Collection Period, and all losses realized on Receivables liquidated during
such Collection Period.
BOOK-ENTRY REGISTRATION
Holders of the Offered Notes may hold through DTC (in the United States) or
CEDEL or Euroclear (in Europe) if they are participants of such systems, or
indirectly through organizations that are participants in such systems. See
"Certain Information Regarding the Securities -- Book-Entry Registration" and
"-- Definitive Securities" in the Prospectus.
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DESCRIPTION OF THE CERTIFICATES
The Trust will also issue Asset Backed Certificates (the "Certificates"
and, together with the Notes, the "Securities") with an aggregate initial
Certificate Balance of $65,625,000.00. The Certificates will represent
fractional undivided interests in the Trust and will be issued pursuant to the
Trust Agreement. The Certificates are not being offered hereby and will
initially be held by the Company, which may thereafter sell the Certificates.
The Certificates will not bear interest. No principal will be paid on the
Certificates until the Notes have been paid in full.
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of the Sale and Servicing
Agreement, the Administration Agreement and the Trust Agreement (collectively,
the "Transfer and Servicing Agreements"). Forms of the Transfer and Servicing
Agreements have been filed as exhibits to the Registration Statement. A copy of
the Sale and Servicing Agreement will be filed with the Commission following the
issuance of the Notes. The summary does not purport to be complete and is
subject to, and qualified in its entirety by reference to, all the provisions of
the Transfer and Servicing Agreements. The following summary supplements, and to
the extent inconsistent therewith replaces, the description of the general terms
and provisions of the Transfer and Servicing Agreements set forth in the
Prospectus, to which description reference is hereby made.
SALE AND ASSIGNMENT OF RECEIVABLES
Certain information regarding the conveyance of the Receivables by the
Seller to the Trust on the Closing Date pursuant to a Sale and Servicing
Agreement to be dated as of October 1, 1998 (as amended and supplemented from
time to time, the "Sale and Servicing Agreement") is set forth in the Prospectus
under "Description of the Transfer and Servicing Agreements -- Sale and
Assignment of Receivables".
ACCOUNTS
The sole account of the Trust will be the Collection Account. Funds payable
to the Noteholders will be allocated within the Collection Account and paid to
the Noteholders directly from the Collection Account. The Reserve Account will
be part of the Collection Account. The Collection Account will be established by
the Servicer and maintained with the Indenture Trustee in the name of the
Indenture Trustee on behalf of the Noteholders.
NO ADVANCES
The Servicer will not make Advances in respect of the Receivables.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicing Fee Rate with respect to the Servicing Fee for the Servicer
will be 1.00% per annum of the Pool Balance as of the first day of the related
Collection Period. The Servicing Fee in respect of a Collection Period (together
with any portion of the Servicing Fee that remains unpaid from prior Payment
Dates) will be paid on the Payment Date following such Collection Period out of
collections for such Collection Period. See "Description of the Transfer and
Servicing Agreements -- Servicing Compensation and Payment of Expenses" in the
Prospectus.
DISTRIBUTIONS
Deposits to Collection Account. On or before each Payment Date, the
Servicer will cause all collections and other amounts constituting the Total
Distribution Amount (net of the Servicing Fee for such Payment Date and any
previously unpaid Servicing Fees and any other distributable amounts that are to
be released to the Company) to be deposited into the Collection Account. The
"Total Distribution Amount" for a Payment Date shall be the sum of the Interest
Distribution Amount and the Regular Principal Distribution Amount
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(other than the portion thereof attributable to Realized Losses). "Realized
Losses" means the excess of the principal balance of any Liquidated Receivable
over Liquidation Proceeds to the extent allocable to principal.
The "Interest Distribution Amount" on any Payment Date will generally be
the sum of the following amounts with respect to the preceding Collection
Period: (i) that portion of all collections on the Receivables allocable to
interest; (ii) all proceeds of the liquidation of defaulted Receivables
("Liquidated Receivables"), net of expenses incurred by the Servicer in
connection with such liquidation and any amounts required by law to be remitted
to the Obligor on such Liquidated Receivables ("Liquidation Proceeds"), to the
extent attributable to interest due thereon in accordance with the Servicer's
customary servicing procedures, and all recoveries in respect of Liquidated
Receivables which were written off in prior Collection Periods; (iii) the
Purchase Amount of each Receivable that was repurchased by the Seller or
purchased by the Servicer under an obligation which arose during the related
Collection Period, to the extent attributable to accrued interest thereon; and
(iv) Investment Earnings for such Payment Date. The Interest Distribution Amount
shall be determined on the related Determination Date on an actual basis. As
described under "The Receivables Pool" herein, finance charges collected on a
Fixed Value Receivable and allocated to its fixed value payment will be released
to the Company and will not be included in the Interest Distribution Amount.
The "Regular Principal Distribution Amount" on any Payment Date will
generally be the sum of the following amounts with respect to the preceding
Collection Period: (i) that portion of all collections on the Receivables
allocable to principal; (ii) all Liquidation Proceeds attributable to the
principal amount of Receivables which became Liquidated Receivables during such
Collection Period in accordance with the Servicer's customary servicing
procedures, plus the amount of Realized Losses with respect to such Liquidated
Receivables; (iii) to the extent attributable to principal, the Purchase Amount
received with respect to each Receivable repurchased by the Seller or purchased
by the Servicer under an obligation which arose during the related Collection
Period; and (iv) partial prepayments relating to refunds of extended warranty
protection plan costs or of physical damage, credit life or disability insurance
policy premiums, but only if such costs or premiums were financed by the
respective Obligor as of the date of the original contract. The Regular
Principal Distribution Amount is the reduction in the aggregate principal
balance of the Receivables in a Collection Period and will be determined on the
related Determination Date on an actual basis.
The Interest Distribution Amount and the Regular Principal Distribution
Amount on any Payment Date shall exclude all payments and proceeds (including
Liquidation Proceeds) of any Receivables, the Purchase Amount of which has been
included in the Total Distribution Amount in a prior Collection Period.
Allocations and Distributions. On each Payment Date, the Servicer will
instruct the Indenture Trustee to make the following allocations and
distributions, to the extent of the amount then on deposit in the Collection
Account (exclusive of the amount allocated to the Reserve Account), in the
following order of priority:
(i) allocate to the Noteholders for distribution as described below,
from the Total Distribution Amount remaining after the deduction of the
unpaid Servicing Fees, the Noteholders' Interest Distributable Amount;
(ii) allocate to the Noteholders for distribution as described below,
from the Total Distribution Amount remaining after the application of
clause (i) and the deduction of the unpaid Servicing Fees, the Noteholders'
Principal Distributable Amount (during the Release Period, the Release
Period Noteholders' Principal Distributable Amount);
(iii) allocate to the Reserve Account, from the Total Distribution
Amount remaining after the application of clauses (i) through (ii) and the
deduction of the unpaid Servicing Fees, the excess, if any, of the
Specified Reserve Amount over the amount then allocated to the Reserve
Account;
(iv) distribute to the Company (to the extent not already retained and
distributed as provided above), from the Total Distribution Amount
remaining after the application of clauses (i) through (iii) and the
deduction of the unpaid Servicing Fees, during the Release Period, the Cash
Release Amount;
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(v) distribute to the Certificateholders, from the Total Distribution
Amount remaining after the application of clauses (i) through (iv) and the
deduction of unpaid Servicing Fees and only after the Notes have been paid
in full, until the Certificate balance has been reduced to zero; and
(vi) distribute to the Company the remaining balance, if any.
For purposes hereof, the following terms shall have the following meanings:
"Noteholders' Distributable Amount" means, with respect to any Payment
Date, the sum of the Noteholders' Interest Distributable Amount and the
Noteholders' Principal Distributable Amount (during the Release Period, the
Release Period Noteholders' Principal Distributable Amount).
"Noteholders' Interest Carryover Shortfall" means, with respect to any
Payment Date, the excess of the Noteholders' Monthly Interest Distributable
Amount for the preceding Payment Date and any outstanding Noteholders'
Interest Carryover Shortfall on such preceding Payment Date, over the
amount in respect of interest that is actually paid on the Notes on such
preceding Payment Date, plus interest on the amount of interest due but not
paid to Noteholders on the preceding Payment Date, to the extent permitted
by law, at the respective Interest Rates borne by each class of the Notes
for the related Interest Accrual Period.
"Noteholders' Interest Distributable Amount" means, with respect to
any Payment Date, the sum of the Noteholders' Monthly Interest
Distributable Amount for such Payment Date and the Noteholders' Interest
Carryover Shortfall for such Payment Date.
"Noteholders' Monthly Interest Distributable Amount" means, with
respect to any Payment Date, interest accrued for the related Interest
Accrual Period (in the case of the Class A-1 Notes, the Class A-1 Interest
Accrual Period) on each class of Notes at the respective Interest Rate for
such class on the outstanding principal balance of the Notes of such class
on the immediately preceding Payment Date (or, in the case of the first
Payment Date, on the Closing Date), after giving effect to all payments of
principal to the Noteholders of such class on or prior to such Payment
Date.
"Noteholders' Monthly Principal Distributable Amount" means, with
respect to each Payment Date, the sum of (i) the Regular Principal
Distribution Amount and (ii) the Accelerated Principal Distribution Amount.
"Noteholders' Principal Carryover Shortfall" means, as of the close of
any Payment Date, the excess of the Noteholders' Monthly Principal
Distributable Amount and any outstanding Noteholders' Principal Carryover
Shortfall from the preceding Payment Date over the amount in respect of
principal that is actually distributed to the Noteholders on such Payment
Date.
"Noteholders' Principal Distributable Amount" means, with respect to
any Payment Date, the sum of the Noteholders' Monthly Principal
Distributable Amount for such Payment Date and the Noteholders' Principal
Carryover Shortfall as of the close of the preceding Payment Date;
provided, however, that the Noteholders' Principal Distributable Amount
shall not exceed the outstanding principal balance of the Notes; and
provided, further, that (i) the Noteholders' Principal Distributable Amount
on the Class A-1 Final Scheduled Payment Date shall not be less than the
amount that is necessary (after giving effect to other amounts to be
deposited in the Note Distribution Account on such Payment Date and
allocable to principal) to reduce the outstanding principal balance of the
Class A-1 Notes to zero; (ii) the Noteholders' Principal Distributable
Amount on the Class A-2 Final Scheduled Payment Date shall not be less than
the amount that is necessary (after giving effect to other amounts to be
deposited in the Note Distribution Account on such Payment Date and
allocable to principal) to reduce the outstanding principal balance of the
Class A-2 Notes to zero; (iii) on the Class A-3 Final Scheduled Payment
Date the Noteholders' Principal Distributable Amount shall not be less than
the amount that is necessary (after giving effect to other amounts to be
deposited in the Note Distribution Account on such Payment Date and
allocable to principal) to reduce the outstanding principal balance of the
Class A-3 Notes to zero; and (iv) on the Class A-4 Final Scheduled Payment
Date the Noteholders' Principal Distributable Amount shall not be less than
the amount that is necessary (after giving effect to other amounts to be
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deposited in the Note Distribution Account on such Payment Date and
allocable to principal) to reduce the outstanding principal balance of the
Class A-4 Notes to zero.
"Release Period Noteholders' Principal Distributable Amount" is
defined below under "-- Overcollateralization and Release of Initial
Overcollateralization Amount".
Payments to Noteholders. On each Payment Date, all amounts allocated to
the Noteholders will be generally paid in the following order of priority:
(i) to the applicable Noteholders, accrued and unpaid interest on the
outstanding principal balance of the applicable class of Notes at the
applicable Interest Rate;
(ii) the Noteholders' Principal Distributable Amount (during the
Release Period, the Release Period Noteholders' Principal Distributable
Amount) in the following order of priority:
(a) to the Class A-1 Noteholders in reduction of principal until
the principal balance of the Class A-1 Notes has been reduced to zero;
(b) to the Class A-2 Noteholders in reduction of principal until
the principal balance of the Class A-2 Notes has been reduced to zero;
(c) to the Class A-3 Noteholders in reduction of principal until
the principal balance of the Class A-3 Notes has been reduced to zero;
and
(d) to the Class A-4 Noteholders in reduction of principal until
the principal balance of the Class A-4 Notes has been reduced to zero.
Notwithstanding the foregoing, on the Last Release Payment Date, the amount
of principal distributable to the Noteholders pursuant to clause (ii) above will
be the Noteholders' Principal Distributable Amount for the Last Release Payment
Date less the Cash Release Amount paid to the Company on the Last Release
Payment Date.
OVERCOLLATERALIZATION AND RELEASE OF THE INITIAL OVERCOLLATERALIZATION AMOUNT
The Initial Pool Balance, $1,802,523,447.71, will exceed the
$1,750,000,000.00 initial aggregate principal amount of the Notes and the
Certificates (the "Initial Securities Principal Balance") by an amount equal to
$52,523,447.71 (the "Initial Overcollateralization Amount"), which amount is
approximately 3.00% of the Initial Securities Principal Balance. Unless offset
by losses on the Receivables or the release of cash during the Release Period as
described below, the distribution of the Accelerated Principal Distribution
Amount, if any, on a Payment Date is expected to cause the aggregate principal
amount of the Notes to decrease faster than the Pool Balance decreases, thereby
increasing the Overcollateralization Amount and the Overcollateralization
Percentage.
The "Overcollateralization Amount" in respect of a Payment Date is equal to
(a) the Pool Balance as of the end of the related Collection Period (the
"Related Pool Balance") minus (b) the aggregate outstanding principal amount of
the Securities after giving effect to payments made on the Securities on such
Payment Date (the "Securities Amount"). The "Overcollateralization Percentage"
in respect of a Payment Date is the percentage derived from a fraction, the
numerator of which is the Overcollateralization Amount for such Payment Date and
the denominator of which is the Related Pool Balance.
Subject to the conditions set forth below, on each Payment Date during the
Release Period (as defined below), the amount of principal distributable on the
Notes will be the Release Period Noteholders' Principal Distributable Amount
rather than the Noteholders' Principal Distributable Amount. The "Release Period
Noteholders' Principal Distributable Amount" shall equal, on any Payment Date
during the Release Period, the excess of (a) the Securities Amount on such
Payment Date (prior to giving effect to any distributions on such Payment Date)
over (b) the product of (1) 95.00% and (2) the Related Pool Balance. The effect
of such distribution calculation is to maintain the Overcollateralization
Percentage at 5.00% during the Release Period. On each Payment Date during the
Release Period, any portion of the Total Distribution Amount which remains after
payment of (a) the Servicing Fee, (b) the Noteholders' Interest Distributable
Amount, (c) the Release Period Noteholders' Principal Distributable Amount and
(d) any amount required to increase
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the amount in the Reserve Account to the Specified Reserve Amount will be
released to the Company (such released amount being the "Cash Release Amount" or
"Cash Release"). The cumulative amount of all Cash Releases during the Release
Period shall not exceed the Initial Overcollateralization Amount.
The release of cash to the Company as described above is subject to the
satisfaction of all of the following conditions:
(1) no Cash Release will be permitted until the date (the "First
Release Payment Date") that is the later of:
(i) the Payment Date following the Payment Date on which the
Overcollateralization Amount is at least equal to the
[Initial Overcollateralization Amount]
plus
[2% x (Related Pool Balance for such preceding Payment Date
minus
Initial Overcollateralization Amount)]; and
(ii) the Payment Date following the Payment Date on which the Class
A-1 Notes have been repaid in full;
(2) the amount allocated to the Reserve Account shall be equal to the
Specified Reserve Amount; and
(3) the cumulative amount of the Cash Releases will not exceed the
Initial Overcollateralization Amount.
On the Payment Date (the "Last Release Payment Date") on which the
cumulative amount of the Cash Releases equals the Initial Overcollateralization
Amount, the amount of principal distributable to the Noteholders will be the
Noteholders' Principal Distributable Amount less the Cash Release Amount
released on such Payment Date. On each Payment Date thereafter, the full
Noteholders' Principal Distributable Amount will be distributable as principal
to the Noteholders. The "Release Period" is the period from and including the
First Release Payment Date to and including the Last Release Payment Date. Any
Cash Release released to the Company will not be available to make payments on
the Notes.
RESERVE ACCOUNT
The protection afforded to the Noteholders will be effected both by the
Overcollateralization Amount and by the establishment of the Reserve Account.
The Reserve Account will be created with an initial deposit to the Collection
Account by the Seller on the Closing Date of cash or Eligible Investments in the
amount of $4,375,000.00 (the "Specified Reserve Amount"), which is 0.25% of the
Initial Securities Principal Balance.
Amounts allocated from time to time to the Reserve Account will continue to
be held for the benefit of Noteholders. On each Payment Date, funds will be
withdrawn from the Reserve Account to the extent that the Total Distribution
Amount (after the payment of the Servicing Fee) with respect to any Collection
Period is less than the Noteholders' Distributable Amount and will be paid to
the Noteholders. On each Payment Date, the Reserve Account will be reinstated up
to the Specified Reserve Amount to the extent of the portion, if any, of the
Total Distribution Amount remaining after payment of the Servicing Fee and the
payment of the Noteholders' Distributable Amount.
If the amount allocated to the Reserve Account on any Payment Date (after
giving effect to all deposits therein or other withdrawals therefrom on such
Payment Date) is greater than the Specified Reserve Amount for such Payment
Date, except as described below and subject to certain limitations, such excess
amount will be distributed to the Company. Upon any distribution to the Company
of such amounts, the Noteholders will not have any rights in, or claims to, such
amounts. Subsequent to any reduction or withdrawal by any Rating Agency of its
rating of any class of Notes, unless such rating has been restored, any such
excess will on a Payment Date be paid to Noteholders as an accelerated payment
of principal on such Payment Date.
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After the payment in full, or the provision for such payment, of (i) all
accrued and unpaid interest on the Notes and (ii) the outstanding principal
balance of the Securities, any funds allocated to the Reserve Account, subject
to certain limitations, will be paid to the Company.
The Certificates, the Overcollateralization Amount and the Reserve Account
are intended to enhance the likelihood of receipt by Noteholders of the full
amount of principal and interest due them and to decrease the likelihood that
the Noteholders will experience losses. However, in certain circumstances, the
Reserve Account could be depleted. If the amount required to be withdrawn from
the Reserve Account to cover shortfalls in collections on the Receivables
exceeds the amount then allocated to the Reserve Account, Noteholders could
incur losses or a temporary shortfall in the amounts distributed to the
Noteholders could result, which could, in turn, increase the average life of the
Notes.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Brown & Wood LLP, counsel for the Underwriters and
special tax counsel for the Trust, for federal income tax purposes, the Offered
Notes will be characterized as debt, and the Trust will not be characterized as
an association (or a publicly traded partnership) taxable as a corporation.
New Withholding Regulations. On October 6, 1997, the Treasury Department
issued new regulations (the "New Regulations") which make certain modifications
to withholding, backup withholding and information reporting rules. The New
Regulations attempt to unify certification requirements and modify reliance
standards. The New Regulations will generally be effective for payments made
after December 31, 1999, subject to certain transition rules. Prospective
investors are urged to consult their own tax advisors regarding the New
Regulations.
ERISA CONSIDERATIONS
The Offered Notes may be purchased by an employee benefit plan or an
individual retirement account (a "Plan") subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") or Section 4975 of the
Internal Revenue Code of 1986, as amended (the "Code"). A fiduciary of a Plan
must determine that the purchase of an Offered Note is consistent with its
fiduciary duties under ERISA and does not result in a nonexempt prohibited
transaction as defined in Section 406 of ERISA or Section 4975 of the Code. For
additional information regarding treatment of the Offered Notes under ERISA, see
"ERISA Considerations" in the Prospectus.
The Offered Notes may not be purchased with the assets of a Plan if the
Seller, the Indenture Trustee, the Owner Trustee or any of their affiliates (a)
has investment or administrative discretion with respect to such Plan assets;
(b) has authority or responsibility to give, or regularly gives, investment
advice with respect to such Plan assets for a fee and pursuant to an agreement
or understanding that such advice (i) will serve as a primary basis for
investment decisions with respect to such Plan assets and (ii) will be based on
the particular investment needs for such Plan; or (c) is an employer maintaining
or contributing to such Plan.
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UNDERWRITING
Subject to the terms and conditions set forth in an Underwriting Agreement
(the "Underwriting Agreement"), the Seller has agreed to cause the Trust to sell
to each of the Underwriters named below (collectively, the "Underwriters"), and
each of the Underwriters has severally agreed to purchase, the principal amount
of the Offered Notes set forth opposite its name below:
CLASS A-2 NOTES
PRINCIPAL
AMOUNT
---------------
Bear, Stearns & Co. Inc..................................... $160,000,000.00
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................... 160,000,000.00
Morgan Stanley & Co. Incorporated .......................... 160,000,000.00
Salomon Smith Barney Inc. .................................. 160,000,000.00
---------------
Total............................................. $640,000,000.00
===============
CLASS A-3 NOTES
PRINCIPAL
AMOUNT
---------------
Bear, Stearns & Co. Inc..................................... $114,000,000.00
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................... 112,000,000.00
Morgan Stanley & Co. Incorporated .......................... 112,000,000.00
Salomon Smith Barney Inc. .................................. 112,000,000.00
---------------
Total............................................. $450,000,000.00
===============
CLASS A-4 NOTES
PRINCIPAL
AMOUNT
---------------
Bear, Stearns & Co. Inc..................................... $ 55,375,000.00
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................... 53,000,000.00
Morgan Stanley & Co. Incorporated .......................... 53,000,000.00
Salomon Smith Barney Inc. .................................. 53,000,000.00
---------------
Total............................................. $214,375,000.00
===============
The Seller has been advised by the Underwriters that they propose initially
to offer the Offered Notes to the public at the prices set forth herein, and to
certain dealers at such prices less the initial concession not in excess of
0.1125% per Class A-2 Note, 0.1275% per Class A-3 Note and 0.1500% per Class A-4
Note. The Underwriters may allow and such dealers may reallow a concession not
in excess of 0.0850% per Class A-2 Note, 0.1000% per Class A-3 Note and 0.1125%
per Class A-4 Note to certain other dealers. After the initial public offering
of the Offered Notes, the public offering price and such concessions may be
changed.
Until the distribution of the Offered Notes is completed, rules of the
Commission may limit the ability of the Underwriters and certain selling group
members to bid for and purchase the Offered Notes. As an exception to these
rules, the Underwriters are permitted to engage in certain transactions that
stabilize the price of the Offered Notes. Such transactions consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of the
Offered Notes.
If the Underwriters create a short position in the Offered Notes in
connection with the offering, i.e., if they sell more Offered Notes than are set
forth on the cover page of this Prospectus Supplement, the Underwriters may
reduce that short position by purchasing Offered Notes in the open market.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases.
Neither the Seller nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the prices of the Offered Notes. In addition,
neither the Seller nor any of the Underwriters makes any representation that the
Underwriters will
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engage in such transactions or that such transactions, once commenced, will not
be discontinued without notice.
Each Underwriter has represented and agreed that (a) it has not offered or
sold, and will not offer or sell, any Offered Notes to persons in the United
Kingdom except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances that do not
constitute an offer to the public in the United Kingdom for the purposes of the
Public Offers of Securities Regulations 1995, (b) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986 of
Great Britain with respect to anything done by it in relation to the Offered
Notes in, from or otherwise involving the United Kingdom and (c) it has only
issued or passed on and will only issue or pass on in the United Kingdom any
document in connection with the issue of the Offered Notes to a person who is of
a kind described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1995 or is a person to whom the document may
otherwise lawfully be issued or passed on.
Upon receipt of a request by an investor who has received an electronic
Prospectus Supplement and Prospectus from an Underwriter or a request by such
investor's representative within the period during which there is an obligation
to deliver a Prospectus Supplement and Prospectus, the Seller or the Underwriter
will promptly deliver, or cause to be delivered, without charge, a paper copy of
the Prospectus Supplement and Prospectus.
LEGAL OPINIONS
In addition to the legal opinions described in the Prospectus, certain
legal matters relating to the Offered Notes will be passed upon for the
Underwriters and certain federal income tax and other matters will be passed
upon for the Trust by Brown & Wood LLP, New York, New York. Brown & Wood LLP may
from time to time render legal services to Chrysler Financial Corporation and
its affiliates.
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INDEX OF TERMS
Accelerated Principal Distribution Amount................... S-18
APR......................................................... S-12
Business Combination Agreement.............................. S-10
Business Day................................................ S-19
Cash Release................................................ S-24
Cash Release Amount......................................... S-24
Cede........................................................ S-3
Certificates................................................ S-5
CFC......................................................... S-5
Chrysler Merger............................................. S-10
Chrysler.................................................... S-8
Class A-1 Final Scheduled Payment Date...................... S-19
Class A-1 Interest Accrual Period........................... S-18
Class A-1 Rate.............................................. S-5
Class A-2 Final Scheduled Payment Date...................... S-19
Class A-2 Rate.............................................. S-5
Class A-3 Final Scheduled Payment Date...................... S-19
Class A-3 Rate.............................................. S-5
Class A-4 Final Scheduled Payment Date...................... S-19
Class A-4 Rate.............................................. S-5
Closing Date................................................ S-5
Code........................................................ S-25
Collection Account.......................................... S-20
Collection Period........................................... S-18
Commission.................................................. S-18
Company..................................................... S-11
CTAS........................................................ S-9
Cutoff Date................................................. S-5
Daimler..................................................... S-10
DaimlerChrysler............................................. S-10
Determination Date.......................................... S-19
DTC......................................................... S-3
DTAG........................................................ S-9
ERISA....................................................... S-25
ESI......................................................... S-9
Excess Spread............................................... S-7
First Release Payment Date.................................. S-24
Guaranteed Exchangeable Certificates........................ S-9
Global Securities........................................... A-1
Indenture................................................... S-18
Indenture Trustee........................................... S-5
Initial Overcollateralization Amount........................ S-6
Initial Pool Balance........................................ S-5
Initial Securities Principal Balance........................ S-7
Interest Accrual Period..................................... S-18
Interest Distribution Amount................................ S-21
IPO......................................................... S-9
Issuer...................................................... S-5
Last Release Payment Date................................... S-24
Liquidated Receivables...................................... S-21
Liquidation Proceeds........................................ S-21
LLC......................................................... S-10
New Regulations............................................. S-25
Noteholders................................................. S-18
Noteholders' Distributable Amount........................... S-22
Noteholders' Interest Carryover Shortfall................... S-22
Noteholders' Interest Distributable Amount.................. S-22
Noteholders' Monthly Interest Distributable Amount.......... S-22
Noteholders' Monthly Principal Distributable Amount......... S-22
S-28
29
Noteholders' Principal Carryover Shortfall.................. S-22
Noteholders' Principal Distributable Amount................. S-22
Notes....................................................... S-5
Offered Notes............................................... S-5
Overcollateralization Amount................................ S-23
Overcollateralization Percentage............................ S-23
Owner Trustee............................................... S-5
Payment Date................................................ S-5
PEI......................................................... S-9
Plan........................................................ S-25
Pool Balance................................................ S-19
Rating Agencies............................................. S-8
Realized Losses............................................. S-21
Receivables................................................. S-5
Receivables Pool............................................ S-12
Redemption Price............................................ S-19
Regular Principal Distribution Amount....................... S-18
Related Pool Balance........................................ S-23
Release Period.............................................. S-24
Release Period Noteholders' Principal Distributable
Amount.................................................... S-23
Reserve Account............................................. S-7
Sale and Servicing Agreement................................ S-20
Securities.................................................. S-5
Securities Amount........................................... S-23
Seller...................................................... S-5
Servicer.................................................... S-5
Specified Reserve Amount.................................... S-24
Thrifty..................................................... S-9
Total Distribution Amount................................... S-20
Transfer and Servicing Agreements........................... S-20
Trust....................................................... S-5
Trust Agreement............................................. S-11
Underwriters................................................ S-26
Underwriting Agreement...................................... S-26
U.S. Person................................................. A-3
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31
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Offered Notes
(the "Global Securities") will be available only in book-entry form. Investors
in the Global Securities may hold such Global Securities through any of DTC,
CEDEL or Euroclear. The Global Securities will be tradeable as home market
instruments in both the European and U.S. domestic markets. Initial settlement
and all secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities
through CEDEL and Euroclear will be conducted in the ordinary way in accordance
with their normal rules and operating procedures and in accordance with
conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations.
Secondary cross-market trading between CEDEL or Euroclear and DTC
Participants holding Offered Notes will be effected on a
delivery-against-payment basis through the respective Depositaries of CEDEL and
Euroclear (in such capacity) and DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the Global Securities will
be represented through financial institutions acting on their behalf as direct
and indirect Participants in DTC. As a result, CEDEL and Euroclear will hold
positions on behalf of their participants through their respective Depositaries,
which in turn will hold such positions in accounts as DTC Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to prior debt issues. Investors' securities
custody accounts will be credited with their holdings against payment in
same-day funds on the settlement date.
Investors electing to hold their Global Securities through CEDEL or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payments in same-day
funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to book-entry
securities in same-day funds.
Trading between CEDEL and/or Euroclear Participants. Secondary market
trading between CEDEL Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
Trading between DTC seller and CEDEL or Euroclear purchaser. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a CEDEL Participant or a Euroclear Participant, the purchaser will
send instructions to CEDEL or Euroclear through a CEDEL Participant or Euroclear
Participant at least one business day prior to settlement. CEDEL or Euroclear,
as applicable, will
A-1
32
instruct its Depositary to receive the Global Securities against payment.
Payment will include interest accrued on the Global Securities from and
including the last coupon payment date to and excluding the settlement date.
Payment will then be made by such Depositary to the DTC Participant's account
against delivery of the Global Securities. After settlement has been completed,
the Global Securities will be credited to the applicable clearing system and by
the clearing system, in accordance with its usual procedures, to the CEDEL
Participant's or Euroclear Participant's account. The Global Securities credit
will appear the next day (European time) and the cash debit will be back-valued
to, and the interest on the Global Securities will accrue from, the value date
(which would be the preceding day when settlement occurred in New York). If
settlement is not completed on the intended value date (i.e., the trade fails),
the CEDEL or Euroclear cash debit will be valued instead as of the actual
settlement date.
CEDEL Participants and Euroclear Participants will need to make available
to the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to pre-position funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within CEDEL or Euroclear. Under this approach,
they may take on credit exposure to CEDEL or Euroclear until the Global
Securities are credited to their accounts one day later.
As an alternative, if CEDEL or Euroclear has extended a line of credit to
them, CEDEL Participants or Euroclear Participants can elect not to pre-position
funds and allow that credit line to be drawn upon the finance settlement. Under
this procedure, CEDEL Participants or Euroclear Participants purchasing Global
Securities would incur overdraft charges for one day, assuming they cleared the
overdraft when the Global Securities were credited to their accounts. However,
interest on the Global Securities would accrue from the value date. Therefore,
in many cases the investment income on the Global Securities earned during that
one-day period may substantially reduce or offset the amount of such overdraft
charges, although this result will depend on each CEDEL Participant's or
Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
the respective Depositary for the benefit of CEDEL Participants or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC Participant a cross-market transaction will
settle no differently than a trade between two DTC Participants.
Trading between CEDEL or Euroclear seller and DTC purchaser. Due to time
zone differences in their favor, CEDEL Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing systems, through
their respective Depositaries, to a DTC Participant. The seller will send
instructions to CEDEL or Euroclear through a CEDEL Participant or Euroclear
Participant at least one business day prior to settlement. In these cases, CEDEL
or Euroclear will instruct their respective Depositaries, as appropriate, to
deliver the bonds to the DTC Participant's account against payment. Payment will
include interest accrued on the Global Securities from and including the last
coupon payment date to and excluding the settlement date. The payment will then
be reflected in the account of the CEDEL Participant or Euroclear Participant
the following day, and receipt of the cash proceeds in the CEDEL Participant's
or Euroclear Participant's account would be back-valued to the value date (which
would be the preceding day, when settlement occurred in New York). Should the
CEDEL Participant or Euroclear Participant have a line of credit with its
clearing system and elect to be in debit in anticipation of receipt of the sale
proceeds in its account, the back-valuation will extinguish any overdraft
charges incurred over that one-day period. If settlement is not completed on the
intended value date (i.e., the trade fails), receipt of the cash proceeds in the
CEDEL Participant's or Euroclear Participant's account would instead be valued
as of the actual settlement date. Finally, day traders that use CEDEL or
Euroclear and that purchase Global Securities from DTC Participants for delivery
to CEDEL Participants or Euroclear Participants should note that these trades
would automatically fail on the sale side unless affirmative action were taken.
At least three techniques should be readily available to eliminate this
potential problem:
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33
(a) borrowing through CEDEL or Euroclear for one day (until the
purchase side of the day trade is reflected in their CEDEL or Euroclear
accounts) in accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant
no later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their CEDEL or Euroclear
account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC Participant is at
least one day prior to the value date for the sale to the CEDEL Participant
or Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through CEDEL or
Euroclear (or through DTC if the holder has an address outside the U.S.) will be
subject to the 30% U.S. withholding tax that generally applies to payments of
interest (including original issue discount) on registered debt issued by U.S.
Persons, unless (i) each clearing system, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or business
in the chain of intermediaries between such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
Exemption of non-U.S. Persons (Form W-8). Beneficial owners of
Offered Notes that are non-U.S. Persons generally can obtain a complete
exemption from the withholding tax by filing a signed Form W-8 (Certificate
of Foreign Status). If the information shown on Form W-8 changes, a new
Form W-8 must be filed within 30 days of such change.
Exemption for non-U.S. Person with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a
U.S. branch, for which the interest income is effectively connected with
its conduct of a trade or business in the United States can obtain an
exemption from the withholding tax by filing Form 4224 (Exemption from
Withholding of Tax on Income Effectively Connected with the Conduct of a
Trade or Business in the United States).
Exemption or reduced rate for non-U.S. Persons resident in treaty
countries (Form 1001). Non-U.S. Persons that are beneficial owners of
Offered Notes residing in a country that has a tax treaty with the United
States can obtain an exemption or reduced tax rate (depending on the treaty
terms) by filing Form 1001 (Ownership, Exemption or Reduced Rate
Certificate). If the treaty provides only for a reduced rate, withholding
tax will be imposed at that rate unless the filer alternatively files Form
W-8. Form 1001 may be filed by the beneficial owner of Offered Notes or
such owner's agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a
complete exemption from the withholding tax by filing Form W-9 (Payer's
Request for Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The beneficial owner of
a Global Security or, in the case of a Form 1001 or a Form 4224 filer, such
owner's agent, files by submitting the appropriate form to the person
through whom it holds the security (the clearing agency, in the case of
persons holding directly on the books of the clearing agency). Form W-8 and
Form 1001 are effective for three calendar years and Form 4224 is effective
for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of the
United States or any political subdivision thereof, (iii) an estate the income
of which is includible in gross income for United States tax purposes,
regardless of its source, or (iv) a trust if a court within the United States is
able to exercise primary supervision of the administration of the trust and one
or more United States fiduciaries have the authority to control all substantial
decisions of the trust. This summary does not deal with all aspects of U.S.
federal income tax withholding that may be relevant to foreign holders of the
Global Securities. Investors are advised to consult their own tax advisors for
specific tax advice concerning their holding and disposing of the Global
Securities.
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35
PROSPECTUS
PREMIER AUTO TRUSTS
ASSET BACKED NOTES
ASSET BACKED CERTIFICATES
---------------------
(LOGO)
Seller and Servicer
---------------------
The Asset Backed Notes (the "Notes") and the Asset Backed Certificates (the
"Certificates" and, together with the Notes, the "Securities") described herein
may be sold from time to time in one or more series, in amounts, at prices and
on terms to be determined at the time of sale and to be set forth in a
supplement to this Prospectus (a "Prospectus Supplement"). Each series of
Securities, which may include one or more classes of Notes and/or one or more
classes of Certificates, will be issued by a trust (each, a "Trust"). Each Trust
will be formed pursuant to either (i) a Trust Agreement to be entered into among
Chrysler Financial Corporation ("CFC"), as seller, the Trustee specified in the
related Prospectus Supplement (the "Trustee") and an entity which will be
specified in the related Prospectus Supplement and which initially will be
owned, directly or indirectly, by CFC (such entity, as identified in the related
Prospectus Supplement, the "Company"), or (ii) a Pooling and Servicing Agreement
to be entered into between the Trustee and CFC, as seller and servicer. A Trust
may issue one or more series of Securities. If a series of Securities includes
Notes, such Notes will be issued and secured pursuant to an Indenture between
the Trust and the Indenture Trustee specified in the related Prospectus
Supplement (the "Indenture Trustee") and will represent indebtedness of the
related Trust. The Certificates of a series will represent fractional undivided
interests in the related Trust or, if the related Trust issues more than one
series of Securities, a separate subdivision of such Trust allocated to such
series of Certificates. The related Prospectus Supplement will specify which
class or classes of Notes, if any, and which class or classes of Certificates,
if any, of the related series are being offered thereby. The property of each
Trust will include a pool of motor vehicle retail installment sale contracts
secured by new or used automobiles and light duty trucks (the "Receivables"),
certain monies due or received thereunder on and after the applicable Cutoff
Date set forth in the related Prospectus Supplement, security interests in the
vehicles financed thereby and certain other property and may include certain
other assets, all as described herein and in the related Prospectus Supplement
(collectively, with respect to a series of Securities issued by such Trust, the
"Series Trust Property"). If the Trust issues more than one series of
Securities, the Securities of a series will be supported solely by the Series
Trust Property allocated to such series and will not have any rights in or claim
on, or receive any payments from, the Series Trust Property allocated to any
other series of Securities issued by such Trust. In addition, if so specified in
the related Prospectus Supplement, the property of the Trust will include monies
on deposit in a trust account (the "Pre-Funding Account") to be established with
the Trustee or the Indenture Trustee, which will be used to purchase additional
motor vehicle retail installment sale contracts (the "Subsequent Receivables")
from CFC from time to time during the Funding Period specified in the related
Prospectus Supplement.
Except as otherwise provided in the related Prospectus Supplement,
each class of Securities of any series will represent the right to receive a
specified amount of payments of principal and interest on the related
Receivables, at the rates, on the dates and in the manner described herein and
in the related Prospectus Supplement. If a series includes multiple classes of
Securities, the rights of one or more classes of Securities to receive payments
may be senior or subordinate to the rights of one or more of the other classes
of such series. A series may include one or more classes of Notes and/or
Certificates which differ as to the timing and priority of payment, interest
rate or amount of distributions in respect of principal or interest or both. A
series may include one or more classes of Notes and/or Certificates entitled to
distributions in respect of principal with disproportionate, nominal or no
interest distributions, or to interest distributions, with disproportionate,
nominal or no distributions in respect of principal. The rate of payment in
respect of principal of any class of Notes and distributions in respect of the
Certificate Balance of the Certificates of any class will depend on the priority
of payment of such class and the rate and timing of payments (including
prepayments, defaults, liquidations and repurchases of Receivables) on the
related Receivables. A rate of payment lower or higher than that anticipated may
affect the weighted average life of each class of Securities in the manner
described herein and in the related Prospectus Supplement.
EXCEPT AS OTHERWISE SPECIFIED IN THE RELATED PROSPECTUS SUPPLEMENT, ANY
NOTES OF A SERIES REPRESENT OBLIGATIONS OF, AND THE CERTIFICATES OF A SERIES
REPRESENT BENEFICIAL INTERESTS IN, THE RELATED TRUST ONLY AND DO NOT REPRESENT
OBLIGATIONS OF OR INTERESTS IN, AND ARE NOT GUARANTEED OR INSURED BY, CHRYSLER
FINANCIAL CORPORATION, THE APPLICABLE COMPANY OR ANY OF THEIR RESPECTIVE
AFFILIATES. PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER
"SPECIAL CONSIDERATIONS" HEREIN AND IN THE RELATED PROSPECTUS SUPPLEMENT.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Retain this Prospectus for future reference. This Prospectus may not be used to
consummate sales of Securities offered hereby unless accompanied by a Prospectus
Supplement.
---------------------
The date of this Prospectus is September 10, 1997.
36
AVAILABLE INFORMATION
Chrysler Financial Corporation, as originator of each Trust, has filed with
the Securities and Exchange Commission (the "Commission") a Registration
Statement (together with all amendments and exhibits thereto, referred to herein
as the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to any Notes and the Certificates offered
pursuant to this Prospectus. For further information, reference is made to the
Registration Statement which may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549; and at the Commission's regional offices at Citicorp Center, 500
West Madison Street, 14th Floor, Chicago, Illinois 60661 and Seven World Trade
Center, New York, New York 10048. Copies of the Registration Statement may be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
maintains a Web site at http://www.sec.gov containing reports, proxy and
information statements and other information regarding registrants, including
Chrysler Financial Corporation, that file electronically with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by Chrysler Financial Corporation, as originator of the
Trust referred to in the accompanying Prospectus Supplement, pursuant to Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended,
subsequent to the date of this Prospectus and prior to the termination of the
offering of the Securities offered by such Trust shall be deemed to be
incorporated by reference in this Prospectus. Any statement contained herein or
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
Chrysler Financial Corporation will provide without charge to each person,
including any beneficial owner of Securities, to whom a copy of this Prospectus
is delivered, on the written or oral request of any such person, a copy of any
or all of the documents incorporated herein or in any related Prospectus
Supplement by reference, except the exhibits to such documents (unless such
exhibits are specifically incorporated by reference in such documents). Requests
for such copies should be directed to Secretary, Chrysler Financial Corporation,
27777 Franklin Road, Southfield, Michigan 48034-8286 (Telephone: 248-948-3058).
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37
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and by reference to
the information with respect to the Securities of any series contained in the
related Prospectus Supplement to be prepared and delivered in connection with
the offering of such Securities. Certain capitalized terms used in this summary
are defined elsewhere in this Prospectus on the pages indicated in the "Index of
Terms".
Issuer.................With respect to each series of Securities, the trust
(referred to herein as the "Trust" or the "Issuer")
formed or to be formed pursuant to either a Trust
Agreement (as amended and supplemented from time to time,
a "Trust Agreement") among the Seller, the Company for
such Trust and the Trustee for such Trust or a Pooling
and Servicing Agreement (as amended and supplemented from
time to time, the "Pooling and Servicing Agreement")
between the Trustee and Chrysler Financial Corporation,
as Seller and Servicer. A Trust may issue one or more
series of Securities.
Seller.................Chrysler Financial Corporation ("CFC" or, in its capacity
as seller, the "Seller").
Servicer...............Chrysler Financial Corporation (in such capacity, the
"Servicer").
Trustee................With respect to each series of Securities, the Trustee
specified in the related Prospectus Supplement.
Indenture Trustee......With respect to any applicable series of Securities, the
Indenture Trustee specified in the related Prospectus
Supplement.
The Notes..............A series of Securities may include one or more classes of
Notes, which will be issued pursuant to an Indenture
between the Trust and the Indenture Trustee (as amended
and supplemented from time to time, an "Indenture"), and
may or may not include any Certificates. The related
Prospectus Supplement will specify which class or
classes, if any, of Notes of the related series are being
offered thereby. If a Trust issues more than one series
of Notes, the Notes of a series will be secured solely by
the Series Trust Property allocated to such series and
will not have any rights in or claims on, or receive any
payments from, the Series Trust Property allocated to any
other series of Securities issued by such Trust.
Unless otherwise specified in the related Prospectus
Supplement, Notes will be available for purchase in
denominations of $1,000 and will be available in book-
entry form only. Unless otherwise specified in the
related Prospectus Supplement, Noteholders will be able
to receive Definitive Notes only in the limited
circumstances described herein or in the related
Prospectus Supplement. See "Certain Information Regarding
the Securities -- Definitive Securities".
Unless otherwise specified in the related Prospectus
Supplement, each class of Notes will have a stated
principal amount and will bear interest at a specified
rate or rates (with respect to each class of Notes, the
"Interest Rate"). Each class of Notes may have a
different Interest Rate, which may be a fixed, variable
or adjustable Interest Rate, or any combination of the
foregoing. The related Prospectus Supplement will specify
the Interest Rate for each class of Notes, or the method
for determining the Interest Rate.
With respect to a series that includes two or more
classes of Notes, each class may differ as to the timing
and priority of payments, seniority, allocations of
losses, Interest Rate or amount of payments of principal
or interest, or payments of principal or interest in
respect of any such class or classes may or may not be
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38
made upon the occurrence of specified events or on the
basis of collections from designated portions of the
Receivables Pool.
In addition, a series may include one or more classes of
Notes ("Strip Notes") entitled to (i) principal payments
with disproportionate, nominal or no interest payments or
(ii) interest payments with disproportionate, nominal or
no principal payments.
If the Servicer exercises its option to purchase the
Receivables of a Trust allocated to a series of Notes
(or, if not and, if and to the extent provided in the
related Prospectus Supplement, satisfactory bids for the
purchase of such Receivables are received), in the manner
and on the respective terms and conditions described
under "Description of the Transfer and Servicing
Agreements -- Termination", the outstanding Notes of such
series will be redeemed as set forth in the related
Prospectus Supplement. In addition, if the related
Prospectus Supplement provides that the property of a
Trust in respect of a series will include a Pre-Funding
Account (as such term is defined in the related
Prospectus Supplement, the "Pre-Funding Account"), one or
more classes of the outstanding Notes of such series will
be subject to partial redemption on or immediately
following the end of the Funding Period (as such term is
defined in the related Prospectus Supplement, the
"Funding Period") in an amount and manner specified in
the related Prospectus Supplement. In the event of such
partial redemption, the Noteholders of such series may be
entitled to receive a prepayment premium from the Trust,
in the amount and to the extent provided in the related
Prospectus Supplement.
The Certificates.......A series may include one or more classes of Certificates
and may or may not include any Notes. The related
Prospectus Supplement will specify which class or
classes, if any, of the Certificates are being offered
thereby. A Trust may issue one or more series of
Certificates with or without Notes. In such a case,
Certificates of a series will be supported solely by the
Series Trust Property allocated to such series and will
not have any rights in or claims on, or receive any
payments from, the Series Trust Property allocated to any
other series of Securities issued by such Trust.
Unless otherwise specified in the related Prospectus
Supplement, Certificates will be available for purchase
in a minimum denomination of $20,000 and will be
available in book-entry form only. Unless otherwise
specified in the related Prospectus Supplement,
Certificateholders will be able to receive Definitive
Certificates only in the limited circumstances described
herein or in the related Prospectus Supplement. See
"Certain Information Regarding the Securities --
Definitive Securities".
Unless otherwise specified in the related Prospectus
Supplement, each class of Certificates will have a stated
Certificate Balance specified in the related Prospectus
Supplement (the "Certificate Balance") and will accrue
interest on such Certificate Balance at a specified rate
(with respect to each class of Certificates, the "Pass
Through Rate"). Each class of Certificates may have a
different Pass Through Rate, which may be a fixed,
variable or adjustable Pass Through Rate, or any
combination of the foregoing. The related Prospectus
Supplement will specify the Pass Through Rate for each
class of Certificates or the method for determining the
Pass Through Rate.
With respect to a series that includes two or more
classes of Certificates, each class may differ as to
timing and priority of distributions, seniority,
allocations of losses, Pass Through Rate or amount of
distributions in respect of principal or
4
39
interest, or distributions in respect of principal or
interest in respect of any such class or classes may or
may not be made upon the occurrence of specified events
or on the basis of collections from designated portions
of the Receivables Pool. In addition, a series may
include one or more classes of Certificates ("Strip
Certificates") entitled to (i) distributions in respect
of principal with disproportionate, nominal or no
interest distributions or (ii) interest distributions
with disproportionate, nominal or no distributions in
respect of principal.
If a series of Securities includes classes of Notes,
distributions in respect of the Certificates may be
subordinated in priority of payment to payments on the
Notes to the extent specified in the related Prospectus
Supplement.
If the Servicer exercises its option to purchase the
Receivables of a Trust allocated to a series of
Securities (or, if not, and if and to the extent provided
in the related Prospectus Supplement, satisfactory bids
for the purchase of such Receivables are received), in
the manner and on the respective terms and conditions
described under "Description of the Transfer and
Servicing Agreements -- Termination", Certificateholders
of such series will receive as a prepayment an amount in
respect of the Certificates as specified in the related
Prospectus Supplement. In addition, if the related
Prospectus Supplement provides that the property of a
Trust in respect of a series will include a Pre-Funding
Account, Certificateholders of such series may receive a
partial prepayment of principal on or immediately
following the end of the Funding Period in an amount and
manner specified in the related Prospectus Supplement. In
the event of such partial prepayment, the
Certificateholders of such series may be entitled to
receive a prepayment premium from the Trust, in the
amount and to the extent provided in the related
Prospectus Supplement.
The Trust Property.....The property of each Trust will include a pool of motor
vehicle retail installment sale contracts secured by new
or used automobiles or light duty trucks (the
"Receivables"), including rights to receive certain
payments made with respect to such Receivables, security
interests in the vehicles financed thereby (the "Financed
Vehicles"), certain accounts and the proceeds thereof and
any proceeds from claims on certain related insurance
policies. In addition, the property of a Trust may
include (i) notes and/or certificates that were issued by
a prior Trust but were not then offered pursuant to this
Prospectus ("Previously Issued Securities") and/or (ii)
the right to receive collections in respect of
Receivables owned by one or more prior Trusts that would
otherwise be released to the Company. In the case of a
Trust that issues more than one series of Securities,
such property will be allocated to a single series of
Securities issued by such Trust (as so allocated, "Series
Trust Property"). Series Trust Property will support only
the single series of Securities to which it has been
allocated and will not benefit or result in any payments
on any other series of Securities issued by the related
Trust or any other Trust.
On the Closing Date specified in the related Prospectus
Supplement with respect to a Trust, the Seller will, if
so specified in such Prospectus Supplement, sell or
transfer Receivables (the "Initial Receivables") having
an aggregate principal balance specified in the related
Prospectus Supplement as of the dates specified therein
(the "Initial Cutoff Date") to such Trust pursuant to
either a Sale and Servicing Agreement between CFC, as
Seller and Servicer, and the Trust (as amended and
supplemented from time to time, a "Sale and Servicing
Agreement") or, if the Trust is to be treated as a
grantor trust for federal income tax purposes, the
related Pooling and Servicing Agreement between CFC, as
Seller and Servicer, and the Trustee. A Prospectus
Supplement may specify that there
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40
will not be any Initial Receivables sold to the Trust on
the Closing Date and that all Receivables will be sold to
the Trust during the Funding Period (which may include
the Closing Date) as described below. The property of
each Trust relating to a series will also include amounts
on deposit in certain trust accounts relating solely to
such series, including the related Collection Account,
any Pre-Funding Account, any Reserve Account and any
other account identified in the applicable Prospectus
Supplement.
To the extent provided in the related Prospectus
Supplement, the Seller will be obligated (subject only to
the availability thereof) to sell, and the related Trust
will be obligated to purchase (subject to the
satisfaction of certain conditions described in the
applicable Sale and Servicing Agreement or Pooling and
Servicing Agreement), additional Receivables (the
"Subsequent Receivables") in respect of the related
series from time to time (as frequently as daily) during
the Funding Period specified in the related Prospectus
Supplement having an aggregate principal balance
approximately equal to the amount on deposit in the
Pre-Funding Account (the "Pre-Funded Amount") on such
Closing Date.
To the extent provided in the related Prospectus
Supplement, for a period of time specified in such
Prospectus Supplement (the "Revolving Period")
collections of principal on the Receivables for the
related series may be applied to purchase additional
Receivables ("Additional Receivables") from the Seller
for such series.
The Receivables arise or will arise from loans originated
by motor vehicle dealers (the "Dealers") and purchased by
the Seller, directly or indirectly, pursuant to
agreements with the Dealers. The Receivables for any
given Receivables Pool will be selected from the
contracts owned by the Seller based on the criteria
specified in the Sale and Servicing Agreement or Pooling
and Servicing Agreement, as applicable, and described
herein and in the related Prospectus Supplement.
Credit Enhancement,
Cash Flow Enhancement
and Liquidity
Arrangements...........If and to the extent specified in the related Prospectus
Supplement, credit enhancement with respect to a Trust or
any class or classes of Securities may include any one or
more of the following: subordination of one or more other
classes of Securities, a Reserve Account,
overcollateralization, letters of credit, credit or
liquidity facilities, surety bonds, guaranteed investment
contracts, swaps (including without limitation currency
swaps), other interest rate protection agreements,
repurchase obligations (including without limitation put
options), yield supplement agreements, liquidity
arrangements, other agreements with respect to third
party payments or other support, cash deposits or other
arrangements. Unless otherwise specified in the related
Prospectus Supplement, any form of credit enhancement,
cash flow enhancement or liquidity arrangement will have
certain limitations and exclusions from coverage
thereunder, which will be described in the related
Prospectus Supplement.
Reserve Account........Unless otherwise specified in the related Prospectus
Supplement, a Reserve Account will be created for a
series of Securities with an initial deposit by the
Seller of cash or certain investments having a value
equal to the amount specified in the related Prospectus
Supplement. To the extent specified in the related
Prospectus Supplement, funds in the Reserve Account will
thereafter be supplemented by the deposit of amounts
remaining on any Distribution Date or
6
41
Payment Date after making all other distributions
required on such date and any amounts deposited from time
to time from the Pre-Funding Account in connection with a
purchase of Subsequent Receivables. Amounts in the
Reserve Account will be available to cover shortfalls in
amounts due to the holders of those classes of Securities
of such series specified in the related Prospectus
Supplement in the manner and under the circumstances
specified therein. The related Prospectus Supplement will
also specify to whom and the manner and circumstances
under which amounts on deposit in the Reserve Account
(after giving effect to all other required distributions
to be made by the applicable Trust) in excess of the
Specified Reserve Account Balance (as defined in the
related Prospectus Supplement) will be distributed.
Transfer and Servicing
Agreements.............With respect to each series of Securities, the Seller
will sell the related Receivables to the related Trust
pursuant to a Sale and Servicing Agreement or a Pooling
and Servicing Agreement. The rights and benefits of any
Trust under a Sale and Servicing Agreement will be
assigned to the Indenture Trustee as collateral for the
Notes of the related series. The Servicer will agree with
such Trust to be responsible for servicing, managing,
maintaining custody of and making collections on the
Receivables. CFC will undertake certain administrative
duties under an Administration Agreement with respect to
any Trust that has issued Notes.
Unless otherwise provided in the related Prospectus
Supplement, the Servicer will be obligated to purchase or
make Advances with respect to any Receivable if, among
other things, it extends the date for final payment by
the Obligor of such Receivable beyond the applicable
Final Scheduled Maturity Date (as defined in the related
Prospectus Supplement, the "Final Scheduled Maturity
Date"), changes the annual percentage rate ("APR") or
amount of a scheduled payment of such Receivable or fails
to maintain a perfected security interest in the related
Financed Vehicle.
Unless otherwise specified in the related Prospectus
Supplement, the Servicer will be entitled to receive a
fee for servicing the Receivables included in each Trust
or Series Trust Property equal to a specified percentage
of the aggregate principal balance of the related
Receivables Pool, as set forth in the related Prospectus
Supplement, plus certain late fees, prepayment charges
and other administrative fees or similar charges. See
"Description of the Transfer and Servicing
Agreements -- Servicing Compensation and Payment of
Expenses" herein and in the related Prospectus
Supplement.
Certain Legal Aspects
of the Receivables;
Repurchase
Obligations............In connection with the sale of Receivables to a Trust,
security interests in the Financed Vehicles securing such
Receivables will be assigned by the Seller to such Trust.
Due to administrative burden and expense, the
certificates of title to the Financed Vehicles will not
be amended to reflect the assignment to such Trust. In
the absence of such an amendment, such Trust may not have
a perfected security interest in the Financed Vehicles
securing the Receivables in some states. Unless otherwise
specified in the related Prospectus Supplement, the
Seller will be obligated to repurchase any Receivable
sold to a Trust as to which a first perfected security
interest in the name of the Seller in the Financed
Vehicle securing such Receivable shall not exist as of
the date such Receivable is purchased by such Trust, if
such breach shall materially adversely affect the
interest of such Trust in such Receivable and if such
failure or breach shall not
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have been cured by the last day of the second (or, if the
Seller elects, the first) month following the discovery
by or notice to the Seller of such breach. If such Trust
does not have a perfected security interest in a Financed
Vehicle, its ability to realize on such Financed Vehicle
in the event of a default may be adversely affected. To
the extent the security interest is perfected, such Trust
will have a prior claim over subsequent purchasers of
such Financed Vehicles and holders of subsequently
perfected security interests. However, as against liens
for repairs of Financed Vehicles or for taxes unpaid by
an Obligor under a Receivable, or because of fraud or
negligence, such Trust could lose the priority of its
security interest or its security interest in Financed
Vehicles. Neither the Seller nor the Servicer will have
any obligation to repurchase a Receivable as to which any
of the aforementioned occurrences result in a Trust's
losing the priority of its security interest or its
security interest in the related Financed Vehicle after
the Closing Date.
Federal and state consumer protection laws impose
requirements upon creditors in connection with extensions
of credit and collections of retail installment loans,
and certain of these laws make an assignee of such a loan
liable to the obligor thereon for any violation by the
lender. Unless otherwise specified in the related
Prospectus Supplement, the Seller will be obligated to
repurchase any Receivable which fails to comply with such
requirements.
Tax Status.............Unless the Prospectus Supplement specifies that the
related Trust will be treated as a grantor trust and,
except as otherwise provided in such Prospectus
Supplement, upon the issuance of the related series of
Securities Federal Tax Counsel to such Trust will deliver
an opinion to the effect that, for federal income tax
purposes: (i) any Notes of such series will be
characterized as debt and (ii) such Trust will not be
characterized as an association (or a publicly traded
partnership) taxable as a corporation. In respect of any
such series, each Noteholder, by the acceptance of a Note
of such series, will agree to treat such Note as
indebtedness, and each Certificateholder, if the
Certificates are not retained solely by the Seller or an
affiliate thereof, by the acceptance of a Certificate of
such series, will agree to treat such Trust as a
partnership in which such Certificateholder is a partner
for federal income tax purposes. Alternative
characterizations of such Trust and such Certificates are
possible, but would not result in materially adverse tax
consequences to Certificateholders.
If the Prospectus Supplement specifies that the related
Trust will be treated as a grantor trust and except as
otherwise provided in such Prospectus Supplement, upon
the issuance of the related series of Certificates,
Federal Tax Counsel to such Trust will deliver an opinion
to the effect that such Trust will be treated as a
grantor trust for federal income tax purposes and will
not be subject to federal income tax.
See "Certain Federal Income Tax Consequences" and
"Certain State Tax Consequences" for additional
information concerning the application of federal and
Michigan tax laws.
ERISA Considerations...Subject to the considerations discussed under "ERISA
Considerations" herein and in the related Prospectus
Supplement, and unless otherwise specified therein, the
Notes of any series and any Certificates issued by a
Trust that is a grantor trust and are not subordinated to
any other class of Certificates will be eligible for
purchase by employee benefit plans.
Unless otherwise specified in the related Prospectus
Supplement, the Certificates of any series that are
subordinated to any other Security of that series may not
be
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acquired by any employee benefit plan subject to the
Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or by any individual retirement
account. See "ERISA Considerations" herein and in the
related Prospectus Supplement.
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SPECIAL CONSIDERATIONS
Certain Legal Aspects -- Security Interests in Financed Vehicles. In
connection with the sale of Receivables to a Trust, security interests in the
Financed Vehicles securing such Receivables will be assigned by the Seller to
such Trust simultaneously with the sale of such Receivables to such Trust. Due
to administrative burden and expense, the certificates of title to the Financed
Vehicles will not be amended to reflect the assignment to the Trust. In the
absence of such an amendment, such Trust may not have a perfected security
interest in the Financed Vehicles securing the Receivables in some states.
Unless otherwise provided in the related Prospectus Supplement, the Seller will
be obligated to repurchase any Receivable sold to such Trust as to which a
perfected security interest in the name of the Seller in the Financed Vehicle
securing such Receivable shall not exist as of the date such Receivable is
transferred to such Trust, if such breach shall materially adversely affect the
interest of such Trust in such Receivable and if such failure or breach shall
not have been cured by the last day of the second (or, if the Seller elects, the
first) month following the discovery by or notice to the Seller of such breach.
If such Trust does not have a perfected security interest in a Financed Vehicle,
its ability to realize on such Financed Vehicle in the event of a default may be
adversely affected. To the extent the security interest is perfected, such Trust
will have a prior claim over subsequent purchasers of such Financed Vehicles and
holders of subsequently perfected security interests. However, as against liens
for repairs of Financed Vehicles or for taxes unpaid by an Obligor under a
Receivable, or through fraud or negligence, such Trust could lose the priority
of its security interest or its security interest in a Financed Vehicle. Neither
the Seller nor the Servicer will have any obligation to repurchase a Receivable
as to which any of the aforementioned occurrences result in such Trust's losing
the priority of its security interest or its security interest in such Financed
Vehicle after the date such security interest was conveyed to such Trust.
Federal and state consumer protection laws impose requirements upon creditors in
connection with extensions of credit and collections of retail installment loans
and certain of these laws make an assignee of such a loan (such as such Trust)
liable to the obligor thereon for any violation by the lender. Unless otherwise
specified in the related Prospectus Supplement, the Seller will be obligated to
repurchase any Receivable which fails to comply with such requirements.
Certain Legal Aspects -- Bankruptcy Considerations. The Seller will
warrant to each Trust in the related Sale and Servicing Agreement or Pooling and
Servicing Agreement that the sale of the Receivables by the Seller to such Trust
is a valid sale of the Receivables to such Trust. Notwithstanding the foregoing,
if the Seller were to become a debtor in a bankruptcy case and a creditor or
trustee-in-bankruptcy of such debtor or such debtor itself were to take the
position that the sale of Receivables to such Trust should instead be treated as
a pledge of such Receivables to secure a borrowing of such debtor, delays in
payments of collections of Receivables to the related Securityholders could
occur or (should the court rule in favor of any such trustee, debtor or
creditor) reductions in the amounts of such payments could result. If the
transfer of Receivables to a Trust is treated as a pledge instead of a sale, a
tax or government lien on the property of the Seller arising before the transfer
of a Receivable to such Trust may have priority over such Trust's interest in
such Receivable. If the transactions contemplated herein are treated as a sale,
the Receivables would not be part of the Seller's bankruptcy estate and would
not be available to the Seller's creditors.
A case decided by the United States Court of Appeals for the Tenth Circuit
contains language to the effect that accounts sold by an entity that
subsequently became bankrupt remained property of the debtor's bankruptcy estate
because the sale of accounts is treated as a "security interest" that must be
perfected under the Uniform Commercial Code ("UCC"). Although the Contracts
constitute chattel paper rather than accounts under the UCC, sale of chattel
paper, like sales of accounts, must be perfected under Article 9 of the UCC. If
CFC were to become a debtor under any insolvency law and a court were to follow
the reasoning of the Tenth Circuit Court of Appeals and apply such reasoning to
chattel paper, the Owner Trust (and thus the Indenture Trustee) or the Grantor
Trust (and thus the Trustee), as applicable, could experience a delay in or
reduction of collections on the Contracts, and the Noteholders and/or the
Certificateholders could incur a loss on their investment as a result.
With respect to each Trust that is not a grantor trust, if the related
Prospectus Supplement so specifies, upon the occurrence of an Insolvency Event
with respect to the Company (which, unless otherwise specified in the related
Prospectus Supplement, will be a wholly-owned subsidiary of the Seller or a
limited liability
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company of which the Seller and/or one or more of its wholly-owned subsidiaries
are members, as set forth in such Prospectus Supplement), the Indenture Trustee
or Trustee for such Trust will promptly sell, dispose of or otherwise liquidate
the related Receivables in a commercially reasonable manner on commercially
reasonable terms, except under certain limited circumstances. The proceeds from
any such sale, disposition or liquidation of Receivables will be treated as
collections on the Receivables and deposited in the related Collection Account
of such Trust. If the proceeds from the liquidation of the Receivables and any
amounts on deposit in the related Reserve Account, the related Note Distribution
Account, if any, and the related Certificate Distribution Account, if any, with
respect to any such Trust and any amounts available from any credit enhancement
are not sufficient to pay the Notes, if any, and the Certificates, if any, of
each related series in full, the amount of principal returned to any Noteholders
or the Certificateholders of each series of such Trust will be reduced and such
Noteholders and Certificateholders will incur a loss. See "Description of the
Transfer and Servicing Agreements -- Insolvency Event".
Trust's Relationship to the Seller and its Affiliates. None of CFC,
Chrysler Corporation ("Chrysler") or any of their affiliates is generally
obligated to make any payments in respect of any Notes, the Certificates or the
Receivables of a given Trust.
However, in connection with the sale of Receivables by the Seller to a
Trust, the Seller will make representations and warranties with respect to the
characteristics of such Receivables and, in certain circumstances, the Seller
may be required to repurchase Receivables with respect to which such
representations and warranties have been breached. See "Description of the
Transfer and Servicing Agreements -- Sale and Assignment of Receivables". In
addition, under certain circumstances, the Servicer may be required to purchase
Receivables. See "Description of the Transfer and Servicing
Agreements -- Servicing Procedures". Moreover, if CFC were to cease acting as
Servicer, delays in processing payments on the Receivables and information in
respect thereof could occur and result in delays in payments to the
Securityholders.
The related Prospectus Supplement may set forth certain additional
information regarding CFC and Chrysler. In addition, CFC and Chrysler are
subject to the information requirements of the Exchange Act and in accordance
therewith file reports and other information with the Commission. For further
information regarding CFC and Chrysler, reference is made to such reports and
other information, which are available as described under "Available
Information".
Subordination; Limited Assets. To the extent specified in the related
Prospectus Supplement, distributions of interest and principal on one or more
classes of Notes and/or Certificates of a series may be subordinated in priority
of payment to interest and principal due on one or more classes of Notes of such
series, and distributions of interest and principal on one or more classes of
Certificates may be subordinated in priority of payment to interest and
principal due on the Notes, if any, and one or more other classes of
Certificates of such series. Moreover, each Trust will not have, nor is it
permitted or expected to have, any significant assets or sources of funds other
than the Receivables and, to the extent provided in the related Prospectus
Supplement, a Pre-Funding Account, a Reserve Account and any other credit
enhancement. The Notes of any series will represent obligations solely of, and
the Certificates of any series will represent interests solely in, the related
Trust and neither the Notes nor the Certificates of any series will be insured
or guaranteed by CFC, the applicable Trustee, any Indenture Trustee or any other
person or entity. Moreover, in the case of a Trust that issues more than one
series of Securities, the Securities of a series issued by such Trust will be
supported solely by the Series Trust Property allocated to such series and will
not have any rights in or claim on, or receive any payments from, the Series
Trust Property allocated to any other series of Securities issued by such Trust.
Consequently, holders of the Securities of any series must rely for repayment
upon payments on solely the Receivables allocated to such series and, if and to
the extent available, amounts on deposit in the Pre-Funding Account (if any),
the Reserve Account (if any) and any other credit enhancement for such series,
all as specified in the related Prospectus Supplement.
Maturity and Prepayment Considerations. All the Receivables are prepayable
at any time. (For this purpose the term "prepayments" includes prepayments in
full, partial prepayments (including those related to rebates of extended
warranty contract costs and insurance premiums) and liquidations due to default,
as well as receipts of proceeds from physical damage, credit life and disability
insurance policies and certain other
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Receivables repurchased for administrative reasons.) The rate of prepayments on
the Receivables may be influenced by a variety of economic, social and other
factors, including the fact that an Obligor generally may not sell or transfer
the Financed Vehicle securing a Receivable without the consent of the Seller.
The rate of prepayment on the Receivables may also be influenced by the
structure of the loan. In addition, under certain circumstances, the Seller will
be obligated to repurchase Receivables pursuant to a Sale and Servicing
Agreement or Pooling and Servicing Agreement as a result of breaches of
representations and warranties and, under certain circumstances, the Servicer
will be obligated to purchase Receivables pursuant to such Sale and Servicing
Agreement or Pooling and Servicing Agreement as a result of breaches of certain
covenants. See "Description of the Transfer and Servicing Agreements -- Sale and
Assignment of Receivables". Any reinvestment risks resulting from a faster or
slower incidence of prepayment of Receivables will be borne entirely by the
Securityholders of the related series of Securities. See also "Description of
the Transfer and Servicing Agreements -- Termination" regarding the Servicer's
option to purchase the Receivables of a Receivables Pool and "-- Insolvency
Event" regarding the possible sale (if provided for in the related Prospectus
Supplement) of the Receivables owned by a Trust that is not a grantor trust if
an Insolvency Event with respect to the applicable Company occurs.
Issuance in Series. A single Trust may issue more than one series of Notes
and/or Certificates. The provisions of the Indenture for a series of Notes or
the supplement to a Trust Agreement for a series of Certificates issued by a
Trust will not be subject to the consent of prior review by the holders of a
series of Notes and/or Certificates that have been previously issued by such
Trust. However, the issuance of a subsequent series of Securities by the same
Trust will be subject to the condition that each Rating Agency that rated a
prior series of Securities issued by such Trust must indicate that the issuance
of such subsequent series of Securities will not cause such Rating Agency to
reduce or withdraw its rating of any such prior series of Securities. There can
be no assurance, however, that the issuance of a subsequent series of Securities
by a Trust will not have some effect on a prior series of Securities issued by
such Trust.
Risk of Commingling. With respect to each series of Securities, the
Servicer will deposit all payments on the related Receivables (from whatever
source) and all proceeds of such Receivables collected during each Collection
Period into the Collection Account for such series within two business days of
receipt thereof. However, in the event that CFC satisfies certain requirements
for monthly or less frequent remittances and the Rating Agencies (as such term
is defined in the related Prospectus Supplement, the "Rating Agencies") affirm
their ratings of the related Securities at the initial level, then for so long
as CFC is the Servicer and provided that (i) there exists no Servicer Default
and (ii) each other condition to making such monthly or less frequent deposits
as may be specified by the Rating Agencies and described in the related
Prospectus Supplement is satisfied, the Servicer will not be required to deposit
such amounts into the Collection Account for such series until on or before the
business day preceding each Distribution Date. The Servicer will deposit the
aggregate Purchase Amount of Receivables purchased by the Servicer into the
applicable Collection Account on or before the business day preceding each
Distribution Date. Pending deposit into such Collection Account, collections may
be invested by the Servicer at its own risk and for its own benefit and will not
be segregated from funds of the Servicer. If the Servicer were unable to remit
such funds, the applicable Securityholders might incur a loss. To the extent set
forth in the related Prospectus Supplement, the Servicer may, in order to
satisfy the requirements described above, obtain a letter of credit or other
security for the benefit of the related Trust to secure timely remittances of
collections on the related Receivables and payment of the aggregate Purchase
Amount with respect to Receivables purchased by the Servicer.
Servicer Default. Unless otherwise provided in the related Prospectus
Supplement with respect to a series of Securities that includes Notes, in the
event a Servicer Default occurs, the Indenture Trustee or the Noteholders with
respect to such series, as described under "Description of the Transfer and
Servicing Agreements -- Rights upon Servicer Default", may remove the Servicer
without the consent of the Trustee or any of the Certificateholders, if any,
with respect to such series. The Trustee or the Certificateholders with respect
to such series will not have the ability to remove the Servicer if a Servicer
Default occurs. In addition, the Noteholders of such series have the ability,
with certain specified exceptions, to waive defaults by the Servicer, including
defaults that could materially adversely affect the Certificateholders, if any,
of such series. See "Description of the Transfer and Servicing
Agreements -- Waiver of Past Defaults".
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Book-Entry Registration. Unless otherwise specified in the related
Prospectus Supplement, each class of a series of Securities will be initially
represented by one or more certificates registered in the name of Cede & Co.
("Cede"), or any other nominee for DTC set forth in the related Prospectus
Supplement (Cede, or such other nominee, "DTC's Nominee"), and will not be
registered in the names of the holders of the Securities of such series or their
nominees. Because of this, unless and until Definitive Securities for such
series are issued, holders of such Securities will not be recognized by the
Trustee or any applicable Indenture Trustee as "Certificateholders",
"Noteholders" or "Securityholders", as the case may be (as such terms are used
herein or in the related Pooling and Servicing Agreement or related Indenture
and Trust Agreement, as applicable). Hence, until Definitive Securities are
issued, holders of such Securities will only be able to exercise the rights of
Securityholders indirectly through DTC and its participating organizations. See
"Certain Information Regarding the Securities -- Book-Entry Registration" and
"-- Definitive Securities".
THE TRUSTS
The Seller will establish a separate Trust pursuant to the respective Trust
Agreement or Pooling and Servicing Agreement, as applicable, for the
transactions described herein and in the related Prospectus Supplement. The
property of each Trust allocated to a series of Securities issued by such Trust
will include a pool (a "Receivables Pool") of motor vehicle retail installment
sales contracts (and, with respect to Fixed Value Receivables (as defined
below), the right to certain payments on retail installment sale contracts)
between dealers (the "Dealers") and purchasers (the "Obligors") of new and used
automobiles or light duty trucks and all payments due thereunder on and after
the applicable Cutoff Date (as such term is defined in the related Prospectus
Supplement, a "Cutoff Date") in the case of Precomputed Receivables and all
payments received thereunder on and after the applicable Cutoff Date in the case
of Simple Interest Receivables. The Receivables of each Receivables Pool were or
will be originated by the Dealers and purchased by CFC, directly or indirectly,
pursuant to agreements with Dealers ("Dealer Agreements"). Such Receivables will
continue to be serviced by the Servicer and evidence indirect financing made
available by the Seller to the Obligors. On the applicable Closing Date, after
the issuance of the Securities of a series, the Seller will sell the Initial
Receivables of the applicable Receivables Pool to the Trust to the extent, if
any, specified in the related Prospectus Supplement. To the extent so provided
in the related Prospectus Supplement, Subsequent Receivables allocable to such
series of Securities will be conveyed to the Trust as frequently as daily during
the Funding Period and Additional Receivables allocable to such series of
Securities may be conveyed to the Trust during the Revolving Period. Any
Subsequent Receivables or Additional Receivables so conveyed will also be assets
of the applicable Trust allocated solely to such series of Securities, subject
to the prior rights of the related Indenture Trustee and the related
Noteholders, if any, therein. The property of each Trust allocated to a series
of Securities issued by such Trust will also include (i) such amounts as from
time to time may be held in separate trust accounts established and maintained
pursuant to the related Sale and Servicing Agreement or Pooling and Servicing
Agreement and the proceeds of such accounts, as described herein and in the
related Prospectus Supplement; (ii) security interests in the Financed Vehicles
and any other interest of the Seller in such Financed Vehicles; (iii) the rights
to proceeds from claims on certain physical damage, credit life and disability
insurance policies covering the Financed Vehicles or the Obligors, as the case
may be; (iv) the interest of the Seller in any proceeds from recourse to Dealers
on Receivables or Financed Vehicles with respect to which the Servicer has
determined that eventual repayment in full is unlikely; (v) any property that
shall have secured a Receivable and that shall have been acquired by the
applicable Trust; and (vi) any and all proceeds of the foregoing (as allocated
to such series of Securities and together the Receivables Pool allocated to such
series and payments thereon, the "Series Trust Property"). To the extent
specified in the related Prospectus Supplement, a Pre-Funding Account, a Reserve
Account or other form of credit enhancement or Previously Issued Securities may
be a part of the property of the Series Trust Property in a Trust or may be held
by the Trustee or an Indenture Trustee for the benefit of holders of the related
Securities. If a Trust issues more than one series of Securities, the Securities
of a series will be supported solely by the Series Trust Property allocated to
such series and will not have any rights in or claim on, or receive any payments
from, the Series Trust Property allocated to any other series of Securities
issued by such Trust. Additionally, pursuant to contracts between the Seller and
the Dealers, the Dealers have an obligation after origination to repurchase
Receivables as to which Dealers have made certain misrepresentations.
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The Servicer will continue to service the Receivables held by each Trust
and will receive fees for such services. See "Description of the Transfer and
Servicing Agreements -- Servicing Compensation and Payment of Expenses" herein
and in the related Prospectus Supplement. To facilitate the servicing of the
Receivables, each Trustee will authorize the Servicer to retain physical
possession of the Receivables held by each Trust and other documents relating
thereto as custodian for each such Trust. Due to the administrative burden and
expense, the certificates of title to the Financed Vehicles will not be amended
to reflect the sale and assignment of the security interest in the Financed
Vehicles to each Trust. In the absence of such an amendment, any Trust may not
have a perfected security interest in the Financed Vehicles in all states. See
"Certain Legal Aspects of the Receivables" and "Description of the Transfer and
Servicing Agreements -- Sale and Assignment of Receivables".
If the protection provided to any Noteholders of a series by the
subordination of the related Certificates, if any, and by the Reserve Account,
if any, or other credit enhancement for such series or the protection provided
to the related Certificateholders by any such Reserve Account or other credit
enhancement is insufficient, such Noteholders or Certificateholders, as the case
may be, would have to look principally to the Obligors on the Receivables in the
related Series Trust Property, the proceeds from the repossession and sale of
Financed Vehicles which secure defaulted Receivables in the related Series Trust
Property and the proceeds from any recourse against Dealers with respect to such
Receivables. In such event, certain factors, such as the applicable Trust's not
having perfected security interests in the Financed Vehicles in all states, may
affect the Servicer's ability to repossess and sell the collateral securing such
Receivables, and thus may reduce the proceeds to be distributed to the holders
of the Securities of such series. See "Description of the Transfer and Servicing
Agreements -- Distributions", "-- Credit and Cash Flow Enhancement" and "Certain
Legal Aspects of the Receivables".
The principal offices of each Trust and the related Trustee will be
specified in the applicable Prospectus Supplement.
THE TRUSTEE
The Trustee for each Trust will be specified in the related Prospectus
Supplement. The Trustee's liability in connection with the issuance and sale of
the related Securities is limited solely to the express obligations of such
Trustee set forth in the related Trust Agreement and the Sale and Servicing
Agreement or the related Pooling and Servicing Agreement, as applicable. A
Trustee may resign at any time, in which event the Servicer, or its successor,
will be obligated to appoint a successor trustee. The Administrator of a Trust
that is not a grantor trust and the Servicer in respect of a Trust that is a
grantor trust may also remove the Trustee if the Trustee ceases to be eligible
to continue as Trustee under the related Trust Agreement or Pooling and
Servicing Agreement, as applicable, or if the Trustee becomes insolvent. In such
circumstances, the Administrator or Servicer, as applicable, will be obligated
to appoint a successor trustee. Any resignation or removal of a Trustee and
appointment of a successor trustee will not become effective until acceptance of
the appointment by the successor trustee.
THE RECEIVABLES POOLS
GENERAL
The Receivables in each Receivables Pool have been or will be purchased by
the Seller, directly or indirectly, from Dealers in the ordinary course of
business through its branches located in the United States. Most of the Dealers
sell products manufactured and/or distributed by Chrysler. The retail
installment sale contracts are purchased pursuant to the Dealer Agreements. The
Seller purchases contracts in accordance with its credit standards which are
based upon the vehicle buyer's ability and willingness to repay the obligation
as well as the value of the vehicle being financed.
The Receivables to be held by a Trust and allocated to a series of
Securities will be selected from the Seller's portfolio for inclusion in the
related Receivables Pool by several criteria, including that, unless otherwise
provided in the related Prospectus Supplement, each Receivable (i) is secured by
a new or used
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vehicle, (ii) was originated in the United States, (iii) provides for level
monthly payments (except for the last payment, which may be minimally different
from the level payments or which, in the case of Fixed Value Receivables, may be
a final fixed value payment) that fully amortize the amount financed over its
original term to maturity, (iv) is a Precomputed Receivable or a Simple Interest
Receivable and (v) satisfies the other criteria, if any, set forth in the
related Prospectus Supplement. No selection procedures believed by the Seller to
be adverse to the Securityholders of any series were or will be used in
selecting the related Receivables.
"Precomputed Receivables" consist of either (i) monthly actuarial
receivables ("Actuarial Receivables") or (ii) receivables that provide for
allocation of payments according to the "sum of periodic balances" or "sum of
monthly payments" method, similar to the "Rule of 78's" ("Rule of 78's
Receivables"). An Actuarial Receivable provides for amortization of the loan
over a series of fixed level payment monthly installments. Each monthly
installment, including the monthly installment representing the final payment on
the Receivable, consists of an amount of interest equal to 1/12 of the APR of
the loan multiplied by the unpaid principal balance of the loan, and an amount
of principal equal to the remainder of the monthly payment. A Rule of 78's
Receivable provides for the payment by the obligor of a specified total amount
of payments, payable in equal monthly installments on each due date, which total
represents the principal amount financed and add-on interest in an amount
calculated on the stated APR for the term of the receivable. The rate at which
such amount of add-on interest is earned and, correspondingly, the amount of
each fixed monthly payment allocated to reduction of the outstanding principal
are calculated in accordance with the "Rule of 78's".
"Fixed Value Receivables" are monthly receivables originated under CFC's
Gold Key Plus program and secured by new automobiles or light duty trucks with a
final payment which is greater than the scheduled monthly payments. A Fixed
Value Receivable provides for amortization of the loan over a series of fixed
level payment monthly installments like an Actuarial Receivable, but also
requires a final fixed value payment due after payment of such monthly
installments which may be satisfied by (i) payment in full in cash of such
amount, (ii) transfer of the vehicle to CFC provided certain conditions are
satisfied or (iii) refinancing the fixed value payment in accordance with
certain conditions. With respect to Fixed Value Receivables, unless otherwise
provided in the related Prospectus Supplement, only the principal and interest
payments due prior to the final fixed value payment and not the final fixed
value payment will be included in such Trust; the final fixed value payment will
be sold by the Seller to the applicable Company. However, in the case of a Trust
that is not a grantor trust, such Company will have the option to transfer the
final fixed value payments with respect to the related Fixed Value Receivables
retained by such Company to such Trust and to cause such Trust to issue
certificates representing interests in such final fixed value payments or
indebtedness secured by such final fixed value payments.
"Simple Interest Receivables" are receivables that provide for the
amortization of the amount financed under each receivable over a series of fixed
level monthly payments. However, unlike the monthly payment under an Actuarial
Receivable, each monthly payment consists of an installment of interest which is
calculated on the basis of the outstanding principal balance of the receivable
multiplied by the stated APR and further multiplied by the period elapsed (as a
fraction of a calendar year) since the preceding payment of interest was made.
As payments are received under a Simple Interest Receivable, the amount received
is applied first to interest accrued to the date of payment and the balance is
applied to reduce the unpaid principal balance. Accordingly, if an obligor pays
a fixed monthly installment before its scheduled due date, the portion of the
payment allocable to interest for the period since the preceding payment was
made will be less than it would have been had the payment been made as
scheduled, and the portion of the payment applied to reduce the unpaid principal
balance will be correspondingly greater. Conversely, if an obligor pays a fixed
monthly installment after its scheduled due date, the portion of the payment
allocable to interest for the period since the preceding payment was made will
be greater than it would have been had the payment been made as scheduled, and
the portion of the payment applied to reduce the unpaid principal balance will
be correspondingly less. In either case, the obligor pays a fixed monthly
installment until the final scheduled payment date, at which time the amount of
the final installment is increased or decreased as necessary to repay the then
outstanding principal balance and any finance charges up to the date of final
payment.
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In the event of the prepayment in full (voluntarily or by acceleration) of
a Rule of 78's Receivable, under the terms of the contract, a "refund" or
"rebate" will be made to the obligor of the portion of the total amount of
payments then due and payable under the contract allocable to "unearned" add-on
interest, calculated in accordance with a method equivalent to the Rule of 78's.
If an Actuarial Receivable is prepaid in full, with minor variations based upon
state law, the Actuarial Receivable requires that the rebate be calculated on
the basis of a constant interest rate. If a Simple Interest Receivable is
prepaid, rather than receive a rebate, the obligor is required to pay interest
only to the date of prepayment. The amount of a rebate under a Rule of 78's
Receivable generally will be less than the amount of a rebate on an Actuarial
Receivable and generally will be less than the remaining scheduled payments of
interest that would have been due under a Simple Interest Receivable for which
all payments were made on schedule.
Unless otherwise provided in the related Prospectus Supplement, each Trust
will account for the Rule of 78's Receivables as if such Receivables were
Actuarial Receivables. Amounts received upon prepayment in full of a Rule of
78's Receivable in excess of the then outstanding principal balance of such
Receivable and accrued interest thereon (calculated pursuant to the actuarial
method) will not be paid to the Noteholders or passed through to the
Certificateholders of the applicable series but will be paid to the Servicer as
additional servicing compensation.
Information with respect to each Receivables Pool will be set forth in the
related Prospectus Supplement, including, to the extent appropriate, the
composition, the distribution by APR and by the states of origination, the
portion of such Receivables Pool consisting of Precomputed Receivables and of
Simple Interest Receivables and the portion of such Receivables Pool secured by
new vehicles and by used vehicles.
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Certain information concerning the experience of the Seller and its United
States subsidiaries pertaining to delinquencies, repossessions and net losses
with respect to new and used retail automobile and light duty truck receivables
(including receivables previously sold which CFC continues to service) will be
set forth in each Prospectus Supplement. There can be no assurance that the
delinquency, repossession and net loss experience on any Receivables Pool will
be comparable to prior experience or to such information.
WEIGHTED AVERAGE LIFE OF THE SECURITIES
The weighted average life of the Notes, if any, and the Certificates, if
any, of any series will generally be influenced by the rate at which the
principal balances of the related Receivables are paid, which payment may be in
the form of scheduled amortization or prepayments. (For this purpose, the term
"prepayments" includes prepayments in full, partial prepayments (including those
related to rebates of extended warranty contract costs and insurance premiums),
liquidations due to default, as well as receipts of proceeds from physical
damage, credit life and disability insurance policies and certain other
Receivables repurchased by the Seller or the Servicer for administrative
reasons.) All of the Receivables are prepayable at any time without penalty to
the Obligor. The rate of prepayment of automotive receivables is influenced by a
variety of economic, social and other factors, including the fact that an
Obligor generally may not sell or transfer the Financed Vehicle securing a
Receivable without the consent of the Seller. The rate of prepayment on the
Receivables may also be influenced by the structure of the loan. In addition,
under certain circumstances, the Seller will be obligated to repurchase
Receivables from a Trust pursuant to the related Sale and Servicing Agreement or
Pooling and Servicing Agreement as a result of breaches of representations and
warranties and the Servicer will be obligated to purchase Receivables from such
Trust pursuant to such Sale and Servicing Agreement or Pooling and Servicing
Agreement as a result of breaches of certain covenants. See "Description of the
Transfer and Servicing Agreements -- Sale and Assignment of Receivables" and
"-- Servicing Procedures". See also "Description of the Transfer and Servicing
Agreements -- Termination" regarding the Servicer's option to purchase the
Receivables from a Trust and "-- Insolvency Event" regarding the possible sale
(if provided for in the related Prospectus Supplement) of the Receivables owned
by a Trust that is not a grantor trust if an Insolvency Event with respect to
the Company applicable to such Trust occurs.
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In addition, a Prospectus Supplement may provide for a Revolving Period
during which principal collections in respect of the Receivables allocated to
the related series will be applied to purchase Additional Receivables for
inclusion in the related Series Trust Property rather than applied to make
distributions on the related Securities. Any such application would increase the
weighted average life of such Securities. Moreover, a Prospectus Supplement may
provide for a liquidity facility or similar arrangement under which collections
of principal may be invested in certain Eligible Investments and distributed on
the related Securities in planned amounts on scheduled Distribution Dates.
In light of the above considerations, there can be no assurance as to the
amount of principal payments to be made on the Notes, if any, or the
Certificates, if any, of a given series on each Payment Date or Distribution
Date, as applicable, since such amount will depend, in part, on the amount of
principal collected on the related Receivables Pool during the applicable
Collection Period. Any reinvestment risks resulting from a faster or slower
incidence of prepayment of Receivables will be borne entirely by the
Noteholders, if any, and the Certificateholders, if any, of a given series. The
related Prospectus Supplement may set forth certain additional information with
respect to the maturity and prepayment considerations applicable to the
particular Receivables Pool and the related series of Securities.
POOL FACTORS AND TRADING INFORMATION
The "Note Pool Factor" for each class of Notes will be a seven-digit
decimal which the Servicer will compute prior to each distribution with respect
to such class of Notes indicating the remaining outstanding principal balance of
such class of Notes, as of the applicable Payment Date (after giving effect to
payments to be made on such Payment Date), as a fraction of the initial
outstanding principal balance of such class of Notes. The "Certificate Pool
Factor" for each class of Certificates will be a seven-digit decimal which the
Servicer will compute prior to each distribution with respect to such class of
Certificates indicating the remaining Certificate Balance of such class of
Certificates, as of the applicable Distribution Date (after giving effect to
distributions to be made on such Distribution Date), as a fraction of the
initial Certificate Balance of such class of Certificates. Each Note Pool Factor
and each Certificate Pool Factor will initially be 1.0000000 and thereafter will
decline to reflect reductions in the outstanding principal balance of the
applicable class of Notes, or the reduction of the Certificate Balance of the
applicable class of Certificates, as the case may be. A Noteholder's portion of
the aggregate outstanding principal balance of the related class of Notes is the
product of (i) the original denomination of such Noteholder's Note and (ii) the
applicable Note Pool Factor. A Certificateholder's portion of the aggregate
outstanding Certificate Balance for the related class of Certificates is the
product of (a) the original denomination of such Certificateholder's Certificate
and (b) the applicable Certificate Pool Factor.
Unless otherwise provided in the related Prospectus Supplement with respect
to a series, the Noteholders, if any, and the Certificateholders, if any, of
such series will receive reports on or about each Payment Date concerning with
respect to the Collection Period immediately preceding such Payment Date,
payments received on the related Receivables, the related Pool Balance (as such
term is defined in the related Prospectus Supplement, the "Pool Balance"), each
Certificate Pool Factor or Note Pool Factor, as applicable, and various other
items of information. In addition, Securityholders of record during any calendar
year will be furnished information for tax reporting purposes not later than the
latest date permitted by law. See "Certain Information Regarding the
Securities -- Reports to Securityholders".
USE OF PROCEEDS
Unless otherwise provided in the related Prospectus Supplement, the net
proceeds from the sale of the Securities of a series will be applied by the
applicable Trust (i) to the purchase of the Receivables and, if applicable, any
Previously Issued Securities from the Seller, (ii) to make the initial deposit
into the Reserve Account, if any, and (iii) to make the deposit of the
Pre-Funded Amount into the Pre-Funding Account, if any. Unless otherwise
specified in the related Prospectus Supplement, the Seller will use that portion
of such net proceeds paid to it with respect to such series of Securities for
general corporate purposes.
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CHRYSLER FINANCIAL CORPORATION
CFC is a financial services organization, all of the common stock of which
is owned by Chrysler. CFC, a Michigan corporation, is the continuing corporation
resulting from a merger on June 1, 1967, of a financial services subsidiary of
Chrysler into a newly acquired, previously nonaffiliated finance company
incorporated in 1926. CFC is engaged in automotive retail, wholesale and fleet
financing, servicing commercial leases and loans, secured small business
financing, and property, casualty and other insurance and automotive dealership
facility development and management. CFC's business is substantially dependent
upon the operations of Chrysler. In particular, lower levels of production and
sale of Chrysler's automotive products could result in a reduction in the level
of finance and insurance operations of CFC. See "Special
Considerations -- Trust's Relationship to the Seller; Financial Condition of
Chrysler Corporation" in the related Prospectus Supplement. The related
Prospectus Supplement will set forth certain additional information with respect
to CFC. CFC's executive offices are located at 27777 Franklin Road, Southfield,
Michigan 48034-8286, and its telephone number is (248) 948-3058.
CFC will warrant to each Trust in the related Sale and Servicing Agreement
or Pooling and Servicing Agreement that the sale of the applicable Receivables
by CFC to such Trust is a valid sale of such Receivables to such Trust. In
addition, CFC and such Trust will treat the transactions described herein and in
the related Prospectus Supplement as a sale of such Receivables to such Trust
and CFC will take all actions that are required to perfect the Trust's ownership
interest in such Receivables. Notwithstanding the foregoing, if CFC were to
become a debtor in a bankruptcy case and a creditor or trustee in bankruptcy of
such debtor or such debtor itself were to take the position that the sale of
Receivables to a Trust should instead be treated as a pledge of such Receivables
to secure a borrowing of such debtor, then delays in payments of collections of
such Receivables could occur or (should the court rule in favor of any such
trustee, debtor or creditor) reductions in the amount of such payments could
result. If the transfer of Receivables to a Trust is treated as a pledge instead
of a sale, a tax or government lien on the property of CFC arising before the
transfer of Receivables to such Trust may have priority over such Trust's
interest in such Receivables. If the transactions contemplated herein are
treated as a sale, the Receivables would not be part of CFC's bankruptcy estate
and would not be available to CFC's creditors.
On December 31, 1995, Chrysler Credit Corporation ("CCC"), which had been a
wholly owned subsidiary of CFC and had provided retail, wholesale and lease
financing services to automobile dealers and their customers throughout the
United States and had originated and serviced CFC's motor vehicle loan
portfolio, was merged into CFC.
DESCRIPTION OF THE NOTES
GENERAL
With respect to each Trust that issues Notes, one or more classes of Notes
of the related series will be issued pursuant to the terms of an Indenture, the
form of which has been filed as an exhibit to the Registration Statement of
which this Prospectus forms a part. The following summary does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the Notes and the Indenture.
If a Trust issues more than one series of Notes, each such series may be
issued pursuant to a master Indenture. In such a case, the Notes of a series
will be secured solely by the Series Trust Property allocated to such series and
will not have any rights in or claims on, or receive any payments from, the
Series Trust Property allocated to any other series of Securities issued by such
Trust.
Unless otherwise specified in the related Prospectus Supplement, each class
of Notes will initially be represented by one or more Notes, in each case
registered in the name of the nominee of DTC (together with any successor
depository selected by the Trust, the "Depository") except as set forth below.
Unless otherwise specified in the related Prospectus Supplement, the Notes will
be available for purchase in denominations of $1,000 in book-entry form only.
The Seller has been informed by DTC that DTC's nominee will be Cede,
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unless another nominee is specified in the related Prospectus Supplement.
Accordingly, such nominee is expected to be the holder of record of the Notes of
each class. Unless and until Definitive Notes are issued under the limited
circumstances described herein or in the related Prospectus Supplement, no
Noteholder will be entitled to receive a physical certificate representing a
Note. All references herein and in the related Prospectus Supplement to actions
by Noteholders refer to actions taken by DTC upon instructions from its
participating organizations (the "Participants") and all references herein and
in the related Prospectus Supplement to distributions, notices, reports and
statements to Noteholders refer to distributions, notices, reports and
statements to DTC or its nominee, as the registered holder of the Notes, for
distribution to Noteholders in accordance with DTC's procedures with respect
thereto. See "Certain Information Regarding the Securities -- Book-Entry
Registration" and "-- Definitive Securities".
PRINCIPAL AND INTEREST ON THE NOTES
The timing and priority of payment, seniority, allocations of losses,
Interest Rate and amount of or method of determining payments of principal and
interest with respect to each class of Notes of a series will be described in
the related Prospectus Supplement. The right of holders of any class of Notes of
a series to receive payments of principal and interest may be senior or
subordinate to the rights of holders of any other class or classes of Notes of
such series, as described in the related Prospectus Supplement. Unless otherwise
provided in the related Prospectus Supplement, payments of interest on the Notes
of such series will be made prior to payments of principal thereon. To the
extent provided in the related Prospectus Supplement, a series may include one
or more classes of Strip Notes entitled to (i) principal payments with
disproportionate, nominal or no interest payments or (ii) interest payments with
disproportionate, nominal or no principal payments. Each class of Notes may have
a different Interest Rate, which may be a fixed, variable or adjustable Interest
Rate (and which may be zero for certain classes of Strip Notes), or any
combination of the foregoing. The related Prospectus Supplement will specify the
Interest Rate for each class of Notes of a series or the method for determining
such Interest Rate. See also "Certain Information Regarding the
Securities -- Fixed Rate Securities" and "-- Floating Rate Securities". One or
more classes of Notes of a series may be redeemable in whole or in part under
the circumstances specified in the related Prospectus Supplement, including at
the end of the Funding Period (if any) or as a result of the Servicer's
exercising its option to purchase the related Receivables Pool.
To the extent specified in any Prospectus Supplement, one or more classes
of Notes of a given series may have fixed principal payment schedules, as set
forth in such Prospectus Supplement; Noteholders of such Notes would be entitled
to receive as payments of principal on any given Payment Date the applicable
amounts set forth on such schedule with respect to such Notes, in the manner and
to the extent set forth in the related Prospectus Supplement. The aggregate
initial principal amount of the Notes and Certificates, if any, of a series may,
after giving effect to the purchase of all Subsequent Receivables, if any, be
greater than the aggregate initial principal balance of the Receivables in that
series.
To the extent specified in the related Prospectus Supplement, payments to
Noteholders of two or more classes within a series in respect of interest may
have the same priority. Under certain circumstances, the amount available for
such payments could be less than the amount of interest payable on such Notes on
any of the dates specified for payments in the related Prospectus Supplement
(each, a "Payment Date", which may be the same date as each Distribution Date as
specified in the related Prospectus Supplement), in which case the holders of
such classes of Notes will receive its ratable share (based upon the aggregate
amount of interest due to such classes of Noteholders) of the aggregate amount
available to be distributed in respect of interest on such Notes. See
"Description of the Transfer and Servicing Agreements -- Distributions" and
"-- Credit and Cash Flow Enhancement".
In the case of a series of Notes which includes two or more classes of
Notes, the sequential order and priority of payment in respect of principal and
interest, and any schedule or formula or other provisions applicable to the
determination thereof, of each such class will be set forth in the related
Prospectus Supplement. Payments in respect of principal and interest of any
class of Notes will be made on a pro rata basis among all the Noteholders of
such class. A series with Notes may provide for a Revolving Period, during which
collections of principal in respect of the Receivables are not applied to
payments of principal of such
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Notes, or may provide for a liquidity facility of similar arrangement that
permits one or more classes of Notes to be paid in planned amounts on scheduled
Distribution Dates.
THE INDENTURE
Master Indenture. If a Trust issues more than one series of Notes, such a
series may be issued pursuant to a base indenture and a series supplement
thereto that relates to such series of Notes (such base indenture together with
such series supplement being also referred to herein as an "Indenture").
Modification of Indenture. With respect to each Trust that has issued
Notes pursuant to an Indenture, the Trust and the Indenture Trustee may, with
the consent of the holders of a majority of the outstanding Notes of the related
series, execute a supplemental indenture to add provisions to, change in any
manner or eliminate any provisions of, the related Indenture, or modify (except
as provided below) in any manner the rights of the related Noteholders.
Unless otherwise specified in the related Prospectus Supplement with
respect to a series of Notes, without the consent of the holder of each such
outstanding Note affected thereby. However, no supplemental indenture will: (i)
change the due date of any installment of principal of or interest on any such
Note or reduce the principal amount thereof, the interest rate specified thereon
or the redemption price with respect thereto or change any place of payment
where or the coin or currency in which any such Note or any interest thereon is
payable; (ii) impair the right to institute suit for the enforcement of certain
provisions of the related Indenture regarding payment; (iii) reduce the
percentage of the aggregate amount of the outstanding Notes of such series, the
consent of the holders of which is required for any such supplemental indenture
or the consent of the holders of which is required for any waiver of compliance
with certain provisions of the related Indenture or of certain defaults
thereunder and their consequences as provided for in such Indenture; (iv) modify
or alter the provisions of the related Indenture regarding the voting of Notes
held by the applicable Trust, any other obligor on such Notes, the Seller or an
affiliate of any of them; (v) reduce the percentage of the aggregate outstanding
amount of such Notes, the consent of the holders of which is required to direct
the related Indenture Trustee to sell or liquidate the Receivables allocated to
such series if the proceeds of such sale would be insufficient to pay the
principal amount and accrued but unpaid interest on the outstanding Notes of
such series; (vi) decrease the percentage of the aggregate principal amount of
such Notes required to amend the sections of the related Indenture which specify
the applicable percentage of aggregate principal amount of the Notes of such
series necessary to amend such Indenture or certain other related agreements; or
(vii) permit the creation of any lien ranking prior to or on a parity with the
lien of the related Indenture with respect to any of the Series Trust Property
securing such Notes or, except as otherwise permitted or contemplated in such
Indenture, terminate the lien of such Indenture on any such collateral or
deprive the holder of any such Note of the security afforded by the lien of such
Indenture.
Unless otherwise provided in the applicable Prospectus Supplement, the
Trust and the applicable Indenture Trustee may also enter into supplemental
indentures, without obtaining the consent of the Noteholders of the related
series, for the purpose of, among other things, adding any provisions to or
changing in any manner or eliminating any of the provisions of the related
Indenture or of modifying in any manner the rights of such Noteholders; provided
that such action will not materially and adversely affect the interest of any
such Noteholder.
Events of Default; Rights upon Event of Default. With respect to the Notes
of a series, unless otherwise specified in the related Prospectus Supplement,
"Events of Default" under the related Indenture will consist of: (i) a default
for five days (or for such other longer period specified in the related
Prospectus Supplement) or more in the payment of any interest on any such Note;
(ii) a default in the payment of the principal of or any installment of the
principal of any such Note when the same becomes due and payable; (iii) a
default in the observance or performance of any covenant or agreement of the
applicable Trust made in the related Indenture and the continuation of any such
default for a period of 30 days after notice thereof is given to such Trust by
the applicable Indenture Trustee or to such Trust and such Indenture Trustee by
the holders of at least 25% in principal amount of such Notes then outstanding;
(iv) any representation or warranty made by such Trust in the related Indenture
or in any certificate delivered pursuant thereto or in connection therewith
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having been incorrect in a material respect as of the time made, and such breach
not having been cured within 30 days after notice thereof is given to such Trust
by the applicable Indenture Trustee or to such Trust and such Indenture Trustee
by the holders of at least 25% in principal amount of such Notes then
outstanding; or (v) certain events of bankruptcy, insolvency, receivership or
liquidation of the applicable Trust. The amount of principal required to be paid
to Noteholders of such series under the related Indenture will generally be
limited to amounts available to be deposited in the applicable Note Distribution
Account. Therefore, unless otherwise specified in the related Prospectus
Supplement, the failure to pay principal on a class of Notes generally will not
result in the occurrence of an Event of Default until the final scheduled
Payment Date for such class of Notes.
In the case of a Trust that issues more than one series of Notes, an Event
of Default with respect to one such series of Notes will not of itself
constitute an Event of Default with respect to any such other series of Notes.
If an Event of Default should occur and be continuing with respect to the
Notes of any series, the related Indenture Trustee or holders of a majority in
principal amount of such Notes then outstanding may declare the principal of
such Notes to be immediately due and payable. Unless otherwise specified in the
related Prospectus Supplement, such declaration may, under certain
circumstances, be rescinded by the holders of a majority in principal amount of
such Notes then outstanding.
If the Notes of any series are due and payable following an Event of
Default with respect thereto, the related Indenture Trustee may institute
proceedings to collect amounts due or foreclose on Series Trust Property
allocated to such series, exercise remedies as a secured party, sell the
Receivables included in such Series Trust Property or elect to have the
applicable Trust maintain possession of such Receivables and continue to apply
collections on such Receivables as if there had been no declaration of
acceleration. Unless otherwise specified in the related Prospectus Supplement,
however, such Indenture Trustee is prohibited from selling the related
Receivables following an Event of Default, other than a default in the payment
of any principal of or a default for five days (or such longer period specified
in the related Indenture) or more in the payment of any interest on any Note of
such series, unless (i) the holders of all the outstanding Notes of such series
consent to such sale, (ii) the proceeds of such sale are sufficient to pay in
full the principal of and the accrued interest on such outstanding Notes at the
date of such sale or (iii) such Indenture Trustee determines that the proceeds
of such Receivables would not be sufficient on an ongoing basis to make all
payments on such Notes as such payments would have become due if such
obligations had not been declared due and payable, and such Indenture Trustee
obtains the consent of the holders of 66 2/3% of the aggregate outstanding
amount of such Notes.
If a Trust issues more than one series of Notes, each such series of Notes
will be secured solely by the Series Trust Property allocated to such series and
will not have any rights in or claims on, or receive any payments from, the
Series Trust Property allocated to any other series of Securities issued by such
Trust.
Subject to the provisions of the applicable Indenture relating to the
duties of the related Indenture Trustee, if an Event of Default occurs and is
continuing with respect to a series of Notes, such Indenture Trustee will be
under no obligation to exercise any of the rights or powers under such Indenture
at the request or direction of any of the holders of such Notes, if such
Indenture Trustee reasonably believes it will not be adequately indemnified
against the costs, expenses and liabilities which might be incurred by it in
complying with such request. Subject to the provisions for indemnification and
certain limitations contained in the related Indenture, the holders of a
majority in principal amount of the outstanding Notes of a series will have the
right to direct the time, method and place of conducting any proceeding or any
remedy available to the applicable Indenture Trustee in respect of such series,
and the holders of a majority in principal amount of such Notes then outstanding
may, in certain cases, waive any default with respect to such Notes, except a
default in the payment of principal or interest or a default in respect of a
covenant or provision of such Indenture that cannot be modified without the
waiver or consent of all the holders of such outstanding Notes.
Unless otherwise specified in the related Prospectus Supplement, no holder
of a Note of any series will have the right to institute any proceeding with
respect to the related Indenture, unless (i) such holder previously has given to
the applicable Indenture Trustee written notice of a continuing Event of
Default,
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(ii) the holders of not less than 25% in principal amount of the outstanding
Notes of such series have made written request to such Indenture Trustee to
institute such proceeding in its own name as Indenture Trustee, (iii) such
holder or holders have offered such Indenture Trustee reasonable indemnity, (iv)
such Indenture Trustee has for 60 days failed to institute such proceeding and
(v) no direction inconsistent with such written request has been given to such
Indenture Trustee during such 60-day period by the holders of a majority in
principal amount of such outstanding Notes.
In addition, each Indenture Trustee and the holders of a series of Notes,
by accepting such Notes, will covenant, to the extent legally enforceable, that
they will not at any time institute against the applicable Trust any bankruptcy,
reorganization or other proceeding under any federal or state bankruptcy or
similar law and that they do not have and will not assert any claims against any
Series Trust Property allocated to any other series of Notes issued by such
Trust.
With respect to any series of Notes issued by a Trust, neither the related
Indenture Trustee nor the related Trustee in its individual capacity, nor any
holder of a Certificate representing an ownership interest in such Trust nor any
of their respective owners, beneficiaries, agents, officers, directors,
employees, affiliates, successors or assigns will, in the absence of an express
agreement to the contrary, be personally liable for the payment of the principal
of or interest on such Notes or for the agreements of such Trust contained in
the applicable Indenture.
Certain Covenants. Each Indenture will provide that the related Trust may
not consolidate with or merge into any other entity, unless (i) the entity
formed by or surviving such consolidation or merger is organized under the laws
of the United States, any state or the District of Columbia, (ii) such entity
expressly assumes such Trust's obligation to make due and punctual payments upon
the Notes of the related series and the performance or observance of every
agreement and covenant of such Trust under the Indenture, (iii) no Event of
Default shall have occurred and be continuing immediately after such merger or
consolidation, (iv) such Trust has been advised that the rating of the Notes or
the Certificates of such series then in effect would not be reduced or withdrawn
by the Rating Agencies as a result of such merger or consolidation and (v) such
Trust has received an opinion of counsel to the effect that such consolidation
or merger would have no material adverse federal income tax consequence to the
Trust or to any related Noteholder or Certificateholder.
With respect to each series of Notes issued by a Trust, such Trust will
not, among other things, (i) except as expressly permitted by the applicable
Indenture, the applicable Transfer and Servicing Agreements or certain related
documents with respect to such Trust and such series (collectively, the "Related
Documents"), sell, transfer, exchange or otherwise dispose of any of the Series
Trust Property allocated to such series, (ii) claim any credit on or make any
deduction from the principal and interest payable in respect of the Notes of
such series (other than amounts withheld under the Code or applicable state law)
or assert any claim against any present or former holder of such Notes because
of the payment of taxes levied or assessed upon such Trust, (iii) dissolve or
liquidate in whole or in part, (iv) permit the validity or effectiveness of the
related Indenture to be impaired or permit any person to be released from any
covenants or obligations with respect to such Notes under such Indenture except
as may be expressly permitted thereby or (v) permit any lien, charge, excise,
claim, security interest, mortgage or other encumbrance to be created on or
extend to or otherwise arise upon or burden such Series Trust Property or any
part thereof, or any interest therein or the proceeds thereof.
No Trust may engage in any activity other than as specified under the
section of the related Prospectus Supplement entitled "The Trust". No Trust will
incur, assume or guarantee any indebtedness other than indebtedness incurred
pursuant to one or more series of Notes issued by it and the related Indentures,
pursuant to any Advances made to it by the Servicer or otherwise in accordance
with the Related Documents.
Annual Compliance Statement. Each Trust will be required to file annually
with the related Indenture Trustee a written statement as to the fulfillment of
its obligations under the Indenture.
Indenture Trustee's Annual Report. The Indenture Trustee for each series
of Notes will be required to mail each year to all related Noteholders a brief
report relating to its eligibility and qualification to continue as Indenture
Trustee under the related Indenture, any amounts advanced by it under the
Indenture, the amount,
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interest rate and maturity date of certain indebtedness owing by the related
Trust to the applicable Indenture Trustee in its individual capacity, the
property and funds physically held by such Indenture Trustee as such and any
action taken by it that materially affects the related Notes and that has not
been previously reported.
Satisfaction and Discharge of Indenture. An Indenture will be discharged
with respect to the Series Trust Property securing the related Notes upon the
delivery to the related Indenture Trustee for cancellation of all such Notes or,
with certain limitations, upon deposit with such Indenture Trustee of funds
sufficient for the payment in full of all such Notes.
THE INDENTURE TRUSTEE
The Indenture Trustee for a series of Notes will be specified in the
related Prospectus Supplement. The Indenture Trustee for any series may resign
at any time, in which event the Issuer will be obligated to appoint a successor
trustee for such series. The Issuer may also remove any such Indenture Trustee
if such Indenture Trustee ceases to be eligible to continue as such under the
related Indenture or if such Indenture Trustee becomes insolvent. In such
circumstances, the Issuer will be obligated to appoint a successor trustee for
the applicable series of Notes. Any resignation or removal of the Indenture
Trustee and appointment of a successor trustee for any series of Notes does not
become effective until acceptance of the appointment by the successor trustee
for such series.
DESCRIPTION OF THE CERTIFICATES
GENERAL
With respect to each Trust, if so specified in the related Prospectus
Supplement, one or more classes of Certificates of the related series will be
issued pursuant to the terms of a Trust Agreement or a Pooling and Servicing
Agreement, a form of each of which has been filed as an exhibit to the
Registration Statement of which this Prospectus forms a part. The following
summary does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Certificates and the
Trust Agreement or Pooling and Servicing Agreement, as applicable.
Unless otherwise specified in the related Prospectus Supplement and except
for the Certificates, if any, of a series purchased by the applicable Company,
each class of Certificates will initially be represented by one or more
Certificates registered in the name of the Depository, except as set forth
below. Unless otherwise specified in the related Prospectus Supplement and
except for the Certificates, if any, of a given series purchased by the
applicable Company, the Certificates will be available for purchase in minimum
denominations of $20,000 in book-entry form only. The Seller has been informed
by DTC that DTC's nominee will be Cede, unless another nominee is specified in
the related Prospectus Supplement. Accordingly, such nominee is expected to be
the holder of record of the Certificates of any series that are not purchased by
the related Company. Unless and until Definitive Certificates are issued under
the limited circumstances described herein or in the related Prospectus
Supplement, no Certificateholder (other than the applicable Company) will be
entitled to receive a physical certificate representing a Certificate. All
references herein and in the related Prospectus Supplement to actions by
Certificateholders refer to actions taken by DTC upon instructions from the
Participants and all references herein and in the related Prospectus Supplement
to distributions, notices, reports and statements to Certificateholders refer to
distributions, notices, reports and statements to DTC or its nominee, as the
case may be, as the registered holder of the Certificates, for distribution to
Certificateholders in accordance with DTC's procedures with respect thereto. See
"Certain Information Regarding the Securities -- Book-Entry Registration" and
"-- Definitive Securities". Any Certificates of a given series owned by the
applicable Company or its affiliates will be entitled to equal and proportionate
benefits under the applicable Trust Agreement, except that such Certificates
will be deemed not to be outstanding for the purpose of determining whether the
requisite percentage of Certificateholders have given any request, demand,
authorization, direction, notice, consent or other action under the Related
Documents (other than the commencement by the related Trust of a voluntary
proceeding in bankruptcy as described under "Description of the Transfer and
Servicing Agreements -- Insolvency Event").
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If a Trust issues more than one series of Certificates, Certificates of a
series will be supported solely by the Series Trust Property allocated to such
series and will not have any rights in or claims on, or receive any payments
from, the Series Trust Property allocated to any other series of Securities
issued by such Trust.
DISTRIBUTIONS OF PRINCIPAL AND INTEREST
The timing and priority of distributions, seniority, allocations of losses,
Pass Through Rate and amount of or method of determining distributions with
respect to principal and interest of each class of Certificates will be
described in the related Prospectus Supplement. Distributions of interest on
such Certificates will be made on the dates specified in the related Prospectus
Supplement (each, a "Distribution Date") and will be made prior to distributions
with respect to principal of such Certificates. To the extent provided in the
related Prospectus Supplement, a series may include one or more classes of Strip
Certificates entitled to (i) distributions in respect of principal with
disproportionate, nominal or no interest distributions or (ii) interest
distributions with disproportionate, nominal or no distributions in respect of
principal. Each class of Certificates may have a different Pass Through Rate,
which may be a fixed, variable or adjustable Pass Through Rate (and which may be
zero for certain classes of Strip Certificates) or any combination of the
foregoing. The related Prospectus Supplement will specify the Pass Through Rate
for each class of Certificates of a series or the method for determining such
Pass Through Rate. See also "Certain Information Regarding the
Securities -- Fixed Rate Securities" and "-- Floating Rate Securities". Unless
otherwise provided in the related Prospectus Supplement, distributions in
respect of the Certificates of a series that includes Notes may be subordinate
to payments in respect of the Notes of such series as more fully described in
the related Prospectus Supplement. Distributions in respect of interest on and
principal of any class of Certificates will be made on a pro rata basis among
all the Certificateholders of such class.
In the case of a series of Certificates which includes two or more classes
of Certificates, the timing, sequential order, priority of payment or amount of
distributions in respect of interest and principal, and any schedule or formula
or other provisions applicable to the determination thereof, of each such class
shall be as set forth in the related Prospectus Supplement. A series with
Certificates may provide for a Revolving Period, during which collections of
principal on the Receivables are not applied to distributions on the related
Securities, or may provide for a liquidity facility or similar arrangement that
permits one or more classes of the related Securities to be paid in planned
amounts on scheduled Distribution Dates. The aggregate initial principal amount
of the Certificates and the Notes, if any, of a series may, after giving effect
to the purchase of all Subsequent Receivables, if any, for such series be
greater than the aggregate initial principal balance of the Receivables in that
series.
CERTAIN INFORMATION REGARDING THE SECURITIES
FIXED RATE SECURITIES
Each class of Securities (other than certain classes of Strip Notes or
Strip Certificates) may bear interest at a fixed rate per annum ("Fixed Rate
Securities") or at a variable or adjustable rate per annum ("Floating Rate
Securities"), as more fully described below and in the applicable Prospectus
Supplement. Each class of Fixed Rate Securities will bear interest at the
applicable per annum Interest Rate or Pass Through Rate, as the case may be,
specified in the applicable Prospectus Supplement. Unless otherwise set forth in
the applicable Prospectus Supplement, interest on each class of Fixed Rate
Securities will be computed on the basis of a 360-day year of twelve 30-day
months. See "Description of the Notes -- Principal and Interest on the Notes"
and "Description of the Certificates -- Distributions of Principal and
Interest".
FLOATING RATE SECURITIES
Each class of Floating Rate Securities will bear interest for each
applicable Interest Reset Period (as such term is defined in the related
Prospectus Supplement with respect to a class of Floating Rate Securities, the
"Interest Reset Period") at a rate per annum determined by reference to an
interest rate basis (the "Base Rate"), plus or minus the Spread, if any, or
multiplied by the Spread Multiplier, if any, in each case as specified in the
related Prospectus Supplement. The "Spread" is the number of basis points (one
basis point
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equals one one-hundredth of a percentage point) that may be specified in the
applicable Prospectus Supplement as being applicable to such class, and the
"Spread Multiplier" is the percentage that may be specified in the applicable
Prospectus Supplement as being applicable to such class.
The applicable Prospectus Supplement will designate one of the following
Base Rates as applicable to a given Floating Rate Security: (i) LIBOR (a "LIBOR
Security"), (ii) the Commercial Paper Rate (a "Commercial Paper Rate Security"),
(iii) the Treasury Rate (a "Treasury Rate Security"), (iv) the Federal Funds
Rate (a "Federal Funds Rate Security"), (v) the CD Rate (a "CD Rate Security")
or (vi) such other Base Rate as is set forth in such Prospectus Supplement. The
"Index Maturity" for any class of Floating Rate Securities is the period of
maturity of the instrument or obligation from which the Base Rate is calculated.
"H.15(519)" means the publication entitled "Statistical Release H.15(519),
Selected Interest Rates", or any successor publication, published by the Board
of Governors of the Federal Reserve System. "Composite Quotations" means the
daily statistical release entitled "Composite 3:30 p.m. Quotations for U.S.
Government Securities" published by the Federal Reserve Bank of New York.
"Interest Reset Date" will be the first day of the applicable Interest Reset
Period, or such other day as may be specified in the related Prospectus
Supplement with respect to a class of Floating Rate Securities.
As specified in the applicable Prospectus Supplement, Floating Rate
Securities of a given class may also have either or both of the following (in
each case expressed as a rate per annum): (i) a maximum limitation, or ceiling,
on the rate at which interest may accrue during any interest period and (ii) a
minimum limitation, or floor, on the rate at which interest may accrue during
any interest period. In addition to any maximum interest rate that may be
applicable to any class of Floating Rate Securities, the interest rate
applicable to any class of Floating Rate Securities will in no event be higher
than the maximum rate permitted by applicable law, as the same may be modified
by United States law of general application.
Each Trust with respect to which a class of Floating Rate Securities will
be issued will appoint, and enter into agreements with, a calculation agent
(each, a "Calculation Agent") to calculate interest rates on each such class of
Floating Rate Securities issued with respect thereto. The applicable Prospectus
Supplement will set forth the identity of the Calculation Agent for each such
class of Floating Rate Securities of a given series, which may be either the
related Trustee or Indenture Trustee with respect to such series. All
determinations of interest by the Calculation Agent shall, in the absence of
manifest error, be conclusive for all purposes and binding on the holders of
Floating Rate Securities of a given class. Unless otherwise specified in the
applicable Prospectus Supplement, all percentages resulting from any calculation
of the rate of interest on a Floating Rate Security will be rounded, if
necessary, to the nearest 1/100,000 of 1% (.0000001), with five one-millionths
of a percentage point rounded upward.
CD Rate Securities. Each CD Rate Security will bear interest for each
Interest Reset Period at the interest rate calculated with reference to the CD
Rate and the Spread or Spread Multiplier, if any, specified in such Security and
in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, the "CD
Rate" for each Interest Reset Period shall be the rate as of the second business
day prior to the Interest Reset Date for such Interest Reset Period (a "CD Rate
Determination Date") for negotiable certificates of deposit having the Index
Maturity designated in the applicable Prospectus Supplement as published in
H.15(519) under the heading "CDs (Secondary Market)". In the event that such
rate is not published prior to 3:00 p.m., New York City time, on the Calculation
Date (as defined below) pertaining to such CD Rate Determination Date, then the
"CD Rate" for such Interest Reset Period will be the rate on such CD Rate
Determination Date for negotiable certificates of deposit of the Index Maturity
designated in the applicable Prospectus Supplement as published in Composite
Quotations under the heading "Certificates of Deposit". If by 3:00 p.m., New
York City time, on such Calculation Date such rate is not yet published in
either H.15(519) or Composite Quotations, then the "CD Rate" for such Interest
Reset Period will be calculated by the Calculation Agent for such CD Rate
Security and will be the arithmetic mean of the secondary market offered rates
as of 10:00 a.m., New York City time, on such CD Rate Determination Date, of
three leading nonbank dealers in negotiable U.S. dollar certificates of deposit
in The City of New York selected by the Calculation Agent for such CD Rate
Security for negotiable certificates of deposit of major United States money
center banks of the highest
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credit standing (in the market for negotiable certificates of deposit) with a
remaining maturity closest to the Index Maturity designated in the related
Prospectus Supplement in a denomination of $5,000,000; provided, however, that
if the dealers selected as aforesaid by such Calculation Agent are not quoting
offered rates as mentioned in this sentence, the "CD Rate" for such Interest
Reset Period will be the same as the CD Rate for the immediately preceding
Interest Reset Period.
The "Calculation Date" pertaining to any CD Rate Determination Date shall
be the first to occur of (a) the tenth calendar day after such CD Rate
Determination Date or, if such day is not a business day, the next succeeding
business day or (b) the second business day preceding the date any payment is
required to be made for any period following the applicable Interest Reset Date.
Commercial Paper Rate Securities. Each Commercial Paper Rate Security will
bear interest for each Interest Reset Period at the interest rate calculated
with reference to the Commercial Paper Rate and the Spread or Spread Multiplier,
if any, specified in such Security and in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, the
"Commercial Paper Rate" for each Interest Reset Period will be determined by the
Calculation Agent for such Commercial Paper Rate Security as of the second
business day prior to the Interest Reset Date for such Interest Reset Period (a
"Commercial Paper Rate Determination Date") and shall be the Money Market Yield
(as defined below) on such Commercial Paper Rate Determination Date of the rate
for commercial paper having the Index Maturity specified in the applicable
Prospectus Supplement, as such rate shall be published in H.15(519) under the
heading "Commercial Paper". In the event that such rate is not published prior
to 3:00 p.m., New York City time, on the Calculation Date (as defined below)
pertaining to such Commercial Paper Rate Determination Date, then the
"Commercial Paper Rate" for such Interest Reset Period shall be the Money Market
Yield on such Commercial Paper Rate Determination Date of the rate for
commercial paper of the specified Index Maturity as published in Composite
Quotations under the heading "Commercial Paper". If by 3:00 p.m., New York City
time, on such Calculation Date such rate is not yet published in either
H.15(519) or Composite Quotations, then the "Commercial Paper Rate" for such
Interest Reset Period shall be the Money Market Yield of the arithmetic mean of
the offered rates, as of 11:00 a.m., New York City time, on such Commercial
Paper Rate Determination Date of three leading dealers of commercial paper in
The City of New York selected by the Calculation Agent for such Commercial Paper
Rate Security for commercial paper of the specified Index Maturity placed for an
industrial issuer whose bonds are rated "AA" or the equivalent by a nationally
recognized rating agency; provided, however, that if the dealers selected as
aforesaid by such Calculation Agent are not quoting offered rates as mentioned
in this sentence, the "Commercial Paper Rate" for such Interest Reset Period
will be the same as the Commercial Paper Rate for the immediately preceding
Interest Reset Period.
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
D X 360
Money Market Yield = ------------- X 100
360 - (D X M)
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the specified Index Maturity.
The "Calculation Date" pertaining to any Commercial Paper Rate
Determination Date shall be the first to occur of (a) the tenth calendar day
after such Commercial Paper Rate Determination Date or, if such day is not a
business day, the next succeeding business day or (b) the second business day
preceding the date any payment is required to be made for any period following
the applicable Interest Reset Date.
Federal Funds Rate Securities. Each Federal Funds Rate Security will bear
interest for each Interest Reset Period at the interest rate calculated with
reference to the Federal Funds Rate and the Spread or Spread Multiplier, if any,
specified in such Security and in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, the
"Federal Funds Rate" for each Interest Reset Period shall be the effective rate
on the Interest Reset Date for such Interest Reset Period (a "Federal Funds Rate
Determination Date") for Federal Funds as published in H.15(519) under the
heading
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"Federal Funds (Effective)". In the event that such rate is not published prior
to 3:00 p.m., New York City time, on the Calculation Date (as defined below)
pertaining to such Federal Funds Rate Determination Date, the "Federal Funds
Rate" for such Interest Reset Period shall be the rate on such Federal Funds
Rate Determination Date as published in Composite Quotations under the heading
"Federal Funds/Effective Rate". If by 3:00 p.m., New York City time, on such
Calculation Date such rate is not yet published in either H.15(519) or Composite
Quotations, then the "Federal Funds Rate" for such Interest Reset Period shall
be the rate on such Federal Funds Rate Determination Date made publicly
available by the Federal Reserve Bank of New York which is equivalent to the
rate which appears in H.15(519) under the heading "Federal Funds (Effective)";
provided, however, that if such rate is not made publicly available by the
Federal Reserve Bank of New York by 3:00 p.m., New York City time, on such
Calculation Date, the "Federal Funds Rate" for such Interest Reset Period will
be the same as the Federal Funds Rate in effect for the immediately preceding
Interest Reset Period. In the case of a Federal Funds Rate Security that resets
daily, the interest rate on such Security for the period from and including a
Monday to but excluding the succeeding Monday will be reset by the Calculation
Agent for such Security on such second Monday (or, if not a business day, on the
next succeeding business day) to a rate equal to the average of the Federal
Funds Rates in effect with respect to each such day in such week.
The "Calculation Date" pertaining to any Federal Funds Rate Determination
Date shall be the next succeeding business day.
LIBOR Securities. Each LIBOR Security will bear interest for each Interest
Reset Period at the interest rate calculated with reference to LIBOR and the
Spread or Spread Multiplier, if any, specified in such Security and in the
applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, with
respect to LIBOR indexed to the offered rates for U.S. dollar deposits, "LIBOR"
for each Interest Reset Period will be determined by the Calculation Agent for
any LIBOR Security as follows:
On the second London Banking Day prior to the Interest Reset Date for
such Interest Reset Period (a "LIBOR Determination Date"), the Calculation
Agent for such LIBOR Security will determine the arithmetic mean of the
offered rates for deposits in U.S. dollars for the period of the Index
Maturity specified in the applicable Prospectus Supplement, commencing on
such Interest Reset Date, which appear on Telerate Page 3750 at
approximately 11:00 a.m., London time, on such LIBOR Determination Date.
"Telerate Page 3750" means the display page so designated on the Dow Jones
Telerate Service (or such other page as may replace that page on that
service, or such other service as may be nominated as the information
vendor, for the purpose of displaying London interbank offered rates of
major banks). If such rate appears on Telerate Page 3750, LIBOR will be
such rate. "LIBOR Business Day" as used herein means a day that is both a
Business Day (as defined in the Indenture or Pooling and Servicing
Agreement) and a day on which banking institutions in the City of London,
England are not required or authorized by law to be closed. If on any LIBOR
Determination Date the offered rate does not appear on Telerate Page 3750,
the Calculation Agent will request each of the reference banks (which shall
be major banks that are engaged in transactions in the London interbank
market selected by the Calculation Agent) to provide the Calculation Agent
with its offered quotation for United States dollar deposits for the period
of the specified Index Maturity to prime banks in the London interbank
market as of 11:00 a.m., London time, on such date. If at least two
reference banks provide the Calculation Agent with such offered quotations,
LIBOR on such date will be the arithmetic mean, rounded upwards, if
necessary, to the nearest 1/100,000 of 1% (.0000001), with five
one-millionths of a percentage point rounded upward, of all such
quotations. If on such date fewer than two of the reference banks provide
the Calculation Agent with such offered quotations, LIBOR on such date will
be the arithmetic mean, rounded upwards, if necessary, to the nearest
1/100,000 of 1% (.0000001), with five one-millionths of a percentage point
rounded upward, of the offered per annum rates that one or more leading
banks in The City of New York selected by the Calculation Agent are quoting
as of 11:00 a.m., New York City time, on such date to leading European
banks for United States dollar deposits for the period of the specified
Index Maturity; provided, however, that if such banks are not quoting as
described above, LIBOR for
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such date will be LIBOR applicable to the Interest Reset Period immediately
preceding such Interest Reset Period.
Treasury Rate Securities. Each Treasury Rate Security will bear interest
for each Interest Reset Period at the interest rate calculated with reference to
the Treasury Rate and the Spread or Spread Multiplier, if any, specified in such
Security and in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, the
"Treasury Rate" for each Interest Period will be the rate for the auction held
on the Treasury Rate Determination Date (as defined below) for such Interest
Reset Period of direct obligations of the United States ("Treasury bills")
having the Index Maturity specified in the applicable Prospectus Supplement, as
such rate shall be published in H.15(519) under the heading "U.S. Government
Securities -- Treasury bills -- auction average (investment)" or, in the event
that such rate is not published prior to 3:00 p.m., New York City time, on the
Calculation Date (as defined below) pertaining to such Treasury Rate
Determination Date, the auction average rate (expressed as a bond equivalent on
the basis of a year of 365 or 366 days, as applicable, and applied on a daily
basis) on such Treasury Rate Determination Date as otherwise announced by the
United States Department of the Treasury. In the event that the results of the
auction of Treasury bills having the specified Index Maturity are not published
or reported as provided above by 3:00 p.m., New York City time, on such
Calculation Date, or if no such auction is held on such Treasury Rate
Determination Date, then the "Treasury Rate" for such Interest Reset Period
shall be calculated by the Calculation Agent for such Treasury Rate Security and
shall be the yield to maturity (expressed as a bond equivalent on the basis of a
year of 365 or 366 days, as applicable, and applied on a daily basis) of the
arithmetic mean of the secondary market bid rates, as of approximately 3:30
p.m., New York City time, on such Treasury Rate Determination Date, of three
leading primary United States government securities dealers selected by such
Calculation Agent for the issue of Treasury bills with a remaining maturity
closest to the specified Index Maturity; provided, however, that if the dealers
selected as aforesaid by such Calculation Agent are not quoting bid rates as
mentioned in this sentence, then the "Treasury Rate" for such Interest Reset
Period will be the same as the Treasury Rate for the immediately preceding
Interest Reset Period.
The "Treasury Rate Determination Date" for each Interest Reset Period will
be the day of the week in which the Interest Reset Date for such Interest Reset
Period falls on which Treasury bills would normally be auctioned. Treasury bills
are normally sold at auction on Monday of each week, unless that day is a legal
holiday, in which case the auction is normally held on the following Tuesday,
except that such auction may be held on the preceding Friday. If, as the result
of a legal holiday, an auction is so held on the preceding Friday, such Friday
will be the Treasury Rate Determination Date pertaining to the Interest Reset
Period commencing in the next succeeding week. If an auction date shall fall on
any day that would otherwise be an Interest Reset Date for a Treasury Rate
Security, then such Interest Reset Date shall instead be the business day
immediately following such auction date.
The "Calculation Date" pertaining to any Treasury Rate Determination Date
shall be the first to occur of (a) the tenth calendar day after such Treasury
Rate Determination Date or, if such a day is not a business day, the next
succeeding business day or (b) the second business day preceding the date any
payment is required to be made for any period following the applicable Interest
Reset Date.
INDEXED SECURITIES
To the extent so specified in any Prospectus Supplement, any class of
Securities of a given series may consist of Securities ("Indexed Securities") in
which the principal amount payable at the final scheduled Payment Date or
Distribution Date, as the case may be, for such class (the "Indexed Principal
Amount") is determined by reference to a measure (the "Index") which will be
related to (i) the difference in the rate of exchange between United States
dollars and a currency or composite currency (the "Indexed Currency") specified
in the applicable Prospectus Supplement (such Indexed Securities, "Currency
Indexed Securities"); (ii) the difference in the price of a specified commodity
(the "Indexed Commodity") on specified dates (such Indexed Securities,
"Commodity Indexed Securities"); or (iii) the difference in the level of a
specified stock index (the "Stock Index"), which may be based on U.S. or foreign
stocks, on specified dates (such Indexed
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Securities, "Stock Indexed Securities"); or (iv) such other objective price or
economic measures as are described in the applicable Prospectus Supplement. The
manner of determining the Indexed Principal Amount of an Indexed Security and
historical and other information concerning the Indexed Currency, the Indexed
Commodity, the Stock Index or other price or economic measures used in such
determination will be set forth in the applicable Prospectus Supplement,
together with information concerning tax consequences to the holders of such
Indexed Securities.
If the determination of the Indexed Principal Amount of an Indexed Security
is based on an Index calculated or announced by a third party and such third
party either suspends the calculation or announcement of such Index or changes
the basis upon which such Index is calculated (other than changes consistent
with policies in effect at the time such Indexed Security was issued and
permitted changes described in the applicable Prospectus Supplement), then such
Index shall be calculated for purposes of such Indexed Security by an
independent calculation agent named in the applicable Prospectus Supplement on
the same basis, and subject to the same conditions and controls, as applied to
the original third party. If for any reason such Index cannot be calculated on
the same basis and subject to the same conditions and controls as applied to the
original third party, then the Indexed Principal Amount of such Indexed Security
shall be calculated in the manner set forth in the applicable Prospectus
Supplement. Any determination of such independent calculation agent shall in the
absence of manifest error be binding on all parties.
Unless otherwise specified in the applicable Prospectus Supplement,
interest on an Indexed Security will be payable based on the amount designated
in the applicable Prospectus Supplement as the "Face Amount" of such Indexed
Security. The applicable Prospectus Supplement will describe whether the
principal amount of the related Indexed Security, if any, that would be payable
upon redemption or repayment prior to the applicable final scheduled Payment
Date or Distribution Date, as the case may be, will be the Face Amount of such
Indexed Security, the Indexed Principal Amount of such Indexed Security at the
time of redemption or repayment or another amount described in such Prospectus
Supplement.
BOOK-ENTRY REGISTRATION
DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York UCC and a "clearing agency"
registered pursuant to Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and to facilitate the clearance and settlement
of securities transactions between Participants through electronic book-entries,
thereby eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers, banks, trust companies and clearing
corporations. Indirect access to the DTC system also is available to others such
as banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly
("Indirect Participants").
Unless otherwise specified in the related Prospectus Supplement,
Securityholders that are not Participants or Indirect Participants but desire to
purchase, sell or otherwise transfer ownership of, or other interests in,
Securities may do so only through Participants and Indirect Participants. In
addition, Securityholders will receive all distributions of principal and
interest from the related Indenture Trustee or the related Trustee, as
applicable (the "Applicable Trustee"), through Participants. Under a book-entry
format, Securityholders may experience some delay in their receipt of payments,
since such payments will be forwarded by the Applicable Trustee to DTC's
Nominee. DTC will forward such payments to its Participants, which thereafter
will forward them to Indirect Participants or Securityholders. Except to the
extent the applicable Company holds Certificates with respect to any series of
Securities, it is anticipated that the only "Securityholder", "Noteholder" and
"Certificateholder" will be DTC's Nominee. Noteholders will not be recognized by
each Indenture Trustee as Noteholders, as such term is used in each Indenture,
and Noteholders will be permitted to exercise the rights of Noteholders only
indirectly through DTC and its Participants. Similarly, Certificateholders will
not be recognized by each Trustee as Certificateholders as such term is used in
each Trust Agreement or Pooling and Servicing Agreement, and Certificateholders
will be permitted to exercise the rights of Certificateholders only indirectly
through DTC and its Participants.
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Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
Securities among Participants on whose behalf it acts with respect to the
Securities and to receive and transmit distributions of principal of, and
interest on, the Securities. Participants and Indirect Participants with which
Securityholders have accounts with respect to the Securities similarly are
required to make book-entry transfers and receive and transmit such payments on
behalf of their respective Securityholders. Accordingly, although
Securityholders will not possess Securities, the Rules provide a mechanism by
which Participants will receive payments and will be able to transfer their
interests.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a
Securityholder to pledge Securities to persons or entities that do not
participate in the DTC system, or to otherwise act with respect to such
Securities, may be limited due to the lack of a physical certificate for such
Securities.
DTC has advised the Seller that it will take any action permitted to be
taken by a Noteholder under the related Indenture or a Certificateholder under
the related Trust Agreement or Pooling and Servicing Agreement only at the
direction of one or more Participants to whose accounts with DTC the applicable
Notes or Certificates are credited. DTC may take conflicting actions with
respect to other undivided interests to the extent that such actions are taken
on behalf of Participants whose holdings include such undivided interests.
Except as required by law, neither the Administrator, if any, the
applicable Trustee nor the applicable Indenture Trustee, if any, will have any
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests of the Securities of any series held by DTC's
Nominee, or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
Cedel Bank, societe anonyme ("CEDEL") is incorporated under the laws of
Luxembourg as a professional depository. CEDEL holds securities for its
participating organizations ("CEDEL Participants") and facilitates the clearance
and settlement of securities transactions between CEDEL Participants through
electronic book-entry changes in accounts of CEDEL Participants, thereby
eliminating the need for physical movement of certificates. Transactions may be
settled in CEDEL in any of 28 currencies, including United States dollars. CEDEL
provides to its CEDEL Participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. CEDEL interfaces with domestic
markets in several countries. As a professional depository, CEDEL is subject to
regulation by the Luxembourg Monetary Institute. CEDEL Participants are
recognized financial institutions around the world, including underwriters,
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations and may include the Underwriters. Indirect
access to CEDEL is also available to others, such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
CEDEL Participant, either directly or indirectly.
The Euroclear System was created in 1968 to hold securities for
participants of the Euroclear System ("Euroclear Participants") and to clear and
settle transactions between Euroclear Participants through simultaneous
electronic book-entry delivery against payment, thereby eliminating the need for
physical movement of certificates and any risk from lack of simultaneous
transfers of securities and cash. Transactions may now be settled in Euroclear
in any of 32 currencies, including United States dollars. The Euroclear System
includes various other services, including securities lending and borrowing, and
interfaces with domestic markets in several countries generally similar to the
arrangements for cross-market transfers with DTC. The Euroclear System is
operated by Morgan Guaranty Trust Company of New York, Brussels, Belgium office
(the "Euroclear Operator" or "Euroclear"), under contract with Euroclear
Clearance System, S.C., a Belgian cooperative corporation (the "Cooperative").
All operations are conducted by the Euroclear Operator, and all Euroclear
securities clearance accounts and Euroclear cash accounts are accounts with the
Euroclear Operator, not the Cooperative. The Cooperative establishes policy for
the Euroclear System on behalf of Euroclear Participants. Euroclear Participants
include banks (including central banks), securities brokers and dealers and
other professional financial intermediaries and may include the Underwriters.
Indirect access to the Euroclear System is also available to other firms that
clear through or maintain a custodial relationship with a Euroclear Participant,
either directly or indirectly.
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The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawal of
securities and cash from the Euroclear System, and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific certificates
to specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear Participants and has no record
of or relationship with persons holding through Euroclear Participants.
Distributions with respect to Securities held through CEDEL or Euroclear
will be credited to the cash accounts of CEDEL Participants or Euroclear
Participants in accordance with the relevant system's rules and procedures, to
the extent received by its Depositary. Such distributions will be subject to tax
reporting in accordance with relevant United States tax laws and regulations.
See "Certain Federal Income Tax Consequences" in this Prospectus and "Global
Clearance, Settlement and Tax Documentation Procedures" in Annex I to the
related Prospectus Supplement. CEDEL or the Euroclear Operator, as the case may
be, will take any other action permitted to be taken by a Security under the
Indenture, Trust Agreement or Pooling and Servicing Agreement, as applicable, on
behalf of a CEDEL Participant or Euroclear Participant only in accordance with
its relevant rules and procedures and subject to its Depositary's ability to
effect such actions on its behalf through DTC.
Cede, as nominee for DTC, will hold the Securities. CEDEL and Euroclear
will hold omnibus positions in the Securities on behalf of the CEDEL
Participants and the Euroclear Participants, respectively, through customers'
securities accounts in CEDEL's and Euroclear's names on the books of their
respective depositaries (collectively, the "Depositaries"), which in turn will
hold such positions in customers' securities accounts in the Depositaries' names
on the books of DTC.
Transfers between DTC's participating organizations (the "Participants")
will occur in accordance with DTC rules. Transfers between CEDEL Participants
and Euroclear Participants will occur in the ordinary way in accordance with
their applicable rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by its Depositary; however, such cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterparty in such system in accordance with its rules and
procedures and within its established deadlines (European time). The relevant
European international clearing system will, if the transaction meets its
settlement requirements, deliver instructions to its Depositary to take action
to effect final settlement on its behalf by delivering or receiving securities
in DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. CEDEL Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities in CEDEL or
Euroclear as a result of a transaction with a Participant will be made during
the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant CEDEL
Participant or Euroclear Participant on such business day. Cash received in
CEDEL or Euroclear as a result of sales of securities by or through a CEDEL
Participant or a Euroclear Participant to a Participant will be received with
value on the DTC settlement date but will be available in the relevant CEDEL or
Euroclear cash account only as of the business day following settlement in DTC.
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Although DTC, CEDEL and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of Securities among participants of DTC, CEDEL
and Euroclear, they are under no obligation to perform or continue to perform
such procedures and such procedures may be discontinued at any time.
In the event that any of DTC, Cedel or Euroclear should discontinue its
services, the Administrator would seek an alternative depository (if available)
or cause the issuance of Definitive Securities to the owners thereof or their
nominees in the manner described in the Prospectus under "Certain Information
Regarding the Securities -- Definitive Securities".
DEFINITIVE SECURITIES
Unless otherwise specified in the related Prospectus Supplement, the Notes,
if any, and the Certificates of a given series will be issued in fully
registered, certificated form ("Definitive Notes" and "Definitive Certificates",
respectively, and collectively referred to herein as "Definitive Securities") to
Noteholders or Certificateholders or their respective nominees, rather than to
DTC or its nominee, only if (i) the related Administrator or Trustee, as
applicable, determines that DTC is no longer willing or able to discharge
properly its responsibilities as depository with respect to such Securities and
such Administrator or Trustee is unable to locate a qualified successor (and if
it is an Administrator that has made such determination, such Administrator so
notifies the Applicable Trustee in writing), (ii) the Administrator or Trustee,
as applicable, at its option, elects to terminate the book-entry system through
DTC or (iii) after the occurrence of an Event of Default or a Servicer Default
with respect to such Securities, holders representing at least a majority of the
outstanding principal amount of the Notes or the Certificates, as the case may
be, of such series advise the Applicable Trustee through DTC in writing that the
continuation of a book-entry system through DTC (or a successor thereto) with
respect to such Notes or Certificates is no longer in the best interest of the
holders of such Securities.
Upon the occurrence of any event described in the immediately preceding
paragraph, the Applicable Trustee will be required to notify all applicable
Securityholders of a given series through Participants of the availability of
Definitive Securities. Upon surrender by DTC of the definitive certificates
representing the corresponding Securities and receipt of instructions for
re-registration, the Applicable Trustee will reissue such Securities as
Definitive Securities to such Securityholders.
Distributions of principal of, and interest on, such Definitive Securities
will thereafter be made by the Applicable Trustee in accordance with the
procedures set forth in the related Indenture or the related Trust Agreement or
Pooling and Servicing Agreement, as applicable, directly to holders of
Definitive Securities in whose names the Definitive Securities were registered
at the close of business on the applicable Record Date specified for such
Securities in the related Prospectus Supplement. Such distributions will be made
by check mailed to the address of such holder as it appears on the register
maintained by the Applicable Trustee. The final payment on any such Definitive
Security, however, will be made only upon presentation and surrender of such
Definitive Security at the office or agency specified in the notice of final
distribution to the applicable Securityholders.
Definitive Securities will be transferable and exchangeable at the offices
of the Applicable Trustee or of a registrar named in a notice delivered to
holders of Definitive Securities. No service charge will be imposed for any
registration of transfer or exchange, but the Applicable Trustee may require
payment of a sum sufficient to cover any tax or other governmental charge
imposed in connection therewith.
LIST OF SECURITYHOLDERS
Unless otherwise specified in the related Prospectus Supplement with
respect to the Notes of any series, three or more holders of the Notes of such
series or one or more holders of such Notes evidencing not less than 25% of the
aggregate outstanding principal balance of such Notes may, by written request to
the related Indenture Trustee, obtain access to the list of all Noteholders
maintained by such Indenture Trustee for the purpose of communicating with other
Noteholders with respect to their rights under the related Indenture or under
such Notes. Such Indenture Trustee may elect not to afford the requesting
Noteholders access to the
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list of Noteholders if it agrees to mail the desired communication or proxy, on
behalf of and at the expense of the requesting Noteholders, to all Noteholders
of such series.
Unless otherwise specified in the related Prospectus Supplement with
respect to the Certificates of any series, three or more holders of the
Certificates of such series or one or more holders of such Certificates
evidencing not less than 25% of the Certificate Balance of such Certificates
may, by written request to the related Trustee, obtain access to the list of all
Certificateholders maintained by such Trustee for the purpose of communicating
with other Certificateholders with respect to their rights under the related
Trust Agreement or Pooling and Servicing Agreement or under such Certificates.
REPORTS TO SECURITYHOLDERS
With respect to each series of Securities that includes Notes, on or prior
to each Payment Date, the Servicer will prepare and provide to the related
Indenture Trustee a statement to be delivered to the related Noteholders on such
Payment Date. With respect to each series of Securities that includes
Certificates, on or prior to each Distribution Date, the Servicer will prepare
and provide to the related Trustee a statement to be delivered to the related
Certificateholders. With respect to each series of Securities, each such
statement to be delivered to Noteholders, if any, will include (to the extent
applicable) the following information (and any other information so specified in
the related Prospectus Supplement) as to the Notes of such series with respect
to such Payment Date or the period since the previous Payment Date, as
applicable, and each such statement to be delivered to Certificateholders, if
any, will include (to the extent applicable) the following information (and any
other information so specified in the related Prospectus Supplement) as to the
Certificates of such series with respect to such Distribution Date or the period
since the previous Distribution Date, as applicable:
(i) the amount of the distribution allocable to principal of each
class of such Notes and to the Certificate Balance of each class of such
Certificates, including, if applicable, the difference, if any (which may
be a positive or negative number) between the amount determined on such
date to be distributable to Noteholders and Certificateholders on account
of principal on the next preceding Payment Date and the amount actually
distributed to Noteholders and Certificateholders on account of principal
on such Payment Date (the "Noteholders' Reconciliation Principal Adjustment
Amount" and "Certificateholders' Reconciliation Principal Adjustment
Amount", respectively);
(ii) the amount of the distribution allocable to interest on or with
respect to each class of Securities of such series;
(iii) the Pool Balance as of the close of business on the last day of
the preceding Collection Period;
(iv) the aggregate outstanding principal balance and the Note Pool
Factor for each class of such Notes, and the Certificate Balance and the
Certificate Pool Factor for each class of such Certificates, each after
giving effect to all payments reported under clause (i) above on such date;
(v) the amount of the Servicing Fee paid to the Servicer with respect
to the related Collection Period or Collection Periods, as the case may be;
(vi) the Interest Rate or Pass Through Rate for the next period for
any class of Notes or Certificates of such series with variable or
adjustable rates;
(vii) the amount of the aggregate realized losses, if any, for the
second preceding Collection Period;
(viii) the Noteholders' Interest Carryover Shortfall, the Noteholders'
Principal Carryover Shortfall, the Certificateholders' Interest Carryover
Shortfall and the Certificateholders' Principal Carryover Shortfall (each
as defined in the related Prospectus Supplement), if any, in each case as
applicable to each class of Securities, and the change in such amounts from
the preceding statement;
(ix) the aggregate Purchase Amounts for Receivables, if any, included
in the related Series Trust Property that were repurchased in such
Collection Period;
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(x) the balance of the related Reserve Account (if any) on such date,
after giving effect to changes therein on such date;
(xi) for each such date during the related Funding Period (if any),
the related remaining Pre-Funded Amount; and
(xii) for the first such date that is on or immediately following the
end of the Funding Period (if any), the amount of any related remaining
Pre-Funded Amount that has not been used to fund the purchase of Subsequent
Receivables and is being passed through as payments of principal on the
Securities of such series.
Each amount set forth pursuant to subclauses (i), (ii), (v) and (viii) with
respect to the Notes or the Certificates of any series will be expressed as a
dollar amount per $1,000 of the initial principal balance of such Notes or the
initial Certificate Balance of such Certificates, as applicable.
Within the prescribed period of time for tax reporting purposes after the
end of each calendar year during the term of each Trust, the Applicable Trustee
will mail to each person who at any time during such calendar year has been a
Securityholder with respect to such Trust and received any payment thereon a
statement containing certain information for the purposes of such
Securityholder's preparation of federal income tax returns. See "Certain Federal
Income Tax Consequences".
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of each Sale and Servicing
Agreement or Pooling and Servicing Agreement pursuant to which a Trust will
purchase Receivables from the Seller with respect to a series of Securities and
the Servicer will agree to service such Receivables, each Trust Agreement (in
the case of a grantor trust, the Pooling and Servicing Agreement) pursuant to
which a Trust will be created and Certificates, if any, will be issued and each
Administration Agreement pursuant to which CFC will undertake certain
administrative duties with respect to a series of Notes (collectively, the
"Transfer and Servicing Agreements"). Forms of the Transfer and Servicing
Agreements have been filed as exhibits to the Registration Statement of which
this Prospectus forms a part. This summary does not purport to be complete and
is subject to, and qualified in its entirety by reference to, all the provisions
of the Transfer and Servicing Agreements.
SALE AND ASSIGNMENT OF RECEIVABLES
On the Closing Date specified with respect to any series of Securities in
the related Prospectus Supplement (the "Closing Date"), the Seller will, if so
specified in such Prospectus Supplement, transfer and assign to the applicable
Trustee, without recourse, pursuant to a Sale and Servicing Agreement or a
Pooling and Servicing Agreement, as applicable, its entire interest in the
Initial Receivables, if any, of the related Receivables Pool, including its
security interests in the related Financed Vehicles. Each such Receivable will
be identified in a schedule appearing as an exhibit to such Pooling and
Servicing Agreement or Sale and Servicing Agreement (a "Schedule of
Receivables"). The applicable Trustee will, concurrently with such transfer and
assignment, execute and deliver the related Notes and/or Certificates, as
applicable. Unless otherwise provided in the related Prospectus Supplement, the
net proceeds received from the sale of the Certificates and the Notes of a
series will be applied to the purchase of the related Receivables from the
Seller and, to the extent specified in the related Prospectus Supplement, to the
deposit of the Pre-Funded Amount for such series into the related Pre-Funding
Account. The related Prospectus Supplement for a series of Securities will
specify whether, and the terms, conditions and manner under which, Subsequent
Receivables for such series will be sold by the Seller to the applicable Trust
from time to time during any Funding Period for such series on each date
specified as a transfer date in the related Prospectus Supplement (each, a
"Subsequent Transfer Date").
In each Sale and Servicing Agreement or Pooling and Servicing Agreement,
the Seller will represent and warrant to the applicable Trust, among other
things, that: (i) the information provided in the related Schedule of
Receivables is correct in all material respects; (ii) the Obligor on each
related Receivable is required to
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maintain physical damage insurance covering the Financed Vehicle in accordance
with the Seller's normal requirements; (iii) as of the applicable Closing Date
or the applicable Subsequent Transfer Date, if any, to the best of its
knowledge, the related Receivables are free and clear of all security interests,
liens, charges and encumbrances and no offsets, defenses or counterclaims have
been asserted or threatened; (iv) as of the Closing Date or the applicable
Subsequent Transfer Date, if any, each of such Receivables is or will be secured
by a first perfected security interest in favor of the Seller in the Financed
Vehicle; (v) each related Receivable, at the time it was originated, complied
and, as of the Closing Date or the applicable Subsequent Transfer Date, if any,
complies in all material respects with applicable federal and state laws,
including, without limitation, consumer credit, truth in lending, equal credit
opportunity and disclosure laws; and (vi) any other representations and
warranties that may be set forth in the related Prospectus Supplement.
Unless otherwise provided in the related Prospectus Supplement, as of the
last day of the second (or, if the Seller elects, the first) month following the
discovery by or notice to the Seller of a breach of any representation or
warranty of the Seller that materially and adversely affects the interests of
the related Trust in any Receivable, the Seller, unless the breach is cured,
will repurchase such Receivable from such Trust at a price equal to the unpaid
principal balance owed by the Obligor thereon plus interest thereon at the
respective APR to the last day of the month of repurchase (the "Purchase
Amount"). The repurchase obligation constitutes the sole remedy available to the
Certificateholders or the Trustee and any Noteholders or Indenture Trustee in
respect of the related series for any such uncured breach.
Pursuant to each Sale and Servicing Agreement or Pooling and Servicing
Agreement, to assure uniform quality in servicing the Receivables and to reduce
administrative costs, each Trust will designate the Servicer as custodian to
maintain possession, as such Trust's agent, of the related motor vehicle retail
installment sale contracts and any other documents relating to the Receivables.
The Seller's accounting records and computer systems will reflect the sale and
assignment of the related Receivables to the applicable Trust, and Uniform
Commercial Code ("UCC") financing statements reflecting such sale and assignment
will be filed.
ACCOUNTS
With respect to each Trust that issues one or more series of Notes, the
Servicer will establish and maintain with the related Indenture Trustee one or
more accounts, in the name of the Indenture Trustee on behalf of the Noteholders
and Certificateholders, if any, of such series, into which all payments made on
or with respect to the Receivables included in the Series Trust Property for
such series will be deposited (the "Collection Account"). The Servicer will
establish and maintain with such Indenture Trustee an account, in the name of
such Indenture Trustee on behalf of such Noteholders, into which amounts
released from the Collection Account and any Pre-Funding Account, Reserve
Account or other credit enhancement for such series for payment to such
Noteholders will be deposited and from which all distributions to such
Noteholders will be made (the "Note Distribution Account"). The Servicer will
establish and maintain with the related Trustee an account, in the name of such
Trustee on behalf of such Certificateholders, into which amounts released from
the Collection Account and any Pre-Funding Account, Reserve Account or other
credit or cash flow enhancement for such series for distribution to such
Certificateholders will be deposited and from which all distributions to such
Certificateholders will be made (the "Certificate Distribution Account"). With
respect to each Trust that does not issue Notes, the Servicer will also
establish and maintain the Collection Account and any other Trust Account in the
name of the related Trustee on behalf of the related Certificateholders. The
Trust Accounts relating to a series of Securities will not contain funds
relating to any other series of Securities.
If so provided in the related Prospectus Supplement, the Servicer will
establish for each series an additional account (the "Payahead Account"), in the
name of the related Indenture Trustee or Trustee, into which, to the extent
required by the Sale and Servicing Agreement, early payments by or on behalf of
Obligors on Precomputed Receivables allocated to such series will be deposited
until such time as the payment becomes due. Until such time as payments are
transferred from the Payahead Account to the Collection Account for such series,
they will not constitute collected interest or collected principal and will not
be available for distribution to the applicable Noteholders or
Certificateholders. The Payahead Account will
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initially be maintained with the applicable Indenture Trustee or, in the case of
each Trust that does not issue Notes, the applicable Trustee.
Any other accounts to be established with respect to a series of
Securities, including any Pre-Funding Account or any Reserve Account, will be
described in the related Prospectus Supplement.
For any series of Securities, funds in the Collection Account, the Note
Distribution Account and any Pre-Funding Account, Reserve Account and other
accounts identified as such in the related Prospectus Supplement (collectively,
the "Trust Accounts") will be invested as provided in the related Sale and
Servicing Agreement or Pooling and Servicing Agreement in Eligible Investments.
"Eligible Investments" are generally limited to investments acceptable to the
Rating Agencies rating such Securities as being consistent with the rating of
such Securities and may include motor vehicle retail sale contracts. Except as
described below or in the related Prospectus Supplement, Eligible Investments
are limited to obligations or securities that mature on or before the date of
the next distribution for such series. However, to the extent permitted by the
Rating Agencies for a series, funds in any Reserve Account for such series may
be invested in securities that will not mature prior to the date of the next
distribution with respect to the Certificates or Notes of such series and will
not be sold to meet any shortfalls. Thus, the amount of cash in any Reserve
Account at any time may be less than the balance of the Reserve Account. If the
amount required to be withdrawn from any Reserve Account to cover shortfalls in
collections on the Receivables allocated to the related series (as provided in
the related Prospectus Supplement) exceeds the amount of cash in the Reserve
Account, a temporary shortfall in the amounts distributed to the related
Noteholders or Certificateholders of such series could result, which could, in
turn, increase the average life of the Notes or the Certificates of such series.
Except as otherwise specified in the related Prospectus Supplement, investment
earnings on funds deposited in the Trust Accounts, net of losses and investment
expenses (collectively, "Investment Earnings"), shall be deposited in the
applicable Collection Account on each Distribution Date or Payment Date and
shall be treated as collections of interest on the related Receivables.
The Trust Accounts will be maintained as Eligible Deposit Accounts.
"Eligible Deposit Account" means either (a) a segregated account with an
Eligible Institution or (b) a segregated trust account with the corporate trust
department of a depository institution organized under the laws of the United
States of America or any one of the states thereof or the District of Columbia
(or any domestic branch of a foreign bank), having corporate trust powers and
acting as trustee for funds deposited in such account, so long as any of the
securities of such depository institution have a credit rating from each Rating
Agency in one of its generic rating categories which signifies investment grade.
"Eligible Institution" means, with respect to a Trust, (a) the corporate trust
department of the related Indenture Trustee or the related Trustee, as
applicable, or (b) a depository institution organized under the laws of the
United States of America or any one of the states thereof or the District of
Columbia (or any domestic branch of a foreign bank), (i) which has either (A) a
long-term unsecured debt rating acceptable to the Rating Agencies or (B) a
short-term unsecured debt rating or certificate of deposit rating acceptable to
the Rating Agencies and (ii) whose deposits are insured by the FDIC.
SERVICING PROCEDURES
The Servicer will make reasonable efforts to collect all payments due with
respect to the Receivables held by any Trust in respect of a series and will,
consistent with the related Sale and Servicing Agreement or Pooling and
Servicing Agreement, follow such collection procedures as it follows with
respect to comparable motor vehicle retail installment sale contracts it
services for itself or others. Consistent with its normal procedures, the
Servicer may, in its discretion, arrange with the Obligor on a Receivable to
extend or modify the payment schedule, but no such arrangement will, for
purposes of any Sale and Servicing Agreement or Pooling and Servicing Agreement,
modify the original due dates or the amount of the scheduled payments or extend
the final payment date of any Receivable beyond the Final Scheduled Maturity
Date (as such term is defined with respect to any Receivables Pool in the
related Prospectus Supplement) for the related series. Some of such arrangements
may result in the Servicer purchasing the Receivable for the Purchase Amount,
while others may result in the Servicer making Advances. The Servicer may sell
the Financed Vehicle
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securing the respective Receivable at public or private sale, or take any other
action permitted by applicable law. See "Certain Legal Aspects of the
Receivables".
COLLECTIONS
With respect to each series, the Servicer will deposit all payments on the
related Receivables (from whatever source) and all proceeds of such Receivables
collected during each collection period specified in the related Prospectus
Supplement (each, a "Collection Period") into the related Collection Account
within two business days after receipt thereof. However, at any time that and
for so long as (i) CFC is the Servicer, (ii) there exists no Servicer Default
and (iii) each other condition to making deposits less frequently than daily as
may be specified by the Rating Agencies or set forth in the related Prospectus
Supplement is satisfied, the Servicer will not be required to deposit such
amounts into the Collection Account until on or before the applicable
Distribution Date or Payment Date. Pending deposit into the Collection Account,
collections may be invested by the Servicer at its own risk and for its own
benefit and will not be segregated from its own funds. If the Servicer were
unable to remit such funds, Securityholders might incur a loss. To the extent
set forth in the related Prospectus Supplement, the Servicer may, in order to
satisfy the requirements described above, obtain a letter of credit or other
security for the benefit of the related Trust to secure timely remittances of
collections on the related Receivables and payment of the aggregate Purchase
Amount with respect to Receivables purchased by the Servicer.
Collections on a Precomputed Receivable made during a Collection Period
shall be applied first to repay any outstanding Precomputed Advances made by the
Servicer with respect to such Receivable (as described below), and to the extent
that collections on a Precomputed Receivable during a Collection Period exceed
the outstanding Precomputed Advances, the collections shall then be applied to
the scheduled payment on such Receivable. If any collections remaining after the
scheduled payment is made are insufficient to prepay the Precomputed Receivable
in full, then, unless otherwise provided in the related Prospectus Supplement,
generally such remaining collections (the "Payaheads") shall be transferred to
and kept in the Payahead Account, until such later Collection Period as the
collections may be transferred to the Collection Account and applied either to
the scheduled payment or to prepay such Receivable in full.
ADVANCES
If so provided in the related Prospectus Supplement, to the extent the
collections of interest and principal on a Precomputed Receivable with respect
to a Collection Period fall short of the respective scheduled payment, the
Servicer will make a Precomputed Advance of the shortfall. The Servicer will be
obligated to make a Precomputed Advance on a Precomputed Receivable only to the
extent that the Servicer, in its sole discretion, expects to recoup such advance
from subsequent collections or recoveries on such Receivable or other
Precomputed Receivables in the related Receivables Pool. The Servicer will
deposit the Precomputed Advance in the applicable Collection Account on or
before the business day preceding the applicable Distribution Date or Payment
Date. The Servicer will recoup its Precomputed Advance from subsequent payments
by or on behalf of the respective Obligor or from insurance or liquidation
proceeds with respect to the Receivable and will release its right to
reimbursement in conjunction with its purchase of the Receivable as Servicer,
or, upon the determination that reimbursement from the preceding sources is
unlikely, will recoup its Precomputed Advance from any collections made on other
Precomputed Receivables in the related Receivables Pool.
If so provided in the related Prospectus Supplement, on or before the
business day prior to each applicable Distribution Date or Payment Date, the
Servicer shall deposit into the related Collection Account as a Simple Interest
Advance an amount equal to the amount of interest that would have been due on
the Simple Interest Receivables allocated to a series at their respective APRs
for the related Collection Period (assuming that such Simple Interest
Receivables are paid on their respective due dates) minus the amount of interest
actually received on such Simple Interest Receivables during the related
Collection Period. If such calculation results in a negative number, an amount
equal to such amount shall be paid to the Servicer in reimbursement of
outstanding Simple Interest Advances. In addition, in the event that a Simple
Interest Receivable allocated to a series becomes a Liquidated Receivable (as
such term is defined in the related
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Prospectus Supplement), the amount of accrued and unpaid interest thereon (but
not including interest for the then current Collection Period) shall be
withdrawn from the Collection Account for such series and paid to the Servicer
in reimbursement of outstanding Simple Interest Advances. No advances of
principal will be made with respect to Simple Interest Receivables.
As used herein, "Advances" means both Precomputed Advances and Simple
Interest Advances.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Unless otherwise specified in the Prospectus Supplement with respect to any
series, the Servicer will be entitled to receive the Servicing Fee for each
Collection Period in an amount equal to specified percentage per annum (as set
forth in the related Prospectus Supplement, the "Servicing Fee Rate") of the
Pool Balance for such series as of the first day of the related Collection
Period (the "Servicing Fee"). The Servicing Fee (together with any portion of
the Servicing Fee that remains unpaid from prior Distribution Dates or Payment
Dates) will be paid solely to the extent of the Interest Distribution Amount for
such series. However, the Servicing Fee will be paid prior to the distribution
of any portion of the Interest Distribution Amount to the Noteholders or the
Certificateholders of such series.
Unless otherwise provided in the related Prospectus Supplement with respect
to a given Trust, the Servicer will also collect and retain any late fees,
prepayment charges and other administrative fees or similar charges allowed by
applicable law with respect to the related Receivables and will be entitled to
reimbursement from such Trust for certain liabilities. Payments by or on behalf
of Obligors will be allocated to scheduled payments and late fees and other
charges in accordance with the Servicer's normal practices and procedures.
The Servicing Fee will compensate the Servicer for performing the functions
of a third party servicer of motor vehicle receivables as an agent for their
beneficial owner, including collecting and posting all payments, responding to
inquiries of Obligors on the Receivables, investigating delinquencies, sending
payment coupons to Obligors, reporting tax information to Obligors, paying costs
of collections and disposition of defaults and policing the collateral. The
Servicing Fee also will compensate the Servicer for administering the particular
Receivables Pool, including making Advances, accounting for collections and
furnishing monthly and annual statements to the related Trustee and Indenture
Trustee with respect to distributions and generating federal income tax
information for such Trust and for the related Noteholders and
Certificateholders. The Servicing Fee also will reimburse the Servicer for
certain taxes, the fees of the related Trustee and Indenture Trustee, if any,
accounting fees, outside auditor fees, data processing costs and other costs
incurred in connection with administering the applicable Receivables Pool.
DISTRIBUTIONS
With respect to each series of Securities, beginning on the Payment Date or
Distribution Date, as applicable, specified in the related Prospectus
Supplement, distributions of principal and interest (or, where applicable, of
principal or interest only) on each class of such Securities entitled thereto
will be made by the Applicable Trustee to the Noteholders and the
Certificateholders of such series. The timing, calculation, allocation, order,
source, priorities of and requirements for all payments to each class of
Noteholders and all distributions to each class of Certificateholders of such
series will be set forth in the related Prospectus Supplement.
With respect to each series, on each Payment Date and Distribution Date, as
applicable, collections on the related Receivables will be transferred from the
Collection Account to the Note Distribution Account, if any, and the Certificate
Distribution Account, if any, for distribution to Noteholders, if any, and
Certificateholders, if any, to the extent provided in the related Prospectus
Supplement. Credit enhancement, such as a Reserve Account, will be available to
cover any shortfalls in the amount available for distribution on such date to
the extent specified in the related Prospectus Supplement. As more fully
described in the related Prospectus Supplement, and unless otherwise specified
therein, distributions in respect of principal of a class of Securities of a
given series will be subordinate to distributions in respect of interest on such
class, and distributions in
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respect of one or more classes of Certificates of such series may be subordinate
to payments in respect of Notes, if any, of such series or other classes of
Certificates of such series.
In the case of a Trust that issues more than one series of Securities, the
distributions on the Securities of any such series will be made solely from
funds in the Series Trust Property allocated to such series and not from any
other Series Trust Property.
Allocation of Collections on Receivables; Reconciliation. Distributions of
principal on the Securities of a series may be based on the amount of principal
collected or due, or the amount of Realized Losses incurred, in a Collection
Period. If so specified in a Prospectus Supplement, the amounts of collections
on the Receivables of a series that are allocable to interest and principal,
respectively, will first be estimated and then be reconciled in the following
manner with the following effect on the distributions on the related Securities.
On the Business Day immediately preceding each Distribution Date or Payment
Date (a "Determination Date"), the Indenture Trustee, if any, or, otherwise, the
Trustee shall determine the amount in the Collection Account available for
distribution on the related Distribution Date or Payment Date (excluding amounts
retained in the Collection Account from prior periods, as described below). Such
amount shall be allocated first to interest based on the weighted average APR
and Pool Balance of the Receivables as of the first day of the related
Collection Period, plus an amount related to the investment earnings on amounts
contained in the Pre-Funding Account, if any, maintained with the Indenture
Trustee or the Trustee, as applicable, in accordance with the Sale and Servicing
Agreement or Pooling and Servicing Agreement, as applicable, and then any
remaining amount in the Collection Account shall be allocated to principal.
Payments to Securityholders shall be distributed on each Distribution Date or
Payment Date in accordance with such allocations, with appropriate adjustments
from the prior period as described below, together with a payment notice setting
forth the amount of such payment allocable to interest and the amount allocable
to principal, including, separately stated, the amount attributable to any
adjustment from the prior period. On each Determination Date (other than the
first Determination Date), the Servicer will provide the Indenture Trustee or
the Trustee, as applicable, with certain information with respect to the
Collection Period related to the prior Distribution Date or Payment Date. On
such current Determination Date or Payment Date, (i) the amounts so allocated
and distributed on the preceding Distribution Date or Payment Date will be
reconciled with the information provided by the Servicer on the preceding
Determination Date, (ii) amounts will be deposited in the Reserve Account or
held in the Collection Account, as appropriate, and (iii) reports reflecting
such reconciled amounts will be forwarded to Securityholders. If, based on such
reconciliation, the amounts distributed to Securityholders on account of
principal on the preceding Distribution Date or Payment Date were less than the
amounts required to be so distributed based on the reconciliation, the amount of
such deficiency shall be retained in the Collection Account for distribution to
Securityholders on such current Distribution Date or Payment Date. If amounts
were distributed to holders as principal in excess of amounts allocable to
principal based on such reconciliation, the amount of such excess will be
deducted from principal when calculating principal distributable on such current
Distribution Date or Payment Date. The payment of principal as described above
is not expected to have a material effect on the average life of any class of
Securities.
CREDIT AND CASH FLOW ENHANCEMENT; LIQUIDITY ARRANGEMENTS
The amounts and types of credit and cash flow enhancement arrangements and
the provider thereof, if applicable, with respect to each class of Securities of
a given series, if any, will be set forth in the related Prospectus Supplement.
If and to the extent provided in the related Prospectus Supplement, credit and
cash flow enhancement may be in the form of subordination of one or more classes
of Securities of a series, Reserve Accounts, overcollateralization, letters of
credit, credit or liquidity facilities, surety bonds, guaranteed investment
contracts, swaps (including without limitation currency swaps), other interest
rate protection agreements, repurchase obligations (including without limitation
put options), yield supplement agreements, other agreements with respect to
third party payments or other support, cash deposits or such other arrangements
as may be described in the related Prospectus Supplement or any combination of
two or more of the foregoing. If specified in the applicable Prospectus
Supplement, credit or cash flow enhancement or any such other arrangement for a
class of Securities may cover one or more other classes of Securities of the
same
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series, and credit or cash flow enhancement or any such other arrangement for a
series of Securities may cover one or more other series of Securities.
The presence of a Reserve Account and other forms of credit enhancement for
the benefit of any class or series of Securities is intended to enhance the
likelihood of receipt by the Securityholders of such class or series of the full
amount of principal and interest due thereon and to decrease the likelihood that
such Securityholders will experience losses. Unless otherwise specified in the
related Prospectus Supplement, the credit enhancement for a class or series of
Securities will not provide protection against all risks of loss and will not
guarantee repayment of the entire principal balance and interest thereon. If
losses occur which exceed the amount covered by any credit enhancement or which
are not covered by any credit enhancement, Securityholders of any class or
series will bear their allocable share of deficiencies, as described in the
related Prospectus Supplement. In addition, if a form of credit enhancement
covers more than one series of Securities, Securityholders of any such series
will be subject to the risk that such credit enhancement will be exhausted by
the claims of Securityholders of other series.
Reserve Account. If so provided in the related Prospectus Supplement,
pursuant to the related Sale and Servicing Agreement or Pool and Servicing
Agreement, the Seller will establish for a series or class of Securities an
account, as specified in the related Prospectus Supplement (the "Reserve
Account"), which will be maintained with the related Trustee or Indenture
Trustee, as applicable. Unless otherwise provided in the related Prospectus
Supplement, the Reserve Account will be funded by an initial deposit by the
Seller on the Closing Date in the amount set forth in the related Prospectus
Supplement and, if the related series has a Funding Period, will also be funded
on each Subsequent Transfer Date to the extent described in the related
Prospectus Supplement. As further described in the related Prospectus
Supplement, the amount on deposit in the Reserve Account will be increased on
each Distribution Date or Payment Date thereafter up to the Specified Reserve
Account Balance (as defined in the related Prospectus Supplement) by the deposit
therein of the amount of collections on the related Receivables remaining on
each such Distribution Date or Payment Date after the payment of all other
required payments and distributions on such date. The related Prospectus
Supplement will describe the circumstances and manner under which distributions
may be made out of the Reserve Account, either to holders of the Securities
covered thereby or to the applicable Company.
NET DEPOSITS
As an administrative convenience, unless the Servicer is required to remit
collections daily (see "-- Collections" above), the Servicer will be permitted
to make the deposit of collections, aggregate Advances and Purchase Amounts for
any Trust for or with respect to the related Collection Period net of
distributions to be made to the Servicer for such Trust with respect to such
Collection Period. The Servicer may cause to be made a single, net transfer from
the Collection Account to the related Payahead Account, if any, or vice versa.
The Servicer, however, will account to the Trustee, any Indenture Trustee, the
Noteholders, if any, and the Certificateholders with respect to each series as
if all deposits, distributions and transfers were made individually. With
respect to any Trust that issues both Certificates and Notes, if the related
Payment Dates do not coincide with Distribution Dates, all distributions,
deposits or other remittances made on a Payment Date will be treated as having
been distributed, deposited or remitted on the Distribution Date for the
applicable Collection Period for purposes of determining other amounts required
to be distributed, deposited or otherwise remitted on such Distribution Date.
STATEMENTS TO TRUSTEES AND TRUST
Prior to each Distribution Date or Payment Date with respect to each series
of Securities, the Servicer will provide to the applicable Indenture Trustee, if
any, and the applicable Trustee as of the close of business on the last day of
the preceding Collection Period a statement setting forth substantially the same
information as is required to be provided in the periodic reports provided to
Securityholders of such series described under "Certain Information Regarding
the Securities -- Reports to Securityholders".
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EVIDENCE AS TO COMPLIANCE
Each Sale and Servicing Agreement and Pooling and Servicing Agreement will
provide that a firm of independent public accountants will furnish to the
related Trust and Indenture Trustee or Trustee, as applicable, annually a
statement as to compliance by the Servicer during the preceding twelve months
(or, in the case of the first such certificate, from the applicable Closing
Date) with certain standards relating to the servicing of the applicable
Receivables, the Servicer's accounting records and computer files with respect
thereto and certain other matters.
Each Sale and Servicing Agreement and Pooling and Servicing Agreement will
also provide for delivery to the related Trust and Indenture Trustee or Trustee,
as applicable, substantially simultaneously with the delivery of such
accountants' statement referred to above, of a certificate signed by an officer
of the Servicer stating that the Servicer has fulfilled its obligations under
the Sale and Servicing Agreement or Pooling and Servicing Agreement, as
applicable, throughout the preceding twelve months (or, in the case of the first
such certificate, from the Closing Date) or, if there has been a default in the
fulfillment of any such obligation, describing each such default. The Servicer
has agreed to give each Indenture Trustee and each Trustee notice of certain
Servicer Defaults under the related Sale and Servicing Agreement or Pooling and
Servicing Agreement, as applicable.
Copies of such statements and certificates may be obtained by
Securityholders by a request in writing addressed to the Applicable Trustee.
CERTAIN MATTERS REGARDING THE SERVICER
Each Sale and Servicing Agreement and Pooling and Servicing Agreement will
provide that CFC may not resign from its obligations and duties as Servicer
thereunder, except upon determination that CFC's performance of such duties is
no longer permissible under applicable law. No such resignation will become
effective until the related Indenture Trustee or Trustee, as applicable, or a
successor servicer has assumed CFC's servicing obligations and duties under such
Sale and Servicing Agreement or Pooling and Servicing Agreement.
Each Sale and Servicing Agreement and Pooling and Servicing Agreement will
further provide that neither the Servicer nor any of its directors, officers,
employees and agents will be under any liability to the related Trust or the
related Noteholders or Certificateholders for taking any action or for
refraining from taking any action pursuant to such Sale and Servicing Agreement
or Pooling and Servicing Agreement or for errors in judgment; except that
neither the Servicer nor any such person will be protected against any liability
that would otherwise be imposed by reason of willful misfeasance, bad faith or
negligence in the performance of the Servicer's duties thereunder or by reason
of reckless disregard of its obligations and duties thereunder. In addition,
each Sale and Servicing Agreement and Pooling and Servicing Agreement will
provide that the Servicer is under no obligation to appear in, prosecute or
defend any legal action that is not incidental to the Servicer's servicing
responsibilities under such Sale and Servicing Agreement or Pooling and
Servicing Agreement and that, in its opinion, may cause it to incur any expense
or liability.
Under the circumstances specified in each Sale and Servicing Agreement and
Pooling and Servicing Agreement , any entity into which the Servicer may be
merged or consolidated, or any entity resulting from any merger or consolidation
to which the Servicer is a party, or any entity succeeding to the business of
the Servicer or, with respect to its obligations as Servicer, any corporation
50% or more of the voting stock of which is owned, directly or indirectly, by
Chrysler, which corporation or other entity in each of the foregoing cases
assumes the obligations of the Servicer, will be the successor of the Servicer
under such Sale and Servicing Agreement or Pooling and Servicing Agreement.
SERVICER DEFAULT
Except as otherwise provided in the related Prospectus Supplement,
"Servicer Default" under each Sale and Servicing Agreement and Pooling and
Servicing Agreement will consist of (i) any failure by the Servicer to deliver
to the Applicable Trustee for deposit in any of the related Trust Accounts or
the related Certificate
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Distribution Account any required payment or to direct the Applicable Trustee to
make any required distributions therefrom, which failure continues unremedied
for five business days after written notice from the Applicable Trustee is
received by the Servicer or after discovery of such failure by the Servicer;
(ii) any failure by the Servicer or the Seller, as the case may be, duly to
observe or perform in any material respect any other covenant or agreement in
such Sale and Servicing Agreement or Pooling and Servicing Agreement, which
failure materially and adversely affects the rights of the Noteholders or the
Certificateholders of the related series and which continues unremedied for 60
days after the giving of written notice of such failure (A) to the Servicer or
the Seller, as the case may be, by the Applicable Trustee or (B) to the Servicer
or the Seller, as the case may be, and to the Applicable Trustee by holders of
Notes or Certificates of such series, as applicable, evidencing not less than
25% in principal amount of such outstanding Notes or of such Certificate
Balance; and (iii) the occurrence of an Insolvency Event with respect to the
Servicer, the Seller or any related Company. "Insolvency Event" means, with
respect to any Person, any of the following events or actions: certain events of
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings with respect to such Person and certain actions by such
Person indicating its insolvency, reorganization pursuant to bankruptcy
proceedings or inability to pay its obligations.
RIGHTS UPON SERVICER DEFAULT
In the case of any Trust that has issued Notes, unless otherwise provided
in the related Prospectus Supplement, as long as a Servicer Default under a Sale
and Servicing Agreement remains unremedied, the related Indenture Trustee or
holders of Notes of the related series evidencing not less than 25% of principal
amount of such Notes then outstanding may terminate all the rights and
obligations of the Servicer under such Sale and Servicing Agreement, whereupon
such Indenture Trustee or a successor servicer appointed by such Indenture
Trustee will succeed to all the responsibilities, duties and liabilities of the
Servicer under such Sale and Servicing Agreement and will be entitled to similar
compensation arrangements. In the case of any Trust that has not issued Notes,
unless otherwise provided in the related Prospectus Supplement, as long as a
Servicer Default under the related Pooling and Servicing Agreement remains
unremedied, the related Trustee or holders of Certificates of the related series
evidencing not less than 25% of the principal amount of such Certificates then
outstanding may terminate all the rights and obligations of the Servicer under
such Pooling and Servicing Agreement, whereupon such Trustee or a successor
servicer appointed by such Trustee will succeed to all the responsibilities,
duties and liabilities of the Servicer under such Pooling and Servicing
Agreement and will be entitled to similar compensation arrangements. If,
however, a bankruptcy trustee or similar official has been appointed for the
Servicer, and no Servicer Default other than such appointment has occurred, such
trustee or official may have the power to prevent such Indenture Trustee, such
Noteholders, such Trustee or such Certificateholders from effecting a transfer
of servicing. In the event that such Indenture Trustee or Trustee is unwilling
or unable to so act, it may appoint, or petition a court of competent
jurisdiction for the appointment of, a successor with a net worth of at least
$100,000,000 and whose regular business includes the servicing of motor vehicle
receivables. Such Indenture Trustee or Trustee may make such arrangements for
compensation to be paid, which in no event may be greater than the servicing
compensation to the Servicer under such Sale and Servicing Agreement or Pooling
and Servicing Agreement.
WAIVER OF PAST DEFAULTS
With respect to each Trust that has issued Notes, unless otherwise provided
in the related Prospectus Supplement, the holders of Notes of a series
evidencing at least a majority in principal amount of the then outstanding Notes
of such series (or the holders of the Certificates of such series evidencing not
less than a majority of the outstanding Certificate Balance, in the case of any
Servicer Default which does not adversely affect the related Indenture Trustee
or such Noteholders) may, on behalf of all such Noteholders and
Certificateholders, waive any default by the Servicer in the performance of its
obligations under the related Sale and Servicing Agreement and its consequences,
except a Servicer Default in making any required deposits to or payments from
any of the Trust Accounts or to the Certificate Distribution Account for such
series in accordance with such Sale and Servicing Agreement. With respect to
each Trust that has not issued Notes, holders of Certificates of a series
evidencing not less than a majority of the principal amount of such Certificates
then outstanding may, on behalf of all such Certificateholders, waive any
default by the Servicer
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in the performance of its obligations under the related Sale and Servicing
Agreement or Pooling and Servicing Agreement, except a Servicer Default in
making any required deposits to or payments from the Certificate Distribution
Account or the Trust Accounts for such series in accordance with such Pooling
and Servicing Agreement. No such waiver will impair such Noteholders' or
Certificateholders' rights with respect to subsequent defaults.
AMENDMENT
Unless otherwise provided in the related Prospectus Supplement, each of the
Transfer and Servicing Agreements may be amended by the parties thereto, without
the consent of the related Noteholders or Certificateholders, for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of such Transfer and Servicing Agreements or of modifying in any
manner the rights of such Noteholders or Certificateholders; provided that such
action will not, in the opinion of counsel satisfactory to the related Trustee
or Indenture Trustee, as applicable, materially and adversely affect the
interest of any such Noteholder or Certificateholder. Unless otherwise specified
in the related Prospectus Supplement, the Transfer and Servicing Agreements may
also be amended by the Seller, the Servicer, the related Trustee and any related
Indenture Trustee with the consent of the holders of Notes evidencing at least a
majority in principal amount of then outstanding Notes, if any, of the related
series and the holders of the Certificates of such series evidencing at least a
majority of the principal amount of such Certificates then outstanding, for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of such Transfer and Servicing Agreements or of modifying in
any manner the rights of such Noteholders or Certificateholders; provided,
however, that no such amendment may (i) increase or reduce in any manner the
amount of, or accelerate or delay the timing of, collections of payments on the
related Receivables or distributions that are required to be made for the
benefit of such Noteholders or Certificateholders or (ii) reduce the aforesaid
percentage of the Notes or Certificates of such series which are required to
consent to any such amendment, without the consent of the holders of all the
outstanding Notes or Certificates, as the case may be, of such series.
INSOLVENCY EVENT
Subject to the following paragraph, with respect to a Trust that is not a
grantor trust, if the related Prospectus so provides, upon the occurrence of an
Insolvency Event with respect to the Company in respect of such Trust, the
related Receivables of such Trust will be liquidated and the Trust will be
terminated 90 days after the date of such Insolvency Event, unless, before the
end of such 90-day period, the related Trustee shall have received written
instructions from (i) holders of each class of the Certificates (other than such
Company) of each series with respect to such Trust representing more than 50% of
the aggregate unpaid principal amount of each such class (not including the
principal amount of such Certificates held by such Company), (ii) holders of
each class of Notes, if any, of each series with respect to such Trust
representing more than 50% of the aggregate unpaid principal amount of each such
class and (iii) holders, if any, of certificates representing more than 50% of
the aggregate unpaid principal amount of certificates representing interests in,
or indebtedness secured by, final fixed value payments with respect to the Fixed
Value Receivables, if any, initially purchased by such Company and subsequently
added to such Trust (such certificates or indebtedness being referred to herein
as "Fixed Value Securities"), to the effect that each such party disapproves of
the liquidation of such Receivables and termination of such Trust. Promptly
after the occurrence of an Insolvency Event with respect to such Company, notice
thereof is required to be given to such Noteholders, Certificateholders and
holders of Fixed Value Securities; provided that any failure to give such
required notice will not prevent or delay termination of such Trust. Upon
termination of any Trust, the related Trustee shall, or shall direct the related
Indenture Trustee to, promptly sell the assets of such Trust (other than the
Trust Accounts and Certificate Distribution Accounts) in a commercially
reasonable manner and on commercially reasonable terms. The proceeds from any
such sale, disposition or liquidation of the Receivables of such Trust allocable
to each series issued by such Trust will be treated as collections on such
Receivables and deposited in the related Collection Account for such series.
With respect to any series of such Trust, if the proceeds from the liquidation
of the Receivables allocated to such series and any amounts on deposit in the
Reserve Account (if any), the Payahead Account (if any), the Note Distribution
Account (if
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any) and the Certificate Distribution Account for such series are not sufficient
to pay the Notes, if any, and the Certificates of such series in full, the
amount of principal returned to Noteholders and Certificateholders of such
series will be reduced and some or all of such Noteholders and
Certificateholders will incur a loss.
Each Trust Agreement will provide that the applicable Trustee does not have
the power to commence a voluntary proceeding in bankruptcy with respect to the
related Trust without the unanimous prior approval of all Certificateholders
(including the applicable Company) of such Trust and the delivery to such
Trustee by each such Certificateholder (including such Company) of a certificate
certifying that such Certificateholder reasonably believes that such Trust is
insolvent.
PAYMENT OF NOTES
Upon the payment in full of all outstanding Notes of a series and the
satisfaction and discharge of the related Indenture, the related Trustee will
succeed to all the rights of the Indenture Trustee, and the Certificateholders
of such series will succeed to all the rights of the Noteholders of such series,
under the related Sale and Servicing Agreement, except as otherwise provided
therein.
COMPANY LIABILITY
If the related Prospectus Supplement so provides, the applicable Company
with respect to the related Trust will agree under the related Trust Agreement
to be liable directly to an injured party for the entire amount of any losses,
claims, damages or liabilities (other than those incurred by a Noteholder or a
Certificateholder in the capacity of an investor with respect to such Trust)
arising out of or based on the arrangement created by such Trust Agreement as
though such arrangement created a partnership under the Delaware Revised Uniform
Limited Partnership Act in which such Company was a general partner.
TERMINATION
With respect to each series, the obligations of the Servicer, the Seller,
the related Trustee and the related Indenture Trustee, if any, pursuant to the
Transfer and Servicing Agreements will terminate upon the earlier of (i) the
maturity or other liquidation of the last related Receivable included in the
Series Trust Property allocated to such series and the disposition of any
amounts received upon liquidation of any such remaining Receivables, (ii) the
payment to Noteholders, if any, and Certificateholders of such series of all
amounts required to be paid to them pursuant to the Transfer and Servicing
Agreements and (iii) the occurrence of either event described below.
Unless otherwise provided in the related Prospectus Supplement, in order to
avoid excessive administrative expense, the Servicer will be permitted at its
option to purchase from each Trust, as of the end of any applicable Collection
Period, if the then outstanding Pool Balance with respect to the Receivables
included in Series Trust Property allocated to a series is 10% or less of the
Initial Pool Balance (as defined in the related Prospectus Supplement, the
"Initial Pool Balance") of such series, all such remaining Receivables at a
price equal to the aggregate of the Purchase Amounts thereof as of the end of
such Collection Period.
If and to the extent provided in the related Prospectus Supplement with
respect to a Trust, the Applicable Trustee will, within ten days following a
Distribution Date or Payment Date as of which the Pool Balance of such series is
equal to or less than the percentage of the Initial Pool Balance of such series
specified in the related Prospectus Supplement, solicit bids for the purchase of
such Receivables remaining in such Trust and allocated to such series, in the
manner and subject to the terms and conditions set forth in such Prospectus
Supplement. If the Applicable Trustee receives satisfactory bids as described in
such Prospectus Supplement, then such remaining Receivables will be sold to the
highest bidder.
As more fully described in the related Prospectus Supplement, any
outstanding Notes of the related series will be redeemed concurrently with
either of the events specified above, and the subsequent distribution to the
related Certificateholders of all amounts required to be distributed to them
pursuant to the applicable Trust Agreement or Pooling and Servicing Agreement
will effect early retirement of the Certificates of such series.
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ADMINISTRATION AGREEMENT
CFC, in its capacity as administrator (the "Administrator"), will enter
into an agreement (as amended and supplemented from time to time, an
"Administration Agreement") with each Trust that issues Notes and the related
Indenture Trustee pursuant to which the Administrator will agree, to the extent
provided in such Administration Agreement, to provide the notices and to perform
other administrative obligations required by the related Indenture. Unless
otherwise specified in the related Prospectus Supplement with respect to any
such Trust, as compensation for the performance of the Administrator's
obligations under the applicable Administration Agreement and as reimbursement
for its expenses related thereto, the Administrator will be entitled to a
monthly administration fee in an amount equal to $200 per month with respect to
each series of Notes, or such other amount as may be set forth in the related
Prospectus Supplement (the "Administration Fee"), which fee will be paid by the
Servicer.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
SECURITY INTEREST IN VEHICLES
In states in which retail installment sale contracts such as the
Receivables evidence the credit sale of automobiles and light duty trucks by
dealers to obligors, the contracts also constitute personal property security
agreements and include grants of security interests in the vehicles under the
applicable UCC. Perfection of security interests in the automobiles and light
duty trucks financed by the Seller is generally governed by the motor vehicle
registration laws of the state in which the vehicle is located. In all states in
which the Receivables have been originated, a security interest in automobiles
and light duty trucks is perfected by obtaining the certificate of title to the
Financed Vehicle or notation of the secured party's lien on the vehicles'
certificate of title (in addition, in Louisiana, a copy of the installment sale
contract must be filed with the appropriate governmental recording office).
All contracts originated or acquired by the Seller name the Seller or CCC
as obligee or assignee and as the secured party. The Seller also takes all
actions necessary under the laws of the state in which the financed vehicle is
located to perfect the Seller's or CCC's security interest in the financed
vehicle, including, where applicable, having a notation of its lien or CCC's
lien, as applicable, recorded on such vehicle's certificate of title. Because
the Seller continues to service the contracts, the obligors on the contracts
will not be notified of the sale to the Trust, and no action will be taken to
record the transfer of the security interest from CCC to the Seller or from the
Seller to the Trust by amendment of the certificates of title for the Financed
Vehicles or otherwise.
The Seller will assign its interests in the Financed Vehicles securing the
related Receivables to each Trust pursuant to the related Sale and Servicing
Agreement or Pooling and Servicing Agreement (as applicable). However, because
of the administrative burden and expense, neither the Seller nor the related
Trustee will amend any certificate of title to identify the Trust as the new
secured party on the certificate of title relating to a Financed Vehicle. Also,
the Seller will continue to hold any certificates of title relating to the
vehicles in its possession as custodian for the Trust pursuant to the related
Sale and Servicing Agreement or Pooling and Servicing Agreement. See
"Description of the Transfer and Servicing Agreements -- Sale and Assignment of
Receivables".
In most states, an assignment such as that under each Sale and Servicing
Agreement or Pooling and Servicing Agreement is an effective conveyance of a
security interest without amendment of any lien noted on a vehicle's certificate
of title, and the assignee succeeds thereby to the assignor's rights as secured
party. However, by not identifying a Trust as the secured party on the
certificate of title, the security interest of such Trust in the vehicle could
be defeated through fraud or negligence. In such states, in the absence of fraud
or forgery by the vehicle owner or the Seller or administrative error by state
or local agencies, the notation of the Seller's lien or CCC's lien on the
certificates of title will be sufficient to protect a Trust against the rights
of subsequent purchasers of a Financed Vehicle or subsequent lenders who take a
security interest in a Financed Vehicle. If there are any Financed Vehicles as
to which the Seller failed to obtain or assign to the Trust a perfected security
interest, the security interest of the Trust would be subordinate to, among
others, the
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interests of subsequent purchasers of the Financed Vehicles and holders of
perfected security interests therein. Such a failure, however, would constitute
a breach of the warranties of the Seller under the related Sale and Servicing
Agreement or Pooling and Servicing Agreement and would create an obligation of
the Seller to repurchase the related Receivable unless the breach were cured.
See "Description of the Transfer and Servicing Agreements -- Sale and Assignment
of Receivables" and "Special Considerations -- Certain Legal Aspects -- Security
Interests in Financed Vehicles".
Under the laws of most states, the perfected security interest in a vehicle
would continue for four months after the vehicle is moved to a state other than
the state in which it is initially registered and thereafter until the owner
thereof re-registers the vehicle in the new state. A majority of states
generally require surrender of a certificate of title to re-register a vehicle.
Accordingly, a secured party must surrender possession if it holds the
certificate of title to the vehicle or, in the case of a vehicle registered in a
state providing for the notation of a lien on the certificate of title but not
possession by the secured party, the secured party would receive notice of
surrender if the security interest is noted on the certificate of title. Thus,
the secured party would have the opportunity to re-perfect its security interest
in the vehicle in the state of relocation. In states that do not require a
certificate of title for registration of a motor vehicle, re-registration could
defeat perfection. In the ordinary course of servicing motor vehicle
receivables, the Servicer takes steps to effect re-perfection upon receipt of
notice of re-registration or information from the obligor as to relocation.
Similarly, when an obligor sells a vehicle, the Servicer must surrender
possession of the certificate of title or will receive notice as a result of its
lien noted thereon and accordingly will have an opportunity to require
satisfaction of the related Receivable before release of the lien. Under each
Sale and Servicing Agreement and Pooling and Servicing Agreement, the Servicer
is obligated to take appropriate steps, at the Servicer's expense, to maintain
perfection of security interests in the Financed Vehicles and is obligated to
purchase the related Receivable if it fails to do so.
Under the laws of most states, liens for repairs performed on a motor
vehicle and liens for unpaid taxes take priority over even a perfected security
interest in a financed vehicle. The Code also grants priority to certain federal
tax liens over the lien of a secured party. The laws of certain states and
federal law permit the confiscation of vehicles by governmental authorities
under certain circumstances if used in unlawful activities, which may result in
the loss of a secured party's perfected security interest in the confiscated
vehicle. Under each Sale and Servicing Agreement and Pooling and Servicing
Agreement, the Seller will represent to the related Trust that, as of the date
the related Receivable is sold to such Trust, each security interest in a
Financed Vehicle is or will be prior to all other present liens (other than tax
liens and other liens that arise by operation of law) upon and security
interests in such Financed Vehicle. However, liens for repairs or taxes could
arise, or the confiscation of a Financed Vehicle could occur, at any time during
the term of a Receivable. No notice will be given to the Trustee, any Indenture
Trustee, any Noteholders or the Certificateholders in respect of a given Trust
if such a lien arises or confiscation occurs.
REPOSSESSION
In the event of default by vehicle purchasers, the holder of the motor
vehicle retail installment sale contract has all the remedies of a secured party
under the UCC, except where specifically limited by other state laws. Among the
UCC remedies, the secured party has the right to perform self-help repossession
unless such act would constitute a breach of the peace. Self-help is the method
employed by the Servicer in most cases and is accomplished simply by retaking
possession of the financed vehicle. In the event of default by the obligor, some
jurisdictions require that the obligor be notified of the default and be given a
time period within which he may cure the default prior to repossession.
Generally, the right of reinstatement may be exercised on a limited number of
occasions in any one-year period. In cases where the obligor objects or raises a
defense to repossession, or if otherwise required by applicable state law, a
court order must be obtained from the appropriate state court, and the vehicle
must then be repossessed in accordance with that order.
NOTICE OF SALE; REDEMPTION RIGHTS
The UCC and other state laws require the secured party to provide the
obligor with reasonable notice of the date, time and place of any public sale
and/or the date after which any private sale of the collateral may be
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held. The obligor has the right to redeem the collateral prior to actual sale by
paying the secured party the unpaid principal balance of the obligation plus
reasonable expenses for repossessing, holding and preparing the collateral for
disposition and arranging for its sale, plus, in some jurisdictions, reasonable
attorneys' fees, or, in some states, by payment of delinquent installments or
the unpaid balance.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of the vehicles generally will be applied first to
the expenses of resale and repossession and then to the satisfaction of the
indebtedness. While some states impose prohibitions or limitations on deficiency
judgments if the net proceeds from resale do not cover the full amount of the
indebtedness, a deficiency judgment can be sought in those states that do not
prohibit or limit such judgments. However, the deficiency judgment would be a
personal judgment against the obligor for the shortfall, and a defaulting
obligor can be expected to have very little capital or sources of income
available following repossession. Therefore, in many cases, it may not be useful
to seek a deficiency judgment or, if one is obtained, it may be settled at a
significant discount.
Occasionally, after resale of a vehicle and payment of all expenses and all
indebtedness, there is a surplus of funds. In that case, the UCC requires the
creditor to remit the surplus to any holder of a lien with respect to the
vehicle or if no such lienholder exists or there are remaining funds, the UCC
requires the creditor to remit the surplus to the former owner of the vehicle.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon lenders and servicers involved in consumer
finance. These laws include the Truth-in-Lending Act, the Equal Credit
Opportunity Act, the Federal Trade Commission Act, the Fair Credit Billing Act,
the Fair Credit Reporting Act, the Fair Debt Collection Procedures Act, the
Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B and Z, the
Soldiers' and Sailors' Civil Relief Act of 1940, the Texas Consumer Credit Code,
state adoptions of the National Consumer Act and of the Uniform Consumer Credit
Code and state motor vehicle retail installment sales acts, retail installment
sales acts and other similar laws. Also, state laws impose finance charge
ceilings and other restrictions on consumer transactions and require contract
disclosures in addition to those required under federal law. These requirements
impose specific statutory liabilities upon creditors who fail to comply with
their provisions. In some cases, this liability could affect an assignee's
ability to enforce consumer finance contracts such as the Receivables.
The so-called "Holder-in-Due-Course" Rule of the Federal Trade Commission
(the "FTC Rule"), the provisions of which are generally duplicated by the
Uniform Consumer Credit Code, other statutes or the common law, has the effect
of subjecting a seller in a consumer credit transaction (and certain related
creditors and their assignees) to all claims and defenses which the obligor in
the transaction could assert against the seller of the goods. Liability under
the FTC Rule is limited to the amounts paid by the obligor under the contract
and the holder of the contract may also be unable to collect any balance
remaining due thereunder from the obligor.
Most of the Receivables will be subject to the requirements of the FTC
Rule. Accordingly, each Trust, as holder of the related Receivables, will be
subject to any claims or defenses that the purchaser of the applicable Financed
Vehicle may assert against the seller of the Financed Vehicle. Such claims are
limited to a maximum liability equal to the amounts paid by the Obligor on the
Receivable. If an Obligor were successful in asserting any such claim or
defense, such claim or defense would constitute a breach of the Seller's
warranties under the related Sale and Servicing Agreement or Pooling and
Servicing Agreement and would create an obligation of the Seller to repurchase
the Receivable unless the breach is cured. See "Description of the Transfer and
Servicing Agreements -- Sale and Assignment of Receivables".
Courts have applied general equitable principles to secured parties
pursuing repossession and litigation involving deficiency balances. These
equitable principles may have the effect of relieving an obligor from some or
all of the legal consequences of a default.
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In several cases, consumers have asserted that the self-help remedies of
secured parties under the UCC and related laws violate the due process
protections provided under the 14th Amendment to the Constitution of the United
States. Courts have generally upheld the notice provisions of the UCC and
related laws as reasonable or have found that the repossession and resale by the
creditor do not involve sufficient state action to afford constitutional
protection to borrowers.
Under each Sale and Servicing Agreement and Pooling and Servicing
Agreement, the Seller will warrant to the related Trust that each Receivable
complies with all requirements of law in all material respects. Accordingly, if
an Obligor has a claim against such Trust for violation of any law and such
claim materially and adversely affects such Trust's interest in a Receivable,
such violation would constitute a breach of the warranties of the Seller under
such Sale and Servicing Agreement or Pooling and Servicing Agreement and would
create an obligation of the Seller to repurchase the Receivable unless the
breach is cured. See "Description of the Transfer and Servicing
Agreements -- Sale and Assignment of Receivables".
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a secured party
to realize upon collateral or to enforce a deficiency judgment. For example, in
a Chapter 13 proceeding under the federal bankruptcy law, a court may prevent a
creditor from repossessing a vehicle, and, as part of the rehabilitation plan,
reduce the amount of the secured indebtedness to the market value of the vehicle
at the time of bankruptcy (as determined by the court), leaving the creditor as
a general unsecured creditor for the remainder of the indebtedness. A bankruptcy
court may also reduce the monthly payments due under a contract or change the
rate of interest and time of repayment of the indebtedness.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of certain federal income tax
consequences of the purchase, ownership and disposition of the Notes and the
Certificates. The summary does not purport to deal with federal income tax
consequences applicable to all categories of holders, some of which may be
subject to special rules. For example, it does not discuss the tax treatment of
Noteholders or Certificateholders that are insurance companies, regulated
investment companies or dealers in securities. Moreover, there are no cases or
Internal Revenue Service ("IRS") rulings on similar transactions involving both
debt and equity interests issued by a trust with terms similar to those of the
Notes and the Certificates. As a result, the IRS may disagree with all or a part
of the discussion below. Prospective investors are urged to consult their own
tax advisors in determining the federal, state, local, foreign and any other tax
consequences to them of the purchase, ownership and disposition of the Notes and
the Certificates.
The following summary is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the Treasury regulations
promulgated thereunder and judicial or ruling authority, all of which are
subject to change, which change may be retroactive. Each Trust will be provided
with an opinion of special Federal tax counsel to each Trust specified in the
related Prospectus Supplement ("Federal Tax Counsel"), regarding certain federal
income tax matters discussed below. An opinion of Federal Tax Counsel, however,
is not binding on the IRS or the courts. No ruling on any of the issues
discussed below will be sought from the IRS. For purposes of the following
summary, references to the Trust, the Notes, the Certificates and related terms,
parties and documents shall be deemed to refer, unless otherwise specified
herein, to each Trust and the Notes, Certificates and related terms, parties and
documents applicable to such Trust.
The federal income tax consequences to Certificateholders will vary
depending on whether (i) an election is made to treat the Trust as a partnership
under the Code, (ii) all the certificates are retained by the Seller or an
affiliate thereof, or (iii) whether the Trust will be treated as a grantor
trust. The Prospectus Supplement for each series of Certificates will specify
whether a partnership election will be made or the Trust will be treated as a
grantor trust.
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TRUSTS FOR WHICH A PARTNERSHIP ELECTION IS MADE
TAX CHARACTERIZATION OF THE TRUST AS A PARTNERSHIP
Federal Tax Counsel will deliver its opinion that a Trust for which a
partnership election is made will not be an association (or publicly traded
partnership) taxable as a corporation for federal income tax purposes. This
opinion will be based on the assumption that the terms of the Trust Agreement
and related documents will be complied with, and on counsel's conclusions that
the nature of the income of the Trust will exempt it from the rule that certain
publicly traded partnerships are taxable as corporations.
TAX CONSEQUENCES TO HOLDERS OF THE NOTES
Treatment of the Notes as Indebtedness. The Seller will agree, and the
Noteholders will agree by their purchase of Notes, to treat the Notes as debt
for federal income tax purposes. Federal Tax Counsel will, except as otherwise
provided in the related Prospectus Supplement, advise the Trust that the Notes
will be classified as debt for federal income tax purposes. The discussion below
assumes this characterization of the Notes is correct.
OID, Indexed Securities, etc. The discussion below assumes that all
payments on the Notes are denominated in U.S. dollars, and that the Notes are
not Indexed Securities or Strip Notes. Moreover, the discussion assumes that the
interest formula for the Notes meets the requirements for "qualified stated
interest" under Treasury regulations (the "OID regulations") relating to
original issue discount ("OID"), and that any OID on the Notes (i.e., any excess
of the principal amount of the Notes over their issue price) does not exceed a
de minimis amount (i.e., 1/4% of their principal amount multiplied by the
number of full years included in their term), all within the meaning of the OID
regulations. If these conditions are not satisfied with respect to any given
series of Notes, additional tax considerations with respect to such Notes will
be disclosed in the applicable Prospectus Supplement.
Interest Income on the Notes. Based on the above assumptions, except as
discussed in the following paragraph, the Notes will not be considered issued
with OID. The stated interest thereon will be taxable to a Noteholder as
ordinary interest income when received or accrued in accordance with such
Noteholder's method of tax accounting. Under the OID regulations, a holder of a
Note issued with a de minimis amount of OID must include such OID in income, on
a pro rata basis, as principal payments are made on the Note. It is believed
that any prepayment premium paid as a result of a mandatory redemption will be
taxable as contingent interest when it becomes fixed and unconditionally
payable. A purchaser who buys a Note for more or less than its principal amount
will generally be subject, respectively, to the premium amortization or market
discount rules of the Code.
A holder of a Note that has a fixed maturity date of not more than one year
from the issue date of such Note (a "Short-Term Note") may be subject to special
rules. An accrual basis holder of a Short-Term Note (and certain cash method
holders, including regulated investment companies, as set forth in Section 1281
of the Code) generally would be required to report interest income as interest
accrues on a straight-line basis over the term of each interest period. Other
cash basis holders of a Short-Term Note would, in general, be required to report
interest income as interest is paid (or, if earlier, upon the taxable
disposition of the Short-Term Note). However, a cash basis holder of a
Short-Term Note reporting interest income as it is paid may be required to defer
a portion of any interest expense otherwise deductible on indebtedness incurred
to purchase or carry the Short-Term Note until the taxable disposition of the
Short-Term Note. A cash basis taxpayer may elect under Section 1281 of the Code
to accrue interest income on all nongovernment debt obligations with a term of
one year or less, in which case the taxpayer would include interest on the
Short-Term Note in income as it accrues, but would not be subject to the
interest expense deferral rule referred to in the preceding sentence. Certain
special rules apply if a Short-Term Note is purchased for more or less than its
principal amount.
Sale or Other Disposition. If a Noteholder sells a Note, the holder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale and the holder's adjusted tax basis in the Note. The
adjusted tax basis of a Note to a particular Noteholder will equal the holder's
cost for the Note,
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increased by any market discount, acquisition discount, OID (including de
minimis OID) and gain previously included by such Noteholder in income with
respect to the Note and decreased by the amount of bond premium (if any)
previously amortized and by the amount of principal payments previously received
by such Noteholder with respect to such Note. Any such gain or loss will be
capital gain or loss if the Note was held as a capital asset, except for gain
representing accrued interest and accrued market discount not previously
included in income. Capital losses generally may be used only to offset capital
gains. The Taxpayer Relief Act of 1997 reduces the maximum rates on long-term
capital gains recognized on capital assets held by individual taxpayers for more
than eighteen months as of the date of disposition (and would further reduce the
maximum rates on such gains in the year 2001 and thereafter for certain
individual taxpayers who meet specified conditions). Prospective investors
should consult their own tax advisors concerning these tax law changes.
Foreign Holders. Interest payments made (or accrued) to a Noteholder who
is a nonresident alien, foreign corporation or other non-U.S. person (a "foreign
person") generally will be considered "portfolio interest", and generally will
not be subject to United States federal income tax and withholding tax, if the
interest is not effectively connected with the conduct of a trade or business
within the United States by the foreign person and the foreign person (i) is not
actually or constructively a "10 percent shareholder" of the Trust or the Seller
(including a holder of 10% of the outstanding Certificates) or a "controlled
foreign corporation" with respect to which the Trust or the Seller is a "related
person" within the meaning of the Code and (ii) provides the Trustee or other
person who is otherwise required to withhold U.S. tax with respect to the Notes
with an appropriate statement (on Form W-8 or a similar form), signed under
penalties of perjury, certifying that the beneficial owner of the Note is a
foreign person and providing the foreign person's name and address. If a Note is
held through a securities clearing organization or certain other financial
institutions, the organization or institution may provide the relevant signed
statement to the withholding agent; in that case, however, the signed statement
must be accompanied by a Form W-8 or substitute form provided by the foreign
person that owns the Note. If such interest is not portfolio interest, then it
will be subject to United States federal income at graduated rates (if received
by a non-U.S. person with effectively connected income) and withholding tax at a
rate of 30 percent, unless reduced or eliminated pursuant to an applicable tax
treaty.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a Note by a foreign person will be exempt from United
States federal income and withholding tax, provided that (i) such gain is not
effectively connected with the conduct of a trade or business in the United
States by the foreign person and (ii) in the case of an individual foreign
person, the foreign person is not present in the United States for 183 days or
more in the taxable year and does not otherwise have a "tax home" within the
United States.
Backup Withholding. Each holder of a Note (other than an exempt holder
such as a corporation, tax-exempt organization, qualified pension and
profit-sharing trust, individual retirement account or nonresident alien who
provides certification as to status as a nonresident) will be required to
provide, under penalties of perjury, a certificate containing the holder's name,
address, correct federal taxpayer identification number and a statement that the
holder is not subject to backup withholding. Should a nonexempt Noteholder fail
to provide the required certification, the Trust will be required to withhold 31
percent of the amount otherwise payable to the holder, and remit the withheld
amount to the IRS as a credit against the holder's federal income tax liability.
Possible Alternative Treatments of the Notes. If, contrary to the opinion
of Federal Tax Counsel, the IRS successfully asserted that one or more of the
Notes did not represent debt for federal income tax purposes, the Notes might be
treated as equity interests in the Trust. If so treated, the Trust might be
treated as a publicly traded partnership taxable as a corporation with the
adverse consequences described above (and the publicly traded partnership
taxable as a corporation would not be able to reduce its taxable income by
deductions for interest expense on Notes recharacterized as equity).
Alternatively, and most likely in the view of Federal Tax Counsel, the Trust
would be treated as a publicly traded partnership that would not be taxable as a
corporation because it would meet certain qualifying income tests. Nonetheless,
treatment of the Notes as equity interests in such a partnership could have
adverse tax consequences to certain holders. For example, income to certain
tax-exempt entities (including pension funds) would be "unrelated business
taxable
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income", income to foreign holders generally would be subject to U.S. tax and
U.S. tax return filing and withholding requirements, and individual holders
might be subject to certain limitations on their ability to deduct their share
of Trust expenses.
TAX CONSEQUENCES TO HOLDERS OF THE CERTIFICATES
Treatment of the Trust as a Partnership. The Seller and the Servicer will
agree, and the Certificateholders will agree by their purchase of Certificates,
to treat the Trust and each separate Series Trust Property as a partnership for
purposes of federal and state income tax, franchise tax and any other tax
measured in whole or in part by income, with the assets of the partnership being
the assets held by the Trust, the partners of the partnership being the
Certificateholders (including the Company in its capacity as recipient of
distributions from the Reserve Account), and the Notes being debt of the related
partnership. However, the proper characterization of the arrangement involving
the Trust, the Certificates, the Notes, the Seller, the Company and the Servicer
is not clear because there is no authority on transactions closely comparable to
that contemplated herein.
A variety of alternative characterizations are possible. For example,
because the Certificates have certain features characteristic of debt, the
Certificates might be considered debt of the Company or the Trust. Any such
characterization would not result in materially adverse tax consequences to
Certificateholders as compared to the consequences from treatment of the
Certificates as equity in a partnership, described below. The following
discussion assumes that the Certificates represent equity interests in a
partnership.
Indexed Securities, etc. The following discussion assumes that all
payments on the Certificates are denominated in U.S. dollars, none of the
Certificates are Indexed Securities or Strip Certificates, and that a series of
Securities includes a single class of Certificates. If these conditions are not
satisfied with respect to any given series of Certificates, additional tax
considerations with respect to such Certificates will be disclosed in the
applicable Prospectus Supplement.
Partnership Taxation. As a partnership, the Trust will not be subject to
federal income tax. Rather, each Certificateholder will be required to
separately take into account such holder's allocated share of income, gains,
losses, deductions and credits of the Trust. The Trust's income will consist
primarily of interest and finance charges earned on the Receivables (including
appropriate adjustments for market discount, OID and bond premium) and any gain
upon collection or disposition of Receivables. The Trust's deductions will
consist primarily of interest accruing with respect to the Notes, servicing and
other fees, and losses or deductions upon collection or disposition of
Receivables.
The tax items of a partnership are allocable to the partners in accordance
with the Code, Treasury regulations and the partnership agreement (here, the
Trust Agreement and related documents). The Trust Agreement will provide, in
general, that the Certificateholders will be allocated taxable income of the
Trust for each month equal to the sum of (i) the interest that accrues on the
Certificates in accordance with their terms for such month, including interest
accruing at the Pass Through Rate for such month and interest on amounts
previously due on the Certificates but not yet distributed; (ii) any Trust
income attributable to discount on the Receivables that corresponds to any
excess of the principal amount of the Certificates over their initial issue
price; (iii) prepayment premium payable to the Certificateholders for such
month; and (iv) any other amounts of income payable to the Certificateholders
for such month. Such allocation will be reduced by any amortization by the Trust
of premium on Receivables that corresponds to any excess of the issue price of
Certificates over their principal amount. All remaining taxable income of the
Trust will be allocated to the Company. Based on the economic arrangement of the
parties, this approach for allocating Trust income should be permissible under
applicable Treasury regulations, although no assurance can be given that the IRS
would not require a greater amount of income to be allocated to
Certificateholders. Moreover, even under the foregoing method of allocation,
Certificateholders may be allocated income equal to the entire Pass Through Rate
plus the other items described above even though the Trust might not have
sufficient cash to make current cash distributions of such amount. Thus, cash
basis holders will in effect be required to report income from the Certificates
on the accrual basis and Certificateholders may become liable for taxes on Trust
income even if they have not received cash from the Trust to pay such taxes. In
addition, because tax allocations and
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tax reporting will be done on a uniform basis for all Certificateholders but
Certificateholders may be purchasing Certificates at different times and at
different prices, Certificateholders may be required to report on their tax
returns taxable income that is greater or less than the amount reported to them
by the Trust.
All of the taxable income allocated to a Certificateholder that is a
pension, profit sharing or employee benefit plan or other tax-exempt entity
(including an individual retirement account) will constitute "unrelated business
taxable income" generally taxable to such a holder under the Code.
An individual taxpayer's share of expenses of the Trust (including fees to
the Servicer but not interest expense) would be miscellaneous itemized
deductions. Such deductions might be disallowed to the individual in whole or in
part and might result in such holder being taxed on an amount of income that
exceeds the amount of cash actually distributed to such holder over the life of
the Trust.
The Trust intends to make all tax calculations relating to income and
allocations to Certificateholders on an aggregate basis. If the IRS were to
require that such calculations be made separately for each Receivable, the Trust
might be required to incur additional expense but it is believed that there
would not be a material adverse effect on Certificateholders.
Discount and Premium. It is believed that the Receivables were not issued
with OID, and, therefore, the Trust should not have OID income. However, the
purchase price paid by the Trust for the Receivables may be greater or less than
the remaining principal balance of the Receivables at the time of purchase. If
so, the Receivables will have been acquired at a premium or discount, as the
case may be. (As indicated above, the Trust will make this calculation on an
aggregate basis, but might be required to recompute it on a
Receivable-by-Receivable basis.)
If the Trust acquires the Receivables at a market discount or premium, the
Trust will elect to include any such discount in income currently as it accrues
over the life of the Receivables or to offset any such premium against interest
income on the Receivables. As indicated above, a portion of such market discount
income or premium deduction may be allocated to Certificateholders.
Section 708 Termination. Under Section 708 of the Code, the Trust will be
deemed to terminate for federal income tax purposes if 50% or more of the
capital and profits interests in the Trust are sold or exchanged within a
12-month period. Pursuant to final Treasury regulations issued on May 9, 1997,
if such a termination occurs, the Trust will be considered to have contributed
the assets of the Trust (the "old partnership") to a new partnership (the "new
partnership") in exchange for interests in the partnership. Such interests would
be deemed distributed to the partners of the old partnership in liquidation
thereof, which would not constitute a sale or exchange.
Disposition of Certificates. Generally, capital gain or loss will be
recognized on a sale of Certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the Certificates sold.
A Certificateholder's tax basis in a Certificate will generally equal the
holder's cost increased by the holder's share of Trust income (includible in
income) and decreased by any distributions received with respect to such
Certificate. In addition, both the tax basis in the Certificates and the amount
realized on a sale of a Certificate would include the holder's share of the
Notes and other liabilities of the Trust. A holder acquiring Certificates at
different prices may be required to maintain a single aggregate adjusted tax
basis in such Certificates, and, upon sale or other disposition of some of the
Certificates, allocate a portion of such aggregate tax basis to the Certificates
sold (rather than maintaining a separate tax basis in each Certificate for
purposes of computing gain or loss on a sale of that Certificate).
Any gain on the sale of a Certificate attributable to the holder's share of
unrecognized accrued market discount on the Receivables would generally be
treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The Trust does not expect to have any other assets that
would give rise to such special reporting requirements. Thus, to avoid those
special reporting requirements, the Trust will elect to include market discount
in income as it accrues.
If a Certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the Certificates that exceeds
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the aggregate cash distributions with respect thereto, such excess will
generally give rise to a capital loss upon the retirement of the Certificates.
Allocations Between Transferors and Transferees. In general, the Trust's
taxable income and losses will be determined monthly and the tax items for a
particular calendar month will be apportioned among the Certificateholders in
proportion to the principal amount of Certificates owned by them as of the close
of the last day of such month. As a result, a holder purchasing Certificates may
be allocated tax items (which will affect its tax liability and tax basis)
attributable to periods before the actual transaction.
The use of such a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or losses
of the Trust might be reallocated among the Certificateholders. The Company is
authorized to revise the Trust's method of allocation between transferors and
transferees to conform to a method permitted by future regulations.
Section 754 Election. In the event that a Certificateholder sells its
Certificates at a profit (loss), the purchasing Certificateholder will have a
higher (lower) basis in the Certificates than the selling Certificateholder had.
The tax basis of the Trust's assets will not be adjusted to reflect that higher
(or lower) basis unless the Trust were to file an election under Section 754 of
the Code. In order to avoid the administrative complexities that would be
involved in keeping accurate accounting records, as well as potentially onerous
information reporting requirements, the Trust will not make such election. As a
result, Certificateholders might be allocated a greater or lesser amount of
Trust income than would be appropriate based on their own purchase price for
Certificates.
Administrative Matters. The Owner Trustee is required to keep or have kept
complete and accurate books of the Trust. Such books will be maintained for
financial reporting and tax purposes on an accrual basis and the fiscal year of
the Trust will be the calendar year. The Trustee will file a partnership
information return (IRS Form 1065) with the IRS for each taxable year of the
Trust and will report each Certificateholder's allocable share of items of Trust
income and expense to holders and the IRS on Schedule K-1. The Trust will
provide the Schedule K-1 information to nominees that fail to provide the Trust
with the information statement described below and such nominees will be
required to forward such information to the beneficial owners of the
Certificates. Generally, holders must file tax returns that are consistent with
the information return filed by the Trust or be subject to penalties unless the
holder notifies the IRS of all such inconsistencies.
Under Section 6031 of the Code, any person that holds Certificates as a
nominee at any time during a calendar year is required to furnish the Trust with
a statement containing certain information on the nominee, the beneficial owners
and the Certificates so held. Such information includes (i) the name, address
and taxpayer identification number of the nominee and (ii) as to each beneficial
owner (x) the name, address and identification number of such person, (y)
whether such person is a United States person, a tax-exempt entity or a foreign
government, an international organization, or any wholly owned agency or
instrumentality of either of the foregoing, and (z) certain information on
Certificates that were held, bought or sold on behalf of such person throughout
the year. In addition, brokers and financial institutions that hold Certificates
through a nominee are required to furnish directly to the Trust information as
to themselves and their ownership of Certificates. A clearing agency registered
under Section 17A of the Exchange Act is not required to furnish any such
information statement to the Trust. The information referred to above for any
calendar year must be furnished to the Trust on or before the following January
31. Nominees, brokers and financial institutions that fail to provide the Trust
with the information described above may be subject to penalties.
The Company will be designated as the tax matters partner in the related
Trust Agreement and, as such, will be responsible for representing the
Certificateholders in any dispute with the IRS. The Code provides for
administrative examination of a partnership as if the partnership were a
separate and distinct taxpayer. Generally, the statute of limitations for
partnership items does not expire before three years after the date on which the
partnership information return is filed. Any adverse determination following an
audit of the return of the Trust by the appropriate taxing authorities could
result in an adjustment of the returns of the Certificateholders, and, under
certain circumstances, a Certificateholder may be precluded from separately
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litigating a proposed adjustment to the items of the Trust. An adjustment could
also result in an audit of a Certificateholder's returns and adjustments of
items not related to the income and losses of the Trust.
Tax Consequences to Foreign Certificateholders. It is not clear whether
the Trust would be considered to be engaged in a trade or business in the United
States for purposes of federal withholding taxes with respect to non-U.S.
persons because there is no clear authority dealing with that issue under facts
substantially similar to those described herein. Although it is not expected
that the Trust would be engaged in a trade or business in the United States for
such purposes, the Trust will withhold as if it were so engaged in order to
protect the Trust from possible adverse consequences of a failure to withhold.
The Trust expects to withhold on the portion of its taxable income that is
allocable to foreign Certificateholders pursuant to Section 1446 of the Code, as
if such income were effectively connected to a U.S. trade or business, at a rate
of 35% for foreign holders that are taxable as corporations and 39.6% for all
other foreign holders. Subsequent adoption of Treasury regulations or the
issuance of other administrative pronouncements may require the Trust to change
its withholding procedures. In determining a holder's withholding status, the
Trust may rely on IRS Form W-8, IRS Form W-9 or the holder's certification of
nonforeign status signed under penalties of perjury.
Each foreign holder might be required to file a U.S. individual or
corporate income tax return (including, in the case of a corporation, the branch
profits tax) on its share of the Trust's income. Each foreign holder must obtain
a taxpayer identification number from the IRS and submit that number to the
Trust on Form W-8 in order to assure appropriate crediting of the taxes
withheld. A foreign holder generally would be entitled to file with the IRS a
claim for refund with respect to taxes withheld by the Trust, taking the
position that no taxes were due because the Trust was not engaged in a U.S.
trade or business. However, interest payments made (or accrued) to a
Certificateholder who is a foreign person generally will be considered
guaranteed payments to the extent such payments are determined without regard to
the income of the Trust. If these interest payments are properly characterized
as guaranteed payments, then the interest will not be considered "portfolio
interest". As a result, Certificateholders will be subject to United States
federal income tax and withholding tax at a rate of 30%, unless reduced or
eliminated pursuant to an applicable treaty. In such case, a foreign holder
would only be entitled to claim a refund for that portion of the taxes in excess
of the taxes that should be withheld with respect to the guaranteed payments.
Backup Withholding. Distributions made on the Certificates and proceeds
from the sale of the Certificates will be subject to a "backup" withholding tax
of 31% if, in general, the Certificateholder fails to comply with certain
identification procedures, unless the holder is an exempt recipient under
applicable provisions of the Code.
TRUSTS IN WHICH ALL CERTIFICATES ARE RETAINED BY THE SELLER
OR AN AFFILIATE OF THE SELLER
TAX CHARACTERIZATION OF THE TRUST
Federal Tax Counsel will deliver its opinion that a Trust which issues one
or more classes of Notes to investors and all the Certificates of which are
retained by Seller or an affiliate thereof will not be an association (or
publicly traded partnership) taxable as a corporation for federal income tax
purposes. This opinion will be based on the assumption that the terms of the
Trust Agreement and related documents will be complied with, and on counsel's
conclusions that the Trust will constitute a mere security arrangement for the
issuance of debt by the single Certificateholder.
Treatment of the Notes as Indebtedness. The Seller will agree, and the
Noteholders will agree by their purchase of Notes, to treat the Notes as debt
for federal income tax purposes. Federal Tax Counsel will, except as otherwise
provided in the related Prospectus Supplement, advise the Trust that the Notes
will be classified as debt for federal income tax purposes. Assuming such
characterization of the Notes is correct, the federal income tax consequences to
Noteholders described above under the heading "TRUSTS FOR WHICH A PARTNERSHIP
ELECTION IS MADE -- Tax Consequences to Holders of the Notes" would apply to the
Noteholders.
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If, contrary to the opinion of Federal Tax Counsel, the IRS successfully
asserted that one or more classes of Notes did not represent debt for federal
income tax purposes, such class or classes of Notes might be treated as equity
interests in the Trust. If so treated, the Trust might be treated as a publicly
traded partnership taxable as a corporation. Alternatively, and more likely in
the view of Federal Tax Counsel the Trust would most likely be treated as a
publicly traded partnership that would not be taxable as a corporation because
it would meet certain qualifying income tests.
Nonetheless, treatment of Notes as equity interests in such a partnership
could have adverse tax consequences to certain holders of such Notes. For
example, income to certain tax-exempt entities (including pension funds) would
be "unrelated business taxable income", income to foreign holders may be subject
to U.S. withholding tax and U.S. tax return filing requirements, and individual
holders might be subject to certain limitations on their ability to deduct their
share of Trust expenses. In the event one or more classes of Notes were treated
as interests in a partnership, the consequences governing the Certificates as
equity interests in a partnership described above under "TRUSTS FOR WHICH A
PARTNERSHIP ELECTION IS MADE -- Tax Consequences to Holders of the Certificates"
would apply to the holders of such Notes.
TRUSTS TREATED AS GRANTOR TRUSTS
TAX CHARACTERIZATION OF THE TRUST AS A GRANTOR TRUST
If a partnership election is not made, Federal Tax Counsel will deliver its
opinion that the Trust will not be classified as an association taxable as a
corporation and that such Trust will be classified as a grantor trust under
subpart E, Part I of subchapter J of the Code. In this case, owners of
Certificates (referred to herein as "Grantor Trust Certificateholders") will be
treated for federal income tax purposes as owners of a portion of the Trust's
assets as described below. The Certificates issued by a Trust that is treated as
a grantor trust are referred to herein as "Grantor Trust Certificates".
Characterization. Each Grantor Trust Certificateholder will be treated as
the owner of a pro rata undivided interest in the interest and principal
portions of the Trust represented by the Grantor Trust Certificates and will be
considered the equitable owner of a pro rata undivided interest in each of the
Receivables in the Trust. Any amounts received by a Grantor Trust
Certificateholder in lieu of amounts due with respect to any Receivable because
of a default or delinquency in payment will be treated for federal income tax
purposes as having the same character as the payments they replace.
Each Grantor Trust Certificateholder will be required to report on its
federal income tax return in accordance with such Grantor Trust
Certificateholder's method of accounting its pro rata share of the entire income
from the Receivables in the Trust represented by Grantor Trust Certificates,
including interest, OID, if any, prepayment fees, assumption fees, any gain
recognized upon an assumption and late payment charges received by the Servicer.
Under Sections 162 or 212 each Grantor Trust Certificateholder will be entitled
to deduct its pro rata share of servicing fees, prepayment fees, assumption
fees, any loss recognized upon an assumption and late payment charges retained
by the Servicer, provided that such amounts are reasonable compensation for
services rendered to the Trust. Grantor Trust Certificateholders that are
individuals, estates or trusts will be entitled to deduct their share of
expenses only to the extent such expenses plus all other Section 212 expenses
exceed two percent of its adjusted gross income. A Grantor Trust
Certificateholder using the cash method of accounting must take into account its
pro rata share of income and deductions as and when collected by or paid to the
Servicer. A Grantor Trust Certificateholder using an accrual method of
accounting must take into account its pro rata share of income and deductions as
they become due or are paid to the Servicer, whichever is earlier. If the
servicing fees paid to the Servicer are deemed to exceed reasonable servicing
compensation, the amount of such excess could be considered as an ownership
interest retained by the Servicer (or any person to whom the Servicer assigned
for value all or a portion of the servicing fees) in a portion of the interest
payments on the Receivables. The Receivables would then be subject to the
"coupon stripping" rules of the Code discussed below.
Premium. The price paid for a Grantor Trust Certificate by a holder will
be allocated to such holder's undivided interest in each Receivable based on
each Receivable's relative fair market value, so that such holder's undivided
interest in each Receivable will have its own tax basis. A Grantor Trust
Certificateholder
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that acquires an interest in Receivables at a premium may elect to amortize such
premium under a constant interest method. Amortizable bond premium will be
treated as an offset to interest income on such Grantor Trust Certificate. The
basis for such Grantor Trust Certificate will be reduced to the extent that
amortizable premium is applied to offset interest payments. It is not clear
whether a reasonable prepayment assumption should be used in computing
amortization of premium allowable under Section 171. A Grantor Trust
Certificateholder that makes this election for a Grantor Trust Certificate that
is acquired at a premium will be deemed to have made an election to amortize
bond premium with respect to all debt instruments having amortizable bond
premium that such Grantor Trust Certificateholder acquires during the year of
the election or thereafter.
If a premium is not subject to amortization using a reasonable prepayment
assumption, the holder of a Grantor Trust Certificate acquired at a premium
should recognize a loss if a Receivable prepays in full, equal to the difference
between the portion of the prepaid principal amount of such Receivable that is
allocable to the Grantor Trust Certificate and the portion of the adjusted basis
of the Grantor Trust Certificate that is allocable to such Receivable. If a
reasonable prepayment assumption is used to amortize such premium, it appears
that such a loss would be available, if at all, only if prepayments have
occurred at a rate faster than the reasonable assumed prepayment rate. It is not
clear whether any other adjustments would be required to reflect differences
between an assumed prepayment rate and the actual rate of prepayments.
STRIPPED BONDS AND STRIPPED COUPONS
Although the tax treatment of stripped bonds is not entirely clear, based
on recent guidance by the IRS, each purchaser of a Grantor Trust Certificate
will be treated as the purchaser of a stripped bond which generally should be
treated as a single debt instrument issued on the day it is purchased for
purposes of calculating any original issue discount. Generally, under recently
issued Treasury regulations (the "Section 1286 Treasury Regulations"), if the
discount on a stripped bond is larger than a de minimis amount (as calculated
for purposes of the OID rules of the Code) such stripped bond will be considered
to have been issued with OID. See "Original Issue Discount." Based on the
preamble to the Section 1286 Treasury Regulations, Federal Tax Counsel is of the
opinion that, although the matter is not entirely clear, the interest income on
the Certificates at the sum of the Pass Through Rate and the portion of the
Servicing Fee Rate that does not constitute excess servicing will be treated as
"qualified stated interest" within the meaning of the Section 1286 Treasury
Regulations and such income will be so treated in the Trustee's tax information
reporting.
Original Issue Discount. The IRS has stated in published rulings that, in
circumstances similar to those described herein, the special rules of the Code
relating to "original issue discount" (currently Sections 1271 through 1273 and
1275) will be applicable to a Grantor Trust Certificateholder's interest in
those Receivables meeting the conditions necessary for these sections to apply.
Generally, a Grantor Trust Certificateholder that acquires an undivided interest
in a Receivable issued or acquired with OID must include in gross income the sum
of the "daily portions," as defined below, of the OID on such Receivable for
each day on which it owns a Certificate, including the date of purchase but
excluding the date of disposition. In the case of an original Grantor Trust
Certificateholder, the daily portions of OID with respect to a Receivable
generally would be determined as follows. A calculation will be made of the
portion of OID that accrues on the Receivable during each successive monthly
accrual period (or shorter period in respect of the date of original issue or
the final Distribution Date). This will be done, in the case of each full
monthly accrual period, by adding (i) the present value of all remaining
payments to be received on the Receivable under the prepayment assumption used
in respect of the Receivables and (ii) any payments received during such accrual
period, and subtracting from that total the "adjusted issue price" of the
Receivable at the beginning of such accrual period. No representation is made
that the Receivables will prepay at any prepayment assumption. The "adjusted
issue price" of a Receivable at the beginning of the first accrual period is its
issue price (as determined for purposes of the OID rules of the Code) and the
"adjusted issue price" of a Receivable at the beginning of a subsequent accrual
period is the "adjusted issue price" at the beginning of the immediately
preceding accrual period plus the amount of OID allocable to that accrual period
and reduced by the amount of any payment (other than "qualified stated
interest") made at the end of or during that accrual period. The OID accruing
during such
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accrual period will then be divided by the number of days in the period to
determine the daily portion of OID for each day in the period. With respect to
an initial accrual period shorter than a full monthly accrual period, the daily
portions of OID must be determined according to an appropriate allocation under
either an exact or approximate method set forth in the OID Regulations, or some
other reasonable method, provided that such method is consistent with the method
used to determine the yield to maturity of the Receivables.
With respect to the Receivables, the method of calculating OID as described
above will cause the accrual of OID to either increase or decrease (but never
below zero) in any given accrual period to reflect the fact that prepayments are
occurring at a faster or slower rate than the prepayment assumption used in
respect of the Receivables. Subsequent purchasers that purchase Receivables at
more than a de minimis discount should consult their tax advisors with respect
to the proper method to accrue such OID.
Market Discount. A Grantor Trust Certificateholder that acquires an
undivided interest in Receivables may be subject to the market discount rules of
Sections 1276 through 1278 to the extent an undivided interest in a Receivable
is considered to have been purchased at a "market discount." Generally, the
amount of market discount is equal to the excess of the portion of the principal
amount of such Receivable allocable to such holder's undivided interest over
such holder's tax basis in such interest. Market discount with respect to a
Grantor Trust Certificate will be considered to be zero if the amount allocable
to the Grantor Trust Certificate is less than 0.25% of the Grantor Trust
Certificate's stated redemption price at maturity multiplied by the weighted
average maturity remaining after the date of purchase. Treasury regulations
implementing the market discount rules have not yet been issued; therefore,
investors should consult their own tax advisors regarding the application of
these rules and the advisability of making any of the elections allowed under
Code Sections 1276 through 1278.
The Code provides that any principal payment (whether a scheduled payment
or a prepayment) or any gain on disposition of a market discount bond shall be
treated as ordinary income to the extent that it does not exceed the accrued
market discount at the time of such payment. The amount of accrued market
discount for purposes of determining the tax treatment of subsequent principal
payments or dispositions of the market discount bond is to be reduced by the
amount so treated as ordinary income.
The Code also grants the Treasury Department authority to issue regulations
providing for the computation of accrued market discount on debt instruments,
the principal of which is payable in more than one installment. While the
Treasury Department has not yet issued regulations, rules described in the
relevant legislative history will apply. Under those rules, the holder of a
market discount bond may elect to accrue market discount either on the basis of
a constant interest rate or according to one of the following methods. If a
Grantor Trust Certificate is issued with OID, the amount of market discount that
accrues during any accrual period would be equal to the product of (i) the total
remaining market discount and (ii) a fraction, the numerator of which is the OID
accruing during the period and the denominator of which is the total remaining
OID at the beginning of the accrual period. For Grantor Trust Certificates
issued without OID, the amount of market discount that accrues during a period
is equal to the product of (i) the total remaining market discount and (ii) a
fraction, the numerator of which is the amount of stated interest paid during
the accrual period and the denominator of which is the total amount of stated
interest remaining to be paid at the beginning of the accrual period. For
purposes of calculating market discount under any of the above methods in the
case of instruments (such as the Grantor Trust Certificates) that provide for
payments that may be accelerated by reason of prepayments of other obligations
securing such instruments, the same prepayment assumption applicable to
calculating the accrual of OID will apply. Because the regulations described
above have not been issued, it is impossible to predict what effect those
regulations might have on the tax treatment of a Grantor Trust Certificate
purchased at a discount or premium in the secondary market.
A holder who acquired a Grantor Trust Certificate at a market discount also
may be required to defer a portion of its interest deductions for the taxable
year attributable to any indebtedness incurred or continued to purchase or carry
such Grantor Trust Certificate purchased with market discount. For these
purposes, the de minimis rule referred above applies. Any such deferred interest
expense would not exceed the market discount that accrues during such taxable
year and is, in general, allowed as a deduction not later than the year in which
such market discount is includible in income. If such holder elects to include
market discount in income
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currently as it accrues on all market discount instruments acquired by such
holder in that taxable year or thereafter, the interest deferral rule described
above will not apply.
Premium. To the extent a Grantor Trust Certificateholder is considered to
have purchased an undivided interest in a Receivable for an amount that is
greater than its stated redemption price at maturity of such Receivable, such
Grantor Trust Certificateholder will be considered to have purchased the
Receivable with "amortizable bond premium" equal in amount to such excess. A
Grantor Trust Certificateholder (who does not hold the Certificate for sale to
customers or in inventory) may elect under Section 171 of the Code to amortize
such premium. Under the Code, premium is allocated among the interest payments
on the Receivables to which it relates and is considered as an offset against
(and thus a reduction of) such interest payments. With certain exceptions, such
an election would apply to all debt instruments held or subsequently acquired by
the electing holder. Absent such an election, the premium will be deductible as
an ordinary loss only upon disposition of the Certificate or pro rata as
principal is paid on the Receivables.
Election to Treat All Interest as OID. The OID regulations permit a
Grantor Trust Certificateholder to elect to accrue all interest, discount
(including de minimis market or original issue discount) and premium in income
as interest, based on a constant yield method. If such an election were to be
made with respect to a Grantor Trust Certificate with market discount, the
Certificateholder would be deemed to have made an election to include in income
currently market discount with respect to all other debt instruments having
market discount that such Grantor Trust Certificateholder acquires during the
year of the election or thereafter. Similarly, a Grantor Trust Certificateholder
that makes this election for a Grantor Trust Certificate that is acquired at a
premium will be deemed to have made an election to amortize bond premium with
respect to all debt instruments having amortizable bond premium that such
Grantor Trust Certificateholder owns or acquires. See "-- Premium" herein. The
election to accrue interest, discount and premium on a constant yield method
with respect to a Grantor Trust Certificate is irrevocable.
Sale or Exchange of a Grantor Trust Certificate. Sale or exchange of a
Grantor Trust Certificate prior to its maturity will result in gain or loss
equal to the difference, if any, between the amount received and the owner's
adjusted basis in the Grantor Trust Certificate. Such adjusted basis generally
will equal the seller's purchase price for the Grantor Trust Certificate,
increased by the OID included in the seller's gross income with respect to the
Grantor Trust Certificate, and reduced by principal payments on the Grantor
Trust Certificate previously received by the seller. Such gain or loss will be
capital gain or loss to an owner for which a Grantor Trust Certificate is a
"capital asset" within the meaning of Section 1221, and will be long-term or
short-term depending on whether the Grantor Trust Certificate has been owned for
the long-term capital gain holding period (currently more than eighteen months).
Grantor Trust Certificates will be "evidences of indebtedness" within the
meaning of Section 582(c)(1), so that gain or loss recognized from the sale of a
Grantor Trust Certificate by a bank or a thrift institution to which such
section applies will be treated as ordinary income or loss.
Non-U.S. Persons. Generally, to the extent that a Grantor Trust
Certificate evidences ownership in underlying Receivables that were issued on or
before July 18, 1984, interest or OID paid by the person required to withhold
tax under Section 1441 or 1442 to (i) an owner that is not a U.S. Person (as
defined below) or (ii) a Grantor Trust Certificateholder holding on behalf of an
owner that is not a U.S. Person will be subject to federal income tax, collected
by withholding, at a rate of 30% or such lower rate as may be provided for
interest by an applicable tax treaty. Accrued OID recognized by the owner on the
sale or exchange of such a Grantor Trust Certificate also will be subject to
federal income tax at the same rate. Generally, such payments would not be
subject to withholding to the extent that a Grantor Trust Certificate evidences
ownership in Receivables issued after July 18, 1984, by natural persons if such
Grantor Trust Certificateholder complies with certain identification
requirements (including delivery of a statement, signed by the Grantor Trust
Certificateholder under penalties of perjury, certifying that such Grantor Trust
Certificateholder is not a U.S. Person and providing the name and address of
such Grantor Trust Certificateholder). Additional restrictions apply to
Receivables of where the obligor is not a natural person in order to qualify for
the exemption from withholding.
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As used herein, a "U.S. Person" means a citizen or resident of the United
States, a corporation or a partnership organized in or under the laws of the
United States or any political subdivision thereof, an estate or trust, the
income of which from sources outside the United States is includible in gross
income for federal income tax purposes regardless of its connection with the
conduct of a trade or business within the United States, or a trust if a court
within the United States is able to exercise primary supervision of the
administration of the trust and one or more United States persons have the
authority to control all substantial decisions of the trust.
Information Reporting and Backup Withholding. The Servicer will furnish or
make available, within a reasonable time after the end of each calendar year, to
each person who was a Grantor Trust Certificateholder at any time during such
year, such information as may be deemed necessary or desirable to assist Grantor
Trust Certificateholders in preparing their federal income tax returns, or to
enable holders to make such information available to beneficial owners or
financial intermediaries that hold Grantor Trust Certificates as nominees on
behalf of beneficial owners. If a holder, beneficial owner, financial
intermediary or other recipient of a payment on behalf of a beneficial owner
fails to supply a certified taxpayer identification number or if the Secretary
of the Treasury determines that such person has not reported all interest and
dividend income required to be shown on its federal income tax return, 31%
backup withholding may be required with respect to any payments. Any amounts
deducted and withheld from a distribution to a recipient would be allowed as a
credit against such recipient's federal income tax liability.
FASIT Legislation. During 1996, President Clinton signed into law the
"Small Business Job Protection Act of 1996" (the "Act"). The Act creates a new
type of entity for federal income tax purposes called a "financial asset
securitization investment trust" or "FASIT." Beginning in September of 1997, the
Act generally enables certain arrangements similar to a trust that is treated as
a partnership to elect to be treated as a FASIT. Under the Act, a FASIT
generally would avoid federal income taxation and could issue securities
substantially similar to the Securities and those securities would be treated as
debt for federal income tax purposes. If so provided in the related Prospectus
Supplement, the Trust Agreement or the Pooling and Servicing Agreement, as
applicable, will permit the Seller or the Trustee to take the appropriate
action, or will set forth certain conditions which, if satisfied, will permit
the Seller to amend such Trust Agreement or Pooling and Servicing Agreement, in
order to enable all or a portion of the Trust to qualify as a FASIT and to
permit a FASIT election to be made with respect thereto, and to make such
modifications to such Trust Agreement or Pooling and Servicing Agreement as may
be permitted by reason of the making of such an election. However, there can be
no assurance that the Seller or the Trustee will or will not cause any
permissible FASIT election to be made with respect to a Trust or amend the
related Trust Agreement or Pooling and Servicing Agreement in connection with
any election. Transition rules provided for by the FASIT legislation contemplate
that the entities in existence on August 31, 1997 may elect to be taxed under
the FASIT rules. However, how such an election would be made and how outstanding
interests of such entity are to be treated subsequent to the election is not
explained in the FASIT legislation.
CERTAIN STATE TAX CONSEQUENCES
The activities of servicing and collecting the Receivables will be
undertaken by the Servicer, which is a Michigan corporation. Because of the
variation in each state's tax laws based in whole or in part upon income, it is
impossible to predict tax consequences to holders of Notes and Certificates in
all of the state taxing jurisdictions in which they are already subject to tax.
Noteholders and Certificateholders are urged to consult their own tax advisors
with respect to state tax consequences arising out of the purchase, ownership
and disposition of Notes and Certificates.
* * *
THE FEDERAL AND STATE TAX DISCUSSIONS SET FORTH ABOVE ARE INCLUDED FOR
GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A NOTEHOLDER'S
OR CERTIFICATEHOLDER'S PARTICULAR TAX SITUATION. PROSPECTIVE PURCHASERS SHOULD
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF
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NOTES AND CERTIFICATES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR
OTHER TAX LAWS.
ERISA CONSIDERATIONS
Section 406 of ERISA and Section 4975 of the Code prohibit a pension,
profit-sharing or other employee benefit plan, as well as individual retirement
accounts and certain types of Keogh Plans (each a "Benefit Plan"), from engaging
in certain transactions with persons that are "parties in interest" under ERISA
or "disqualified persons" under the Code with respect to such Benefit Plan. A
violation of these "prohibited transaction" rules may result in an excise tax or
other penalties and liabilities under ERISA and the Code for such persons.
Certain transactions involving a Trust might be deemed to constitute
prohibited transactions under ERISA and the Code with respect to a Benefit Plan
that purchased Notes or Certificates if assets of the Trust were deemed to be
assets of the Benefit Plan. Under a regulation issued by the United States
Department of Labor (the "Plan Assets Regulation"), the assets of a Trust would
be treated as plan assets of a Benefit Plan for the purposes of ERISA and the
Code only if the Benefit Plan acquired an "equity interest" in the Trust and
none of the exceptions contained in the Plan Assets Regulation was applicable.
An equity interest is defined under the Plan Assets Regulation as an interest
other than an instrument which is treated as indebtedness under applicable local
law and which has no substantial equity features. The likely treatment in this
context of Notes and Certificates of a given series will be discussed in the
related Prospectus Supplement.
Employee benefit plans that are governmental plans (as defined in Section
3(32) of ERISA) and certain church plans (as defined in Section 3(33) of ERISA)
are not subject to ERISA requirements.
A plan fiduciary considering the purchase of Securities of a given series
should consult its tax and/or legal advisors regarding whether the assets of the
related Trust would be considered plan assets, the possibility of exemptive
relief from the prohibited transaction rules and other issues and their
potential consequences.
SENIOR CERTIFICATES ISSUED BY TRUSTS THAT DO NOT ISSUE NOTES
Unless otherwise specified in the related Prospectus Supplement, the
following discussion applies only to nonsubordinated Certificates (referred to
herein as "Senior Certificates") issued by a Trust that does not issue Notes.
The U.S. Department of Labor has granted to the lead Underwriter named in
the Prospectus Supplement an exemption (the "Exemption") from certain of the
prohibited transaction rules of ERISA with respect to the initial purchase, the
holding and the subsequent resale by Benefit Plans of certificates representing
interests in asset-backed pass-through trusts that consist of certain
receivables, loans and other obligations that meet the conditions and
requirements of the Exemption. The receivables covered by the Exemption include
motor vehicle installment sales contracts such as the Receivables. The Exemption
will apply to the acquisition, holding and resale of the Senior Certificates by
a Benefit Plan, provided that certain conditions (certain of which are described
below) are met.
Among the conditions which must be satisfied for the Exemption to apply to
the Senior Certificates are the following:
(1) The acquisition of the Senior Certificates by a Benefit Plan is on
terms (including the price for the Senior Certificates) that are at least
as favorable to the Benefit Plan as they would be in an arm's length
transaction with an unrelated party;
(2) The rights and interests evidenced by the Senior Certificates
acquired by the Benefit Plan are not subordinated to the rights and
interests evidenced by other certificates of the Trust;
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(3) The Senior Certificates acquired by the Benefit Plan have received
a rating at the time of such acquisition that is in one of the three
highest generic rating categories from either Standard & Poor's
Corporation, Moody's Investors Service, Inc., Duff & Phelps Inc. or Fitch
Investors Service, Inc.;
(4) The Trustee is not an affiliate of any other member of the
Restricted Group (as defined below);
(5) The sum of all payments made to the Underwriters in connection
with the distribution of the Senior Certificates represents not more than
reasonable compensation for underwriting the Senior Certificates; the sum
of all payments made to and retained by the Seller pursuant to the sale of
the Contracts to the Trust represents not more than the fair market value
of such Contracts; and the sum of all payments made to and retained by the
Servicer represents not more than reasonable compensation for the
Servicer's services under the Agreement and reimbursement of the Servicer's
reasonable expenses in connection therewith; and
(6) The Benefit Plan investing in the Senior Certificates is an
"accredited investor" as defined in Rule 501(a)(1) of Regulation D of the
Securities and Exchange Commission under the Securities Act of 1933.
Moreover, the Exemption would provide relief from certain
self-dealing/conflict of interest or prohibited transactions only if, among
other requirements, (i) in the case of the acquisition of Senior Certificates in
connection with the initial issuance, at least fifty (50) percent of the Senior
Certificates are acquired by persons independent of the Restricted Group (as
defined below), (ii) the Benefit Plan's investment in Senior Certificates does
not exceed twenty-five (25) percent of all of the Senior Certificates
outstanding at the time of the acquisition, and (iii) immediately after the
acquisition, no more than twenty-five (25) percent of the assets of the Benefit
Plan are invested in certificates representing an interest in one or more trusts
containing assets sold or serviced by the same entity. The Exemption does not
apply to Plans sponsored by the Seller, any Underwriter, the Trustee, the
Servicer, any obligor with respect to Contracts included in the Trust
constituting more than five percent of the aggregate unamortized principal
balance of the assets in the Trust, or any affiliate of such parties (the
"Restricted Group").
The Seller believes that the Exemption will apply to the acquisition and
holding by Benefit Plans of Senior Certificates sold by the Underwriter or
Underwriters named in the Prospectus Supplement and that all conditions of the
Exemption other than those within the control of the investors have been met. In
addition, as of the date hereof, no obligor with respect to Contracts included
in the Trust constitutes more than five percent of the aggregate unamortized
principal balance of the assets of the Trust.
PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement with
respect to the Notes, if any, of a series and an underwriting agreement with
respect to the Certificates of such series (collectively, the "Underwriting
Agreements"), the Seller will agree to cause the related Trust to sell to the
underwriters named therein and in the related Prospectus Supplement, and each of
such underwriters will severally agree to purchase, the principal amount of each
class of Notes and Certificates, as the case may be, of the related series set
forth therein and in the related Prospectus Supplement.
In each of the Underwriting Agreements with respect to any given series of
Securities, the several underwriters will agree, subject to the terms and
conditions set forth therein, to purchase all the Notes and Certificates, as the
case may be, described therein which are offered hereby and by the related
Prospectus Supplement if any of such Notes and Certificates, as the case may be,
are purchased.
Each Prospectus Supplement will either (i) set forth the price at which
each class of Notes and Certificates, as the case may be, being offered thereby
will be offered to the public and any concessions that may be offered to certain
dealers participating in the offering of such Notes and Certificates or (ii)
specify that the related Notes and Certificates, as the case may be, are to be
resold by the underwriters in negotiated transactions at varying prices to be
determined at the time of such sale. After the initial public offering of any
such Notes and Certificates, such public offering prices and such concessions
may be changed.
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96
Each Underwriting Agreement will provide that the Seller will indemnify the
underwriters against certain civil liabilities, including liabilities under the
Securities Act, or contribute to payments the several underwriters may be
required to make in respect thereof.
Each Trust may, from time to time, invest the funds in its Trust Accounts
in Eligible Investments acquired from such underwriters or from the Seller.
Pursuant to each Underwriting Agreement with respect to a given series of
Securities, the closing of the sale of any class of Securities subject to such
Underwriting Agreement will be conditioned on the closing of the sale of all
other such classes of Securities of that series.
The place and time of delivery for the Securities in respect of which this
Prospectus is delivered will be set forth in the related Prospectus Supplement.
LEGAL OPINIONS
Certain legal matters relating to the Securities of any series will be
passed upon for the related Trust and the Seller by the General Counsel of the
Seller.
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INDEX OF TERMS
Actuarial Receivables....................................... 15
Additional Receivables...................................... 6
Administration Agreement.................................... 45
Administration Fee.......................................... 45
Administrator............................................... 45
Advances.................................................... 38
Applicable Trustee.......................................... 29
APR......................................................... 7
Base Rate................................................... 24
Benefit Plan................................................ 60
Calculation Agent........................................... 25
Calculation Date............................................ 26
CCC......................................................... 18
CD Rate..................................................... 25
CD Rate Determination Date.................................. 25
CD Rate Security............................................ 25
Cede........................................................ 13
Certificate Balance......................................... 4
Certificate Distribution Account............................ 35
Certificate Pool Factor..................................... 17
Certificateholder........................................... 29
Certificateholders' Reconciliation Principal Adjustment
Amount.................................................... 33
Certificates................................................ 1
CFC......................................................... 3
Chrysler.................................................... 11
Closing Date................................................ 34
Code........................................................ 48
Collection Account.......................................... 35
Collection Period........................................... 37
Commercial Paper Rate....................................... 26
Commercial Paper Rate Determination Date.................... 26
Commercial Paper Rate Security.............................. 25
Commission.................................................. 2
Commodity Indexed Securities................................ 28
Company..................................................... 1
Composite Quotations........................................ 25
Currency Indexed Securities................................. 28
Cutoff Date................................................. 13
Dealer Agreements........................................... 13
Dealers..................................................... 13
Definitive Certificates..................................... 32
Definitive Notes............................................ 32
Definitive Securities....................................... 32
Depository.................................................. 18
Determination Date.......................................... 39
Distribution Date........................................... 24
DTC's Nominee............................................... 13
Eligible Deposit Account.................................... 36
Eligible Institution........................................ 36
Eligible Investments........................................ 36
ERISA....................................................... 9
Events of Default........................................... 20
Exemption................................................... 60
Federal Funds Rate.......................................... 26
Federal Funds Rate Determination Date....................... 26
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98
Federal Funds Rate Security................................. 25
Federal Tax Counsel......................................... 48
Final Scheduled Maturity Date............................... 7
Financed Vehicles........................................... 5
Fixed Rate Securities....................................... 24
Fixed Value Receivables..................................... 15
Fixed Value Securities...................................... 43
Floating Rate Securities.................................... 24
FTC Rule.................................................... 47
Funding Period.............................................. 4
Grantor Trust Certificateholders............................ 55
Grantor Trust Certificates.................................. 55
H.15(519)................................................... 25
Indenture................................................... 3
Indenture Trustee........................................... 1
Index....................................................... 28
Index Maturity.............................................. 25
Indexed Commodity........................................... 28
Indexed Currency............................................ 28
Indexed Principal Amount.................................... 28
Indexed Securities.......................................... 28
Indirect Participants....................................... 29
Initial Cutoff Date......................................... 5
Initial Pool Balance........................................ 44
Initial Receivables......................................... 5
Insolvency Event............................................ 42
Interest Rate............................................... 3
Interest Reset Date......................................... 25
Interest Reset Period....................................... 24
Investment Earnings......................................... 36
IRS......................................................... 48
Issuer...................................................... 3
LIBOR....................................................... 27
LIBOR Determination Date.................................... 27
LIBOR Security.............................................. 25
London Banking Day.......................................... 27
Money Market Yield.......................................... 26
Note Distribution Account................................... 35
Note Pool Factor............................................ 17
Noteholder.................................................. 29
Noteholders' Reconciliation Principal Adjustment Amount..... 33
Notes....................................................... 1
Obligors.................................................... 13
OID......................................................... 49
OID Regulations............................................. 49
Participants................................................ 19
Pass Through Rate........................................... 4
Payahead Account............................................ 35
Payaheads................................................... 37
Payment Date................................................ 19
Plan Assets Regulation...................................... 60
Pool Balance................................................ 17
Pooling and Servicing Agreement............................. 3
Pre-Funded Amount........................................... 6
Pre-Funding Account......................................... 1
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Precomputed Advance......................................... 4
Precomputed Receivables..................................... 15
Previously Issued Securities................................ 5
Prospectus Supplement....................................... 1
Purchase Amount............................................. 35
Rating Agencies............................................. 12
Receivables................................................. 5
Receivables Pool............................................ 13
Registration Statement...................................... 2
Related Documents........................................... 22
Reserve Account............................................. 40
Restricted Group............................................ 61
Revolving Period............................................ 6
Rule of 78's................................................ 15
Rule of 78's Receivables.................................... 15
Rules....................................................... 30
Sale and Servicing Agreement................................ 5
Schedule of Receivables..................................... 34
Securities.................................................. 1
Securities Act.............................................. 2
Section 1286 Treasury Regulations........................... 56
Securityholders............................................. 29
Seller...................................................... 3
Senior Certificates......................................... 60
Series Trust Property....................................... 5
Servicer.................................................... 3
Servicer Default............................................ 41
Servicing Fee............................................... 38
Servicing Fee Rate.......................................... 38
Short-Term Note............................................. 49
Simple Interest Receivables................................. 15
Spread...................................................... 24
Spread Multiplier........................................... 25
Stock Index................................................. 28
Stock Indexed Securities.................................... 29
Strip Certificates.......................................... 5
Strip Notes................................................. 4
Subsequent Receivables...................................... 6
Subsequent Transfer Date.................................... 34
Transfer and Servicing Agreements........................... 34
Treasury bills.............................................. 28
Treasury Rate............................................... 28
Treasury Rate Determination Date............................ 28
Treasury Rate Security...................................... 25
Trust....................................................... 3
Trustee..................................................... 1
Trust Accounts.............................................. 36
Trust Agreement............................................. 3
UCC......................................................... 10
Underwriting Agreements..................................... 61
U.S. Person................................................. 59
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
SELLER OR BY THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO
NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE
SECURITIES OFFERED HEREBY TO ANYONE IN ANY JURISDICTION IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM
IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT INFORMATION HEREIN OR
THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS
SUPPLEMENT OR PROSPECTUS.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
----
Reports to Noteholders.................... S-3
Table of Contents......................... S-4
Summary of Terms.......................... S-5
Special Considerations.................... S-8
The Trust................................. S-11
The Receivables Pool...................... S-12
Chrysler Financial Corporation............ S-17
Weighted Average Life of the Notes........ S-17
Description of the Notes.................. S-18
Description of the Certificates........... S-20
Description of the Transfer and Servicing
Agreements.............................. S-20
Certain Federal Income Tax Consequences... S-25
ERISA Considerations...................... S-25
Underwriting.............................. S-26
Legal Opinions............................ S-27
Index of Terms............................ S-28
Annex I................................... A-1
PROSPECTUS
Available Information..................... 2
Incorporation of Certain Documents by
Reference............................... 2
Summary of Terms.......................... 3
Special Considerations.................... 10
The Trusts................................ 13
The Receivables Pools..................... 14
Weighted Average Life of the Securities... 16
Pool Factors and Trading Information...... 17
Use of Proceeds........................... 17
Chrysler Financial Corporation............ 18
Description of the Notes.................. 18
Description of the Certificates........... 23
Certain Information Regarding the
Securities.............................. 24
Description of the Transfer and Servicing
Agreements.............................. 34
Certain Legal Aspects of the
Receivables............................. 45
Certain Federal Income Tax Consequences... 48
Certain State Tax Consequences............ 59
ERISA Considerations...................... 60
Plan of Distribution...................... 61
Legal Opinions............................ 62
Index of Terms............................ 63
UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL DEALERS
EFFECTING TRANSACTIONS IN THE NOTES OFFERED BY THIS PROSPECTUS SUPPLEMENT,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. THIS IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
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$1,304,375,000
PREMIER AUTO TRUST
1998-5
$640,000,000
5.07% ASSET BACKED NOTES, CLASS A-2
$450,000,000
5.07% ASSET BACKED NOTES, CLASS A-3
$214,375,000
5.19% ASSET BACKED NOTES, CLASS A-4
[CHRYSLER FINANCIAL CORPORATION LOGO]
SELLER AND SERVICER
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PROSPECTUS SUPPLEMENT
DATED OCTOBER 20, 1998
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BEAR, STEARNS & CO. INC.
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY
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