Filed Pursuant to Rule 424(b)(5)
Registration File No.: 333-36939
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. THIS PROSPECTUS SUPPLEMENT AND THE ATTACHED PROSPECTUS ARE NOT AN
OFFER TO SELL THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED DECEMBER 5, 2000
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED DECEMBER 5, 2000)
$1,280,466,538.08
CHASE MANHATTAN AUTO OWNER TRUST 2000-A
$1,242,000,000.00 ASSET BACKED NOTES
$ 38,466,538.08 ASSET BACKED CERTIFICATES
CHASE MANHATTAN BANK USA, NATIONAL ASSOCIATION
Seller and Servicer
- --------------------------------------------------------------------------------
BEFORE YOU PURCHASE ANY OF THESE SECURITIES, BE SURE TO READ THIS PROSPECTUS
SUPPLEMENT AND THE ATTACHED PROSPECTUS, ESPECIALLY THE RISK FACTORS BEGINNING
ON PAGE S-10 OF THIS PROSPECTUS SUPPLEMENT AND ON PAGE 9 OF THE PROSPECTUS.
A security is not a deposit and neither the securities nor the underlying motor
vehicle retail installment sales contracts and loans are insured or guaranteed
by the FDIC or any other governmental authority.
These securities represent obligations of or interests in the trust only and
are not obligations of or interests in Chase Manhattan Bank USA, National
Association or any of its affiliates.
No one may use this prospectus supplement to offer and sell these securities
unless it is accompanied by the prospectus.
- --------------------------------------------------------------------------------
THE TRUST WILL ISSUE THE FOLLOWING SECURITIES:
- -----------------------------------------------------------------------------------------------------------------------------------
Class A-1 Class A-2 Class A-3 Class A-4
Notes Notes Notes Notes Certificates
- -----------------------------------------------------------------------------------------------------------------------------------
Principal Amount $ 259,000,000.00 $ 292,000,000.00 $ 397,000,000.00 $ 294,000,000.00 $ 38,466,538.08
- -----------------------------------------------------------------------------------------------------------------------------------
Interest Rate % % % % %
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Final Scheduled
Payment Date December 17, 2001 June 16, 2003 December 15, 2004 June 15, 2007 June 15, 2007
- -----------------------------------------------------------------------------------------------------------------------------------
Price to Public % % % % %
- -----------------------------------------------------------------------------------------------------------------------------------
Underwriting
Discount % % % % %
- -----------------------------------------------------------------------------------------------------------------------------------
Proceeds to Seller (1) % % % % %
- -----------------------------------------------------------------------------------------------------------------------------------
- ----------
(1) Before deducting expenses payable by the seller estimated to be $900,000.
The total price to public is $ .
The total underwriting discount is $ .
The total proceeds to the seller are $ .
The assets of the trust will be motor vehicle retail installment sales
contracts and loans and related property.
The trust will pay interest and principal on the securities on the 15th day of
each month. The first payment date will be January 16, 2001.
The certificates are subordinated to the notes.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF
THIS PROSPECTUS SUPPLEMENT OR THE ATTACHED PROSPECTUS IS ACCURATE OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
Underwriters of the Notes
CHASE SECURITIES INC. J.P. MORGAN & CO.
BANC OF AMERICA SECURITIES LLC
BEAR, STEARNS & CO. INC.
THE WILLIAMS CAPITAL GROUP
Underwriters of the Certificates
CHASE SECURITIES INC. J.P. MORGAN & CO.
The date of this prospectus supplement is December , 2000.
[THIS PAGE INTENTIONALLY LEFT BLANK]
TABLE OF CONTENTS
SUMMARY OF TERMS ........................................ S-4
RISK FACTORS ............................................ S-10
Holders of certificates are subject to
greater credit risks because
distributions in respect of the
certificates are subordinate to
payments on the notes ............................ S-10
You may experience prepayments
and losses on your securities
after an event of default under
the indenture .................................... S-10
Only the assets of the trust are
available to pay your
securities ....................................... S-10
Geographic concentration of
receivables may result in more
risk to you ...................................... S-10
The absence of an existing market
for the securities may limit
your ability to resell the
securities ....................................... S-11
THE TRUST ............................................... S-12
General .............................................. S-12
Trust Property ....................................... S-12
Capitalization of the Trust .......................... S-13
Trustee .............................................. S-13
THE RECEIVABLES POOL .................................... S-13
Delinquency and Loan Loss
Information ...................................... S-17
CHASE USA ............................................... S-19
USE OF PROCEEDS ......................................... S-19
WEIGHTED AVERAGE LIFE OF THE SECURITIES ................. S-19
Maturity and Prepayment
Considerations ................................ S-19
Illustration of Effect of Prepayments
of Receivables on the Life of the
Securities .................................... S-20
DESCRIPTION OF THE NOTES ................................ S-27
General .............................................. S-27
Payments of Interest ................................. S-27
Payments of Principal ................................ S-27
Prepayment ........................................... S-29
DESCRIPTION OF THE CERTIFICATES ......................... S-29
General .............................................. S-29
Distributions of Interest ............................ S-29
Distributions of Principal ........................... S-30
Prepayment ........................................... S-31
Restrictions on Foreign Ownership .................... S-31
PAYMENTS AND DISTRIBUTIONS .............................. S-31
Source of Funds ...................................... S-31
Priority of Payments and
Distributions .................................... S-32
DESCRIPTION OF THE TRANSFER AND SERVICING
AGREEMENTS ......................................... S-33
Accounts ............................................. S-33
Servicing Compensation ............................... S-33
Servicing Procedures ................................. S-33
Reserve Account ...................................... S-34
Administration Agreement ............................. S-35
MONEY MARKET ELIGIBILITY ................................ S-35
CERTAIN FEDERAL INCOME TAX CONSEQUENCES ................. S-35
Tax Characterization of the Trust .................... S-36
Tax Consequences to Noteholders ...................... S-36
Tax Consequences To
Certificateholders ............................... S-39
CERTAIN STATE TAX CONSEQUENCES .......................... S-42
ERISA CONSIDERATIONS .................................... S-42
General .............................................. S-42
The Notes ............................................ S-43
The Certificates ..................................... S-44
Taxation of Tax-Exempt Investors ..................... S-46
UNDERWRITING ............................................ S-47
Note Underwriting Agreement .......................... S-47
Certificate Underwriting
Agreement ........................................ S-47
Proceeds to Seller ................................... S-48
General .............................................. S-48
LEGAL MATTERS ........................................... S-49
GLOSSARY OF TERMS ....................................... S-50
ANNEX A--GLOBAL CLEARANCE, SETTLEMENT
AND TAX DOCUMENTATION PROCEDURES .................... A-1
S-2
READING THESE DOCUMENTS
We provide information on the securities in two documents that offer
varying levels of detail:
o prospectus -- provides general information, some of which may not
apply to the securities.
o prospectus supplement -- provides a summary of the specific terms of
the securities.
We suggest you read this prospectus supplement and the prospectus in their
entirety. The prospectus supplement pages begin with "S". If the terms of the
securities described in this prospectus supplement vary with the attached
prospectus, you should rely on the information in this prospectus supplement.
We include cross-references to sections in these documents where you can
find further related discussions. Refer to the table of contents on page S-2 in
this document and on page 2 in the attached prospectus to locate the referenced
sections.
The glossary of terms on page S-50 of this prospectus supplement lists
definitions of certain terms used in this prospectus supplement and the index
of principal terms on page 60 in the prospectus references the pages on which
you can find the definitions of certain terms used in the prospectus.
This prospectus supplement and the attached prospectus may be used by
Chase Securities Inc., an affiliate of Chase Manhattan Bank USA, N.A. and a
subsidiary of The Chase Manhattan Corporation, in connection with offers and
sales related to market-making transactions in the securities offered by this
prospectus supplement and the attached prospectus. Chase Securities Inc. may
act as principal or agent in such transactions. Such sales will be made at
prices related to prevailing market prices at the time of sale.
You should rely only on information on the securities provided in this
prospectus supplement and the prospectus. We have not authorized anyone to
provide you with different information. The information in this prospectus
supplement or the attached prospectus is accurate only as of the dates on their
respective covers.
In this prospectus supplement, the terms "we," "us" and "our" refer to
Chase Manhattan Bank USA, National Association.
S-3
SUMMARY OF TERMS
The following summary is a short description of the main terms of the
securities offered by this prospectus supplement. For that reason, this summary
does not contain all of the information that may be important to you. To fully
understand the terms of the securities offered by this prospectus supplement,
you will need to read both this prospectus supplement and the attached
prospectus in their entirety.
TRUST
The Chase Manhattan Auto Owner Trust 2000-A is a Delaware statutory business
trust established by the seller pursuant to a trust agreement.
OFFERED SECURITIES
The following securities are being offered by this prospectus supplement:
$259,000,000 Class A-1 % Asset Backed Notes
$292,000,000 Class A-2 % Asset Backed Notes
$397,000,000 Class A-3 % Asset Backed Notes
$294,000,000 Class A-4 % Asset Backed Notes
$ 38,466,538.08 % Asset Backed Certificates
SELLER AND SERVICER
Chase Manhattan Bank USA, National Association, a wholly-owned subsidiary of
The Chase Manhattan Corporation.
INDENTURE TRUSTEE
Wells Fargo Bank Minnesota, National Association.
OWNER TRUSTEE
Wilmington Trust Company.
CLOSING DATE
The trust expects to issue the securities on December , 2000.
CUTOFF DATE
The seller will transfer the receivables to the trust as of December 1, 2000.
PROPERTY OF THE TRUST
The property of the trust will include the following:
o the receivables,
o all collections on the receivables received on and after the cutoff
date,
o amounts held from time to time in the reserve account and the other
bank accounts maintained for the trust,
o security interests in the financed vehicles,
o rights to proceeds from the exercise of the seller's recourse rights
against dealers,
o rights to proceeds from claims on insurance policies that cover the
obligors of the receivables or the vehicles financed by the
receivables, and
o repossessed financed vehicles.
THE RECEIVABLES
On the closing date, the seller will transfer receivables having an aggregate
principal balance of approximately $1,280,466,538.08 as of the cutoff date to
the trust in exchange for the securities. The receivables are retail
installment sales contracts and purchase money notes and other notes secured by
new and used automobiles and light-duty trucks.
The composition of the receivables as of the cutoff date was as follows:
Number of Receivables ............. 70,960
Average Principal Balance ......... $ 18,044.91
Average Original Balance .......... $ 18,304.65
Weighted Average Contract
Rate ........................... 9.75%
Contract Rate (Range) ............. 1.90% to 18.00%
Weighted Average Original
Term ........................... 58.18 months
Original Term (Range) ............. 12 months to
73 months
Weighted Average Remaining
Term ........................... 56.46 months
Remaining Term (Range) ............ 9 months to
71 months
S-4
PRINCIPAL TERMS OF THE NOTES
FORM
The notes will be issued in book-entry form through DTC, Clearstream and
Euroclear in minimum denominations of $1,000 and integral multiples thereof.
Definitive notes will be issued only under limited circumstances.
PAYMENT DATES
The trust will pay interest and principal on the notes on the 15th day of each
month unless the 15th day is not a business day, in which case the payment will
be made on the following business day. The first payment date is January 16,
2001.
RECORD DATES
On each payment date, the trust will pay interest and principal to the holders
of the notes as of the related record date. The record date for the notes will
be the day before the payment date. If definitive notes are issued, the record
date will be the last day of the month before the payment date.
INTEREST RATES
On each payment date, the trust will pay interest on each class of notes at the
rate shown on the cover page of this prospectus supplement.
INTEREST ACCRUAL
Class A-1 Notes. "Actual/360", accrued from the prior payment date (or the
closing date, in the case of the first payment date) to and excluding the
current payment date.
Class A-2 Notes, Class A-3 Notes and Class A-4 Notes. "30/360", accrued from
the 15th day of the previous month (or the closing date, in the case of the
first payment date) to and excluding the 15th day of the current month.
This means that, if there are no outstanding shortfalls in the payment of
interest, the interest due on each payment date will be the product of:
o the outstanding principal balance,
o the interest rate and
o in the case of the Class A-1 notes: the actual number of days in the
accrual period divided by 360, and
o in the case of the other classes of notes:
30 (or in the case of the first payment date, ) divided by 360.
Interest on any note that is not paid on a payment date will be due on the next
payment date, together with interest on that amount at the applicable interest
rate, to the extent lawful.
For a more detailed description of the payment of interest on the notes, refer
to the section of this prospectus supplement entitled "Description of the
Notes--Payments of Interest."
PRINCIPAL PAYMENTS
The trust will pay the principal of the notes on each payment date in an amount
equal to the lesser of
o the amount available to the trust to pay principal on the notes and
o a targeted amount generally equal to either 97% or 100% of the sum of
o principal amounts collected on the receivables during the prior
calendar month and
o the aggregate principal balance of all receivables designated as
"defaulted receivables" in that month, net of liquidation
proceeds allocable to principal received in that month.
The targeted amount will equal 100% of that sum until the Class A-1 notes are
paid in full and 97% thereafter unless
o the balance in the reserve account drops below 0.5% of the aggregate
principal balance of the receivables as of the cutoff date, in which
case, the targeted amount will equal 100% of that sum until the notes
have been paid in full or the balance in the reserve account equals or
exceeds the required amount
or
o the maturity of the notes has been accelerated following an event of
default, in which case, the targeted amount will equal 100% of that
sum until the notes have been paid in full.
S-5
If the full targeted amount of principal payable to the noteholders on any
payment date is not paid, the shortfall will be included in the amount of
principal payable to the noteholders on the next payment date.
Application of Principal Prior to Acceleration of the Notes. The trust will pay
the principal of the notes of each class sequentially starting with the
earliest maturing class of notes then outstanding until that class is paid in
full.
Application of Principal After Acceleration of the Notes. After an acceleration
of the maturity of the notes following an event of default, the trust will pay
the principal of the notes ratably, based upon the outstanding principal amount
of each class of notes.
The trust is required to pay the entire outstanding principal amount of each
class of notes, to the extent not previously paid, on the respective final
scheduled payment date shown on the cover page of this prospectus supplement.
For a more detailed description of the payment of principal on the notes, refer
to the section of this prospectus supplement entitled "Description of the
Notes--Payments of Principal."
PREPAYMENT
The trust will prepay the Class A-4 notes in full if the servicer exercises its
option to purchase the receivables.
For a more detailed description of the servicer's option to purchase the
receivables, refer to the section of this prospectus supplement entitled
"Description of the Notes--Prepayment."
PRINCIPAL TERMS OF THE CERTIFICATES
FORM
The certificates will be issued in book-entry form through DTC in minimum
denominations of $1,000 and integral multiples thereof. Definitive certificates
will be issued only under limited circumstances.
PAYMENT DATES
The trust will make distributions of interest and principal in respect of the
certificates on the 15th day of each month unless the 15th day is not a
business day, in which case the distribution will be made on the following
business day. The first payment date is January 16, 2001.
RECORD DATES
On each payment date, the trust will distribute interest and principal to the
holders of the certificates as of the related record date. The record date for
the certificates will be the day before the payment date. If definitive
certificates are issued, the record date will be the last day of the month
before the payment date.
PASS-THROUGH RATE
On each payment date, the trust will distribute interest in respect of the
certificates at the pass-through rate shown on the cover of this prospectus
supplement.
INTEREST ACCRUAL
"30/360", accrued from the 15th day of the previous month (or the closing date,
in the case of the first payment date) to and excluding the 15th day of the
current month.
The trust will not make distributions of interest in respect of the
certificates after the acceleration of the maturity of the notes following an
event of default arising from a payment default until the trust pays the notes
in full.
Interest in respect of the certificates that is not paid on a payment date will
be due on the next payment date, together with interest on that amount at the
applicable pass-through rate, to the extent lawful.
PRINCIPAL DISTRIBUTIONS
On the payment date on which the trust pays the Class A-1 notes in full and on
each payment date thereafter until the notes have been paid in full, the trust
will distribute principal in respect of the certificates in an amount equal to
the lesser of
o the amount available to the trust to make distributions of principal
in respect of the certificates and
o a targeted amount generally equal to 3% of the sum of
S-6
o principal amounts collected on the receivables during the prior
calendar month and
o the aggregate principal balance of all receivables designated as
"defaulted receivables" in that month, net of liquidation proceeds
allocable to principal received in that month,
provided that the targeted amount will be zero on any payment date on which the
targeted amount for the notes is equal to 100% of the sum referenced above. On
each payment date after the notes have been paid in full, the targeted amount
will equal 100% of the sum referenced above.
Refer to the section entitled "Principal Terms of the Notes--Principal
Payments" above for a discussion of when the targeted amount for the notes will
be 100%.
If the full targeted amount of principal distributable to the certficateholders
on any payment date is not distributed, the shortfall will be included in the
amount of principal distributable to the certificateholders on the next payment
date.
The trust is required to reduce the outstanding certificate balance to zero no
later than the final scheduled payment date shown on the cover of this
prospectus supplement.
PREPAYMENT
The trust will reduce the outstanding certificate balance to zero if the
servicer exercises its option to purchase the receivables.
For a more detailed description of the servicer's option to purchase the
receivables, refer to the section of this prospectus supplement entitled
"Description of the Certificates."
PRIORITY OF PAYMENTS
From available collections on the receivables received during the prior
calendar month and any amounts withdrawn from the reserve account, the trust
will pay the following amounts on each payment date in the following order or
priority:
o the servicing fee payable to the servicer,
o the administration fee payable to the administrator,
o interest payable on the notes, ratably to the holders of each class of
notes,
o interest distributable in respect of the certificates, to the holders
of the certificates; provided that, if the maturity of the notes has
been accelerated following an event of default arising from a payment
default, interest will not be distributed to the holders of the
certificates until the notes are paid in full,
o principal due on the notes, to the holders of the notes in the order
described above,
o after the trust has paid the Class A-1 notes in full, principal
distributable in respect of the certificates, to the holders of the
certificates,
o any remaining amount, to the reserve account.
For a more detailed description of the priority of payments, refer to the
section of this prospectus supplement entitled "Payments and Distributions."
CREDIT ENHANCEMENT
Losses and other shortfalls of cash flow will be covered by
o excess interest payments on other receivables,
o withdrawals from the reserve account and
o allocations of available funds to
o the payment of interest on the notes before the distribution of
interest in respect of the certificates,
o the payment of principal of the notes before the distribution of
principal in respect of the certificates and,
o after the maturity of the notes has been accelerated following an
event of default arising from a payment default, the payment of
principal of the notes before the distribution of interest in
respect of the certificates.
S-7
Reserve Account
On the closing date, the trust will deposit $12,804,665.38 (1.00% of the
aggregate principal balance of the receivables as of the cutoff date) in the
reserve account.
On each payment date, if collections on the receivables are insufficient to pay
the servicing fee, the administration fee and all amounts payable in respect of
the securities, the indenture trustee will withdraw available funds from the
reserve account to pay such amounts.
Generally, the balance required to be on deposit in the reserve account will be
2.25% of the outstanding principal balance of the receivables. However, the
reserve account balance is required to be no less than the lesser of
$9,603,499.04 (0.75% of the aggregate principal balance of the receivables as
of the cutoff date) and the aggregate principal balance of the receivables.
If the average delinquency ratio or the average net loss ratio exceeds its
specified trigger level, then the balance that will be required to be on
deposit in the reserve account will be calculated using 4.50% rather than
2.25%.
The seller may reduce the balance required to be on deposit in the reserve
account to a lesser amount, provided that the reduction does not adversely
affect the rating of any class of notes or the certificates.
On each payment date, the trust will deposit into the reserve account all
collections on the receivables remaining after the trust has paid the servicer,
the administrator and amounts due to the noteholders and the certificateholders
as described in this prospectus supplement.
On each payment date, the trust will distribute to the seller funds on deposit
in the reserve account in excess of the required balance. On each payment date,
the seller will be entitled to receive all investment earnings on funds on
deposit in the reserve account earned since the prior payment date.
For a more detailed description of the deposits to and withdrawals from the
reserve account, refer to the section of this prospectus supplement entitled
"Description of the Transfer and Servicing Agreements--Reserve Account."
SERVICING FEE
The trust will pay the servicer a servicing fee on each payment date for the
prior month equal to
o 1/12 of 1.0% of the aggregate principal balance of the receivables at
the end of the month before that month (or, in the case of the first
payment date, the aggregate principal balance of the receivables as of
the cutoff date),
o all late fees and other administrative fees and expenses, if any,
collected during that month and
o all investment earnings on funds deposited into the collection account
during that month.
ADMINISTRATION FEE
The trust will pay The Chase Manhattan Bank, as administrator, an
administration fee of $1,000 per month payable on the following payment date.
TAX STATUS
Simpson Thacher & Bartlett, special counsel to the seller, will deliver its
opinion that for U.S. federal income tax purposes:
o the notes will be characterized as debt and
o the trust will not be characterized as an association (or a publicly
traded partnership) taxable as a corporation.
By purchasing a note, you will agree to treat your note as indebtedness.
By purchasing a certificate, you will agree to treat the trust as a partnership
in which the certificateholders are partners for federal, state and local
income tax purposes.
For a more detailed discussion of tax matters, refer to the sections of this
prospectus supplement entitled "Certain Federal Income Tax Consequences" and
"Certain State Tax Consequences."
TAX-RELATED INVESTMENT RESTRICTIONS ON CERTIFICATES
The certificates may not be purchased by persons who are not "U.S. Persons" for
U.S. federal income tax purposes.
S-8
ERISA CONSIDERATIONS
The notes are generally eligible for purchase by or on behalf of employee
benefit plans and other similar retirement plans and arrangements that are
subject to ERISA, Section 4975 of the Internal Revenue Code or any similar laws
or regulations, and by entities whose underlying assets are considered to
include the assets of such plans and arrangements, provided certain conditions
are satisfied.
The certificates may also be purchased by or on behalf of such plans,
arrangements and entities if certain conditions are satisfied. However, any
fiduciary of such a plan, arrangement or entity that is considering an
investment in the certificates should consult with counsel concerning the
consequences of such a purchase, including the treatment of income in respect
of the certificates as unrelated business taxable income to a tax-exempt
investor.
Refer to the section entitled "ERISA Considerations" in this prospectus
supplement and the prospectus.
RATINGS OF THE SECURITIES
It is a condition to the issuance of the securities that:
o the Class A-1 notes be rated in the highest short-term rating category
by at least two nationally recognized statistical rating
organizations,
o the notes of each other class be rated in the highest long-term rating
category by at least two nationally recognized statistical rating
organizations, and
o the certificates be rated at least in the "A" category, or its
equivalent by at least two nationally recognized statistical rating
organizations.
A rating is not a recommendation to purchase, hold or sell the securities,
inasmuch as a rating does not comment as to market price or suitability for a
particular investor. The ratings of the securities address the likelihood of
the payment of principal and interest on the securities according to their
terms. We cannot assure you that any of these ratings will not be lowered or
withdrawn by the related rating agency.
LEGAL INVESTMENT
The Class A-1 notes will be eligible securities for purchase by money market
funds under paragraph (a)(10) of Rule 2a-7 under the Investment Company Act of
1940, as amended.
INVESTOR INFORMATION--MAILING ADDRESS AND
TELEPHONE NUMBER
The mailing address of the principal executive offices of Chase Manhattan Bank
USA, National Association is 800 Delaware Avenue, Wilmington, Delaware 19801.
Its telephone number is (302) 575-5033.
S-9
RISK FACTORS
You should consider the following risk factors and the risk factors
described on page 9 of the prospectus in deciding whether to purchase any of
the securities.
HOLDERS OF CERTIFICATES ARE SUBJECT TO GREATER CREDIT RISKS BECAUSE
DISTRIBUTIONS IN RESPECT OF THE CERTIFICATES ARE SUBORDINATE TO PAYMENTS ON THE
NOTES.
The certificates bear greater credit risk than the notes because
distributions of principal in respect of the certificates are subordinated to
the payment of principal of the notes and distributions of interest in respect
of the certificates are subordinated to payment of interest on the notes and,
after the acceleration of the maturity of the notes following an event of
default arising from a payment default, no further distributions of principal
or interest in respect of the certificates will be made until the notes are
paid in full.
In addition, the trust will distribute no principal in respect of the
certificates until it pays the Class A-1 notes in full or any time thereafter
if the balance in the reserve account drops below 0.5% of the aggregate
principal balance of the receivables as of the cutoff date. Under those
circumstances, the trust will not resume distributions of principal in respect
of the certificates until the trust has paid the notes in full or the balance
in the reserve account equals or exceeds the required amount.
The subordination of the certificates means that the holders of the
certificates are more likely to suffer the consequences of delinquent payments
and defaults on the receivables than the holders of the notes.
YOU MAY EXPERIENCE PREPAYMENTS AND LOSSES ON YOUR SECURITIES AFTER AN EVENT OF
DEFAULT UNDER THE INDENTURE.
An event of default under the indenture may result in losses on your notes
or certificates if the receivables are sold and the sale proceeds, together
with any other assets of the trust, are insufficient to pay the amounts owed on
the notes and the certificates. In addition, if you receive your principal
earlier than expected, you may not be able to reinvest the prepaid amount at a
rate of return that is equal to or greater than the rate of return on your
securities.
ONLY THE ASSETS OF THE TRUST ARE AVAILABLE TO PAY YOUR SECURITIES.
The trust will not have any source of funds other than the receivables and
the amounts on deposit in the reserve account. You must rely for repayment of
your securities on payments on the receivables and available amounts on deposit
in the reserve account. Funds on deposit in the reserve account will be limited
in amount, and the amount required to be maintained on deposit in the reserve
account will be reduced as the balance of the receivables declines. You may
suffer a loss if the amount on deposit in the reserve account is exhausted and
payments on the receivables are insufficient to make payments on the notes and
the certificates.
The securities will not be insured or guaranteed by Chase USA or any of
its affiliates and are not obligations of or interests in Chase USA or any of
its affiliates.
GEOGRAPHIC CONCENTRATION OF RECEIVABLES MAY RESULT IN MORE RISK TO YOU.
If adverse events or economic conditions were particularly severe in a
geographic region where there is substantial concentration of obligors, the
amount of delinquent payments and defaulted receivables may increase. As a
result, the overall timing and amount of collections on the receivables may
differ from what you expect, and you may experience delays or reductions in
payments on your securities.
S-10
The following are the approximate percentages of the aggregate principal
balance of the receivables as of the cutoff date of the receivables originated
by or through a dealer located in the following states:
Texas 16.72%
California 13.43%
New York 11.67%
New Jersey 7.44%
Florida 6.21%
None of the remaining states accounted for more than 5% of the aggregate
principal balance of the receivables as of the cutoff date.
THE ABSENCE OF AN EXISTING MARKET FOR THE SECURITIES MAY LIMIT YOUR ABILITY TO
RESELL THE SECURITIES.
There is currently no existing market for the securities. The underwriters
currently intend to make a market in the securities, but none of them is under
any obligation to do so. We cannot assure you that a secondary market will
develop or, if a secondary market does develop, that it will provide you with
liquidity of investment or that it will continue for the life of the
securities.
S-11
THE TRUST
GENERAL
Chase Manhattan Auto Owner Trust 2000-A is a statutory business trust
formed under the laws of the State of Delaware by a trust agreement, as amended
and restated as of the cutoff date, between Chase USA and Wilmington Trust
Company, as trustee.
The trust will not engage in any activity other than:
o acquiring, holding and managing the receivables, the other assets of
the trust and proceeds of those assets,
o issuing the notes and the certificates,
o making payments on the notes and distributions on the certificates and
o engaging in other activities that are necessary, suitable or
convenient to accomplish any of the purposes listed above or are in
any way connected with these activities.
The trust will not acquire any receivables or assets other than the
property described below and will not have any need for additional capital
resources.
The trust will be capitalized by the issuance of the notes and the
certificates and the making of an initial deposit of $12,804,665.38 into the
reserve account. The certificate balance and the reserve account represent the
equity in the trust. The trust will issue the securities to the order of the
seller in exchange for the seller's transfer of the receivables and related
property.
The trust's principal offices are in Delaware at the address listed below
under "--Trustee."
TRUST PROPERTY
The trust property will include a pool of receivables and all monies
received on the receivables on and after the cutoff date. The receivables are
motor vehicle retail installment sales contracts and purchase money notes and
other notes relating to new or used automobiles or light-duty trucks.
The trust property will also include:
o amounts held from time to time in the reserve account and other
accounts maintained for the trust,
o security interests in the financed vehicles,
o rights to proceeds from the exercise of the seller's recourse rights
against dealers,
o rights to proceeds from claims on theft and physical damage, credit
life and credit disability insurance policies covering the vehicles
financed by the receivables or the obligors of the receivables,
o repossessed financed vehicles and
o any and all proceeds of the above items.
If the protection provided to the noteholders by the subordination of
distributions to the certificateholders and to the noteholders and the
certificateholders by the reserve account is insufficient, the trust will have
to look solely to the obligors on the receivables and the proceeds from the
repossession and sale of the financed vehicles which secure defaulted
receivables in order to repay you. In that event, certain factors, such as the
trust's not having a first priority perfected security interest 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 which the trust can
distribute to securityholders.
For a more detailed description of the subordination of distributions in
respect of the securities, refer to the section of this prospectus supplement
entitled "Description of the Transfer and Servicing
S-12
Agreements--Payments and Distributions." For a more detailed description of the
risks affecting the trust's ability to realize on the financed vehicles, refer
to the section of the prospectus entitled "Certain Legal Aspects of the
Receivables."
CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the trust as of the
cutoff date, as if the issuance and sale of the notes and the certificates had
taken place on that date:
Class A-1 Notes ....................................... $ 259,000,000.00
Class A-2 Notes ....................................... 292,000,000.00
Class A-3 Notes ....................................... 397,000,000.00
Class A-4 Notes ....................................... 294,000,000.00
Certificates .......................................... 38,466,538.08
-----------------
Total ................................................ $1,280,466,538.08
=================
TRUSTEE
Wilmington Trust Company is the trustee under the trust agreement.
Wilmington Trust Company is a Delaware banking corporation and its principal
offices are located at Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001, telephone (302) 651-1000. The seller and its
affiliates may maintain normal commercial banking relations with the trustee
and its affiliates.
THE RECEIVABLES POOL
The trust will own a pool of receivables consisting of retail installment
sales contracts, purchase money notes and other notes secured by new and used
automobiles and light-duty trucks. The receivables were selected from the
retail installment sales contracts, purchase money notes and other notes owned
by Chase USA that satisfy certain criteria.
In addition to the criteria set forth in the prospectus under "The
Receivables Pools--General" these criteria include the requirement that each
receivable:
o has a remaining maturity, as of the cutoff date, of at least 9 months
and not more than 71 months,
o is secured by a new financed vehicle and had an original maturity of
not less than 12 months and not more than 73 months or is secured by a
used financed vehicle and had an original maturity of not less than 12
months and not more than 67 months,
o is a fully-amortizing fixed rate simple interest contract that
provides for level scheduled monthly payments over its remaining term
and has an annual contract rate of interest of at least 1.90% per
annum and not more than 18.00% per annum,
o has a remaining principal balance, as of the cutoff date, of not less
than $2,000 and not more than $100,000,
o has no payment more than 30 days past due as of the cutoff date,
o is not a receivable originated by or through a dealer located in the
State of Alabama,
o is not a receivable subject to a debt cancellation policy issued by
Chase USA to the obligor that forgives the principal balance of the
receivable to the extent that the insurance proceeds in the event of a
total loss of the financed vehicle are insufficient to repay the
receivable in full,
o is a receivable originated under a dealer agreement with Chase USA and
S-13
o if it has an annual contract rate of interest of less than or equal to
6.90%, it was originated under a program with Saturn Corporation under
which Saturn makes an upfront payment to Chase USA in exchange for
Chase USA's originating a receivable with a below-market annual
contract rate of interest.
The receivables were selected from Chase USA's portfolio of retail
installment sales contracts, purchase money notes and other notes secured by
new and used automobile and light-duty trucks that met the above criteria. For
administrative reasons, Chase USA selected only from those contracts and notes
in its portfolio that were posted to its servicing system from October 2, 2000
through November 17, 2000, which were segregated and held for sale by Chase
USA.
As of the cutoff date, approximately 67.98% of the aggregate principal
balance of the receivables were secured by new vehicles and light-duty trucks,
and approximately 32.02% were secured by used vehicles and light duty trucks.
The composition of the receivables as of the cutoff date was as follows:
COMPOSITION OF THE RECEIVABLES
NEW FINANCED USED FINANCED ALL FINANCED
VEHICLES VEHICLES VEHICLES
-------- -------- --------
Aggregate Principal Balance ........ $ 870,476,332.26 $ 409,990,205.82 $ 1,280,466,538.08
Number of Receivables .............. 43,539 27,421 70,960
Average Principal Balance .......... $19,993.03 $ 14,951.69 $ 18,044.91
Average Original Balance ........... $20,289.25 $ 15,153.50 $ 18,304.65
Weighted Average Contract Rate ..... 9.28% 10.74% 9.75%
Contract Rate (Range) .............. 1.90% to 17.90% 1.90% to 18.00% 1.90% to 18.00%
Weighted Average Original Term ..... 58.67 months 57.14 months 58.18 months
Original Term (Range) .............. 12 months to 73 months 12 months to 67 months 12 months to 73 months
Weighted Average Remaining
Term .............................. 56.95 months 55.44 months 56.46 months
Remaining Term (Range) ............. 9 months to 71 months 9 months to 65 months 9 months to 71 months
The distribution by contract rate of the receivables, the geographic
distribution of the receivables, the distribution by principal balance of the
receivables and the distribution by remaining term to maturity of the
receivables, in each case as of the cutoff date, are set forth in the following
tables.
S-14
DISTRIBUTION BY CONTRACT RATE OF THE RECEIVABLES
PERCENT OF
NUMBER OF PRINCIPAL AGGREGATE
CONTRACT RATE RANGE(%) RECEIVABLES BALANCE PRINCIPAL BALANCE
- ------------------------ ------------- --------------------- ------------------
1.90 to 7.49 ........... 3,597 $ 52,542,332.55 4.10%
7.50 to 7.99 ........... 6,146 113,034,452.12 8.83
8.00 to 8.49 ........... 7,589 147,375,291.68 11.51
8.50 to 8.99. .......... 10,530 211,331,955.54 16.50
9.00 to 9.49 ........... 6,294 121,848,190.29 9.52
9.50 to 9.99 ........... 11,097 208,395,032.11 16.27
10.00 to 10.49 ......... 3,362 59,775,345.12 4.67
10.50 to 10.99 ......... 5,948 104,866,287.85 8.19
11.00 to 11.49 ......... 2,042 34,167,071.32 2.67
11.50 to 11.99 ......... 3,655 61,113,603.24 4.77
12.00 to 12.49 ......... 2,206 35,539,588.22 2.78
12.50 to 12.99 ......... 3,021 48,089,179.37 3.76
13.00 to 13.49 ......... 1,564 23,817,774.12 1.86
13.50 to 13.99 ......... 1,307 19,729,927.37 1.54
14.00 to 14.49 ......... 591 8,598,134.57 0.67
14.50 to 14.99 ......... 747 11,526,027.54 0.90
15.00 to 15.49 ......... 240 3,395,048.30 0.27
15.50 to 15.99 ......... 242 3,777,539.18 0.30
16.00 to 16.49 ......... 191 3,021,256.41 0.24
16.50 to 16.99 ......... 209 2,974,013.91 0.23
17.00 to 17.49 ......... 83 1,191,304.24 0.09
17.50 to 17.99 ......... 277 4,096,871.55 0.32
18.00 .................. 22 260,311.48 0.02
------ ----------------- ------
Total(1) .............. 70,960 $1,280,466,538.08 100.00%
====== ================= ======
- ----------
(1) Percentages may not add to 100.00% due to rounding.
S-15
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES(1)
PERCENT OF
NUMBER OF PRINCIPAL AGGREGATE
STATE RECEIVABLES BALANCE PRINCIPAL BALANCE
- ------------------------------ ------------- --------------------- ------------------
Arizona ...................... 764 $ 14,441,650.63 1.13%
Arkansas ..................... 549 9,312,448.88 0.73
California ................... 8,331 171,996,468.62 13.43
Colorado ..................... 976 18,259,684.66 1.43
Connecticut .................. 2,756 46,884,636.33 3.66
Delaware ..................... 578 9,648,879.83 0.75
District of Columbia ......... 2 53,128.53 0.00
Florida ...................... 4,450 79,573,571.89 6.21
Georgia ...................... 1,945 38,741,410.06 3.03
Hawaii ....................... 8 133,682.09 0.01
Idaho ........................ 24 434,561.75 0.03
Illinois ..................... 2,566 44,740,973.39 3.49
Indiana ...................... 680 11,272,806.49 0.88
Iowa ......................... 361 5,985,708.80 0.47
Kansas ....................... 389 7,006,800.17 0.55
Kentucky ..................... 344 5,883,049.92 0.46
Louisiana .................... 437 8,211,802.49 0.64
Maine ........................ 160 2,986,039.47 0.23
Maryland ..................... 262 4,681,713.20 0.37
Massachusetts ................ 3,249 56,142,795.98 4.38
Michigan ..................... 1,345 23,184,508.64 1.81
Minnesota .................... 1,665 27,355,324.06 2.14
Mississippi .................. 82 1,573,250.53 0.12
Missouri ..................... 1,451 25,052,627.30 1.96
Montana ...................... 45 734,528.68 0.06
Nebraska ..................... 290 4,756,991.83 0.37
Nevada ....................... 475 8,694,675.47 0.68
New Hampshire ................ 807 13,499,578.00 1.05
New Jersey ................... 5,578 95,209,855.68 7.44
New Mexico ................... 205 3,862,632.79 0.30
New York ..................... 8,741 149,404,467.38 11.67
North Carolina ............... 1,238 22,401,333.05 1.75
North Dakota ................. 9 151,180.33 0.01
Ohio ......................... 1,943 32,496,981.53 2.54
Oklahoma ..................... 489 8,808,021.74 0.69
Oregon ....................... 544 9,235,191.64 0.72
Pennsylvania ................. 2,064 33,210,279.28 2.59
Rhode Island ................. 258 4,137,014.82 0.32
South Carolina ............... 379 6,429,687.23 0.50
South Dakota ................. 36 628,888.83 0.05
Tennessee .................... 457 9,475,681.33 0.74
Texas ........................ 11,111 214,093,374.86 16.72
Utah ......................... 72 1,183,668.74 0.09
Vermont ...................... 346 5,577,014.77 0.44
Virginia ..................... 979 17,095,266.78 1.34
Washington ................... 515 9,804,076.85 0.77
West Virginia ................ 96 1,656,817.39 0.13
Wisconsin .................... 896 14,142,533.42 1.10
Wyoming ...................... 13 219,271.95 0.02
------ ----------------- ------
Total(2) .................... 70,960 $1,280,466,538.08 100.00%
====== ================= ======
- ----------
(1) Based on the location of the dealer originating the receivable.
(2) Percentages may not add to 100.00% due to rounding.
S-16
DISTRIBUTION BY PRINCIPAL BALANCE OF THE RECEIVABLES
PERCENT OF
NUMBER AGGREGATE
OF PRINCIPAL PRINCIPAL
PRINCIPAL BALANCE ($) RECEIVABLES BALANCE BALANCE
- ------------------------- ------------- --------------------- -----------
2,000.01 to 5,000.00 354 $ 1,501,204.76 0.12%
5,000.01 to 10,000.00 7,852 65,438,332.95 5.11
10,000.01 to 15,000.00 20,359 258,096,887.36 20.16
15,000.01 to 20,000.00 20,139 349,960,640.94 27.33
20,000.01 to 25,000.00 11,576 257,997,321.50 20.15
25,000.01 to 30,000.00 5,577 151,739,970.70 11.85
30,000.01 to 35,000.00 2,553 82,328,363.78 6.43
35,000.01 to 40,000.00 1,201 44,756,872.23 3.50
40,000.01 to 45,000.00 566 23,940,170.06 1.87
45,000.01 to 50,000.00 305 14,460,673.01 1.13
50,000.01 to 55,000.00 147 7,690,297.38 0.60
55,000.01 to 60,000.00 98 5,639,311.26 0.44
60,000.01 to 65,000.00 67 4,185,569.60 0.33
65,000.01 to 70,000.00 48 3,244,424.05 0.25
70,000.01 to 75,000.00 40 2,902,341.90 0.23
75,000.01 to 80,000.00 28 2,170,886.16 0.17
80,000.01 to 85,000.00 19 1,568,806.06 0.12
85,000.01 to 90,000.00 13 1,138,125.10 0.09
90,000.01 to 95,000.00 10 920,734.46 0.07
95,000.01 to 100,000.00 8 785,604.82 0.06
------ ----------------- ------
Total(1) 70,960 $1,280,466,538.08 100.00%
====== ================= ======
- ----------
(1) Percentages may not add to 100.00% due to rounding.
DISTRIBUTION BY REMAINING TERM TO MATURITY OF THE RECEIVABLES
PERCENT OF
NUMBER AGGREGATE
OF PRINCIPAL PRINCIPAL
REMAINING TERM TO MATURITY(IN MONTHS) RECEIVABLES BALANCE BALANCE
- --------------------------------------- ------------- --------------------- -----------
9 to 12 70 $ 931,245.35 0.07%
13 to 24 709 8,779,822.03 0.69
25 to 36 5,023 68,568,985.55 5.36
37 to 48 9,925 146,995,236.18 11.48
49 to 60 48,970 914,319,125.64 71.41
61 to 72 6,263 140,872,123.33 11.00
------ ----------------- ------
Total(1) 70,960 $1,280,466,538.08 100.00%
====== ================= ======
- ----------
(1) Percentages may not add to 100.00% due to rounding.
DELINQUENCY AND LOAN LOSS INFORMATION
The following tables set forth information with respect to delinquencies,
loan losses and recoveries for the portfolio of retail installment sales
contracts, purchase money notes and other notes secured by new and used
automobile and light-duty trucks owned or serviced by CHASE AUTO FINANCE as of
the dates and for the periods indicated. The portions of that portfolio that
provide for payments based upon a variable rate of interest or that provide for
a final scheduled payment which is greater than the scheduled monthly payments
are included in the following tables, but the receivables held by the trust
will not include those types of loans. CHASE AUTO FINANCE does not maintain
separate records that distinguish among the delinquency and loan loss
experience for fixed rate motor vehicle loans (such as the receivables) and
variable rate motor vehicle loans nor does it maintain records of the
delinquency and loan loss experience that excludes receivables with larger
final scheduled payments. The seller believes that the delinquency and loan
loss experience with respect to the types of motor vehicle loans included in
the trust is not materially different from the performance of CHASE AUTO
FINANCE'S portfolio set forth below.
The data presented in the following tables are for illustrative purposes
only. Delinquency and loan loss experience may be influenced by a variety of
economic, social and other factors. We cannot assure you that the delinquency
and loan loss experience of the receivables will be similar to the delinquency
and loan loss levels set forth below.
S-17
DELINQUENCY EXPERIENCE
AS OF SEPTEMBER 30,
-----------------------------------------------------------
2000 1999
----------------------------- -----------------------------
NUMBER NUMBER
DOLLARS OF DOLLARS OF
(000'S) LOANS (000'S) LOANS
----------------- ----------- ----------------- -----------
Outstanding Principal Amount $15,525,907 1,241,196 $14,532,974 1,164,456
Delinquencies(1)(2)
30-59 Days ....................... $ 214,677 18,530 $ 208,937 16,716
60-89 Days ....................... 55,034 5,526 46,903 4,312
90 Days or More .................. 25,482 2,473 21,957 2,283
Total Delinquencies ............... $ 295,193 26,529 $ 277,797 23,311
Repossession Inventory ............ 28,047 1,942 19,937 1,318
Total Delinquencies &
Repossession Inventory ........... $ 323,240 28,471 $ 297,734 24,629
Delinquencies(1)(2)(3) ............
30-59 ............................ 1.38% 1.44%
60-89 ............................ 0.35% 0.32%
90 Days or More .................. 0.16% 0.15%
----------- -----------
Total Delinquencies(3)(4) ......... 1.90% 1.91%
Repossession Inventory(3) ......... 0.18% 0.14%
----------- -----------
Total Delinquencies &
Repossession Inventory(3)(4) ..... 2.08% 2.05%
AS OF DECEMBER 31,
----------------------------------------------------------
1999 1998
----------------------------- ----------------------------
NUMBER NUMBER
DOLLARS OF DOLLARS OF
(000'S) LOANS (000'S) LOANS
----------------- ----------- ----------------- ----------
Outstanding Principal Amount $14,454,904 1,178,052 $14,451,927 1,149,636
Delinquencies(1)(2)
30-59 Days ....................... $ 229,630 16,581 $ 215,114 15,909
60-89 Days ....................... 57,738 4,835 46,707 4,008
90 Days or More .................. 27,286 2,827 28,329 2,529
Total Delinquencies ............... $ 314,654 24,243 $ 290,150 22,446
Repossession Inventory ............ 25,843 1,834 26,018 1,690
Total Delinquencies &
Repossession Inventory ........... $ 340,497 26,077 $ 316,168 24,136
Delinquencies(1)(2)(3) ............
30-59 ............................ 1.59% 1.49%
60-89 ............................ 0.40% 0.32%
90 Days or More .................. 0.19% 0.20%
----------- -----------
Total Delinquencies(3)(4) ......... 2.18% 2.01%
Repossession Inventory(3) ......... 0.18% 0.18%
----------- -----------
Total Delinquencies &
Repossession Inventory(3)(4) ..... 2.36% 2.19%
AS OF DECEMBER 31,
---------------------------------------------------------------------------------------
1997 1996 1995
---------------------------- --------------------------- --------------------------
NUMBER NUMBER NUMBER
DOLLARS OF DOLLARS OF DOLLARS OF
(000'S) LOANS (000'S) LOANS (000'S) LOANS
---------------- --------- --------------- --------- --------------- --------
Outstanding Principal Amount $11,114,504 938,495 $9,842,364 832,993 $7,451,714 628,009
Delinquencies(1)(2)
30-59 Days ....................... $ 153,761 12,937 $ 127,722 10,879 $ 78,499 7,054
60-89 Days ....................... 39,329 3,448 31,153 2,739 15,866 1,513
90 Days or More .................. 24,322 2,190 18,031 1,590 8,654 786
Total Delinquencies ............... $ 217,412 18,575 $ 176,906 15,208 $ 103,019 9,353
Repossession Inventory ............ 30,374 1,944 21,755 1,421 7,290 443
Total Delinquencies &
Repossession Inventory ........... $ 247,786 20,519 $ 198,661 16,629 $ 110,309 9,796
Delinquencies(1)(2)(3)
30-59 Days ....................... 1.38% 1.30% 1.05%
60-89 Days ....................... 0.35% 0.32% 0.21%
90 Days or More .................. 0.22% 0.18% 0.12%
----------- ---------- ----------
Total Delinquencies(3)(4) ......... 1.96% 1.80% 1.38%
Repossession Inventory(3) ......... 0.27% 0.22% 0.10%
----------- ---------- ----------
Total Delinquencies &
Repossession
Inventory(3)(4) .................. 2.23% 2.02% 1.48%
- ----------
(1) Delinquencies include principal amounts and interest.
(2) The period of delinquency is based on the number of days payments are
contractually past due.
(3) As a percent of outstanding principal in dollars.
(4) Percentages representing Total Delinquencies and Total Delinquencies &
Repossession Inventory may not equal the sum of their components due to
rounding.
S-18
LOAN LOSS EXPERIENCE
(DOLLARS IN 000'S)
NINE MONTHS ENDED
--------------------------------
SEPTEMBER 30, SEPTEMBER 30,
2000 1999
--------------- ----------------
Number of Loans(1) .............. 1,241,196 1,164,456
Period End Outstanding
Principal Amount ............... $15,525,907 $14,532,974
Average Outstanding
Principal Amount(2) ............ $14,577,874 $14,582,989
Number of Repossessions ......... 7,569 6,346
Number of Gross
Charge-Offs .................... 9,491 8,101
Gross Charge-Offs(3) ............ $ 64,205 $ 61,232
Gross Charge-Offs as a %
of Period End
Outstanding Principal
Amount(3)(6) ................... 0.55% 0.56%
Gross Charge-Offs as a %
of Average End
Outstanding Principal
Amount(3)(6) ................... 0.59% 0.56%
Recoveries(4) ................... $ (14,578) $ (16,156)
Net Charge-Offs(5) .............. $ 49,627 $ 45,076
Net Charge-Offs as a % of
Period End Outstanding
Principal Amount(5)(6) ......... 0.43% 0.41%
Net Charge-Offs as a % of
Average Outstanding
Principal Amount(5)(6) ......... 0.45% 0.41%
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ------------ ------------ ---------- ----------
Number of Loans(1) .............. 1,178,052 1,149,636 938,495 832,993 628,009
Period End Outstanding
Principal Amount ............... $14,454,904 $14,451,927 $11,114,504 $9,842,364 $7,451,714
Average Outstanding
Principal Amount(2) ............ $14,504,476 $12,782,467 $10,630,360 $9,153,306 $6,572,006
Number of Repossessions ......... 8,684 7,837 5,834 3,719 1,863
Number of Gross
Charge-Offs .................... 10,172 9,942 7,524 5,076 2,633
Gross Charge-Offs(3) ............ $ 82,688 $ 81,652 $ 57,017 $ 29,461 $ 11,765
Gross Charge-Offs as a %
of Period End
Outstanding Principal
Amount(3)(6) ................... 0.57% 0.56% 0.51% 0.30% 0.16%
Gross Charge-Offs as a %
of Average End
Outstanding Principal
Amount(3)(6) ................... 0.57% 0.64% 0.54% 0.32% 0.18%
Recoveries(4) ................... $ (22,327) $ (18,236) $ (10,622) $ (7,554) $ (3,869)
Net Charge-Offs(5) .............. $ 60,361 $ 63,416 $ 46,395 $ 21,908 $ 7,896
Net Charge-Offs as a % of
Period End Outstanding
Principal Amount(5)(6) ......... 0.42% 0.44% 0.42% 0.22% 0.11%
Net Charge-Offs as a % of
Average Outstanding
Principal Amount(5)(6) ......... 0.42% 0.50% 0.44% 0.24% 0.12%
- ----------
(1) Number of loans as of period end.
(2) The average for each period presented was computed by taking a simple
average of monthly average outstanding principal amounts for such period.
(3) Amount charged off is remaining principal balance less proceeds from sale
of repossessed vehicles.
(4) Recoveries generally include amounts received with respect to loans
previously charged-off, except for proceeds realized in connection with
the sale of the repossessed vehicles.
(5) Net Charge-Offs mean gross charge-offs minus recoveries of loans
previously charged-off. Net Charge-Offs may not equal the difference of
its components due to rounding.
(6) Percentages for the nine-month periods ended September 30, 2000 and
September 30, 1999 are annualized.
CHASE USA
Information regarding the seller and the servicer is set forth under
"Chase USA" in the prospectus. At September 30, 2000, Chase USA's total assets
were approximately $34.9 billion, total liabilities were approximately $31.4
billion and total stockholder's equity was approximately $3.5 billion.
USE OF PROCEEDS
The seller will use the proceeds from the sale of the securities, after
capitalizing the trust by making the initial deposit into the reserve account
and paying expenses, for general purposes.
WEIGHTED AVERAGE LIFE OF THE SECURITIES
MATURITY AND PREPAYMENT CONSIDERATIONS
Information regarding certain maturity and prepayment considerations with
respect to the securities is set forth under "Weighted Average Life of
Securities" in the prospectus.
S-19
In addition, no principal payments will be made:
o on the Class A-2 notes until the Class A-1 notes have been paid in
full,
o on the Class A-3 notes until the Class A-2 notes have been paid in
full,
o on the Class A-4 notes until the Class A-3 notes have been paid in
full or
o on the certificates until the Class A-1 notes have been paid in full.
However, if the maturity of the notes is accelerated following an event of
default, principal payments will be made ratably to all classes of the notes
and no further distributions of principal (or, in the case of an event of
default arising from a payment default, interest) in respect of the
certificates will be made until the notes are paid in full.
The rate of payment of principal of each class of notes and the
certificates will depend on the rate of payment (including prepayments) of the
principal balance of the receivables. A higher than anticipated rate of
prepayments will reduce the outstanding amounts of the securities faster than
expected and reduce the anticipated aggregate interest payments on the
securities. Noteholders and certificateholders alone will bear any reinvestment
risks resulting from a faster or slower incidence of prepayment of receivables
as set forth in the priority of distributions in this prospectus supplement.
Such reinvestment risks include the risk that interest rates may be lower at
the time such holders receive payments from the trust than interest rates would
otherwise have been had such prepayments not been made or had such prepayments
been made at a different time.
Noteholders and certificateholders should consider:
o in the case of notes or certificates purchased at a discount, the risk
that a slower than anticipated rate of prepayments of receivables
could result in an actual yield that is less than the anticipated
yield and
o in the case of notes or certificates purchased at a premium, the risk
that a faster than anticipated rate of prepayments of receivables
could result in an actual yield that is less than the anticipated
yield.
Under a program sponsored by Saturn Corporation and its dealers, a
purchaser of a new Saturn vehicle has the right to return his or her car to the
related dealer for any reason within 30 days of purchase or 1,500 miles of use
and receive a refund of the purchase price. 5.05% of the aggregate principal
balance of the receivables as of the cutoff date were secured by financed
vehicles manufactured by Saturn. In the event the obligor under a receivable
secured by a Saturn vehicle returns the related financed vehicle for a refund,
such receivable will be prepaid and the weighted average life of the notes and
the certificates may be decreased.
WE CANNOT ASSURE YOU THAT YOUR SECURITIES WILL BE REPAID ON THE RELATED
FINAL SCHEDULED PAYMENT DATE. We expect that final payment of the notes and the
final distribution in respect of the certificates will occur on or prior to the
respective final scheduled payment date for such securities. However, we cannot
assure you that sufficient funds will be available to pay each class of notes
and the certificates on or prior to the respective final scheduled payment date
for such securities. If sufficient funds are not available, final payment of
the notes and the final distribution in respect of the certificates could occur
later than such dates.
ILLUSTRATION OF EFFECT OF PREPAYMENTS OF RECEIVABLES ON THE LIFE OF THE
SECURITIES
The following information is given solely to illustrate the effect of
prepayments of the receivables on the weighted average life of the securities
under the stated assumptions and is not a prediction of the prepayment rate
that might actually be experienced by the receivables.
Prepayments on motor vehicle receivables can be measured relative to a
prepayment standard or model. The model used in this prospectus supplement, the
Absolute Prepayment Model ("ABS") represents an assumed rate of prepayment each
month relative to the original number of receivables in a pool of receivables.
ABS further assumes that all the receivables are the same size and amortize
S-20
at the same rate and that each receivable in each month of its life will either
be paid as scheduled or be prepaid in full. For example, in a pool of
receivables originally containing 10,000 receivables, a 1% ABS rate means that
100 receivables prepay each month. ABS does not purport to be a historical
description of prepayment experience or a prediction of the anticipated rate of
prepayment of any pool of assets, including the receivables.
The tables (the "ABS Tables") captioned "Percent of Initial Note Principal
Amount at Various ABS Percentages" and "Percent of Initial Certificate Balance
at Various ABS Percentages," respectively, have been prepared on the basis of
the characteristics of the receivables and the securities. The ABS Tables
assume that:
o the receivables prepay in full at the specified constant percentage of
ABS monthly, with no defaults, losses or repurchases,
o each scheduled monthly payment on the receivables is scheduled to be
made and is made on the last day of each month and each month has 30
days,
o payment on the notes and distributions on the certificates are made on
each payment date (and each payment date is assumed to be the
fifteenth day of the applicable month),
o no event of default occurs,
o the notes and certificates are issued on December 14, 2000, and
o the servicer does not exercise its option to purchase the receivables.
The ABS Tables indicate the projected weighted average life of each class
of notes and the certificates and set forth the percent of the initial
principal amount of each class of notes and the percent of the initial
certificate balance of the certificates that is projected to be outstanding
after each of the payment dates shown at various constant ABS percentages.
The ABS Tables also assume that the receivables have been aggregated into
hypothetical pools with all of the receivables within each such pool having the
following characteristics and that the level scheduled monthly payment for each
of the pools (which is based on its aggregate principal balance, weighted
average contract rate of interest, weighted average original term to maturity
and weighted average remaining term to maturity as of the cutoff date) will be
such that each pool will be fully amortized by the end of its remaining term to
maturity. The pools have an assumed cutoff date of December 1, 2000.
ORIGINAL TERM REMAINING TERM
AGGREGATE CONTRACT TO MATURITY TO MATURITY
POOL PRINCIPAL BALANCE RATE (IN MONTHS) (IN MONTHS)
- ----------- ----------------- --------- ------------- --------------
1 ......... $ 9,711,067.38 9.122% 23 21
2 ......... $ 68,568,985.55 7.957% 36 34
3 ......... $ 146,995,236.18 9.402% 48 46
4 ......... $ 914,319,125.64 9.840% 60 58
5 ......... $ 140,872,123.33 10.445% 71 69
S-21
The actual characteristics and performance of the receivables will differ
from the assumptions used in constructing the ABS Tables. The assumptions used
are hypothetical and have been provided only to give a general sense of how the
principal cash flows might behave under varying prepayment scenarios. For
example, it is very unlikely that the receivables will prepay at a constant
level of ABS until maturity or that all of the receivables will prepay at the
same level of ABS. Moreover, the diverse terms of receivables within each of
the hypothetical pools could produce slower or faster principal distributions
than indicated in the ABS Tables at the various constant percentages of ABS
specified, even if the original and remaining terms to maturity of the
receivables are as assumed. Any difference between such assumptions and the
actual characteristics and performance of the receivables, or actual prepayment
experience, will affect the percentages of initial amounts outstanding over
time and the weighted average life of each class of notes and the certificates.
PERCENT OF INITIAL NOTE PRINCIPAL AMOUNT AT VARIOUS ABS PERCENTAGES
CLASS A-1 NOTES
-----------------------------------------------------------
ASSUMED ABS PERCENTAGE(1)
-----------------------------------------------------------
PAYMENT DATES 0.50% 1.00% 1.30% 1.50% 1.70% 2.00%
- ----------------------- --------- --------- --------- --------- --------- ---------
Closing Date .......... 100 100 100 100 100 100
January 15, 2001 ...... 90 88 86 85 84 83
February 15, 2001 ..... 81 76 73 71 69 65
March 15, 2001 ........ 71 64 59 56 53 49
April 15, 2001 ........ 61 52 46 42 38 32
May 15, 2001 .......... 52 40 33 28 23 16
June 15, 2001 ......... 42 28 20 14 8 0
July 15, 2001 ......... 32 16 7 * 0 0
August 15, 2001 ....... 23 5 0 0 0 0
September 15, 2001..... 13 0 0 0 0 0
October 15, 2001 ...... 4 0 0 0 0 0
November 15, 2001 ..... 0 0 0 0 0 0
December 15, 2001 ..... 0 0 0 0 0 0
January 15, 2002 ...... 0 0 0 0 0 0
February 15, 2002 ..... 0 0 0 0 0 0
March 15, 2002 ........ 0 0 0 0 0 0
April 15, 2002 ........ 0 0 0 0 0 0
May 15, 2002 .......... 0 0 0 0 0 0
June 15, 2002 ......... 0 0 0 0 0 0
July 15, 2002 ......... 0 0 0 0 0 0
August 15, 2002 ....... 0 0 0 0 0 0
September 15, 2002..... 0 0 0 0 0 0
October 15, 2002 ...... 0 0 0 0 0 0
November 15, 2002 ..... 0 0 0 0 0 0
December 15, 2002 ..... 0 0 0 0 0 0
Weighted Average
Life (years)(2) ...... 0.48 0.39 0.36 0.33 0.32 0.29
CLASS A-2 NOTES
-----------------------------------------------------------
ASSUMED ABS PERCENTAGE(1)
-----------------------------------------------------------
PAYMENT DATES 0.50% 1.00% 1.30% 1.50% 1.70% 2.00%
- ----------------------- --------- --------- --------- --------- --------- ---------
Closing Date .......... 100 100 100 100 100 100
January 15, 2001 ...... 100 100 100 100 100 100
February 15, 2001 ..... 100 100 100 100 100 100
March 15, 2001 ........ 100 100 100 100 100 100
April 15, 2001 ........ 100 100 100 100 100 100
May 15, 2001 .......... 100 100 100 100 100 100
June 15, 2001 ......... 100 100 100 100 100 99
July 15, 2001 ......... 100 100 100 100 94 86
August 15, 2001 ....... 100 100 95 88 82 72
September 15, 2001..... 100 94 84 77 70 59
October 15, 2001 ...... 100 85 73 66 58 46
November 15, 2001 ..... 95 75 63 54 46 34
December 15, 2001 ..... 87 65 52 43 35 21
January 15, 2002 ...... 79 56 42 33 23 9
February 15, 2002 ..... 70 46 32 22 12 0
March 15, 2002 ........ 62 37 22 11 1 0
April 15, 2002 ........ 54 28 12 1 0 0
May 15, 2002 .......... 46 19 2 0 0 0
June 15, 2002 ......... 38 10 0 0 0 0
July 15, 2002 ......... 30 1 0 0 0 0
August 15, 2002 ....... 22 0 0 0 0 0
September 15, 2002..... 14 0 0 0 0 0
October 15, 2002 ...... 6 0 0 0 0 0
November 15, 2002 ..... 0 0 0 0 0 0
December 15, 2002 ..... 0 0 0 0 0 0
Weighted Average
Life (years)(2) ...... 1.42 1.18 1.07 1.00 0.94 0.86
- ----------
(1) An asterisk "*" means a percent of initial note principal balance of more
than zero and less than 0.5%.
(2) The weighted average life of a note is determined by (i) multiplying the
amount of each principal payment of such note by the number of years from
the date of the issuance of the note to the payment date on which it is
made, (ii) adding the results and (iii) dividing the sum by the initial
principal amount of such note.
THE ABS TABLES HAVE BEEN PREPARED BASED ON THE ASSUMPTIONS DESCRIBED ABOVE
(INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND PERFORMANCE OF THE
RECEIVABLES WHICH WILL DIFFER FROM THE ACTUAL CHARACTERISTICS AND PERFORMANCE
THEREOF) AND SHOULD BE READ IN CONJUNCTION THEREWITH.
S-22
CLASS A-3 NOTES CLASS A-4 NOTES
------------------------------------------------ -----------------------------------------------
ASSUMED ABS PERCENTAGE(1) ASSUMED ABS PERCENTAGE(1)
------------------------------------------------ -----------------------------------------------
PAYMENT DATES 0.50% 1.00% 1.30% 1.50% 1.70% 2.00% 0.50% 1.00% 1.30% 1.50% 1.70% 2.00%
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Closing Date ........ 100 100 100 100 100 100 100 100 100 100 100 100
January 15, 2001 .... 100 100 100 100 100 100 100 100 100 100 100 100
February 15, 2001 ... 100 100 100 100 100 100 100 100 100 100 100 100
March 15, 2001 ...... 100 100 100 100 100 100 100 100 100 100 100 100
April 15, 2001 ...... 100 100 100 100 100 100 100 100 100 100 100 100
May 15, 2001 ........ 100 100 100 100 100 100 100 100 100 100 100 100
June 15, 2001 ....... 100 100 100 100 100 100 100 100 100 100 100 100
July 15, 2001 ....... 100 100 100 100 100 100 100 100 100 100 100 100
August 15, 2001 ..... 100 100 100 100 100 100 100 100 100 100 100 100
September 15, 2001 .. 100 100 100 100 100 100 100 100 100 100 100 100
October 15, 2001 .... 100 100 100 100 100 100 100 100 100 100 100 100
November 15, 2001 ... 100 100 100 100 100 100 100 100 100 100 100 100
December 15, 2001 ... 100 100 100 100 100 100 100 100 100 100 100 100
January 15, 2002 .... 100 100 100 100 100 100 100 100 100 100 100 100
February 15, 2002 ... 100 100 100 100 100 98 100 100 100 100 100 100
March 15, 2002 ...... 100 100 100 100 100 89 100 100 100 100 100 100
April 15, 2002 ...... 100 100 100 100 93 81 100 100 100 100 100 100
May 15, 2002 ........ 100 100 100 93 85 72 100 100 100 100 100 100
June 15, 2002 ....... 100 100 94 86 77 64 100 100 100 100 100 100
July 15, 2002 ....... 100 100 88 79 70 56 100 100 100 100 100 100
August 15, 2002 ..... 100 94 81 72 63 49 100 100 100 100 100 100
September 15, 2002 .. 100 88 74 65 55 41 100 100 100 100 100 100
October 15, 2002 .... 100 81 67 58 48 34 100 100 100 100 100 100
November 15, 2002 ... 99 75 61 51 42 27 100 100 100 100 100 100
December 15, 2002 ... 93 69 55 45 35 20 100 100 100 100 100 100
January 15, 2003 .... 87 63 49 39 29 14 100 100 100 100 100 100
February 15, 2003 ... 82 57 42 32 22 7 100 100 100 100 100 100
March 15, 2003 ...... 76 51 37 26 16 1 100 100 100 100 100 100
April 15, 2003 ...... 70 46 31 21 10 0 100 100 100 100 100 93
May 15, 2003 ........ 65 40 25 15 5 0 100 100 100 100 100 85
June 15, 2003 ....... 59 34 19 9 0 0 100 100 100 100 99 78
July 15, 2003 ....... 53 29 14 4 0 0 100 100 100 100 91 71
August 15, 2003 ..... 48 23 9 0 0 0 100 100 100 98 84 64
September 15, 2003 .. 42 18 3 0 0 0 100 100 100 91 78 57
October 15, 2003 .... 37 13 0 0 0 0 100 100 98 84 71 51
November 15, 2003 ... 32 8 0 0 0 0 100 100 91 78 65 45
December 15, 2003 ... 27 3 0 0 0 0 100 100 85 72 59 40
January 15, 2004 .... 21 0 0 0 0 0 100 98 79 67 54 34
February 15, 2004 ... 16 0 0 0 0 0 100 92 74 61 49 30
March 15, 2004 ...... 11 0 0 0 0 0 100 86 68 56 43 25
April 15, 2004 ...... 6 0 0 0 0 0 100 80 62 51 39 21
May 15, 2004 ........ 2 0 0 0 0 0 100 74 57 46 34 17
June 15, 2004 ....... 0 0 0 0 0 0 95 68 52 41 30 13
July 15, 2004 ....... 0 0 0 0 0 0 89 63 47 36 26 9
August 15, 2004 ..... 0 0 0 0 0 0 82 57 42 32 22 6
September 15, 2004 .. 0 0 0 0 0 0 76 52 38 28 18 4
October 15, 2004 .... 0 0 0 0 0 0 69 47 33 24 15 1
- ----------
(1) An asterisk "*" means a percent of initial note principal balance of more
than zero and less than 0.5%.
THE ABS TABLES HAVE BEEN PREPARED BASED ON THE ASSUMPTIONS DESCRIBED ABOVE
(INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND PERFORMANCE OF THE
RECEIVABLES WHICH WILL DIFFER FROM THE ACTUAL CHARACTERISTICS AND PERFORMANCE
THEREOF) AND SHOULD BE READ IN CONJUNCTION THEREWITH.
S-23
CLASS A-3 NOTES
-----------------------------------------------------------
ASSUMED ABS PERCENTAGE(1)
-----------------------------------------------------------
PAYMENT DATES 0.50% 1.00% 1.30% 1.50% 1.70% 2.00%
- ------------------------- --------- --------- --------- --------- --------- ---------
November 15, 2004 ....... 0 0 0 0 0 0
December 15, 2004 ....... 0 0 0 0 0 0
January 15, 2005 ........ 0 0 0 0 0 0
February 15, 2005 ....... 0 0 0 0 0 0
March 15, 2005 .......... 0 0 0 0 0 0
April 15, 2005 .......... 0 0 0 0 0 0
May 15, 2005 ............ 0 0 0 0 0 0
June 15, 2005 ........... 0 0 0 0 0 0
July 15, 2005 ........... 0 0 0 0 0 0
August 15, 2005 ......... 0 0 0 0 0 0
September 15, 2005 ...... 0 0 0 0 0 0
October 15, 2005 ........ 0 0 0 0 0 0
November 15, 2005 ....... 0 0 0 0 0 0
December 15, 2005 ....... 0 0 0 0 0 0
January 15, 2006 ........ 0 0 0 0 0 0
February 15, 2006 ....... 0 0 0 0 0 0
March 15, 2006 .......... 0 0 0 0 0 0
April 15, 2006 .......... 0 0 0 0 0 0
May 15, 2006 ............ 0 0 0 0 0 0
June 15, 2006 ........... 0 0 0 0 0 0
July 15, 2006 ........... 0 0 0 0 0 0
August 15, 2006 ......... 0 0 0 0 0 0
September 15, 2006 ...... 0 0 0 0 0 0
Weighted Average Life
(years)(2) ............. 2.69 2.33 2.13 2.00 1.88 1.71
Weighted Average Life
to Optional
Clean-Up
Call (years)(2)(3) ..... -- -- -- -- -- --
Optional Clean-Up
Call Date .............. -- -- -- -- -- --
CLASS A-4 NOTES
------------------------------------------------------------------------
ASSUMED ABS PERCENTAGE(1)
------------------------------------------------------------------------
PAYMENT DATES 0.50% 1.00% 1.30% 1.50% 1.70% 2.00%
- ------------------------- ----------- ------------ ----------- ----------- ----------- -----------
November 15, 2004 ....... 63 42 30 21 12 0
December 15, 2004 ....... 58 38 26 18 10 0
January 15, 2005 ........ 52 34 23 15 7 0
February 15, 2005 ....... 47 30 19 12 5 0
March 15, 2005 .......... 41 26 16 10 3 0
April 15, 2005 .......... 36 22 13 8 2 0
May 15, 2005 ............ 31 18 11 6 * 0
June 15, 2005 ........... 25 15 8 4 0 0
July 15, 2005 ........... 20 11 6 2 0 0
August 15, 2005 ......... 15 8 3 1 0 0
September 15, 2005 ...... 9 4 1 0 0 0
October 15, 2005 ........ 4 1 0 0 0 0
November 15, 2005 ....... 3 1 0 0 0 0
December 15, 2005 ....... 3 * 0 0 0 0
January 15, 2006 ........ 2 0 0 0 0 0
February 15, 2006 ....... 2 0 0 0 0 0
March 15, 2006 .......... 1 0 0 0 0 0
April 15, 2006 .......... * 0 0 0 0 0
May 15, 2006 ............ 0 0 0 0 0 0
June 15, 2006 ........... 0 0 0 0 0 0
July 15, 2006 ........... 0 0 0 0 0 0
August 15, 2006 ......... 0 0 0 0 0 0
September 15, 2006 ...... 0 0 0 0 0 0
Weighted Average Life
(years)(2) ............. 4.19 3.89 3.66 3.47 3.27 2.96
Weighted Average Life
to Optional
Clean-Up
Call (years)(2)(3) ..... 4.06 3.72 3.47 3.29 3.08 2.82
Optional Clean-Up
Call Date .............. 4/15/05 12/15/04 9/15/04 7/15/04 4/15/04 1/15/04
- ----------
(1) An asterisk "*" means a percent of initial note principal balance of more
than zero and less than 0.5%.
(2) The weighted average life of a note is determined by (i) multiplying the
amount of each principal payment of such note by the number of years from
the date of the issuance of the note to the payment date on which it is
made, (ii) adding the results and (iii) dividing the sum by the initial
principal amount of such note.
(3) This calculation assumes the servicer purchases the receivables on the
earliest payment date on which it is permitted to do so.
THE ABS TABLES HAVE BEEN PREPARED BASED ON THE ASSUMPTIONS DESCRIBED ABOVE
(INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND PERFORMANCE OF THE
RECEIVABLES WHICH WILL DIFFER FROM THE ACTUAL CHARACTERISTICS AND PERFORMANCE
THEREOF) AND SHOULD BE READ IN CONJUNCTION THEREWITH.
S-24
PERCENTAGE OF INITIAL CERTIFICATE BALANCE AT VARIOUS ABS PERCENTAGES
CERTIFICATES
--------------------------------------------------------
ASSUMED ABS PERCENTAGE(1)
--------------------------------------------------------
PAYMENT DATES 0.50% 1.00% 1.30% 1.50% 1.70% 2.00%
- ---------------------------- ------- ------- ------- ------- ------- ------
Closing Date ............... 100 100 100 100 100 100
January 15, 2001 ........... 100 100 100 100 100 100
February 15, 2001 .......... 100 100 100 100 100 100
March 15, 2001 ............. 100 100 100 100 100 100
April 15, 2001 ............. 100 100 100 100 100 100
May 15, 2001 ............... 100 100 100 100 100 100
June 15, 2001 .............. 100 100 100 100 100 100
July 15, 2001 .............. 100 100 100 100 99 97
August 15, 2001 ............ 100 100 99 97 96 94
September 15, 2001 ......... 100 99 96 95 93 90
October 15, 2001 ........... 100 96 94 92 90 87
November 15, 2001 .......... 99 94 91 89 87 84
December 15, 2001 .......... 97 92 89 87 85 81
January 15, 2002 ........... 95 90 86 84 82 79
February 15, 2002 .......... 93 87 84 82 79 76
March 15, 2002 ............. 91 85 82 79 77 73
April 15, 2002 ............. 89 83 79 77 74 70
May 15, 2002 ............... 87 81 77 74 72 68
June 15, 2002 .............. 85 79 75 72 69 65
July 15, 2002 .............. 84 77 73 70 67 63
August 15, 2002 ............ 82 75 70 67 65 60
September 15, 2002 ......... 80 73 68 65 62 58
October 15, 2002 ........... 78 71 66 63 60 55
November 15, 2002 .......... 76 69 64 61 58 53
December 15, 2002 .......... 74 67 62 59 56 51
January 15, 2003 ........... 72 65 60 57 54 49
February 15, 2003 .......... 71 63 58 55 52 47
March 15, 2003 ............. 69 61 56 53 50 45
April 15, 2003 ............. 67 59 54 51 48 43
May 15, 2003 ............... 65 57 53 49 46 41
June 15, 2003 .............. 63 56 51 48 44 39
July 15, 2003 .............. 62 54 49 46 43 38
August 15, 2003 ............ 60 52 47 44 41 36
September 15, 2003 ......... 58 50 46 43 39 34
October 15, 2003 ........... 56 49 44 41 38 33
November 15, 2003 .......... 55 47 43 39 36 32
December 15, 2003 .......... 53 46 41 38 35 30
January 15, 2004 ........... 51 44 40 37 34 29
February 15, 2004 .......... 50 43 38 35 32 28
March 15, 2004 ............. 48 41 37 34 31 27
April 15, 2004 ............. 47 40 36 33 30 26
May 15, 2004 ............... 45 38 34 32 29 25
- ----------
(1) An asterisk "*" means a percent of initial certificate balance of more
than zero and less than 0.5%.
THE ABS TABLES HAVE BEEN PREPARED BASED ON THE ASSUMPTIONS DESCRIBED ABOVE
(INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND PERFORMANCE OF THE
RECEIVABLES WHICH WILL DIFFER FROM THE ACTUAL CHARACTERISTICS AND PERFORMANCE
THEREOF) AND SHOULD BE READ IN CONJUNCTION THEREWITH.
S-25
CERTIFICATES
----------------------------------------------------------------------------------
ASSUMED ABS PERCENTAGE(1)
----------------------------------------------------------------------------------
PAYMENT DATES 0.50% 1.00% 1.30% 1.50% 1.70% 2.00%
- ------------------------------------------ ----------- ------------ ----------- ----------- ----------- -----------
June 15, 2004 ............................ 44 37 33 31 28 24
July 15, 2004 ............................ 42 36 32 30 27 23
August 15, 2004 .......................... 40 35 31 29 26 22
September 15, 2004 ....................... 39 33 30 28 25 22
October 15, 2004 ......................... 37 32 29 27 25 21
November 15, 2004 ........................ 36 31 28 26 24 14
December 15, 2004 ........................ 35 30 27 25 23 0
January 15, 2005 ......................... 33 29 26 25 23 0
February 15, 2005 ........................ 32 28 26 24 22 0
March 15, 2005 ........................... 31 27 25 23 22 0
April 15, 2005 ........................... 29 26 24 23 21 0
May 15, 2005 ............................. 28 25 23 22 21 0
June 15, 2005 ............................ 27 24 23 22 15 0
July 15, 2005 ............................ 26 24 22 21 8 0
August 15, 2005 .......................... 24 23 22 21 3 0
September 15, 2005 ....................... 23 22 21 16 0 0
October 15, 2005 ......................... 22 21 17 8 0 0
November 15, 2005 ........................ 22 21 14 6 0 0
December 15, 2005 ........................ 22 21 12 4 0 0
January 15, 2006 ......................... 21 21 10 3 0 0
February 15, 2006 ........................ 21 18 8 2 0 0
March 15, 2006 ........................... 21 15 7 1 0 0
April 15, 2006 ........................... 21 12 5 * 0 0
May 15, 2006 ............................. 19 9 4 0 0 0
June 15, 2006 ............................ 14 7 2 0 0 0
July 15, 2006 ............................ 9 4 1 0 0 0
August 15, 2006 .......................... 5 2 1 0 0 0
September 15, 2006 ....................... 0 0 0 0 0 0
Weighted Average Life (years)(2) ......... 3.36 3.08 2.87 2.72 2.56 2.28
Weighted Average Life to Optional
Clean-Up Call (years)(2)(3) ............. 3.06 2.74 2.54 2.40 2.25 2.06
Optional Clean-Up Call Date .............. 4/15/05 12/15/04 9/15/04 7/15/04 4/15/04 1/15/04
- ----------
(1) An asterisk "*" means a percent of initial certificate balance of more
than zero and less than 0.5%.
(2) The weighted average life of a certificate is determined by (i)
multiplying the amount of each principal payment of such certificate by
the number of years from the date of the issuance of such certificate to
the payment date on which it is made, (ii) adding the results and (iii)
dividing the sum by the initial principal balance of such certificate.
(3) This calculation assumes the servicer purchases the receivables on the
earliest payment date on which it is permitted to do so.
THE ABS TABLES HAVE BEEN PREPARED BASED ON THE ASSUMPTIONS DESCRIBED ABOVE
(INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND PERFORMANCE OF THE
RECEIVABLES WHICH WILL DIFFER FROM THE ACTUAL CHARACTERISTICS AND PERFORMANCE
THEREOF) AND SHOULD BE READ IN CONJUNCTION THEREWITH.
S-26
DESCRIPTION OF THE NOTES
GENERAL
The trust will issue the notes under an indenture between the trust and
Wells Fargo Bank Minnesota, National Association, as indenture trustee. The
corporate trust offices of the indenture trustee are located at Sixth Street
and Marquette Avenue, Minneapolis, Minnesota 55479-0070, telephone (612)
667-8058. Chase USA and its affiliates may have normal banking relationships
with the indenture trustee and its affiliates.
We will file a copy of the indenture in its execution form with the SEC
after the trust issues the notes. We summarize below some of the most important
terms of the notes. This summary is not a complete description of all the
provisions of the notes and the indenture. The following summary supplements
the description of the general terms and provisions of the notes of any trust
and the related indenture in the sections of the prospectus entitled
"Description of the Notes" and "Certain Information Regarding the Securities."
We refer you to those sections.
PAYMENTS OF INTEREST
Interest on the principal balances of each class of notes will accrue at
the related per annum interest rate shown on the cover page of this prospectus
supplement and will be payable to the noteholders monthly on each payment date,
commencing January 16, 2001.
CALCULATION OF INTEREST PAYABLE. Interest on the outstanding principal
amount of each class of notes will accrue and shall be calculated as follows:
Actual/360. Interest on the Class A-1 notes will accrue from and including
the prior payment date (or the closing date, in the case of the first payment
date) to but excluding the current payment date and be calculated on the basis
of actual days elapsed and a 360-day year.
30/360. Interest on the Class A-2 notes, Class A-3 notes and Class A-4
notes will accrue from and including the 15th day of the calendar month
preceding the payment date (or the closing date, in the case of the first
payment date) to but excluding the 15th day of the calendar month of that
payment date and be calculated on the basis of a 360-day year of twelve 30-day
months.
INTEREST ON UNPAID INTEREST. Interest on any note that is not paid on a
payment date will be due on the next payment date, together with interest on
that amount at the applicable interest rate, to the extent lawful.
PRIORITY OF INTEREST PAYMENTS. Interest payments on all classes of notes
will have the same priority. If on any payment date the trust has insufficient
funds to make a full payment of interest on the notes, the trust will apply the
funds available to pay interest on the notes ratably, based upon the aggregate
amount of interest payable on each class of notes.
FUNDS AVAILABLE TO PAY INTEREST. The trust will pay interest on the notes
on each payment date from collections on the receivables received during the
prior calendar month and amounts withdrawn from the reserve account for that
payment date less the portion of those amounts applied to the payment of the
servicing fee and the administration fee.
For a more detailed description of the priority of interest payments on
the notes, refer to the section of this prospectus supplement entitled
"Payments and Distributions."
PAYMENTS OF PRINCIPAL
CALCULATION OF PRINCIPAL PAYABLE. The trust will pay the principal of the
notes on each payment date in an amount generally equal to the lesser of the
amount available to pay the principal of the notes and
o 100% of the PRINCIPAL DISTRIBUTION AMOUNT for that payment date until
the Class A-1 notes have been paid in full and
S-27
o 97% of the PRINCIPAL DISTRIBUTION AMOUNT for each payment date
thereafter (or, in the case of the payment date on which the Class A-1
notes are paid in full, 97% of the remaining amount of the PRINCIPAL
DISTRIBUTION AMOUNT) until all of the notes have been paid in full
o unless
o the balance in the reserve account on that payment date would
drop below 0.5% of the aggregate principal balance of the
receivables as of the cutoff date, after giving effect to any
withdrawals from the reserve account on that payment date, in
which case, the targeted amount of principal payable to the
noteholders will be 100% of the PRINCIPAL DISTRIBUTION AMOUNT for
that payment date and each payment date thereafter until the
notes have been paid in full or the balance in the reserve
account equals or exceeds the required amount
or
o the maturity of the notes has been accelerated after the
occurrence of an event of default, in which case, the targeted
amount of principal payable to the noteholders will be 100% of
the PRINCIPAL DISTRIBUTION AMOUNT for each payment date until the
notes have been paid in full.
The PRINCIPAL DISTRIBUTION AMOUNT for each payment date will generally equal
the sum of
o the principal collections on the receivables received during the prior
calendar month and
o the aggregate principal balance of all receivables designated as
"defaulted receivables" during that calendar month, net of liquidation
proceeds allocable to principal received during that month in respect
of receivables designated as "defaulted receivables" during prior
months.
The precise definition of PRINCIPAL DISTRIBUTION AMOUNT is set forth in
the section of this prospectus supplement entitled "Glossary of Terms." We
refer you to that definition.
A receivable will be designated as a "defaulted receivable" when the
servicer determines, based on its usual collection practices and procedures,
that eventual payment in full of the receivable is unlikely or when at least
10% of a scheduled payment is 240 or more days delinquent.
The amount of the principal of the notes payable on the final scheduled
payment date for any class of notes will equal the amount needed to repay the
principal amount of that class of notes in full.
If the full targeted amount of principal payable to the noteholders on any
payment date is not paid, the shortfall will be included in the amount of
principal payable to the noteholders on the next payment date.
PRIORITY OF PRINCIPAL PAYMENTS PRIOR TO ACCELERATION OF THE NOTES. The
trust will pay the principal of the notes in the following order of priority:
o the Class A-1 Notes until they are paid in full,
o the Class A-2 Notes until they are paid in full,
o the Class A-3 Notes until they are paid in full and
o the Class A-4 Notes until they are paid in full.
PRIORITY OF PRINCIPAL PAYMENTS AFTER ACCELERATION OF THE NOTES. After an
acceleration of the maturity of the notes following an event of default, the
trust will pay the principal of the notes ratably, based upon the outstanding
principal amount of each class of notes.
FUNDS AVAILABLE TO PAY PRINCIPAL. The trust will pay the principal of the
notes on each payment date from collections on the receivables received during
the prior calendar month and amounts withdrawn from the reserve account for
that payment date less the portion of those amounts applied to the payment of
the servicing fee, the administration fee, interest on the notes and interest
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distributions in respect of the certificates. If the maturity of the notes has
been accelerated following an event of default resulting from a payment
default, the trust will not make any distributions in respect of interest on
the certificates until after the notes have been paid in full.
For a more detailed description of the priority of principal payments on
the notes, refer to the section of this prospectus supplement entitled
"Payments and Distributions."
The trust's failure to pay principal of the notes of any class on any
payment date will not be an event of default until the final scheduled payment
date for that class of notes.
NOTES MIGHT NOT BE PAID IN FULL ON THEIR FINAL SCHEDULED PAYMENT
DATES. The principal amount of any class of notes if not previously paid will
be due on the final scheduled payment date relating to that class shown on the
cover page of this prospectus supplement. The actual date on which the
outstanding principal amount of any class of notes is paid may be earlier or
later than the final scheduled payment date for that class of notes based on a
variety of factors, including those described in the sections of this
prospectus supplement and the prospectus entitled "Weighted Average Life of the
Securities."
PREPAYMENT
The servicer may purchase the receivables on any payment date after the
Class A-1 notes, the Class A-2 notes and the Class A-3 notes have been paid in
full on which the aggregate principal balance of the receivables has declined
to 10% or less of the aggregate principal balance of the receivables as of the
cutoff date. If the servicer purchases the receivables, the trust will prepay
the Class A-4 notes in full.
For a more detailed description of the right of the servicer to purchase
the receivables, refer to the section of the prospectus entitled "Description
of the Transfer and Servicing Agreements--Termination."
DESCRIPTION OF THE CERTIFICATES
GENERAL
The trust will issue the certificates under the trust agreement. We will
file a copy of the trust agreement with the SEC after the trust issues the
certificates. We summarize below some of the most important terms of the
certificates. This summary is not a complete description of all the provisions
of the trust agreement and the certificates. The following summary is a
supplement to the description of the general terms and provisions of the
certificates of any given trust and the related trust agreement in the sections
of the prospectus entitled "Descriptions of the Certificates," "Certain
Information Regarding the Securities" and "Description of the Transfer and
Servicing Agreements." We refer you to those sections.
DISTRIBUTIONS OF INTEREST
On each payment date, commencing on January 16, 2001, the
certificateholders will be entitled to receive the amount of interest that
accrues on the CERTIFICATE BALANCE at the pass-through rate shown on the cover
page of this prospectus supplement.
CALCULATION OF INTEREST ACCRUAL. Interest in respect of the certificates
will accrue from and including the 15th day of the calendar month preceding the
payment date (or the closing date, in the case of the first payment date) to
but excluding the 15th day of the calendar month of that payment date and be
calculated on the basis of a 360-day year of twelve 30-day months.
INTEREST ON UNPAID INTEREST. Interest in respect of any certificate that
is not distributed on a payment date will be due on the next payment date,
together with interest on that amount at the pass-through rate, to the extent
lawful.
FUNDS AVAILABLE FOR INTEREST DISTRIBUTIONS; SUBORDINATION. The trust will
make interest distributions in respect of the certificates on each payment date
from collections on the receivables
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received during the prior calendar month and amounts withdrawn from the reserve
account for that payment date less the portion of those amounts applied to the
payment of the servicing fee, the administration fee and interest on the notes.
If the maturity of the notes has been accelerated following an event of default
resulting from a payment default, the trust will not make any distributions in
respect of interest on the certificates until after the notes have been paid in
full.
For a more detailed description of the priority of interest distributions
in respect of the certificates, refer to the section of this prospectus
supplement entitled "Payments and Distributions."
DISTRIBUTIONS OF PRINCIPAL
CALCULATION OF PRINCIPAL DISTRIBUTABLE. On the payment date on which the
trust pays the Class A-1 notes in full and on each payment date thereafter
until the notes have been paid in full, the trust will distribute principal in
respect of the certificates in an amount equal to the lesser of
o the amount available to the trust to make distributions of principal
in respect of the certificates and
o 3% of the PRINCIPAL DISTRIBUTION AMOUNT (or, in the case of the
payment date on which the Class A-1 notes are paid in full, 3% of the
remaining amount of the PRINCIPAL DISTRIBUTION AMOUNT)
unless
o the balance in the reserve account on that payment date would
drop below 0.5% of the aggregate principal balance of the
receivables as of the cutoff date, after giving effect to any
withdrawals from the reserve account on that payment date, in
which case, the trust will not distribute principal in respect of
the certificates until the notes have been paid in full or the
balance in the reserve account equals or exceeds the required
amount
or
o the maturity of the notes has been accelerated after the
occurrence of an event of default, in which case, the trust will
not distribute principal in respect of the certificates until the
notes have been paid in full.
On each payment date after the notes have been paid in full, the trust will
distribute principal in respect of the certificates in an amount equal to the
lesser of
o the amount available to the trust to make distributions of principal
in respect of the certificates and
o 100% of the PRINCIPAL DISTRIBUTION AMOUNT (or, in the case of the
payment date on which the notes are paid in full, 100% of the
remaining amount of the PRINCIPAL DISTRIBUTION AMOUNT).
In addition, the amount of principal distributable in respect of the
certificates on the final scheduled payment date for the certificates will
equal the amount needed to reduce the CERTIFICATE BALANCE to zero.
If the full targeted amount of principal distributable to the
certificateholders on any payment date is not distributed, the shortfall will
be included in the amount of principal distributable to the certificateholders
on the next payment date.
The CERTIFICATE BALANCE will be reduced on each payment date by
o distributions in respect of principal to the certificateholders and
o the amount that the sum of the aggregate principal amount of the notes
and the CERTIFICATE BALANCE exceeds the aggregate principal balance of
the receivables as of the last day of the prior month,
and increased on any payment date by the amount of principal distributed in
respect of the certificates on that payment date relating to any prior non-cash
reductions.
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FUNDS AVAILABLE TO DISTRIBUTE PRINCIPAL; SUBORDINATION. The trust will
distribute principal in respect of the certificates on each payment date from
collections on the receivables received during the prior calendar month and
amounts withdrawn from the reserve account for that payment date less the
portion of those amounts applied to the payment of the servicing fee, the
administration fee, interest on the notes, interest distributions in respect of
the certificates and principal of the notes. If the maturity of the notes has
been accelerated following an event of default, the trust will not make any
distributions of principal in respect of the certificates until after the notes
have been paid in full.
For a more detailed description of the priority of principal distributions
in respect of the certificates, refer to the section of this prospectus
supplement entitled "Payments and Distributions."
CERTIFICATE BALANCE MIGHT NOT BE REDUCED TO ZERO ON ITS FINAL SCHEDULED
PAYMENT DATE. The trust is required to reduce the CERTIFICATE BALANCE to zero
on the final scheduled payment date of the certificates shown on the cover page
of this prospectus supplement. The actual date on which the CERTIFICATE BALANCE
is reduced to zero may be earlier or later than the final scheduled payment
date for the certificates based on a variety of factors, including those
described in the sections of this prospectus supplement and the prospectus
entitled "Weighted Average Life of the Securities."
PREPAYMENT
The servicer may purchase the receivables on any payment date after the
Class A-1 notes, the Class A-2 notes and the Class A-3 notes have been paid in
full on which the aggregate principal balance of the receivables has declined
to 10% or less of the aggregate principal balance of the receivables as of the
cutoff date. If the servicer purchases the receivables, the trust will
distribute to certificateholders an amount equal to the CERTIFICATE BALANCE
together with accrued and unpaid interest at the pass-through rate.
For a more detailed description of the right of the servicer to purchase
the receivables, refer to the section of the prospectus entitled "Description
of the Transfer and Servicing Agreements--Termination."
RESTRICTIONS ON FOREIGN OWNERSHIP
Purchasers of certificates and their assignees will be deemed to represent
that the beneficial owners of such certificates are not FOREIGN INVESTORS.
For a more detailed description of the restrictions on foreign ownership
of the certificates, refer to the section of this prospectus supplement
entitled "Certain Federal Income Tax Consequences."
PAYMENTS AND DISTRIBUTIONS
SOURCE OF FUNDS
The funds available to the trust to pay expenses and make payments on the
securities on each payment date will equal the sum of the TOTAL DISTRIBUTION
AMOUNT for that payment date and any funds withdrawn from the reserve account
for that payment date.
The TOTAL DISTRIBUTION AMOUNT for each payment date will generally consist
of the following:
o collections received on the receivables during the prior calendar
month, including net recoveries on receivables that were charged off
as losses in prior months and
o proceeds of repurchases of receivables by the seller or purchases of
receivables by the servicer.
The precise definition of TOTAL DISTRIBUTION AMOUNT is set forth in the
section of this prospectus supplement entitled "Glossary of Terms." We refer
you to that definition.
In general, the servicer will be permitted to retain collections on the
receivables until the business day prior to each payment date. On that business
day, the servicer will cause all collections on the
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receivables and other amounts constituting the TOTAL DISTRIBUTION AMOUNT for
the payment date to be deposited in the collection account, together with any
funds required to be withdrawn by the indenture trustee from the reserve
account for the payment date.
For a description of the circumstances under which the servicer would be
required to deposit collections on the receivables within 48 hours of receipt,
refer to the section of the prospectus entitled "Description of the Transfer
and Servicing Agreements--Collections."
PRIORITY OF PAYMENTS AND DISTRIBUTIONS
PRIOR TO ACCELERATION OF THE NOTES FOLLOWING A PAYMENT DEFAULT. On each
payment date, the trust will apply the TOTAL DISTRIBUTION AMOUNT and any funds
withdrawn from the reserve account to make payments and distributions in the
following order of priority:
o to the servicer, the servicing fee for the prior month and all unpaid
servicing fees for prior months,
o to the administrator, the administration fee for the prior month and
all unpaid administration fees for prior months,
o ratably to the holders of each class of notes, interest due on all the
notes on that payment date,
o to the holders of the certificates, interest distributable in respect
of the certificates on that payment date,
o to the noteholders, the amount of the principal of the notes payable
on that payment date as described in the section of this prospectus
supplement entitled "Description of the Notes--Payments of Principal,"
o to the certificateholders, the amount of principal distributable in
respect of the certificates on that payment date as described in the
section of this prospectus supplement entitled "Description of the
Certificates--Distributions of Principal" and
o to the reserve account, any remaining portion of the TOTAL
DISTRIBUTION AMOUNT.
AFTER ACCELERATION OF THE NOTES FOLLOWING A PAYMENT DEFAULT. On each
payment date after the maturity of the notes has been accelerated following an
event of default resulting from a payment default, the trust will apply the
TOTAL DISTRIBUTION AMOUNT and any funds withdrawn from the reserve account to
make payments and distributions in the following order of priority:
o to the servicer, the servicing fee for the prior month and all unpaid
servicing fees for other prior months,
o to the administrator, the administration fee for the prior month and
all unpaid administration fees for other prior months,
o ratably to the holders of each class of notes, interest due on all the
notes on that payment date,
o to the noteholders, the outstanding principal amount of the notes,
o to the holders of the certificates, interest distributable in respect
of the certificates on that payment date,
o to the certificateholders, the CERTIFICATE BALANCE and
o to the reserve account, any remaining portion of the TOTAL
DISTRIBUTION AMOUNT.
WITHDRAWALS FROM RESERVE ACCOUNT. The indenture trustee will withdraw
funds from the reserve account, to the extent that funds are available for
withdrawal, in respect of any payment date for which the TOTAL DISTRIBUTION
AMOUNT is insufficient to pay the servicing fee, the administration fee,
principal and interest payable to the noteholders and principal and interest
distributable in respect of the certificates. In no event will investment
earnings on funds on deposit in the reserve account be available for withdrawal
to pay these amounts.
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DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
We have summarized below some of the important terms of the sale and
servicing agreement, the trust agreement and the administration agreement. A
form of each of these agreements has been filed as an exhibit to the
registration statement of which the attached prospectus forms a part. We will
file a copy of each of these agreements with the SEC after we issue the
securities. This summary is not a complete description of these agreements. The
following summary supplements the description of the general terms and
provisions of these agreements set forth in the prospectus.
ACCOUNTS
The trust will establish a collection account and the reserve account in
the name of the indenture trustee for the benefit of the noteholders and the
certificateholders. The servicer will establish a distribution account for the
noteholders in the name of the indenture trustee for the benefit of the
noteholders. The trustee will establish a distribution account for the
certificateholders in the name of the trustee for the benefit of the
certificateholders. Each of these accounts will be treated as a "Trust Account"
as described in the section of the prospectus entitled "Description of the
Transfer and Servicing Agreements--Accounts."
Each of the collection account, the note distribution account and the
certificate distribution account will be initially established in the trust
department of The Chase Manhattan Bank. The Chase Manhattan Bank acting as the
paying agent at the direction of the servicer will have the right to withdraw
funds from those accounts for the purpose of making distributions to
securityholders.
SERVICING COMPENSATION
The servicer will be entitled to receive a servicing fee for each month
payable on the following payment date. The servicing fee for each month will
equal the sum of
o the product of 1/12 of 1% and the aggregate principal balance of the
receivables as of the last day of the prior month (or, in the case of
the first payment date, as of the cutoff date) and
o any late charges, credit-related extension fees or other
administrative fees or similar charges allowed by applicable law
collected by the servicer during that month.
In addition, the servicer will be entitled to receive investment earnings, net
of losses and investment expenses, on funds deposited in the collection
account.
For a more detailed description of the fees and expenses of the servicer,
refer to the section of the prospectus entitled "Description of the Transfer
and Servicing Agreements--Servicing Compensation and Payment of Expenses."
SERVICING PROCEDURES
The servicer will service the receivables and will make reasonable efforts
to collect all payments due with respect to the receivables. The servicer will
be obligated to follow collection and servicing procedures consistent with the
procedures it follows with respect to comparable new or used automobile
receivables that it services for itself and with prudent industry standards. In
addition, the sale and servicing agreement will provide that the servicer may
not
o change the amount of any receivable, other than allowing a prepayment
of a scheduled payment that does not result in a deferral of any other
scheduled payment,
o decrease the contract rate of any receivable or
o extend any receivable beyond the final scheduled payment date for the
certificates.
If the servicer fails to comply with the terms of the sale and servicing
agreement and such failure materially and adversely affects the interests of
the securityholders in a receivable, the servicer will be required to purchase
the affected receivable at a price equal to the unpaid principal balance owed
by
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the obligor plus interest at the contract rate of interest through the last day
of the month of repurchase. The purchase obligation will constitute the sole
remedy available to the securityholders, the trust or the indenture trustee for
any such uncured breach.
Chase USA offers certain obligors or classes of obligors on an annual
basis a one-month noncredit related extension of a regularly scheduled payment
otherwise due under a receivable. The sale and servicing agreement will
establish criteria governing those extensions.
For a more detailed description of the servicing procedures, refer to the
section of the prospectus entitled "Description of the Transfer and Servicing
Agreements--Servicing Procedures."
RESERVE ACCOUNT
FUNDING OF RESERVE ACCOUNT. The trust will establish the reserve account
in the name of the indenture trustee for the benefit of the noteholders and
certificateholders. The trust will fund the reserve account on the closing date
by making an initial deposit of $12,804,665.38 (1.00% of the aggregate
principal balance of the receivables as of the cutoff date), which is less than
the amount that is required to be on deposit in the reserve account. The
reserve account will thereafter be funded on each payment date with the portion
of the TOTAL DISTRIBUTION AMOUNT remaining after the payment of the servicing
fee, the administration fee, interest and principal payable to the noteholders
and interest and principal distributable in respect of the certificates as
described in the section of this prospectus supplement entitled "Payments and
Distributions."
WITHDRAWALS FROM RESERVE ACCOUNT. The indenture trustee will withdraw
funds from the reserve account and deposit them into the collection account
under the circumstances described in the section of this prospectus supplement
entitled "Payments and Distributions."
On each payment date, the indenture trustee will withdraw from the reserve
account and pay to the seller all investment earnings on funds on deposit in
the reserve account earned since the prior payment date and any amounts on
deposit in the reserve account, after giving effect to deposits and withdrawals
made on that payment date, in excess of the SPECIFIED RESERVE ACCOUNT BALANCE
on that payment date.
The SPECIFIED RESERVE ACCOUNT BALANCE on each payment date will equal
2.25% of the aggregate principal balance of the receivables as of the last day
of the preceding calendar month, but in any event will not be less than the
lesser of
o $9,603,499.04 (0.75% of the aggregate principal balance of the
receivables as of the cutoff date) and
o the aggregate principal balance of the receivables as of the last day
of the preceding calendar month;
provided, that the SPECIFIED RESERVE ACCOUNT BALANCE will be calculated using a
percentage of 4.50% on any payment date for which the AVERAGE NET LOSS RATIO
exceeds 1.75% or the AVERAGE DELINQUENCY PERCENTAGE exceeds 1.75%. The seller
may reduce the SPECIFIED RESERVE ACCOUNT BALANCE to a lesser amount if each of
the rating agencies confirms that the reduction will not adversely affect the
ratings of the securities by that rating agency.
FUNDS IN THE RESERVE ACCOUNT WILL BE LIMITED. Amounts in the reserve
account are intended to enhance the likelihood of receipt by securityholders of
the full amount of principal and interest payable to them and to decrease the
likelihood that the securityholders will experience losses. However, the amount
in the reserve account is limited and the reserve account could be depleted. If
the amount required to be withdrawn from the reserve account to cover
shortfalls in collections on the receivables exceeds the amount of available
cash in the reserve account, noteholders or certificateholders could incur
losses or a temporary shortfall in the amounts distributed to them could
result. Delays in payments could increase the average life of the notes or the
certificates Shortfalls in collections on the receivables may result from,
among other things, losses on the receivables or the failure by the servicer to
make any remittance under the sale and servicing agreement.
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ADMINISTRATION AGREEMENT
The Chase Manhattan Bank, as the administrator, will enter into an
administration agreement with the trust and the indenture trustee pursuant to
which it will agree to perform certain administrative functions on behalf of
the trust. The administrator will be entitled to receive an administration fee
of $1,000 per month payable on the following payment date.
Under the administration agreement the administrator may act directly or
through its agents or attorneys pursuant to agreements entered into with any of
them. The administrator will not be liable for the conduct or misconduct of its
agents or attorneys if the administrator selected those agents or attorneys
with due care.
Chase USA will enter into an agreement with the administrator pursuant to
which it will agree to perform certain of the duties of the administrator and
to reimburse and indemnify the administrator for all expenses or liabilities
the administrator may incur as a result of the administrator's entering into
the administration agreement.
MONEY MARKET ELIGIBILITY
The Class A-1 notes will be eligible securities for purchase by money
market funds under paragraph (a)(10) of Rule 2a-7 under the Investment Company
Act of 1940, as amended.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of the material United States federal
income tax consequences that may be relevant to the purchase, ownership and
disposition of the notes and the certificates by an investor who purchases the
notes or the certificates pursuant to their original issuance at their original
issue price. This summary is based upon the CODE, the Treasury regulations
promulgated thereunder, administrative rulings or pronouncements and judicial
decisions, all as in effect on the date hereof and all of which are subject to
change, possibly retroactively. The following discussion does not deal with all
aspects of U.S. federal income taxation, nor does it address U.S. federal
income tax consequences that may be relevant to certain types of investors,
such as financial institutions, insurance companies, dealers in securities or
currencies, tax-exempt organizations, persons who hold the notes or
certificates as part of a hedging, integrated or conversion transaction,
constructive sale or straddle, traders in securities that have elected to mark
their securities holdings to market or persons whose functional currency is not
the U.S. dollar, who may be subject to special treatment under the CODE. In
addition, the following discussion does not address the alternative minimum tax
consequences of an investment in the notes or the certificates or the
consequences of such an investment under state and local tax laws or foreign
tax laws. Prospective investors should note that no rulings have been or will
be sought from the IRS with respect to any of the U.S. federal income tax
consequences discussed in this prospectus and opinions of counsel are not
binding on the IRS or the courts. Thus, we can give you no assurance that the
IRS will not take positions contrary to those described below. The opinions of
Simpson Thacher & Bartlett, special counsel to the seller, described in this
prospectus supplement will be based upon certain representations and
assumptions, including, but not limited to, the assumption that all relevant
parties will comply with the terms of the trust agreement and related
documents.
This summary is intended as an explanatory discussion of the possible
effects of the classification of the trust as a partnership for U.S. federal
income tax purposes for investors generally and related tax matters affecting
investors generally, but does not purport to furnish information in the level
of detail or with the attention to the investor's specific tax circumstances
that would be provided by an investor's own tax advisor. Accordingly, investors
should consult their own tax advisors to determine the federal, state, local,
and other tax consequences that may be relevant to their purchase, ownership
and disposition of the notes or the certificates based upon their particular
facts and circumstances.
If a partnership holds notes or certificates, the tax treatment of a
partner will generally depend upon the status of the partner and the activities
of the partnership. A noteholder or certificateholder that is a partner of a
partnership holding notes or certificates should consult its own tax advisor.
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For purposes of the following discussion, except as otherwise provided
herein, the terms "noteholder" and "certificateholder" refer, respectively, to
the beneficial owner of a note or certificate. In addition, the discussion
below assumes that noteholders and certificateholders will hold their notes and
certificates as "capital assets" within the meaning of Section 1221 of the
CODE. As used herein, a "U.S. noteholder" or "U.S. certificateholder" means a
holder that is:
o a citizen or resident of the United States,
o a corporation or partnership created or organized in or under the laws
of the United States or any political subdivision thereof,
o an estate the income of which is subject to United States federal
income taxation regardless of its source or
o a trust (a) that is subject to the supervision of a court within the
United States and the control of one or more United States persons as
described in Section 7701(a)(30) of the CODE or (b) that has a valid
election in effect under applicable U.S. Treasury regulations to be
treated as a United States person.
A "non-U.S. noteholder" or "non-U.S. certificateholder" is a holder that is not
a U.S. noteholder or U.S. certificateholder.
TAX CHARACTERIZATION OF THE TRUST
In the opinion of Simpson Thacher & Bartlett, the trust will not be
classified as an association (or publicly traded partnership) taxable as a
corporation. This opinion is based on, among other things, certain facts and
assumptions contained in such opinion and counsel's conclusion, based in part
upon representations of the seller, that the nature of the trust's income
exempts it from the rule that certain publicly traded partnerships are taxable
as corporations.
The seller and the certificateholders, by their purchase of certificates,
will agree to treat the trust as a partnership for all U.S. tax purposes with
the assets of such partnership being the assets held by the trust (including
the reserve account and all investment earnings thereon), the partners of the
partnership being the certificateholders and the seller, and the notes being
debt of the partnership. However, the proper characterization of the
arrangement involving the trust, the certificateholders, the noteholders and
the seller is not clear.
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 seller or the trust. The following
discussion assumes that, for U.S. federal income tax purposes, (i) the trust is
properly classified as a partnership (other than a publicly traded
partnership), (ii) the notes will be treated as debt of this partnership and
(iii) the certificates represent equity interests in such partnership.
TAX CONSEQUENCES TO NOTEHOLDERS
Treatment of the Notes as Indebtedness. The trust and the noteholders, by
their purchase of the notes, agree to treat the notes as debt for all U.S. tax
purposes. In the opinion of Simpson Thacher & Bartlett, the notes will be
characterized as debt for U.S. federal income tax purposes. The discussion
below assumes this characterization of the notes is correct.
Interest Income on the Notes. It is anticipated that the notes will be
sold at no more than the statutorily defined de minimis discount (i.e., 1/4% of
the principal amount of a note multiplied by its weighted average life to
maturity) from their stated principal amount. In such case, the notes will not
be considered to have been issued with original issue discount or OID in excess
of the statutorily defined de minimis amount. Consequently, the stated interest
thereon will be taxable to a noteholder as ordinary interest income at the time
it is received or accrued in accordance with such noteholder's method of tax
accounting. Under the applicable Treasury regulations, a holder of a note
issued with a de minimis amount of OID must include gain attributable to such
OID in income, on a pro rata basis, as principal payments are made on the note.
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Sale or Other Disposition. If a noteholder sells or otherwise disposes of
a note in a taxable transaction, the former noteholder will recognize capital
gain or loss in an amount equal to the difference between the amount realized
on such sale or other disposition (less an amount equal to any accrued, unpaid
interest not previously included in income which will be taxable as such) and
the former noteholder's adjusted tax basis in the note. The long-term capital
gains of individuals generally are eligible for reduced rates of taxation.
Capital losses generally may be used only to offset capital gains.
Non-U.S. Noteholders. Under present U.S. federal income tax law, and
subject to the discussion below concerning backup withholding:
(a) no withholding of U.S. federal income tax will be required with
respect to the payment by the trust of principal or interest on a note
owned by a non-U.S. noteholder, provided that the beneficial owner of the
note (i) is not actually or constructively a "10-percent shareholder" of
the trust (including a holder of 10% or more of the trust's outstanding
certificates) or the seller, (ii) is not a "controlled foreign corporation"
with respect to which the trust or the seller is a "related person" within
the meaning of the CODE, (iii) is not a bank whose receipt of interest on a
note is described in Section 881(c)(3)(A) of the CODE and (iv) satisfies
the statement requirement (described generally below) set forth in Section
871(h) and Section 881(c) of the CODE and the regulations thereunder; and
(b) no withholding of U.S. federal income tax generally will be
required with respect to any gain realized by a non-U.S. noteholder upon
the sale, exchange or retirement of a note provided that, in the case of
any gain representing accrued interest, the conditions described in (a)
above are satisfied.
To satisfy the requirement referred to in (a)(iv) above, the beneficial
owner of such note, or a financial institution holding the note on behalf of
such owner, must provide, in accordance with specified procedures, the U.S.
entity that would otherwise be required to withhold U.S. taxes with a statement
to the effect that the beneficial owner is not a U.S. person. These
requirements will be met if (i) the beneficial owner provides his name and
address, and certifies, under penalties of perjury that he, she or it is not a
"U.S. person" (which certification may be made on an IRS Form W-8BEN or
successor form), or (ii) a financial institution or securities clearing
organization holding the note on behalf of such beneficial owner certifies,
under penalties of perjury, that such statement has been received by it and
furnishes the U.S. entity otherwise required to withhold U.S. taxes with a copy
thereof. The statement requirement referred to in (a)(iv) above may also be
satisfied with other documentary evidence for interest paid after December 31,
2000, with respect to an offshore account or through certain foreign
intermediaries.
If a non-U.S. noteholder cannot satisfy the requirements of the "portfolio
interest" exception described in (a) above, payments of premium, if any, and
interest (including OID) made to a non-U.S. noteholder with respect to a note
will be subject to a 30% U.S. withholding tax unless the beneficial owner of
the note provides the U.S. entity otherwise required to withhold U.S. taxes
with a properly executed (i) IRS Form W-8BEN (or successor form) claiming an
exemption from, or reduction in the rate of, withholding under the benefit of
an applicable tax treaty or (ii) IRS Form W-8ECI (or successor form) stating
that the interest paid on the note is not subject to U.S. withholding tax
because such interest income is effectively connected with the beneficial
owner's conduct of a trade or business in the United States.
If a non-U.S. noteholder is engaged in a trade or business in the United
States and interest on the note is effectively connected with the conduct of
such trade or business, the non-U.S. noteholder, although exempt from the U.S.
withholding tax discussed above, will be subject to U.S. federal income tax on
such interest on a net income basis in the same manner as if it were a U.S.
person. In addition, if such non-U.S. noteholder is a foreign corporation, it
may be subject to a branch profits tax equal to 30% (or lesser rate under an
applicable tax treaty) of its effectively connected earnings and profits for
the taxable year, subject to adjustments. For this purpose, such interest on
the note will be included in such foreign corporation's effectively connected
earnings and profits.
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Any gain realized by a non-U.S. noteholder upon the sale, exchange or
retirement of a note generally will not be subject to U.S. federal income tax
unless (i) such gain is effectively connected with a trade or business
conducted by the non-U.S. noteholder in the United States or (ii) in the case
of gain recognized by a non-U.S. noteholder who is an individual, such
individual is present in the United States for 183 days or more in the taxable
year of such sale, exchange or retirement, and certain other conditions are
met.
Special rules may apply to certain non-U.S. noteholders, such as
"controlled foreign corporations", "passive foreign investment companies" and
"foreign personal holding companies", that are subject to special treatment
under the CODE. Such non-U.S. noteholders should consult their own tax advisors
to determine the U.S. federal, state and local and other tax consequences that
may be relevant to their decision to purchase notes.
Information Reporting and Backup Withholding. In general, information
reporting requirements will apply to certain payment of principal, interest and
premium, if any, paid on the notes and to the proceeds from the sale of a note
paid to U.S. persons, other than certain exempt recipients (such as
corporations). A 31% U.S. backup withholding tax will apply to such payments if
the U.S. person fails to provide a taxpayer identification number or
certification of foreign or other exempt status or fails to report in full
dividend and interest income.
No information reporting or backup withholding will be required with
respect to payments made by the trust to a non-U.S. noteholder if a statement
described in (a)(iv) above under the caption "Non-U.S. Noteholders" has been
received by the U.S. entity otherwise required to withhold U.S. taxes and such
entity does not have actual knowledge that the beneficial owner is a U.S.
person.
In addition, backup withholding and information reporting will not apply
if payments of principal, interest or premium (if any) on a note are paid or
collected by a foreign office of a custodian, nominee or other foreign agent on
behalf of the beneficial owner of such note, or if a foreign office of a broker
(as defined in applicable Treasury regulations) pays the proceeds from the sale
of a note to the owner thereof. If, however, such nominee, custodian, agent or
broker is, for U.S. federal income tax purposes, a U.S. person, a controlled
foreign corporation or a foreign person that derives 50% or more of its gross
income for certain periods from the conduct of a trade or business in the
United States, or after December 31, 2000, if such nominee, custodian, agent or
broker is a foreign partnership, in which one or more U.S. persons, in the
aggregate, own more than 50% of the income or capital interests in the
partnership or if the partnership is engaged in a trade or business in the
United States, such payments will not be subject to backup withholding but will
be subject to information reporting, unless (i) such custodian, nominee, agent
or broker has documentary evidence in its records that the beneficial owner is
not a U.S. person and certain other conditions are met or (ii) the beneficial
owner otherwise establishes an exemption.
Payments of principal, interest and premium (if any) on a note paid to the
beneficial owner of a note by a U.S. office of a custodian, nominee or agent,
or the payment by the U.S. office of a broker of the proceeds from the sale of
a note, will be subject to both backup withholding and information reporting
unless the beneficial owner (i) provides the statement referred to in (a)(iv)
above and the payor does not have actual knowledge that the beneficial owner is
a U.S. person or (ii) otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules will be allowed as
a refund or a credit against such holder's U.S. federal income tax liability
provided the required information is furnished to the IRS.
Possible Alternative Classification of the Notes. If, contrary to the
opinion of Simpson Thacher Bartlett, the IRS successfully asserted that one or
more of the notes did not represent debt for U.S. federal income tax purposes,
the notes might be treated as equity interests in the trust. If so treated, the
trust might be treated as a publicly traded partnership taxable as a
corporation with potentially adverse tax consequences (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
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equity). Alternatively, 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 income", income to non-U.S. 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. See "Tax
Consequences to Certificateholders" below.
TAX CONSEQUENCES TO CERTIFICATEHOLDERS
Treatment of the Trust as a Partnership. As discussed above under the
caption "Trust Treated as Partnership--Tax Characterization of the Trust," the
following discussion assumes that for U.S. federal income tax purposes, (i) the
trust will be treated as a partnership (other than a publicly traded
partnership), (ii) the notes will be treated as debt of this partnership and
(iii) the certificates represent equity interests in such partnership.
Partnership Taxation. As a partnership, the trust will not be subject to
U.S. federal income tax. Rather, each certificateholder will be required
separately to take into account such certificateholder's allocable share of the
trust's income, gains, losses, deductions and credits. The trust's income will
consist primarily of interest and late and other administrative fees earned on
the receivables (including appropriate adjustments for market discount, OID and
bond premium) and any gain realized upon the 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
realized upon the collection or disposition of receivables.
The tax items of a partnership are allocable to the partners in accordance
with the CODE, the relevant Treasury regulations promulgated thereunder and the
partnership agreement (here, the trust agreement and related documents).
However, inasmuch as the trust's payment of the pass-through rate applicable to
the certificates is payable to the certificateholders without regard to the
income of the trust, the trust intends to treat payments of such amounts to
certificateholders as "guaranteed payments" within the meaning of Section
707(c) of the CODE. Under such treatment, payments will be considered ordinary
income to a certificateholder but may not be considered interest income for
U.S. federal income tax purposes.
In the event that such tax treatment is not respected, the trust agreement
provides that the certificateholders will be allocated gross income of the
trust for each calendar month equal to the sum of (i) the amount of interest
that accrues on the certificates for such calendar month, (ii) an amount
equivalent to interest that accrues during such period on amounts previously
due on the certificates but not yet distributed and (iii) any gross income of
the trust attributable to discount on the receivables that corresponds to any
excess of the principal amount of the certificates over their initial issue
price. All remaining income of the trust will be allocated to the seller. All
deductions and losses also will be allocated to the seller.
No assurance can be given that the IRS would not require the trust to
allocate a greater amount of gross or net income to the certificateholders.
Moreover, even under the foregoing method of allocation (and also under the
rules applicable to the tax treatment of guaranteed payments, which is the
trust's primary U.S. federal income tax reporting position), certificateholders
will realize income equal to the entire pass-through rate on the certificates
even though the trust may not have sufficient cash to make current cash
distributions with respect to such income. Thus, cash method certificateholders
will be required effectively to report income from the certificates on an
accrual basis and all certificateholders will be liable for the U.S. federal
income taxes due on their allocable share of the trust's income even if they
have not received any cash distributions from the trust with respect to such
income. In addition, because tax allocations and tax reporting will be done on
a uniform basis for all certificateholders, certificateholders purchasing
certificates at different times and at different prices may be required to
recognize an amount of taxable income that is greater or less than the amount
reported to them by the trust. See "Allocations between Transferors and
Transferees" below.
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A significant portion 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.
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.
Discount and Premium. The seller anticipates that the receivables
transferred to the trust will not have been issued with OID. In such case, the
trust should not have to accrue any 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 U.S. 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. If such a termination occurs, the trust would be considered to
have transferred all of its assets and liabilities to a new trust and then to
have immediately liquidated and distributed the interests in the new trust to
the continuing certificateholders. The trust will not comply with certain
technical requirements that might apply when such a constructive termination
occurs. Consequently, the trust may be subject to certain tax penalties and may
incur additional expenses if it is required to comply with those requirements.
Disposition of Certificates. Generally, subject to a number of specific
exceptions, a certificateholder will recognize capital gain or loss on a sale
or other taxable disposition of certificates in an amount equal to the
difference between the amount realized by the certificateholder on such sale or
disposition and the certificateholder's tax basis in such certificates. A
certificateholder's tax basis in a certificate generally will equal the
certificateholder's cost therefor increased by the certificateholder's
allocable share of trust 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 certificateholder's allocable share of the notes and other liabilities of
the trust. A certificateholder 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
certificateholder's share of unrecognized accrued market discount on the
receivables generally would be treated as ordinary income to the
certificateholder and would give rise to special tax reporting requirements. In
order to avoid this tax treatment and the resulting special tax reporting
requirements related thereto, 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 over the life of the certificates that exceeds the aggregate cash
distributions with respect thereto, such excess generally will give rise to a
capital loss upon the retirement of the certificates. The deductibility of
capital losses is subject to limitations.
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
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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, an investor 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 certificateholder's interest), taxable income
or losses of the trust might be reallocated among the certificateholders. The
trustee 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 (or loss), the purchasing certificateholder will have
a higher (or lower) tax 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, the
trust will not make such an election. As a result, certificateholders might be
allocated a greater or lesser amount of trust income than would be appropriate
based on their own purchase price for certificates.
Administrative Matters. The trustee will be required to keep complete and
accurate books for 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 or cause to be filed 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
trustee will provide or cause to be provided 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, certificateholders
must file tax returns that are consistent with the information return filed by
the trust or be subject to penalties unless the certificateholder 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 taxpayer identification number of
such person, (y) whether such person is a United States person, a tax-exempt
entity or a foreign government, an international organization, or any wholly
owned agency or instrumentality of either of the foregoing and (z) certain
information 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 Securities Exchange Act of
1934 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 seller will be designated as the tax matters partner in the 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
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may be precluded from separately litigating a proposed adjustment to the items
of the trust. An adjustment could result in an audit of a certificateholder's
U.S. federal income tax returns and, consequently, to adjustments of items not
related to the certificateholder's allocable share of the income and losses of
the trust.
Tax Consequences to Non-U.S. Certificateholders. Under the terms of the
trust agreement, the certificates may not be acquired by or for the account of
an individual or entity that is not a U.S. person as defined in Section
7701(a)(30) of the CODE, and any transfer of a certificate to a person that is
not a U.S. person shall be void. Moreover, the trust will withhold on any
amounts allocable or payable to a non-U.S. certificateholder at a rate of 35%
for non-U.S. certificateholders that are taxable as corporations and 39.6% for
all other non-U.S. certificateholders. In determining a certificateholder's
withholding status, the U.S. entity otherwise required to withhold U.S. taxes
may rely on IRS Forms W-8, IRS Form W-9 or a certificateholder's certification
of nonforeign status signed under penalties of perjury.
Backup Withholding. Distributions made on the certificates and proceeds
from the sale of the certificates generally will be subject to the 31% U.S.
backup withholding tax if the certificateholder fails to comply with certain
identification procedures or otherwise fails to establish an exemption.
CERTAIN STATE TAX CONSEQUENCES
The above discussion does not address the tax treatment of the trust, the
notes, the certificates, noteholders or certificateholders under any state tax
laws. You are urged to consult with your own tax advisors regarding the state
tax treatment of the trust as well as any state tax consequences to you,
particularly in the case of financial institutions, of purchasing, holding and
disposing of your notes or certificates.
ERISA CONSIDERATIONS
GENERAL
Before investing in the notes or certificates, fiduciaries of PLANS should
consider, among other matters:
o ERISA's fiduciary standards or similar standards under SIMILAR LAWS,
o whether such investment in the notes or certificates by the PLAN
satisfies the prudence and diversification requirements of ERISA or
applicable standards under SIMILAR LAWS, taking into account the
overall investment policy of the PLAN, the composition of the PLAN'S
portfolio and any limitations on the marketability of the notes and
certificates,
o whether such fiduciaries have authority to make such investment in the
notes or certificates under the applicable PLAN investment policies
and governing instruments and
o rules under ERISA and the CODE or similar standards under SIMILAR
LAWS, that prohibit plan fiduciaries from causing a PLAN to engage in
certain "prohibited transactions."
Under the plan assets regulation issued by the U.S. Department of Labor,
or the DOL, if a PLAN subject to ERISA invests in an "equity interest" of an
entity that is neither a publicly-offered security nor a security issued by an
investment company registered under the Investment Company Act of 1940, the
PLAN'S assets will include both the equity interest and an undivided interest
in each of the entity's underlying assets, unless it is established that the
entity is an operating company or that equity participation in the entity by
benefit plan investors is not significant. An "equity interest" is an interest
in an entity other than an instrument that is treated as indebtedness under
applicable local law and which has no substantial equity features. If the
underlying assets of the trust or the seller were deemed to be "plan assets" of
PLANS under ERISA, this would result, among other things, in (i) the
application of the prudence and other fiduciary responsibility standards of
ERISA to activities engaged in by the seller, the trustee, and others and (ii)
the possibility that certain transactions in
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which the seller, the trustee and others might seek to engage could constitute
"prohibited transactions" under ERISA and the CODE. If a prohibited transaction
occurs for which no exemption is available, the seller, the trustee and any
other fiduciary that has engaged in the prohibited transaction could be
required (i) to restore to the PLAN any profit realized on the transaction and
(ii) to reimburse the PLAN for any losses suffered by the PLAN as a result of
the investment. In addition, each disqualified person (within the meaning of
Section 4975 of the CODE) involved could be subject to an excise tax equal to
15% of the amount involved in the prohibited transaction for each year the
transaction continues and, unless the transaction is corrected within
statutorily required periods, to an additional tax of 100%. PLAN fiduciaries
who decide to invest in the notes or certificates could, under certain
circumstances, be liable for prohibited transactions or other violations as a
result of their investment or as co-fiduciaries for actions taken by or on
behalf of the seller or the trust. With respect to an individual retirement
account, or IRA, that invests in the notes or certificates, the occurrence of a
prohibited transaction involving the individual who established the IRA, or his
or her beneficiaries, would cause the IRA to lose its tax-exempt status.
THE NOTES
Although there can be no assurances, since there is little authority on
the subject, we believe that the notes will not constitute equity interests
under the plan assets regulation because the notes (a) should be treated as
indebtedness under local law and as debt, rather than equity, for tax purposes
(see "Certain Federal Income Tax Consequences--Tax Consequences to Noteholders"
in this prospectus supplement), and (b) should not be deemed to have any
"substantial equity features." Therefore, the receivables and other assets
included as assets of the trust should not be deemed to be "plan assets" of the
investing PLANS. Those conclusions are based, in part, upon the traditional
debt features of the notes, including the reasonable expectation of purchasers
of notes that the notes (which are highly rated by the rating agencies) will be
repaid when due, as well as the absence of conversion rights, warrants and
other typical equity features. However, we cannot assure you that the notes
would be characterized by the DOL or others as indebtedness on the date of
issuance or at any given time thereafter. Accordingly, before purchasing the
notes, a fiduciary or other PLAN investor should itself confirm that the notes
constitute indebtedness, and have no substantial equity features, for purposes
of the plan assets regulation.
Section 406 of ERISA and Section 4975 of the CODE prohibit PLANS subject
to Title I of ERISA or Section 4975 of the CODE from engaging in specified
transactions involving plan assets with persons or entities who are "parties in
interest," within the meaning of ERISA, or "disqualified persons," within the
meaning of Section 4975 of the CODE. The acquisition and/or ownership of the
notes by a PLAN with respect to which the seller, the trustee, the indenture
trustee, the owner of the certificates or others involved with the notes, or
any of their respective affiliates is considered a party in interest or a
disqualified person may constitute or result in a prohibited transaction under
Section 406 of ERISA or Section 4975 of the CODE, unless the notes are acquired
and are held in accordance with an applicable statutory, regulatory, class or
individual prohibited transaction exemption. In this regard, the DOL has issued
prohibited transaction class exemptions, which are called PTCEs, that may apply
to the acquisition and holding of the notes. These class exemptions include,
among others, PTCE 84-14 respecting transactions effected by independent
qualified professional asset managers, PTCE 90-1 respecting insurance company
pooled separate accounts, PTCE 91-38 respecting bank collective investment
funds, PTCE 95-60 respecting insurance company general accounts and PTCE 96-23
respecting transactions effected by in-house asset managers.
SIMILAR LAWS governing the investment and management of the assets of
governmental and non-U.S. plans may contain fiduciary and prohibited
transaction requirements similar to those under ERISA and the CODE discussed
above. Accordingly, fiduciaries of such governmental plans and non-U.S. plans,
in consultation with their advisors, should consider the impact of any
applicable SIMILAR LAWS on investments in the notes and the considerations
described above, if applicable.
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The notes may not be purchased with plan assets of any PLAN if any of the
seller, the servicer, the indenture trustee, the trustee or any of their
respective affiliates
o has investment or administrative discretion with respect to the plan
assets used to effect such purchase,
o has authority or responsibility to give, or regularly gives,
investment advice with respect to such plan assets, for a fee and
pursuant to an agreement or understanding that such advice (1) will
serve as a primary basis for investment decisions with respect to such
plan assets, and (2) will be based on the particular investment needs
of such PLAN or
o is an employer maintaining or contributing to such PLAN.
Any fiduciary proposing to invest in the notes for or on behalf of a PLAN,
directly or indirectly, should consult with counsel for the PLAN and each
fiduciary investing in a note will be deemed to represent that its purchase and
holding of the notes (i) are eligible for exemptive relief under PTCE 84-14,
PTCE 90-1, PTCE 91-38, PTCE 95-60, PTCE 96-23, or, if the PLAN is not subject
to ERISA or Section 4975 of the CODE, does not and will not constitute or
result in a non-exempt prohibited transaction, or otherwise trigger any
penalties or liabilities under, or violate in any way, any other applicable
SIMILAR LAWS, and (ii) will satisfy the applicable fiduciary requirements
imposed under ERISA and any other applicable SIMILAR LAWS.
THE CERTIFICATES
The following is a summary of certain considerations associated with an
investment in the certificates by PLANS.
Section 406 of ERISA and Section 4975 of the CODE prohibit PLANS from
engaging in specified transactions involving plan assets with persons or
entities who are "parties in interest," within the meaning of ERISA, or
"disqualified persons," within the meaning of Section 4975 of the CODE. Because
the certificates will constitute "equity interests" under the plan assets
regulation and there can be no assurance that any exception under that
regulation will apply, it is likely that an investment by PLANS in certificates
will cause the assets of the trust to be "plan assets." The acquisition and/or
ownership of certificates by a PLAN with respect to which the seller, the
trustee, the indenture trustee, or others involved with the certificates, or
any of their respective affiliates is considered a party in interest or a
disqualified person may constitute or result in a direct or indirect prohibited
transaction under Section 406 of ERISA and/or Section 4975 of the CODE, unless
the certificates are acquired and are held in accordance with an applicable
statutory, regulatory, class or individual prohibited transaction exemption.
The DOL has granted to an affiliate of Chase Securities Inc. the EXEMPTION
which exempts from certain of the prohibited transaction rules and the related
excise tax provisions of Section 4975 of the CODE with respect to the initial
purchase, the holding and the subsequent resale by PLANS of securities,
including certificates, issued by certain qualifying issuers holding investment
pools that consist of only certain receivables, loans, and other obligations,
and the related servicing, operation and management of the issuers, provided
the conditions and requirements of the EXEMPTION are satisfied. The receivables
covered by the EXEMPTION include retail installment sales contracts, purchase
money notes and other notes secured by automobiles and light-duty trucks such
as the receivables to be held by the trust. Among the general conditions that
must be satisfied for the EXEMPTION to apply are the following:
o the acquisition of the securities by a PLAN is on terms, including the
price for the securities, that are at least as favorable to the PLAN
as they would be in an arm's-length transaction with an unrelated
party,
o the rights and interests evidenced by the securities acquired by the
PLAN are not subordinated to the rights and interests evidenced by
other securities of the issuer unless the investment pool contains
certain types of collateral, such as consumer loans fully secured by
motor vehicles,
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o the securities acquired by the PLAN have received a rating at the time
of such acquisition that is in one of the three highest generic rating
categories (four, in a transaction in which the investment pool
contains certain types of collateral, such as consumer loans fully
secured by motor vehicles) from either Moody's Investors Service,
Inc., Standard & Poor's, a division of The McGraw-Hill Companies, Inc.
or Fitch, Inc.,
o the trustee must not be an affiliate of any other member of the
RESTRICTED GROUP,
o the sum of all payments made to and retained by the underwriters in
connection with the distribution of the securities represents not more
than reasonable compensation for underwriting the securities,
o the sum of all payments made to and retained by the seller pursuant to
the assignment of the loans to the issuer represents not more than the
fair market value of such loans,
o the sum of all payments made to and retained by the servicer and any
other servicer represents not more than reasonable compensation for
such person's services under any servicing agreement,
o the PLAN investing in the securities 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, as amended and
o for certain types of issuers, the documents establishing the issuer
and governing the transaction must contain certain provisions intended
to protect the assets of the issuer from creditors of the sponsor.
The EXEMPTION defines the term "reasonable compensation" by reference to
DOL Regulation Section 2550.408c-2, which states that whether compensation is
reasonable depends upon the particular facts and circumstances of each case.
Each fiduciary of a PLAN considering the purchase of a certificate should
satisfy itself that all amounts paid to or retained by the underwriter and the
servicer represent reasonable compensation for purposes of the EXEMPTION if the
EXEMPTION is being relied upon.
Furthermore, in order for its securities to qualify under the EXEMPTION,
an issuer must meet certain requirements, including the following:
o the corpus of the issuer must consist solely of assets of the type
that have been included in other investment pools,
o securities in such other investment pools must have been rated in one
of the three highest rating categories (four, in a transaction in
which the investment pool contains certain types of collateral, such
as consumer loans fully secured by motor vehicles) of either Moody's
Investors Service, Inc., Standard & Poor's, a division of The
McGraw-Hill Companies, Inc. or Fitch, Inc. for at least one year prior
to the PLAN's acquisition of the securities and
o securities evidencing interests in such other investment pools must
have been purchased by investors other than PLANS for at least one
year prior to any PLAN'S acquisition of securities.
The EXEMPTION generally does not apply to PLANS sponsored by a member of
the RESTRICTED GROUP. Moreover, the EXEMPTION provides certain PLAN fiduciaries
relief from certain self-dealing/conflict of interest prohibited transactions
that may arise when the fiduciary causes a PLAN to acquire securities of an
issuer holding obligations on which the fiduciary or its affiliate is obligor
only if, among other requirements:
o in the case of an acquisition in connection with the initial issuance
of securities, at least 50% of each class of securities in which PLANS
have invested is acquired by persons independent of the RESTRICTED
GROUP and at least 50% of the aggregate interest in the issuer is
acquired by persons independent of the RESTRICTED GROUP,
o such fiduciary or its affiliate is an obligor with respect to 5% or
less of the fair market value of the obligations contained in the
investment pool,
S-45
o the PLAN'S investment in securities of any class does not exceed 25%
of all of the securities of the class outstanding at the time of the
acquisition and
o immediately after the acquisition, no more than 25% of the assets of
any PLAN with respect to which such person is a fiduciary is invested
in securities representing an interest in one or more issuers
containing assets sold or serviced by the same entity.
The rating of a security may change. If the rating of a security declines
below the lowest permitted rating, the security will no longer be eligible for
exemptive relief under the EXEMPTION and consequently may not be purchased by
or sold to a PLAN (although a PLAN that had purchased the security when it had
a permitted rating would not be required by the EXEMPTION to dispose of it).
The EXEMPTION will apply to the acquisition and the holding of the
certificates only if all of the conditions to application of the EXEMPTION are
satisfied. Before purchasing a certificate, a PLAN fiduciary should make its
own determination as to the availability of the relief provided by the
EXEMPTION. In particular, a fiduciary of any PLAN considering an investment in
the certificates must ascertain that the PLAN 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, as amended, and that, at the time
of the acquisition, the certificates are rated BBB- or higher by Moody's
Investors Service, Inc., Standard & Poor's, a division of The McGraw-Hill
Companies, Inc. or Fitch, Inc.
TAXATION OF TAX-EXEMPT INVESTORS
A PLAN that is exempt from the U.S. federal income tax under Section
501(a) of the CODE is nevertheless subject to federal income taxation to the
extent that its income is "unrelated business taxable income," or UBTI, within
the meaning of Section 512 of the CODE. All or a portion of the income in
respect of certificates and other equity interests of a trust that has issued
debt obligations is "debt-financed income," within the meaning of Section 514
of the CODE, and is therefore UBTI. Any potential investor that is exempt from
the U.S. federal income tax under Section 501(a) of the CODE should consult
counsel concerning the taxation of an investment in the certificates.
Each PLAN fiduciary should consult with its legal advisor concerning the
considerations discussed above before making an investment in the certificates,
including the applicability of a PTCE or the EXEMPTION. As indicated above,
SIMILAR LAWS governing the investment and management of the assets of
governmental, non-U.S., and other plans may contain fiduciary and prohibited
transaction requirements similar to those under ERISA and/or the
CODE. Accordingly, fiduciaries of such PLANS, in consultation with their
advisors, should consider the impact of applicable SIMILAR LAWS on an
investment in the certificates and the considerations discussed above, as
applicable. In addition, the general fiduciary requirements which apply to
investments in the notes apply as well to investments in the certificates, and
each purchaser and holder of certificates will be deemed to have represented
and warranted that its purchase and holding of a certificate or any interest
therein satisfies such requirements.
For further information, refer to the section of the prospectus entitled
"ERISA Considerations."
S-46
UNDERWRITING
NOTE UNDERWRITING AGREEMENT
Subject to the terms and conditions set forth in an underwriting agreement
with respect to the notes, the seller has agreed to sell to the underwriters
named below, and each of the those underwriters has severally agreed to
purchase, the principal amount of notes of each class set forth opposite its
name below:
PRINCIPAL AMOUNT PRINCIPAL AMOUNT PRINCIPAL AMOUNT PRINCIPAL AMOUNT
NOTE UNDERWRITERS OF CLASS A-1 NOTES OF CLASS A-2 NOTES OF CLASS A-3 NOTES OF CLASS A-4 NOTES
- ------------------------------------------ -------------------- -------------------- -------------------- -------------------
Chase Securities Inc. .................... $ $ $ $
--------------- --------------- --------------- ---------------
J.P. Morgan Securities Inc. ..............
Banc of America Securities LLC ...........
Bear, Stearns & Co. Inc. .................
The Williams Capital Group, L.P. .........
Total ................................... $259,000,000.00 $292,000,000.00 $397,000,000.00 $294,000,000.00
=============== =============== =============== ===============
In the underwriting agreement with respect to the notes, the several
underwriters have agreed, subject to the terms and conditions therein, to
purchase all the notes if any notes are purchased.
The seller has been advised by the underwriters that they propose
initially to offer the notes to the public at the prices set forth on the cover
page of this prospectus supplement. After the initial public offering, such
public offering prices may change.
The underwriting discounts and commissions, the selling concessions that
the underwriters of the notes may allow to certain dealers, and the discounts
that such dealers may reallow to certain other dealers, expressed as a
percentage of the aggregate initial principal amount of each class of notes
shall be as follows:
UNDERWRITING DISCOUNT SELLING CONCESSIONS REALLOWANCE
AND COMMISSIONS NOT TO EXCEED NOT TO EXCEED
----------------------- --------------------- --------------
Class A-1 Notes. ......... % % %
Class A-2 Notes ..........
Class A-3 Notes. .........
Class A-4 Notes ..........
CERTIFICATE UNDERWRITING AGREEMENT
Subject to the terms and conditions set forth in an underwriting agreement
with respect to the certificates, the seller has agreed to sell to the
underwriters named below, and each of those underwriters has severally agreed
to purchase, the principal amount of the certificates set forth opposite its
name below:
CERTIFICATE UNDERWRITERS PRINCIPAL AMOUNT OF CERTIFICATES
------------------------ --------------------------------
Chase Securities Inc. ................ $
J.P. Morgan Securities Inc. .......... $
--------------
Total .............................. $38,466,538.08
In the underwriting agreement with respect to the certificates, the
underwriters of the certificates have agreed, subject to the terms and
conditions therein, to purchase all of the certificates if any certificates are
purchased.
The seller has been advised by the underwriters of the certificates that
they propose initially to offer the certificates to the public at the price set
forth on the cover page of this prospectus supplement. After the initial public
offering, such public offering price may change.
S-47
The underwriting discounts and commissions, the selling concessions that
the underwriters of the certificates may allow to certain dealers, and the
discounts that such dealers may reallow to certain other dealers, expressed as
a percentage of the initial certificate balance shall be as follows:
UNDERWRITING DISCOUNT SELLING CONCESSIONS REALLOWANCE
AND COMMISSIONS NOT TO EXCEED NOT TO EXCEED
----------------------- --------------------- --------------
Certificates ......... % % %
PROCEEDS TO SELLER
The seller will receive the proceeds listed below, after payment of the
underwriting discounts and commissions listed below and estimated expenses of
$900,000:
PROCEEDS TO SELLER AS % UNDERWRITING
OF THE PRINCIPAL AMOUNT DISCOUNTS
PROCEEDS TO SELLER OF THE SECURITIES AND COMMISSIONS
-------------------- ------------------------- ----------------
Class A-1 Notes ......... $ % $
Class A-2 Notes ......... $ % $
Class A-3 Notes ......... $ % $
Class A-4 Notes ......... $ % $
Certificates ............ $ % $
GENERAL
Until the distribution of the notes is completed, rules of the SEC may
limit the ability of the underwriters and certain selling group members to bid
for and purchase the securities. As an exception to these rules, the
underwriters are permitted to engage in certain transactions that stabilize the
price of the securities. Such transactions consist of bids or purchases for the
purpose of pegging, fixing or maintaining the price of the securities.
If the underwriters create a short position in the securities in
connection with this offering (i.e., they sell more securities than the
aggregate initial principal amount set forth on the cover page of this
prospectus supplement), the underwriters may reduce that short position by
purchasing securities in the open market.
The underwriters may also impose a penalty bid on certain underwriters and
selling group members. This means that if the underwriters purchase securities
in the open market to reduce the underwriters' short position or to stabilize
the price of such securities, they may reclaim the amount of the selling
concession from any underwriter or selling group member who sold those
securities as part of the offering.
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. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
Neither the seller nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that any of the
transactions described above might have on the price of the securities. In
addition, neither the seller nor any of the underwriters makes any
representation that the underwriters will engage in such transactions or that
such transactions, if commenced, will not be discontinued without notice.
The notes and the certificates are new issues of securities and there
currently is no secondary market for the notes or the certificates. The
underwriters for the securities expect to make a market in the securities but
will not be obligated to do so. We cannot assure you that a secondary market
for the securities will develop. If a secondary market for the securities does
develop, it might end at any time or it might not be sufficiently liquid to
enable you to resell any of your notes or certificates.
S-48
The indenture trustee may, from time to time, invest the funds in the
collection account and the reserve account in investments acquired from or
issued by the underwriters.
In the ordinary course of business, the underwriters and their affiliates
have engaged and may engage in investment banking and commercial banking
transactions with the seller and its affiliates.
The seller has agreed to indemnify the underwriters against certain
liabilities, including civil liabilities under the Securities Act of 1933, as
amended, or to contribute to payments which the underwriters may be required to
make in respect thereof.
The underwriters have agreed to pay certain expenses of the seller in
connection with the offering.
The closings of the sale of each class of the notes and the certificates
are conditioned on the closing of the sale of each other class of notes and
those certificates.
This prospectus supplement and the attached prospectus may be used by
Chase Securities Inc. in connection with offers and sales related to
market-making transactions in the securities. Chase Securities Inc. may act as
principal or agent in such transactions. Such sales will be made at prices
related to prevailing market prices at the time of sale. Chase Securities Inc.
has no obligation to make a market in the securities and any such market-making
may be discontinued at any time without notice, in its sole discretion. Chase
Securities Inc. is among the underwriters participating in the initial
distribution of the securities.
Upon receipt of a request by an investor who has received an electronic
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,
the seller or such underwriter will promptly deliver, without charge, a paper
copy of this prospectus supplement and the prospectus.
LEGAL MATTERS
Certain legal matters relating to the issuance of the securities will be
passed upon for the seller by Simpson Thacher & Bartlett, New York, New York
and certain other legal matters will be passed upon for the seller by Jeff
Levine, Esq., a Senior Vice President and Assistant General Counsel of Chase
and for the Underwriters by Brown & Wood LLP, New York, New York. From time to
time Simpson Thacher & Bartlett and Brown & Wood LLP provide legal services to
the seller and its affiliates.
S-49
GLOSSARY OF TERMS
Additional defined terms used in this prospectus supplement are defined in
the prospectus.
ABS means the Absolute Prepayment Model which we use to measure
prepayments on receivables and which we describe under "Weighted Average Life
of the Securities".
ABS TABLES means the tables captioned "Percent of Initial Note Principal
Amount at Various ABS Percentages" and "Percent of Initial Certificate Balance
at Various ABS Percentages" included under "Weighted Average Life of the
Securities".
AGGREGATE NET LOSSES means, for any payment date, the amount equal to the
aggregate principal balance of all receivables that were designated "defaulted
receivables" during the related COLLECTION PERIOD minus the LIQUIDATION
PROCEEDS allocable to principal collected during such COLLECTION PERIOD with
respect to any receivables previously designated as "defaulted receivables."
AVAILABLE INTEREST means, for any payment date, the sum of the portion of
collections on the receivables received during the related COLLECTION PERIOD
allocated to interest and that portion of the repurchase amounts received with
respect to the receivables repurchased by the seller or purchased by the
servicer during the related COLLECTION PERIOD that would have been treated as
AVAILABLE INTEREST if the obligor thereof had prepaid such receivables in full
on the date as of which such receivables were repurchased or purchased.
AVAILABLE PRINCIPAL means, for any payment date, the sum of the portion of
collections on the receivables during the related COLLECTION PERIOD allocated
to the principal balance of the receivables and that portion of the repurchase
amounts received with respect to the receivables repurchased by the seller or
purchased by the servicer during the related COLLECTION PERIOD that would have
been treated as AVAILABLE PRINCIPAL if the obligor thereof had prepaid such
receivables in full on the date as of which such receivables were repurchased
or purchased.
AVERAGE DELINQUENCY PERCENTAGE means, for any payment date, the average of
the DELINQUENCY PERCENTAGES for such payment date and the preceding two payment
dates.
AVERAGE NET LOSS RATIO means, for any payment date, the average of the NET
LOSS RATIOS for such payment date and the preceding two payment dates.
CERTIFICATE BALANCE means $38,466,538.08 as of the closing date and,
thereafter, will be an amount equal to the initial CERTIFICATE BALANCE, reduced
by all amounts allocable to principal previously distributed to
certificateholders. The CERTIFICATE BALANCE shall also be reduced on any
payment date by the excess, if any, of (i) the sum of the CERTIFICATE BALANCE
and the outstanding principal amount of the notes (in each case after giving
effect to payments and distributions on that payment date), over (ii) the
aggregate principal balance of the receivables as of the close of business on
the last day of the preceding COLLECTION PERIOD. Thereafter, the CERTIFICATE
BALANCE will be increased on any payment date to the extent that any portion of
the TOTAL DISTRIBUTION AMOUNT on such payment date is available to make
distributions of principal shortfalls carried over from prior payment dates in
respect of the certificates.
CHASE AUTO FINANCE means the automotive financing and automotive loan
servicing business of The Chase Manhattan Bank, its predecessors (other than
Chemical Bank prior to its merger with The Chase Manhattan Bank, N.A.) and
affiliates.
CODE means the Internal Revenue Code of 1986, as amended.
COLLECTION PERIOD means, with respect to the first payment date, the
period from and including the cutoff date to and including December 31, 2000
and, with respect to each subsequent payment date, the calendar month preceding
the calendar month in which such payment date occurs.
DELINQUENCY PERCENTAGE means, for any payment date, the sum of the
outstanding principal balances of all receivables which are 60 days or more
delinquent (including receivables, which are not designated as "defaulted
receivables," relating to financed vehicles that have been repossessed), as of
the close of business on the last day of the COLLECTION PERIOD immediately
preceding such payment date, determined in accordance with the servicer's
normal practices, such sum expressed as a percentage of the aggregate principal
balance of the receivables as of the close of business on the last day of such
COLLECTION PERIOD.
S-50
EXEMPTION means the individual administrative exemption granted by the DOL
to an affiliate of Chase Securities Inc. (Prohibited Transaction Exemption
90-33, 55 Fed. Reg. 2351 (1990)), as amended.
FOREIGN INVESTOR means any person other than (i) a citizen or resident of
the United States, (ii) a corporation or partnership created or organized in or
under the laws of the United States or any political subdivision thereof, (iii)
an estate the income of which is subject to United States federal income
taxation regardless of its source or (iv) a trust (a) that is subject to the
supervision of a court within the United States and the control of one or more
United States persons as described in Section 7701(a)(30) of the CODE or (b)
that has a valid election in effect under applicable U.S. Treasury regulations
to be treated as a United States person.
LIQUIDATION PROCEEDS means with respect to any receivable, (i) insurance
proceeds, (ii) the monies collected during a COLLECTION PERIOD from whatever
source on a defaulted receivable and (iii) proceeds of a financed vehicle sold
after repossession, in each case, net of any liquidation expenses and payments
required by law to be remitted to the obligor.
NET LOSS RATIO means, for any payment date, an amount expressed as a
percentage, equal to (i) the AGGREGATE NET LOSSES for such payment date,
divided by (ii) the average of the aggregate principal balance of the
receivables on the first day of such COLLECTION PERIOD and the aggregate
balance of the receivables on the last day of such COLLECTION PERIOD.
PLANS means employee benefit plans that are subject to ERISA, plans,
individual retirement accounts and other arrangements that are subject to
Section 4975 of the CODE, or provisions under SIMILAR LAWS, and entities whose
underlying assets are considered to include "plan assets" of such plans,
accounts and arrangements.
PRINCIPAL DISTRIBUTION AMOUNT means, for any payment date, the sum of the
following amounts, without duplication, for such payment date: (i) AVAILABLE
PRINCIPAL and (ii) the aggregate principal balance (net of liquidation proceeds
received during the related COLLECTION PERIOD and applied to principal) of all
receivables designated as "defaulted receivables" in that COLLECTION PERIOD.
RESTRICTED GROUP means, for purposes of the EXEMPTION, the underwriter,
the trustee, the seller, the servicer, any insurer with respect to the loans,
and any obligor with respect to loans included in the investment pool
constituting more than 5% of the aggregate unamortized principal balance of the
assets in the investment pool and affiliates of any of those parties.
SIMILAR LAWS means applicable federal, state, local, non-U.S. or other
laws or regulations that contain a provision or provisions that are similar to
the provisions of Title I of ERISA or Section 4975 of the CODE.
SPECIFIED RESERVE ACCOUNT BALANCE means, on any payment date, 2.25% of the
aggregate principal balance of the receivables as of the last day of the
COLLECTION PERIOD preceding the COLLECTION PERIOD in which such payment date
occurs, but in any event will not be less than the lesser of (i) $9,603,499.04
(0.75% of the aggregate principal balance of the receivables as of the cutoff
date) and (ii) the aggregate principal balance of the receivables; provided,
that the SPECIFIED RESERVE ACCOUNT BALANCE will be calculated using a
percentage of 4.50% on any payment date (beginning with the March 2001 payment
date) for which the AVERAGE NET LOSS RATIO exceeds 1.75% or the AVERAGE
DELINQUENCY PERCENTAGE exceeds 1.75%.
TOTAL DISTRIBUTION AMOUNT means, for any payment date, the sum of
AVAILABLE INTEREST and AVAILABLE PRINCIPAL for that payment date. The TOTAL
DISTRIBUTION AMOUNT for any payment date will exclude all payments and proceeds
(including any liquidation proceeds and any amounts received from dealers with
respect to receivables) of (i) any receivables repurchased by the seller or
purchased by the servicer, the repurchase amount of which has been included in
the TOTAL DISTRIBUTION AMOUNT for a prior payment date and (ii) investment
earnings and any late fees.
S-51
ANNEX A
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Chase
Manhattan Auto Trust 2000-A Class A-1 % Asset Backed Notes, Class A-2 %
Asset Backed Notes, Class A-3 % Asset Backed Notes and Class A-4 % Asset
Backed Notes and % Asset Backed Certificates to be issued will be available
only in book-entry form. Investors may hold global notes through any of DTC,
Clearstream or Euroclear or hold global certificates through DTC. 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 notes through
Clearstream 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 Clearstream or Euroclear and DTC
participants holding global notes will be effected on a delivery-against-payment
basis through the respective depositaries of Clearstream and Euroclear (in such
capacity) and as DTC participants.
Non-U.S. holders 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 corporation 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 or 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, Clearstream 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 practice applicable to U.S. corporate debt obligations. Investor
securities custody accounts will be credited with the holdings against payment
in same-day funds on the settlement date.
Investors electing to hold their global notes through Clearstream 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 payment in
same-day funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC participants. Secondary market trading between DTC
participants will be settled using the procedures applicable to U.S. corporate
debt obligations in same-day funds.
Trading between Clearstream Customers and/or Euroclear
Participants. Secondary market trading between Clearstream customers or
Euroclear participants will be settled using the procedures applicable to
conventional eurobonds in same-day funds.
Trading between DTC seller and Clearstream or Euroclear purchaser. When
global notes are to be transferred from the account of a DTC participant to the
account of a Clearstream customer or a
A-1
Euroclear participant, the purchaser will send instructions to Clearstream or
Euroclear, through a Clearstream customer or Euroclear participant, at least
one business day prior to settlement. Clearstream or Euroclear will instruct
the respective depositary to receive the global notes against payment. Payment
will include interest accrued on the global notes from and including the last
coupon payment date to and excluding the settlement date. Payment will then be
made by the respective depositary to the DTC participant's account against
delivery of the global notes. After settlement has been completed, the global
notes will be credited to the respective clearing system and by the clearing
system, in accordance with its usual procedures, to the Clearstream customer's
or Euroclear participant's account. The global notes credit will appear the
next day (European time) and the cash debit will be backed-valued to, and the
interest on the global notes will accrue from, the value date (which would be
the preceding day when settlement occurred in New York). If settlement is not
completed on the intended value date (i.e., the trade fails), the Clearstream
or Euroclear cash debit will be valued instead as of the actual settlement
date.
Clearstream customers and Euroclear participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most direct means of doing so is to preposition
funds for settlement, either from cash on hand or existing lines of credit, as
they would for any settlement occurring within Clearstream or Euroclear. Under
this approach, they may take on credit exposure to Clearstream or Euroclear
until the global notes are credited to their accounts one day later.
As an alternative, if Clearstream or Euroclear has extended a line of
credit to them, Clearstream customers or Euroclear participants can elect not
to preposition funds and allow that credit line to be drawn upon the finance
settlement. Under this procedure, Clearstream customers or Euroclear
participants purchasing global notes would incur overdraft charges for one day,
assuming they cleared the overdraft when the global notes were credited to
their accounts. However, interest on the global notes would accrue from the
value date. Therefore, in many cases the investment income on the global notes
earned during the one-day period may substantially reduce or offset the amount
of such overdraft charges, although this result will depend on each Clearstream
customer's or Euroclear participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
participants can employ their usual procedures for sending global notes to the
respective depositary for the benefit of Clearstream customers 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 Clearstream or Euroclear seller and DTC purchaser. Due to
time zone differences in their favor, Clearstream customers and Euroclear
participants may employ their customary procedures for transactions in which
global notes are to be transferred by the respective clearing system, through
the respective depositary, to a DTC participant. The seller will send
instructions to Clearstream or Euroclear, through a Clearstream customers or
Euroclear participant, at least one business day prior to settlement. In these
cases, Clearstream or Euroclear will instruct the respective depositary, as
appropriate, to deliver the bonds to the DTC participant's account against
payment. Payment will include interest accrued on the global notes from and
including the last coupon payment date to and excluding the settlement date.
The payment will then be reflected in the account of the Clearstream customer
or Euroclear participant the following day, and receipt of the cash proceeds in
the Clearstream customer'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 Clearstream customer or Euroclear
participant have a line of credit with its respective clearing system and elect
to be in debit in anticipation of receipt of the sale proceeds in its account,
the back-valuation will extinguish any overdraft charges incurred over that
one-day period. If settlement is not completed on the intended value date
(i.e., the trade fails), receipt of the cash proceeds in the Clearstream
customer's or Euroclear participant's account would instead be valued as of the
actual settlement date.
A-2
Finally, day traders that use Clearstream or Euroclear and that purchase
global notes from DTC participants for delivery to Clearstream customers 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:
o borrowing through Clearstream or Euroclear for one day (until the
purchase side of the day trade is reflected in their Clearstream
or Euroclear accounts) in accordance with the clearing system's
custom procedures;
o borrowing the global notes in the U.S. from a DTC participant no
later than one day prior to settlement, which would give the
global notes sufficient time to be reflected in their Clearstream
or Euroclear account in order to settle the sale side of the
trade; or
o 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 Clearstream customer or Euroclear participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
Global Notes. A beneficial owner of global notes holding notes securities
through Clearstream 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:
o 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
o such beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate.
o Exemption for non-U.S. Persons (Form W-8). Beneficial owners of
global notes that are non-U.S. Persons can currently obtain a
complete exemption from the withholding tax by filing a signed
Form W-8BEN (Certificate of Foreign Status). If the information
shown on Form W-8BEN changes, a new Form W-8BEN must be filed
within 30 days of such change.
o Exemption for non-U.S. Persons with effectively connected income
(Form W-8ECI). A non-U.S. Person, including a non-U.S.
corporation or bank with a U.S. branch, for which the interest
income is effectively connected with its conduct of a trade or
business in the United States, can currently obtain an exemption
from the withholding tax by filing Form W-8ECI (Exemption from
Withholding of Tax on Income Effectively Connected with the
Conduct of a Trade or Business in the United States).
o Exemption or reduced rate for non-U.S. Persons resident in treaty
countries (Form W-8BEN). Non-U.S. Persons that are securities
owners 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 W-8BEN (Ownership,
Exemption or Reduced Rate Certificate). Form W-8BEN may be filed
by the securities owner or his or her agent.
o 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).
o U.S. Federal Income Tax Reporting Procedure. The beneficial owner
of a global note or, in the case of a Form W-8BEN or a W-8ECI
filer, his or her agent, files by submitting the appropriate form
to the person through whom it holds (the clearing agency, in the
case of persons holding directly on the books of the clearing
agency). Form W-8BEN is effective for three calendar years and
Form W-8ECI is effective for one calendar year.
A-3
The term U.S. PERSON means:
o a citizen or resident of the United States,
o a corporation or partnership created or organized in the United States
or under the laws of the United States or of any state,
o an estate the income of which is subject to United States federal
income taxation regardless of its source, or
o 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
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 note.
Investors are advised to consult their own tax advisors for specific tax advice
concerning their holding and disposing of the global notes.
A-4
CHASE MANHATTAN AUTO TRUSTS
ASSET BACKED NOTES
ASSET BACKED CERTIFICATES
AUTOMOBILE LOAN PASS-THROUGH CERTIFICATES
CHASE MANHATTAN BANK USA, NATIONAL ASSOCIATION
Seller and Servicer
- --------------------------------------------------------------------------------
BEFORE YOU PURCHASE ANY OF THESE SECURITIES, BE SURE TO READ THE RISK FACTORS
BEGINNING ON PAGE 9 OF THIS PROSPECTUS AND THE RISK FACTORS SET FORTH IN THE
RELATED PROSPECTUS SUPPLEMENT.
A security is not a deposit and neither the securities nor the underlying motor
vehicle retail installment sales contracts and loans are insured or guaranteed
by the FDIC or any other governmental authority.
The notes and the certificates will represent obligations of or interests in
the trust only and will not represent obligations of or interests in Chase
Manhattan Bank USA, National Association, or any of its affiliates.
- --------------------------------------------------------------------------------
EACH TRUST--
o will issue asset-backed notes and/or certificates or automobile loan
pass-through certificates in one or more classes, rated in one of the four
highest rating categories by at least one nationally recognized statistical
rating organization;
o will own--
-- a portfolio of retail installment sales contracts and purchase money
notes and other notes secured by new or used automobiles or light-duty
trucks;
-- collections on those contracts and notes;
-- security interests in the vehicles financed by those contracts and
notes; and
-- funds in the accounts of the trust; and
o may have the benefit of some form of credit or payment enhancement.
The main sources of funds for making payments on a trust's securities will be
collections on its installment sales contracts and notes and any enhancement
that the trust may have.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF
THIS PROSPECTUS OR ANY RELATED PROSPECTUS SUPPLEMENT IS ACCURATE OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is December 5, 2000
[THIS PAGE INTENTIONALLY LEFT BLANK]
TABLE OF CONTENTS
READING THIS PROSPECTUS AND THE ACCOMPANYING
PROSPECTUS SUPPLEMENT ............................... 3
WHERE YOU CAN FIND ADDITIONAL INFORMATION ............... 3
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE ........................................... 3
SUMMARY ................................................. 5
RISK FACTORS ............................................ 9
Interests of other persons in the financed
vehicles could reduce the funds
available to make payments on your
securities. .................................... 9
Insolvency of Chase USA could result in
accelerated, delayed or reduced
payments to you. ............................... 9
Only the assets of the trust are available to
pay your securities. ........................... 10
Delays in collecting payments could occur
if Chase USA ceases to be the
servicer. ...................................... 10
Subordination may cause some classes of
securities to bear additional credit risk 11
Prepayments on the receivables may
adversely affect the average life of and
rate of return on your securities. ............. 11
You may suffer losses on your securities
because the servicer will hold
collections and commingle them with
its own funds. ................................. 12
Additional receivables may have different
characteristics than the initial pool of
receivables. ................................... 12
You may experience a prepayment of your
securities as a result of pre-funding. ......... 12
You may suffer losses because you have
limited control over the actions of the
trust. ......................................... 12
THE TRUSTS .............................................. 13
THE RECEIVABLES POOLS ................................... 14
General ........................................... 14
Delinquency and Loan Loss Information ............. 16
Origination and Servicing of Motor Vehicle
Loans .......................................... 17
Underwriting of Motor Vehicle Loans ............... 18
Insurance and Collection Procedures ............... 20
WEIGHTED AVERAGE LIFE OF THE SECURITIES ................. 21
POOL FACTORS AND TRADING INFORMATION .................... 23
USE OF PROCEEDS ......................................... 24
CHASE USA ............................................... 24
DESCRIPTION OF THE NOTES ................................ 25
General ........................................... 25
Principal and Interest on the Notes ............... 25
The Indenture ..................................... 26
Certain Covenants ................................. 29
The Indenture Trustee ............................. 30
DESCRIPTION OF THE CERTIFICATES ......................... 31
General ........................................... 31
Distributions of Principal and Interest ........... 31
The Trustee ....................................... 32
CERTAIN INFORMATION REGARDING THE SECURITIES ............ 32
Fixed Rate Securities ............................. 32
Floating Rate Securities .......................... 32
Indexed Securities ................................ 33
Book-Entry Registration ........................... 34
Definitive Securities ............................. 37
List of Securityholders ........................... 38
Reports to Securityholders ........................ 38
DESCRIPTION OF THE TRANSFER AND SERVICING
AGREEMENTS ........................................ 40
Sale and Assignment of Receivables ................ 40
Accounts .......................................... 42
Servicing Procedures .............................. 44
Collections ....................................... 44
Servicing Compensation and Payment of
Expenses ....................................... 45
Advances .......................................... 45
Distributions ..................................... 46
Credit and Cash Flow Enhancement .................. 46
Net Deposits ...................................... 47
Statements to Trustees and Trust .................. 48
Evidence as to Compliance ......................... 48
Certain Matters Regarding the Servicer ............ 48
Events of Servicing Termination ................... 50
Rights Upon Event of Servicing
Termination .................................... 50
Waiver of Past Defaults ........................... 51
Amendment ......................................... 51
Payment of Notes .................................. 52
Termination ....................................... 52
Administration Agreement .......................... 53
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES ................ 53
General ........................................... 53
Security Interests in the Financed Vehicles 54
Enforcement of Security Interests in
Vehicles ....................................... 55
Other Matters ..................................... 56
ERISA CONSIDERATIONS .................................... 57
PLAN OF DISTRIBUTION .................................... 58
RATINGS ................................................. 59
LEGAL MATTERS ........................................... 59
INDEX OF PRINCIPAL TERMS ................................ 60
2
READING THIS PROSPECTUS AND THE ACCOMPANYING
PROSPECTUS SUPPLEMENT
We provide information on your securities in two separate documents that
offer varying levels of detail:
o this prospectus provides general information, some of which may not
apply to a particular series of securities, including your securities,
and
o the accompanying prospectus supplement will provide a summary of the
specific terms of your securities.
If the terms of the securities described in this prospectus vary with the
accompanying prospectus supplement, you should rely on the information in the
prospectus supplement.
We include cross-references to sections in these documents where you can
find further related discussions. Refer to the table of contents in the front
of each document to locate the referenced sections.
You will find an index of defined terms used in this prospectus on page
60.
You should rely only on the information contained in this prospectus and
the accompanying prospectus supplement, including any information incorporated
by reference. We have not authorized anyone to provide you with different
information. The information in this prospectus or the accompanying prospectus
supplement is only accurate as of the dates on their respective covers.
In this prospectus, the terms "we," "us" and "our" refer to Chase
Manhattan Bank USA, National Association.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
Chase Manhattan Bank USA, National Association, has filed a registration
statement with the Securities and Exchange Commission ("SEC") under the
Securities Act of 1933, as amended. This prospectus is part of the registration
statement but the registration statement includes additional information.
You may inspect and copy the registration statement at:
o the public reference facilities maintained by the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549 (telephone 1-800-732-0330),
o the SEC's regional office at Citicorp Center, 500 West Madison Street,
14th Floor, Chicago Illinois 60661, and
o the SEC's regional office at Seven World Trade Center, New York, New
York 10048.
Also, the SEC maintains a Web site at http://www.sec.gov containing reports,
proxy and information statements and other information regarding registrants
that file electronically with the SEC.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" information we file with
it, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus. Information that we file later with the SEC will
automatically update the information in this prospectus. In all cases, you
should rely on the later information over different information included in
this prospectus or the related prospectus supplement. We incorporate by
reference any future annual, monthly or special SEC reports and proxy materials
filed by or on behalf of a trust until we terminate our offering of the
securities by that trust.
3
COPIES OF THE DOCUMENTS
You may receive a free copy of any or all of the documents incorporated by
reference in this prospectus or incorporated by reference into the accompanying
prospectus supplement if:
o you received this prospectus and
o you request such copies from our affiliate, The Chase Manhattan Bank,
Attention: Investor Relations, 270 Park Avenue, New York, New York
10017 (telephone: (212) 270-6000).
This offer only includes the exhibits to such documents if such exhibits are
specifically incorporated by reference in such documents. You may also read and
copy these materials at the public reference facilities of the SEC in
Washington, D.C. referred to above.
4
SUMMARY
The following summary is a short description of the main structural
features that a trust's securities may have. For that reason, this summary does
not contain all of the information that may be important to you or that
describes all of the terms of a security. To fully understand the terms of a
trust's securities, you will need to read both this prospectus and the related
prospectus supplement, in their entirety.
THE TRUSTS
We will form a separate trust to issue each series of securities. Each trust
will be created by an agreement between us and a trustee.
THE SELLER AND THE SERVICER
Chase Manhattan Bank USA, National Association is a wholly-owned subsidiary of
The Chase Manhattan Corporation. Chase USA's activities are predominantly
related to consumer lending. The Chase Manhattan Corporation is a bank holding
company, the principal subsidiary of which is The Chase Manhattan Bank, a New
York state bank.
CHASE AUTO FINANCE
Chase USA, together with its affiliates, is engaged in the automotive financing
and automotive loan servicing business. In this prospectus, the term "CHASE
AUTO FINANCE" refers to the automotive financing and automotive loan servicing
business of The Chase Manhattan Bank, its predecessors (other than Chemical
Bank prior to its merger with The Chase Manhattan Bank, N.A.) and affiliates.
TRUSTEE
The prospectus supplement will name the trustee for the trust.
INDENTURE TRUSTEE
If the trust issues notes, the prospectus supplement will name the indenture
trustee.
SECURITIES
A trust's securities may include one or more classes of notes and/or
certificates. You will find the following information about each class of
securities in the related prospectus supplement:
o its principal amount,
o its interest rate, which may be fixed or variable or a combination,
o the timing, amount and priority or subordination of payments of
principal and interest,
o the method for calculating the amount of principal payments,
o its final payment date and
o whether and when it may be redeemed prior to its final payment date.
Some classes of securities may be entitled to:
o principal payments with disproportionate, nominal or no interest
payments or
o interest payments with disproportionate, nominal or no principal
payments.
The prospectus supplement will identify any class of securities issued by a
trust that is not being offered to the public.
OPTIONAL PREPAYMENT
Generally, the servicer will have the option to purchase the receivables of
each trust on any payment date when the aggregate principal balance of the
receivables sold to the trust has declined to the percentage specified in the
prospectus supplement or less of the initial principal balance. Upon such a
purchase, the securities of that trust will be prepaid in full.
THE RECEIVABLES AND OTHER TRUST PROPERTY
The receivables of each trust will consist of a pool of retail installment sale
contracts and purchase money notes and other notes secured by new and used
automobiles and light-duty trucks and other property, including:
o the rights to receive payments made on the receivables on and after
the cutoff date specified in the related prospectus supplement,
o security interests in the vehicles financed by the receivables and
o any proceeds from claims on various related insurance policies.
5
You will find a description of the characteristics of the trust's receivables
in the prospectus supplement.
For a more detailed description of the receivables, including the criteria they
must meet in order to be included in a trust, and the other property supporting
the securities, see "The Receivables Pools" in this prospectus.
OTHER PROPERTY OF THE TRUST
In addition to the receivables, each trust will own amounts on deposit in
various trust accounts, which may include:
o an account into which collections are deposited,
o an account securing obligations under a cash collateral guaranty
providing credit enhancement,
o an account to fund post-closing purchases of additional receivables,
o an account providing yield enhancement to the receivables or
o a reserve account or other account providing credit enhancement.
PURCHASE OF RECEIVABLES AFTER THE CLOSING DATE
If a trust has not purchased all of its receivables at the time you purchase
your securities, it will purchase the remainder of its receivables from Chase
USA over a period specified in the prospectus supplement.
CREDIT OR PAYMENT ENHANCEMENT
The prospectus supplement will specify the credit or payment enhancement, if
any, for each trust. Credit or payment enhancement may consist of one or more
of the following:
o subordination of one or more classes of securities,
o a cash collateral guaranty secured by a cash collateral account,
o a reserve account,
o a yield supplement agreement or account,
o overcollateralization (i.e., the amount by which the principal
amount of the receivables exceeds the principal amount of all of the
trust's securities),
o letter of credit or other credit or liquidity facility,
o surety bond,
o guaranteed investment contracts,
o swaps or other interest rate protection agreements,
o repurchase obligations,
o other agreements with respect to third party payments or other
support or
o cash deposits or other arrangements.
Limitations or exclusions from coverage could apply to any form of credit or
payment enhancement. The prospectus supplement will describe the credit or
payment enhancement and related limitations and exclusions applicable to
securities issued by a trust. Enhancements cannot guarantee that losses will
not be incurred on the securities.
CASH COLLATERAL GUARANTY
If there is a cash collateral guaranty secured by a cash collateral account,
the seller or a cash collateral depositor will initially deposit in the account
cash or securities having a value equal to the amount specified in the
prospectus supplement.
Amounts drawn on the cash collateral guaranty will be available to cover
shortfalls in the payments on the securities as described in the prospectus
supplement. The prospectus supplement may also specify a minimum balance to be
maintained in the cash collateral account and what funds are available for
deposit to reinstate that balance, and when and to whom any amount will be
distributed if the balance exceeds this minimum amount.
RESERVE ACCOUNT
If there is a reserve account, the trust will initially deposit in it cash or
securities having a value equal to the amount specified in the prospectus
supplement.
Amounts on deposit in a reserve account will be available to cover shortfalls
in the payments on
6
the securities as described in the prospectus supplement. The prospectus
supplement may also specify a minimum balance to be maintained in the reserve
account and what funds are available for deposit to reinstate that balance, and
when and to whom any amount will be distributed if the balance exceeds this
minimum amount.
YIELD SUPPLEMENT AGREEMENT OR YIELD SUPPLEMENT ACCOUNT
If the seller or a third party enters into a yield supplement agreement and/or
establishes a yield supplement account, funds will be available to provide you
with payments in respect of receivables having a contract rate which is less
than the required rate specified in the prospectus supplement.
For more information about credit enhancement, see "Description of the Transfer
and Servicing Agreements--Credit and Cash Flow Enhancement" in this prospectus.
TRANSFER AND SERVICING OF THE RECEIVABLES
The seller will transfer receivables to a trust under an agreement. The
servicer will agree with the trust to be responsible for servicing, managing,
maintaining custody of and making collections on the receivables.
For more information about the sale and servicing of the receivables, see
"Description of the Transfer and Servicing Agreements--Sale and Assignment of
Receivables" in this prospectus.
SERVICING FEES
Each trust will pay the servicer a servicing fee based on the outstanding
balance of the receivables. The amount of the servicing fee will be in the
related prospectus supplement. The servicer will also be entitled to retain as
supplemental servicing compensation certain fees and charges paid by obligors.
In addition, if set forth in the related prospectus supplement, the servicer
will be entitled to receive investment income on amounts on deposit in the
trust's accounts.
For more information on servicing compensation, see "Description of the
Transfer and Servicing Agreements--Servicing Compensation and Payment of
Expenses" in this prospectus and the corresponding section in the related
prospectus supplement.
SERVICER ADVANCES
The servicer may make advances of delinquent payments on the receivables. The
related prospectus supplement will describe the terms and conditions of those
advances.
The servicer will be entitled to reimbursement from other collections of the
trust for advances that are not repaid out of collections of the related
delinquent payments.
TAX STATUS
Unless the related prospectus supplement specifies that a trust will be
classified as a grantor trust, Simpson Thacher & Bartlett, special counsel to
the seller, will deliver an opinion to the effect that, for federal income tax
purposes:
o any notes issued by the trust will be treated as debt and
o the trust will not be characterized as an association (or a publicly
traded partnership) taxable as a corporation.
Alternative characterizations of the trust and the certificates issued by the
trust are possible, but would not result in materially adverse tax consequences
to holders of the certificates.
If the related prospectus supplement specifies that a trust will be classified
as a grantor trust, Simpson Thacher & Bartlett, special counsel to the seller,
will deliver an opinion to the effect that the trust will be treated as a
grantor trust for federal income tax purposes and not as an association (or
other entity) taxable as a corporation.
The opinions referred to in the preceding two paragraphs will be filed with the
SEC as an Exhibit to a Current Report filed on Form 8-K at the time the related
securities are sold.
For additional information concerning the application of federal and state tax
laws to your securities, see "Certain Federal Income Tax Consequences" and
"Certain State Tax Consequences" in the related prospectus supplement.
7
ERISA CONSIDERATIONS
If you are investing the assets of an employee benefit plan, arrangement or
account that is subject to ERISA, the Code or any similar laws or regulations,
or an entity whose underlying assets are considered to include the assets of
any such plan, arrangement or account, you should carefully review the matters
discussed under "ERISA Considerations" in this prospectus and in the related
prospectus supplement before investing in the securities.
FORM AND DENOMINATION
Your securities may be issued in definitive form or in book-entry form. If they
are issued in book-entry form, you will not receive your securities in
definitive form. You may purchase securities in the denominations set forth in
the prospectus supplement.
For additional information concerning the form of your securities, see "Certain
Information Regarding the Securities--Book-Entry Registration" and
"--Definitive Securities" in this prospectus.
8
RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase any of the securities.
INTERESTS OF OTHER PERSONS IN THE FINANCED VEHICLES COULD REDUCE THE FUNDS
AVAILABLE TO MAKE PAYMENTS ON YOUR SECURITIES.
If another person acquires a security or other interest in a financed
vehicle that is superior to the trust's security interest in the vehicle, some
or all of the proceeds from the sale of the vehicle may not be available to
make payments on the securities.
The trust's security interest in the financed vehicles could be impaired
for one or more of the following reasons:
o we might fail to perfect our security interest in a financed vehicle,
o another person may acquire an interest in a financed vehicle that is
superior to the trust's security interest through fraud, forgery,
negligence or error because neither the seller nor the trustee will
amend the certificate of title or ownership to identify the trust as
the new secured party,
o the trust may not have a security interest in the financed vehicles in
certain states because the certificates of title for the financed
vehicles will not be amended to reflect the assignment of a security
interest therein to the trust and may not have been amended to reflect
an earlier assignment of a security interest therein to the seller by
the originator of the related receivable,
o holders of some types of liens, such as tax liens or mechanics liens,
may have priority over the trust's security interest and
o the trust may lose its security interest in vehicles confiscated by
the government.
Neither the seller nor the servicer will be required to repurchase a
receivable if the security interest in a financed vehicle or the receivable
becomes impaired after the receivable is sold to the trust.
INSOLVENCY OF CHASE USA COULD RESULT IN ACCELERATED, DELAYED OR REDUCED
PAYMENTS TO YOU.
Chase USA is chartered as a national banking association and is subject to
regulation and supervision by the office of the Comptroller of the Currency. If
Chase USA becomes insolvent, is in an unsound condition or engages in violation
of its bylaws or regulations, the Comptroller is authorized to appoint the FDIC
as conservator or receiver. Under such circumstances, the FDIC could:
o require the trustee to go through an administrative claims procedure
to establish its rights to payments collected on the receivables,
o request a stay of proceedings with respect to the trust's claims
against Chase USA or
o repudiate without compensation Chase USA's ongoing obligations under
the sale and servicing agreement or pooling and servicing agreement,
as applicable, such as the duty to collect payments or otherwise
service the receivables.
If the FDIC were to take any of those actions, payments of principal and
interest on your securities could be delayed or reduced.
By statute, the FDIC as conservator or receiver is authorized to repudiate
any "contract" of Chase USA upon payment of "actual direct compensatory
damages." This authority may be interpreted by the FDIC to permit it to
repudiate the transfer of receivables to a trust. Under a recently enacted FDIC
regulation, however, the FDIC as conservator or receiver will not reclaim,
recover, or recharacterize a bank's transfer of financial assets if certain
conditions are met, including that the transfer qualifies for sale accounting
treatment, was made for adequate consideration, and was not made fraudulently,
in contemplation of insolvency, or with the intent to hinder, delay, or defraud
9
the bank or its creditors. Chase USA believes the new FDIC regulation will
apply to the transfer of receivables to a trust in the manner contemplated by
this prospectus and intends on satisfying the conditions of the regulation.
If a condition required under the FDIC regulation, or other statutory or
regulatory requirement applicable to the transaction, were found not to have
been satisfied, the FDIC as conservator or receiver might refuse to recognize
Chase USA's transfer of the receivables to the trust. In that event the trust
could be limited to seeking recovery based upon its security interest in the
receivables. The FDIC's statutory authority has been interpreted by the FDIC
and at least one court to permit the repudiation of a security interest upon
payment of actual direct compensatory damages measured as of the date of
conservatorship or receivership. Such damages do not include lost profits or
opportunity, and no damages would be paid for the period between the date of
conservatorship or receivership and the date of repudiation. The FDIC could
delay its decision whether to recognize Chase USA's transfer of the receivables
for a reasonable period following its appointment as conservator or receiver
for the bank. If the FDIC were to refuse to recognize Chase USA's transfer of
the receivables, payments of principal and interest on your securities could be
delayed or reduced. See "Certain Legal Aspects of the Receivables--Other
Matters" in this prospectus.
ONLY THE ASSETS OF THE TRUST ARE AVAILABLE TO PAY YOUR SECURITIES.
Neither Chase USA nor any of its affiliates is obligated to make any
payments in respect of the securities of a trust or the receivables owned by a
trust. Therefore, you must rely solely on the assets of the trust for repayment
of your securities. If these assets are insufficient, you may suffer losses on
your securities.
The assets of a trust will consist solely of its receivables and, to the
extent specified in the prospectus supplement, various deposit accounts and any
credit or payment enhancement.
AMOUNTS ON DEPOSIT IN ANY ACCOUNT PROVIDING CREDIT ENHANCEMENT OR OTHER
CREDIT ENHANCEMENT PROVIDED WILL BE LIMITED AND SUBJECT TO DEPLETION. The
amount required to be on deposit in any account providing credit enhancement or
any other credit enhancement will be limited in amount. If such amount is
depleted to cover shortfalls in distributions of principal and interest on your
securities, the trust will depend solely on collections on the receivables and
any other credit or payment enhancement to make payments on your securities. In
addition, the minimum required balance in an account providing credit
enhancement may decrease as the outstanding balance of the receivables
decreases.
YOU MAY SUFFER LOSSES UPON A LIQUIDATION OF THE RECEIVABLES IF THE
PROCEEDS OF THE LIQUIDATION ARE LESS THAN THE AMOUNTS DUE ON THE OUTSTANDING
SECURITIES. Under certain circumstances described in this prospectus, the
receivables of a trust may be sold after the occurrence of an event of default.
The related securityholders will suffer losses if the trust sells the
receivables for less than the total amount due on its securities. We cannot
assure you that sufficient funds would be available to repay those
securityholders in full.
DELAYS IN COLLECTING PAYMENTS COULD OCCUR IF CHASE USA CEASES TO BE THE
SERVICER.
If we were to cease acting as servicer, the processing of payments on the
receivables and information relating to collections could be delayed, which
could delay payments to securityholders. We can be removed as servicer if we
default on our servicing obligations as described in this prospectus. See
"Description of the Transfer and Servicing Agreement--Events of Servicing
Termination." We may resign as servicer under certain circumstances described
in this prospectus. See "Description of the Transfer and Servicing
Agreements--Certain Matters Regarding the Servicer."
10
SUBORDINATION MAY CAUSE SOME CLASSES OF SECURITIES TO BEAR ADDITIONAL CREDIT
RISK.
The rights of the holders of any class of securities to receive payments
of interest and principal may be subordinated to one or more other classes of
securities.
Holders of subordinated classes of securities will bear more credit risk
than senior classes. Subordination may take the following forms:
o interest payments on any date on which interest is due may first be
allocated to the more senior classes,
o principal payments on the subordinated classes might not begin until
principal of the more senior classes is repaid in full,
o principal payments on the more senior classes may be made on a payment
date before interest payments on the subordinated classes are made,
o subordinated classes bear the risk of losses on the receivables and
the resulting cash shortfalls before the more senior classes do and
o if the trustee sells the receivables after an event of default, the
net proceeds of that sale may be allocated first to pay principal and
interest on the more senior classes.
The timing and priority of payment, seniority, allocations of losses and
methods of determining payments on the respective classes of securities of any
trust will be described in the related prospectus supplement.
PREPAYMENTS ON THE RECEIVABLES MAY ADVERSELY AFFECT THE AVERAGE LIFE OF AND
RATE OF RETURN ON YOUR SECURITIES.
Faster than expected prepayments on the receivables will cause the trust
to make payments on its securities earlier than expected. You may not be able
to reinvest the principal repaid to you at a rate of return that is equal to or
greater than the rate of return on your securities. We cannot predict the
effect of prepayments on the average life of your securities.
All the receivables by their terms may be prepaid at any time. Prepayments
include:
o prepayments in whole or in part by the obligor,
o liquidations due to default,
o partial payments with proceeds from physical damage, credit life and
disability insurance policies,
o a required repurchase of a receivable by the seller or the servicer
resulting from a breach of representation, warranty or covenant and
o an optional repurchase of a trust's receivables by the servicer when
their aggregate principal balance is equal to or less than the
percentage of the initial aggregate principal balance specified in the
prospectus supplement.
A variety of economic, social and other factors will influence the rate of
optional prepayments on the receivables and the rate of defaults.
The final payment of each class of securities is expected to occur prior
to its final scheduled payment date because of the prepayment and purchase
considerations set forth above. If sufficient funds are not available to pay
any class of notes in full on its final payment date, an event of default will
occur and final payment of such class of notes will occur later than such date.
In addition, the servicer may, on a case-by-case basis, permit extensions
of the due dates of payments on the receivables in accordance with its normal
and customary servicing practices and procedures. Deferral or extensions may
increase the weighted average life of the securities. The
11
servicer will not be permitted to grant an extension or deferral if as a result
the final scheduled payment date on a receivable would fall on or after the
final payment date of the related securities unless the servicer purchases the
affected receivable.
For more information regarding the timing of repayments of the securities,
see "Weighted Average Life of the Securities" in the prospectus supplement and
in this prospectus.
YOU MAY SUFFER LOSSES ON YOUR SECURITIES BECAUSE THE SERVICER WILL HOLD
COLLECTIONS AND COMMINGLE THEM WITH ITS OWN FUNDS.
Provided that the conditions established by the rating agencies are
satisfied, the servicer will generally be permitted to hold with its own funds
collections it receives from obligors on the receivables and the purchase price
of receivables required to be repurchased from the trust until the day prior to
the next date on which distributions are made on the securities. During this
time, the servicer may invest those amounts at its own risk and for its own
benefit and need not segregate them from its own funds. If the servicer is
unable for any reason to pay these amounts to the trust on the payment date,
you might incur a loss on your securities.
For more information about the servicer's obligations regarding payments
on the receivables, see "Description of the Transfer and Servicing
Agreements--Collections" in this prospectus.
ADDITIONAL RECEIVABLES MAY HAVE DIFFERENT CHARACTERISTICS THAN THE INITIAL POOL
OF RECEIVABLES.
A trust may not have purchased all of its receivables at the time you
purchase your securities. It may purchase the remainder of its receivables from
the seller over a period specified in the prospectus supplement. The additional
receivables will not be required to have any particular characteristics. The
additional receivables may be originated by Chase USA at a later date using
criteria different from those applied to the initial pool of receivables and
may be of a different credit quality and seasoning. In addition, following the
transfer of the additional receivables to the trust, the characteristics of the
receivables may vary from those of the initial receivables. As a result the
overall credit quality of the receivables pool may decline. Any resulting
increase in defaults will result in an increased rate of prepayments and a
greater risk of loss.
YOU MAY EXPERIENCE A PREPAYMENT OF YOUR SECURITIES AS A RESULT OF PRE-FUNDING.
If the principal amount of additional receivables transferred to a trust
during the pre-funding period specified in the prospectus supplement is less
than the amount set aside in a pre-funding account on the closing date to
purchase additional receivables, the amount remaining in that account at the
end of the pre-funding period will be applied to the prepayment of the
securities issued by the trust. The amount remaining in the pre-funding account
at the end of the pre-funding period will depend on Chase USA's ability to
generate a sufficient amount of additional receivables during the pre-funding
period. Any premium paid to you with any prepayment may not be sufficient to
compensate you for any difference between the yield on your securities and the
yield at which you may reinvest the prepayment proceeds.
YOU MAY SUFFER LOSSES BECAUSE YOU HAVE LIMITED CONTROL OVER THE ACTIONS OF THE
TRUST.
A trust issuing notes will pledge its property to the indenture trustee to
secure payment of the notes, including its rights under the sale and servicing
agreement. As a result, the indenture trustee, not the holders of the
certificates issued by the trust, will have the right to take certain actions
in connection with the administration of the trust property, including under
certain circumstances selling the receivables at the direction of the
noteholders. In addition, the noteholders will have the right to waive the
occurrence of a servicer default and to terminate the servicer upon the
occurrence of a servicer default. The holders of the certificates will not have
these rights until the notes have been paid in full.
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THE TRUSTS
Chase USA, as seller (the "SELLER"), will establish a separate trust (each
a "TRUST") pursuant to a trust agreement (each a "TRUST AGREEMENT") or a
pooling and servicing agreement (each a "POOLING AND SERVICING AGREEMENT"), as
applicable, in connection with the issuance of each series of Asset-Backed
Notes (the "NOTES") and/or Asset-Backed Certificates or Automobile Loan
Pass-Through Certificates (collectively, the "CERTIFICATES" and, together with
the Notes, the "SECURITIES") and for the purpose of conducting the activities
described in this prospectus and in the related prospectus supplement.
The property of each Trust will include:
o a pool (a "RECEIVABLES POOL") of motor vehicle retail installment
sales contracts, purchase money notes and other notes ("MOTOR VEHICLE
LOANS") and all payments due or received thereunder (the
"RECEIVABLES") from the related obligors (the "OBLIGORS") on and after
the related cutoff date specified in the related prospectus supplement
(a "CUTOFF DATE"),
o 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 (each a "SALE AND SERVICING AGREEMENT") or Pooling
and Servicing Agreement and the proceeds of such accounts, as
described in this prospectus and in the related prospectus supplement,
o security interests in the vehicles financed by the Motor Vehicle Loans
(the "FINANCED VEHICLES"),
o the rights to proceeds as a result of the Seller's exercise of its
recourse rights against Dealers as described in this prospectus under
"The Receivables Pools--Origination and Servicing of Motor Vehicle
Loans",
o an assignment of the rights of the Seller to receive proceeds from
claims on theft and physical damage, credit life and credit disability
insurance policies covering the Financed Vehicles or the Obligors, as
the case may be, to the extent that such insurance policies relate to
the Receivables,
o the rights with respect to any Financed Vehicle that has been
repossessed by Chase USA, as servicer (in such capacity, the
"SERVICER"), on behalf of the related Trust, and
o any and all proceeds of the foregoing.
If so specified in the related prospectus supplement, the property of a
Trust may include monies on deposit in a trust account (a "PRE-FUNDING
ACCOUNT") to be used to purchase additional Receivables from the Seller from
time to time during the period (the "FUNDING PERIOD") specified in the related
prospectus supplement.
If so specified in the prospectus supplement relating to a Trust
classified as a grantor trust, the Trustee will have the right to demand
payments under a cash collateral guaranty (the "CASH COLLATERAL GUARANTY")
under certain circumstances as described in this prospectus and in the related
prospectus supplement. Each Cash Collateral Guaranty will be secured by a Cash
Collateral Account.
If so specified in the prospectus supplement relating to a Trust not
classified as a grantor trust, a Reserve Account, a yield supplement agreement
(a "YIELD SUPPLEMENT AGREEMENT") and/or a yield supplement account (a "YIELD
SUPPLEMENT ACCOUNT") or other form of credit enhancement may be a part of the
property of any given Trust. A Yield Supplement Account may not be included in
the property of the Trust but be held by another trust or a trustee for the
benefit of holders of the related Securities in the case of a Trust classified
as a grantor trust.
On or before the related Closing Date, the Seller will transfer a pool of
Motor Vehicle Loans having an aggregate principal balance specified in the
related prospectus supplement (the "INITIAL RECEIVABLES") to the related Trust
in exchange for the Securities issued by the Trust. If provided in the related
prospectus supplement, additional Motor Vehicle Loans (the "SUBSEQUENT
RECEIVABLES") and
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the related property having an aggregate principal balance approximately equal
to the amount (the "PRE-FUNDING AMOUNT") on deposit in the related Pre-Funding
Account on the Closing Date will be conveyed to the related Trust as frequently
as daily during the Funding Period. Any Subsequent Receivables so conveyed will
also be assets of the related Trust.
The principal offices of each Trust and the entity named as trustee of the
Trust (each a "TRUSTEE") will be specified in the related prospectus
supplement.
THE RECEIVABLES POOLS
GENERAL
Chase USA, together with its affiliates, is engaged in the automotive
financing and automotive loan servicing business. The originating bank of each
Motor Vehicle Loan (the "ORIGINATING BANK") will be Chase USA, The Chase
Manhattan Bank ("CHASE") or any of their respective affiliates in its capacity
as originator of the Motor Vehicle Loans.
The Motor Vehicle Loans are motor vehicle retail installment sales
contracts relating to new or used automobiles and light-duty trucks purchased
from Dealers who regularly originate and sell such contracts to the Originating
Bank pursuant to Assignments. Motor Vehicle Loans also include purchase money
loans secured by financed vehicles made by the Originating Bank directly or
pursuant to arrangements with Dealers in accordance with approved Dealer
Agreements. The Receivables to be held by each Trust will be selected from the
portfolio of Motor Vehicle Loans owned or to be owned by the Seller. Selection
will be based upon several criteria, including that, unless otherwise provided
in the related prospectus supplement, each Receivable
o was acquired from or made through a Dealer located in the United
States or made directly by the Originating Bank without involvement of
a Dealer,
o is secured by a Financed Vehicle that, as of the related Cutoff Date,
had not been repossessed without reinstatement,
o has not been identified on the computer files of the Seller as
relating to an Obligor who was in a bankruptcy proceeding as of the
related Cutoff Date,
o if not a Final Payment Receivable, provides for fully amortizing level
scheduled monthly payments (except for the last payment, which may be
different from the level payments) and for accrual of interest at a
fixed rate (the "CONTRACT RATE") according to the simple interest or
actuarial method,
o is an Actuarial Receivable or a Simple Interest Receivable (either of
which may be a Final Payment Receivable) and
o satisfies the other criteria, if any, set forth in the related Sale
and Servicing Agreement or Pooling and Servicing Agreement, as
applicable, and in the related prospectus supplement.
The Seller will not use any selection procedures that it believes to be
materially adverse to the Securityholders of any series in selecting the
related Receivables.
"SIMPLE INTEREST RECEIVABLES" provide for the allocation of payments made
thereunder to principal and interest in accordance with the "simple interest"
method. As payments are received under a Simple Interest Receivable, the
finance charges accrued to date are paid first, the unpaid amount financed (to
the extent of the remaining monthly scheduled payment) is paid second and the
remaining payment is applied to the unpaid late charges. Accordingly, if an
Obligor pays the fixed monthly installment in advance of the date on which a
payment is due (the "DUE DATE"), the portion of the payment allocable to
finance charges for the period since the preceding payment will be less than it
would be if the payment were made on the Due Date, and the portion of the
payment allocable to reduce the amount financed will be correspondingly
greater. Conversely, if the Obligor pays the fixed monthly installment after
its Due Date, the portion of the payment allocable to finance
14
charges for the period since the last payment will be greater than it would be
if the payment were made on the Due Date, and the portion of the payment
allocable to reduce the amount financed will be correspondingly smaller. When
necessary, an adjustment is made at the maturity of the loan to the scheduled
final payment to reflect the larger or smaller, as the case may be, allocations
of payments to the amount financed under a Simple Interest Receivable as a
result of early or late payments, as the case may be. See "Weighted Average
Life of the Securities" in this prospectus.
"ACTUARIAL RECEIVABLES" provide for amortization of the loan over a series
of fixed level payment monthly installments. Each monthly installment,
including the monthly installment representing the final payment on the
Receivable, consists of an amount of interest equal to 1/12th of the annual
contract rate of interest on the loan multiplied by the unpaid principal
balance of the loan, and an amount of principal equal to the remainder of the
monthly payment.
"FINAL PAYMENT RECEIVABLES" are either Actuarial Receivables or Simple
Interest Receivables which provide for a final scheduled payment which is
greater than the scheduled monthly payments. A Final Payment Receivable
provides for amortization of the loan over a series of fixed level payment
monthly installments like an Actuarial Receivable or a Simple Interest
Receivable, but also requires a final scheduled payment due after payment of
such monthly installments which may be satisfied by
o payment in full in cash of such amount,
o transfer of the financed vehicle to the Seller provided certain
conditions are satisfied or
o refinancing the final scheduled payment in accordance with certain
conditions.
With respect to any Final Payment Receivables included in a Trust, only the
principal and interest payments due prior to the final scheduled payment and
not the final scheduled payment will be included in the Trust; the final
scheduled payment will be retained by the Seller. However, in the case of a
Trust that is not classified as a grantor trust, the Seller will have the
option to transfer the final scheduled payments with respect to the related
Final Payment Receivables to such Trust and to cause such Trust to issue
certificates representing interests in such final scheduled payments or notes
secured by such final scheduled payments.
All of the Receivables will be prepayable at any time without penalty to
the Obligor and will contain due on sale provisions. If a Simple Interest
Receivable is prepaid, the Obligor is required to pay interest only to the date
of prepayment, rather than receive a rebate. 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.
In the case of the liquidation of a Receivable or repossession of a
Financed Vehicle, amounts recovered will be applied in accordance with Chase
Auto Finance's normal and customary servicing practices and procedures. Chase
Auto Finance reserves the right to change its policy with respect to the
application of amounts recovered from a liquidated Receivable or a repossessed
Financed Vehicle.
Information with respect to each Receivables Pool will be set forth in the
related prospectus supplement, including, to the extent appropriate, the
composition of the Receivables, the distribution by annual contract rate of
interest and by the states of origination of the Receivables, the portion of
such Receivables Pool consisting of Actuarial Receivables, Simple Interest
Receivables (and the portion thereof consisting of Final Payment Receivables)
and the portion of such Receivables Pool secured by new Financed Vehicles and
by used Financed Vehicles.
If the related prospectus supplement provides for a Pre-Funding Account,
from time to time during the Funding Period, the Seller will be obligated,
subject only to availability, to sell, and the related Trust will be obligated
to purchase, subject to the satisfaction of certain conditions, Subsequent
Receivables and the related property having an aggregate principal balance
approximately equal to the Pre-Funding Amount. Each Subsequent Receivable
transferred to the related Trust must satisfy the eligibility criteria
specified in the related Pooling and Servicing Agreement or Sale and Servicing
Agreement, as applicable, at the time of its addition. However, except for such
criteria, there will be
15
no required characteristics of such Subsequent Receivables. Therefore,
following the transfer of Subsequent Receivables to the related Trust, the
characteristics of the entire Receivables Pool included in such Trust may vary
from those of the Initial Receivables.
Subsequent Receivables may be originated at a later date using credit
criteria different from those which were applied to any Initial Receivables and
may be of a different credit quality and seasoning. In addition, following the
transfer of Subsequent Receivables to the applicable Trust, the characteristics
of the entire pool of Receivables included in such Trust may vary from those of
the Initial Receivables transferred to such Trust. See "Risk
Factors--Additional receivables may have different characteristics than the
initial pool of receivables." If the prospectus supplement provides for a
Pre-Funding Account, the prospectus supplement will also describe the effects
including Subsequent Receivables may have on the Receivables Pool included in
the related Trust. If a Trust includes Subsequent Receivables, regular periodic
reports regarding the Subsequent Receivables will be included under Item 5 in
each Current Report filed by or on behalf of such Trust on Form 8-K with the
SEC pursuant to the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT").
DELINQUENCY AND LOAN LOSS INFORMATION
Certain information concerning the delinquencies, loan losses and
recoveries for the portfolio of Motor Vehicle Loans originated with the
involvement of Dealers and owned or serviced by Chase Auto Finance (the "CHASE
AUTO FINANCE PORTFOLIO") as of the dates and for the periods set forth in the
related prospectus supplement will be set forth therein. There can be no
assurance that the delinquency and loan loss experience on any Receivables Pool
will be comparable to prior experience or to such information.
Pursuant to a merger, as of January 1, 1993, The Chase Manhattan Bank,
N.A. ("CHASE N.A.") commenced servicing Motor Vehicle Loans originated by Chase
N.A.'s affiliate, Chase Lincoln First Bank, National Association ("CHASE
LINCOLN BANK"). The delinquency and loan loss experience with respect to the
Chase Auto Finance Portfolio (the "PORTFOLIO EXPERIENCE") presented in the
related prospectus supplement will include data with respect to loans
originated by Chase Lincoln Bank (collectively, "CHASE LINCOLN LOANS"). The
Seller believes that the delinquency and loan loss experience for Chase Auto
Finance's entire portfolio of Motor Vehicle Loans for any period presented in a
prospectus supplement without inclusion of any Chase Lincoln Loans would not be
materially different from the Portfolio Experience set forth in such prospectus
supplement.
From February 1993 through April 1995, Chase N.A. or Chase N.A.'s
affiliates serviced Motor Vehicle Loans for The Chase Manhattan Bank of
Connecticut, National Association ("CHASE CONNECTICUT BANK"), which loans
(collectively, "CHASE CONNECTICUT LOANS") were originated using materially the
same Dealer Agreements, underwriting criteria and servicing standards as those
for Chase Auto Finance's Motor Vehicle Loans. As of May 1, 1995, Chase
Connecticut Bank was merged into Chase N.A. The Portfolio Experience presented
in the related prospectus supplement will include data with respect to Chase
Connecticut Loans. The Seller believes that the delinquency and loan loss
experience for Chase Auto Finance's entire portfolio of Motor Vehicle Loans for
any period presented in a prospectus supplement without inclusion of any Chase
Connecticut Loans would not be materially different from the Portfolio
Experience set forth in such prospectus supplement.
On December 1, 1995, Chase N.A. purchased substantially the entire Motor
Vehicle Loan portfolio originated by its affiliate, The Chase Manhattan Private
Bank (Florida), National Association ("CHASE FLORIDA BANK"). The purchase
involved approximately 41,000 loans originated principally through Dealers
located in Florida ("CHASE FLORIDA LOANS"), with such loans having an aggregate
outstanding principal balance at the time of purchase of approximately $400
million. The Portfolio Experience presented in the related prospectus
supplement will include data with respect to Chase Florida Loans. Chase Florida
Loans were originated using materially the same Dealer Agreements, underwriting
criteria and servicing standards as those for Chase Auto Finance's Motor
Vehicle Loans. The Seller believes that the delinquency and loan loss
experience for Chase Auto Finance's entire portfolio of Motor Vehicle Loans for
any period presented in a prospectus supplement without inclusion of any Chase
Florida Loans would not be materially different from the Portfolio Experience
set forth in such prospectus supplement.
16
In September 1995, Chase N.A. purchased substantially all outstanding
Motor Vehicle Loans originated by The Chase Manhattan Bank of Maryland ("CHASE
MARYLAND LOANS"). The Portfolio Experience presented in the related prospectus
supplement will include data with respect to Chase Maryland Loans. The Seller
believes that the delinquency and loan loss experience for Chase Auto Finance's
entire portfolio of Motor Vehicle Loans for any period presented in a
prospectus supplement without inclusion of any Chase Maryland Loans would not
be materially different from the Portfolio Experience set forth in such
prospectus supplement.
To the extent specified in the related prospectus supplement, the Motor
Vehicle Loans included in a Trust may include loans made directly by the
Originating Bank to Obligors without involvement of Dealers ("DIRECT
RECEIVABLES"). However, the Portfolio Experience set forth in the related
prospectus supplement will not include delinquency and loan loss experience for
Direct Receivables. The Seller believes that the delinquency and loan loss
experience for Direct Receivables will not be materially different from the
Portfolio Experience set forth in the related prospectus supplement.
ORIGINATION AND SERVICING OF MOTOR VEHICLE LOANS
The Originating Bank purchases motor vehicle retail installment sales
contracts relating to new or used automobiles from automobile dealers
("DEALERS") who regularly originate such contracts pursuant to the terms of
approved dealer agreements and assignments, and the Originating Bank also makes
purchase money loans secured by financed vehicles directly or pursuant to
arrangements with Dealers in accordance with approved dealer agreements. Dealer
agreements and assignments related to motor vehicle retail installment sales
contracts, and dealer agreements related to purchase money loans are
collectively referred to in this prospectus as "DEALER AGREEMENTS". The
Originating Bank purchases such contracts from Dealers pursuant to assignments
(the "ASSIGNMENTS"). Dealer Agreements are entered into with Dealers based upon
a review of each Dealer, including in some cases, a financial review and a
review of the reputation and prior experience of Chase Auto Finance with such
Dealer and its key management. Generally, Dealers who sell new financed
vehicles are franchised by the manufacturer of the financed vehicles.
The Originating Bank currently makes or purchases Motor Vehicle Loans
involving Dealers throughout the United States. Each Dealer makes
representations and warranties to the Originating Bank with respect to the
Motor Vehicle Loans, the obligors on the Motor Vehicle Loans and the security
interests in the financed vehicles relating thereto, which representations and
warranties typically include, among others, that
o to the best of the Dealer's knowledge,
o no statements made or furnished to Chase Auto Finance by the
obligor, the Dealer or any other person are untrue or incomplete,
o the obligor has not financed any down payment for the financed
vehicle,
o the obligor is a bona fide applicant having legal capacity to
contract for a Motor Vehicle Loan,
o the signature of the obligor on all documents is genuine and
o the amount stated in the Motor Vehicle Loan to be due will in
fact be due and payable at the time or times provided therein
free of any claims, defenses, setoffs or counterclaims,
o the Dealer had indefeasible title to the financed vehicle immediately
prior to the purchase by the obligor, and had the right and authority
to sell the vehicle to the obligor, free and clear of all liens and
encumbrances,
o the Dealer will secure and perfect for the Originating Bank a security
interest in the financed vehicle free and clear of any liens or
encumbrances and
o the description of the financed vehicle in the Motor Vehicle Loan is
true and complete and the financed vehicle will be or has been duly
delivered to and accepted without revocation by the obligor.
17
Generally, these representations and warranties do not relate to the
creditworthiness of the obligors or the collectibility of the Motor Vehicle
Loans. Upon breach of any representation or warranty made by a Dealer, the
Originating Bank has a right of recourse against such Dealer to require it to
purchase or repurchase such Motor Vehicle Loan. Generally, in determining
whether to exercise any right of recourse, Chase Auto Finance considers the
prior performance of the Dealer and other business and commercial factors. The
Servicer will be obligated to enforce such rights with respect to Dealer
Agreements relating to the Motor Vehicle Loans in accordance with Chase Auto
Finance's customary practices, and the right to any proceeds received upon such
enforcement will be conveyed to the related Trust under the related Pooling and
Servicing Agreement or Sale and Servicing Agreement, as applicable. The Seller
will make no representations as to the financial condition of such Dealers to
which the Seller may have recourse, and there can be no assurance as to the
ability of any such Dealer to perform its obligations under a Dealer Agreement.
The Originating Bank makes direct Motor Vehicle Loans to obligors at its
branches or by accepting applications by phone. Since these Motor Vehicle Loans
are not originated by Dealers under Dealer Agreements, the representations and
warranties made by the Dealers in the Dealer Agreements are not made with
respect to these Motor Vehicle Loans. However, the motor vehicle dealers and
others selling the financed vehicles to the obligors make certain more limited
representations and warranties regarding the Motor Vehicle Loans and the
related financed vehicles by accepting the proceeds of the Motor Vehicle Loans
under a restrictive endorsement. These representations and warranties include a
representation that the financed vehicle is free and clear of all liens,
security interests and other claims and a warranty that the dealer, or the
obligor, if the seller is not a dealer, will apply for a certificate of title
for the financed vehicle showing only the obligor as the owner of the financed
vehicle and perfect a first priority security interest in the financed vehicle
in favor of the Originating Bank. If a Motor Vehicle Loan is made in connection
with the refinancing of an existing loan, no one other than the obligor will
make any representations or warranties with respect to the financed vehicle and
the obligor alone will be responsible for securing and perfecting the
Originating Bank's security interest in the financed vehicle.
The Originating Bank makes Motor Vehicle Loans to obligors by accepting
loan applications via a number of internet sites offering online vehicle
shopping and financing. These Motor Vehicle Loans are not originated by Dealers
under Dealer Agreements. However, where the financed vehicle is paid for with a
site draft containing a restrictive endorsement, the motor vehicle dealer
selling the financed vehicle and the internet provider make the same limited
representations and warranties regarding the Motor Vehicle Loan and the related
financed vehicle that are made by a dealer accepting the proceeds of a direct
Motor Vehicle Loan described above. Motor Vehicle Loans not funded by site
drafts containing restrictive endorsements are funded by the Originating Bank
through the internet provider. In those cases, the internet provider makes
similar limited representations and warranties regarding the Motor Vehicle
Loans and the related Financed Vehicles.
The Servicer will service all of the Motor Vehicle Loans consistent with
Chase Auto Finance's servicing policies and practices. The servicing functions
performed by the Servicer or any of its affiliates on a centralized basis will
include the payment of Motor Vehicle Loan proceeds to Dealers, customer
service, document file and computerized record keeping, vehicle titles
processing and automated collections. Other servicing functions are generally
regionalized and are and will be performed by the several regional support
offices called Dealer Service Centers ("DSCS"). The servicing functions
performed by the DSCs include certain aspects of Dealer liaison, Dealer sales,
customer service, credit underwriting, documentation reviews and collections as
well as other such services. An outside service provider enters credit
application data relating to indirect Motor Vehicle Loans into Chase Auto
Finance's loan origination system. The servicing policies and practices of
Chase Auto Finance may change over time in accordance with Chase USA's business
judgment.
UNDERWRITING OF MOTOR VEHICLE LOANS
Each applicant for a Motor Vehicle Loan is evaluated individually by the
appropriate DSC based on uniform underwriting standards developed by Chase Auto
Finance. These underwriting standards
18
are intended to assess the applicant's ability to repay such Motor Vehicle Loan
and the adequacy of the financed vehicle as collateral, based upon a review of
the information contained in a loan application form that generally lists the
applicant's income, deposit accounts, liabilities, credit history, employment
history and a description of the financed vehicle intended to secure the Motor
Vehicle Loan. Among the criteria considered in evaluating the individual
applications are
o stability of the obligor with specific regard to the obligor's length
of residence in the area and length of employment,
o the obligor's payment history based on information known directly by
Chase Auto Finance or as provided by various credit reporting agencies
with respect to present and past debt,
o a debt service to gross monthly income ratio test,
o a loan to value ratio test taking into account the age, type and
market value of the financed vehicle and
o a credit bureau score.
The amount advanced under any Motor Vehicle Loan generally will not exceed
o for a new financed vehicle, 110% to 125% of the manufacturer's
suggested retail price or
o for a used financed vehicle, 85% to 120% of the "average trade" value
stated in the most recently published National Automobile Dealer's
Association Official Used Car Price Guide for the applicable region
plus taxes and title and license fees on the financed vehicle. However, the
maximum amount advanced for Motor Vehicle Loans may vary depending on a number
of factors, including the length of the Motor Vehicle Loan term and the model
and year of the financed vehicle. These adjustments are made to insure that the
financed vehicle constitutes adequate collateral to secure the Motor Vehicle
Loan. In addition, whether a financed vehicle is new or used, Chase Auto
Finance will also finance credit life/accident/health insurance and service
warranties under a Motor Vehicle Loan. Chase Auto Finance's general policy has
been to reject applications for Motor Vehicle Loans whose applicants' debt
service to gross monthly income ratios exceed 40%.
Chase Auto Finance uses an empirically based credit scoring process to
objectively index the applicant's creditworthiness. This scoring process was
created using historical information from the database of Motor Vehicle Loans
owned and serviced by Chase Auto Finance. Through credit scoring, Chase Auto
Finance evaluates credit profiles in order to satisfactorily quantify credit
risk. The credit scoring process entails the use of statistics to correlate
common characteristics with credit risk. The credit scoring process used by
Chase Auto Finance is periodically reviewed and updated to ensure its validity.
In addition to Chase Auto Finance's scoring process, Chase Auto Finance uses
consumer reporting agency scores to assist in the underwriting process. In
January 1998, Chase Auto Finance introduced custom credit scorecards to enhance
the underwriting process.
Chase Auto Finance uses an automated approval and declination process for
certain applications based on selection criteria that were statistically
derived from the database of Motor Vehicle Loans owned and serviced by Chase
Auto Finance. A credit analyst reviews applications that are not automatically
approved or denied. Except for the applications that are automatically approved
or denied, Chase Auto Finance's scoring process and consumer reporting agency
scores are intended to provide a basis for lending decisions, but are not meant
to supersede the judgment of the credit analyst. Motor Vehicle Loan approval at
variance with standard credit guidelines has occurred, both before and after
implementation of the credit scoring process, but generally has required
concurrent approval of a second, designated senior credit analyst or credit
manager. Motor Vehicle Loans that do not comply with all of Chase Auto
Finance's guidelines must have strong compensating factors that indicate a high
ability of the applicant to repay the loan. Generally, if a Motor Vehicle Loan
is approved it is because the obligor has made a down payment and the amount
financed is lower than the maximum amount permitted by Chase Auto Finance's
guidelines.
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Detailed analysis of Chase Auto Finance's portfolio is performed to
evaluate the effectiveness of the credit guidelines and scoring process. If
external economic factors, credit delinquencies or credit losses change, credit
guidelines are adjusted to maintain a level of asset quality deemed acceptable
by Chase Auto Finance's management. Each day, the credit manager and credit
supervisors of each DSC review a computer selected group of Motor Vehicle Loans
to ensure that credit analysts are following Chase Auto Finance's established
policies and procedures. Chase Auto Finance randomly reviews, on a quarterly
basis, the quality of the Motor Vehicle Loans and conducts quality audits to
ensure compliance with established policies and procedures. The credit
underwriting standards of Chase Auto Finance may change over time in accordance
with Chase USA's business judgment.
INSURANCE AND COLLECTION PROCEDURES
Each Motor Vehicle Loan requires the obligor to obtain fire, theft and
collision insurance or comprehensive and collision insurance with respect to
the financed vehicle. The Dealer Agreements include a representation and
warranty that each financed vehicle has such insurance at the time of
origination of the Motor Vehicle Loan. If an obligor fails to maintain the
required insurance, Chase Auto Finance may, but is not obligated to, purchase
limited collision and comprehensive insurance (force placed insurance) to
protect the interests of Chase Auto Finance and the obligor and to charge the
obligor for the cost of such insurance.
Chase Auto Finance does not currently purchase force placed insurance and
no force placed insurance coverage is currently in effect on any of Chase Auto
Finance's Motor Vehicle Loans. No Trust will include any Motor Vehicle Loans on
which force placed insurance was ever purchased for the related financed
vehicle, nor will any such Trust include any Motor Vehicle Loans with coverage
commonly known as vendor's single interest and non-filing insurance. Unless
otherwise specified in the related prospectus supplement, there will be no
third party insurance of any kind covering this risk for any of the Motor
Vehicle Loans included in any Trust. In addition, neither the Seller, the
Originating Bank nor the Servicer, as applicable, independently verifies or
will verify whether obligors obtain or maintain the required insurance either
at or after the origination of a Motor Vehicle Loan. Chase Auto Finance
monitors its loss experience with respect to financed vehicles that are not
properly insured.
Chase USA reserves the right to change its policies with respect to
insurance on financed vehicles in accordance with its business judgment.
As a result of a New York statutory change, for Motor Vehicle Loans
originated through New York Dealers on and after approximately August 31, 1995,
Chase Auto Finance agreed not to obligate the related obligor for the so-called
"GAP amount" in the event there is a total loss of the vehicle caused by its
theft, confiscation or physical damage. The "GAP amount" that the obligor will
not be obligated to pay is the difference between the amount owed on the Motor
Vehicle Loan as of the date of the total loss and the sum of (1) any unpaid
monthly payments, unpaid late fees and other unpaid amounts due prior to the
date of the total loss, plus (2) the vehicle's actual cash value as of the date
of the total loss. If the obligor has maintained the insurance required under
the Motor Vehicle Loan, the vehicle's actual cash value shall have the same
meaning as under the insurance policy (inclusive of the deductible, which the
Motor Vehicle Loan specifies may be no higher than $500). If the obligor has
not maintained the insurance required under the Motor Vehicle Loan, the
vehicle's actual cash value shall mean the "average trade" value of the vehicle
in the most recently published National Automobile Dealer's Association
Official Used Car Guide for the applicable region as of the date of the total
loss. Chase Auto Finance will not maintain third party insurance of any kind
against this risk, and Chase Auto Finance does not have any data on its
historical loss experience on this risk.
Collection activities with respect to delinquent Motor Vehicle Loans will
be performed by the Servicer or its affiliates consistent with Chase Auto
Finance's servicing policies and practices. Collection activities include
prompt investigation and evaluation of the causes of any delinquency. An
obligor is deemed current if an amount equal to no more than 10% of a scheduled
monthly payment remains unpaid.
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An automated collection system is utilized to assist in collection
efforts. The automated collection system provides relevant obligor information
(for example, current addresses, phone numbers and loan information), records
of all contacts with obligors and, in some cases, automated dialing. The system
also records an obligor's promise to pay and allows supervisor review of
collection personnel activity, permits supervisors to modify priorities as to
which obligors should be contacted and provides extensive reports concerning
Motor Vehicle Loan delinquencies. Under current practices, contact by mail is
made with an obligor whose Motor Vehicle Loan has become 15 days delinquent and
personal telephone contact with the obligor is attempted on or after the 15th
day of delinquency. Generally, after a Motor Vehicle Loan continues to be
delinquent for 90 days, repossession procedures will have been implemented.
However, if
o a Motor Vehicle Loan is deemed uncollectible,
o the financed vehicle is deemed by collection personnel to be in danger
of being damaged, destroyed or made unavailable for repossession, or
o the obligor voluntarily surrenders the financed vehicle,
a repossession may occur without regard to length or existence of payment
delinquency. Repossessions are generally conducted by third parties who are
engaged in the business of repossessing vehicles for secured parties. After
repossession, the obligor generally has an additional 10 to 30 days to redeem
the financed vehicle before the financed vehicle is resold. Upon repossession
and sale of the financed vehicle, any deficiency remaining will be pursued to
the extent deemed practical and to the extent permitted by law.
Losses may occur in connection with delinquent Motor Vehicle Loans and can
arise in several ways, including the inability to locate the financed vehicle
or the obligor, or because of a discharge of the obligor in a bankruptcy
proceeding. Generally, losses on Motor Vehicle Loans are recognized, as
applicable,
o during the calendar month in which a financed vehicle was or is
liquidated by Chase Auto Finance, if the liquidation takes place at or
before the calendar month in which more than 10% of a scheduled
payment of the related Motor Vehicle Loan becomes 120 days delinquent,
o during the calendar month in which more than 10% of a scheduled
payment of a Motor Vehicle Loan becomes 120 days delinquent if Chase
Auto Finance was or is not in possession of the related financed
vehicle by the end of such calendar month,
o such earlier time as Chase Auto Finance deems a Motor Vehicle Loan
uncollectible, or
o at such other times or in such a manner as Chase Auto Finance believed
or believes is appropriate in accordance with its normal and customary
servicing practices and procedures;
provided that such loss recognition cannot be later than the calendar month in
which more than 10% of a scheduled payment on a Motor Vehicle Loan becomes 240
days delinquent. The loss recognition and collection policies and practices of
Chase Auto Finance may change over time in accordance with Chase USA's business
judgment.
Chase Auto Finance may, on a case-by-case basis, permit extensions with
respect to the Due Dates of payments on Motor Vehicle Loans in accordance with
its normal and customary servicing practices and procedures, as will be
described more fully in the related prospectus supplement.
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, liquidations
due to default, as well as receipts of proceeds from theft and physical damage,
credit life and credit disability insurance policies covering the Financed
Vehicles and amounts received in connection with certain other
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Receivables repurchased by the Seller or purchased by the Servicer for
administrative reasons). The Receivables are prepayable by the Obligors at any
time. If a prospectus supplement provides that the property of the related
Trust will include a Pre-Funding Account, the related Securities will be
subject to partial redemption on or immediately following the end of the
Funding Period in an amount and in the manner specified in the related
prospectus supplement. If provided in any prospectus supplement, prepayments
may also result from demands under any Cash Collateral Guaranty or from any
Reserve Account or other enhancement related to such series with respect to
Defaulted Receivables.
The rate of prepayments on the Receivables may be influenced by a variety
of economic, social and other factors, including the fact that an Obligor may
not sell or transfer the Financed Vehicle securing a Receivable without the
Seller's consent. The rate of prepayment of the Motor Vehicle Loans in any
Receivables Pool may also be influenced by programs offered by lenders
(including Chase USA and its affiliates) that solicit or make available credit
that may be used by Obligors to prepay Motor Vehicle Loans. Such credit
includes but is not limited to home equity lines of credit, consumer
installment credit and credit cards offered by lenders (including Chase USA and
its affiliates). Chase USA and its affiliates may, in the ordinary course of
business, offer general or targeted solicitations for such extensions of
credit, and such solicitations may be sent, to Obligors. In addition, each Sale
and Servicing Agreement and Pooling and Servicing Agreement will provide a
covenant that the Servicer may refinance an existing Motor Vehicle Loan for an
Obligor, so long as the proceeds of such refinanced loan would be used to
prepay such existing Motor Vehicle Loan in full and any such refinanced loan is
evidenced by a new promissory note. Any such loan thus created by a refinancing
would not be the property of the related Trust. See "Description of the
Transfer and Servicing Agreements--Termination" in this prospectus regarding
the Servicer's option to purchase the Receivables from a given Trust.
In light of the above considerations, there can be no assurance as to the
amount of principal payments to be made on the Securities 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 Securityholders 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.
Chase Auto Finance maintains certain records of the historical prepayment
experience of certain portions of its portfolio of Motor Vehicle Loans. The
Seller believes that such records are not adequate to provide meaningful
information with respect to the Receivables. In any event, no assurance can be
given that prepayments on the Receivables would conform to any historical
experience, and no prediction can be made as to the actual prepayment
experience to be expected with respect to the Receivables.
In addition, under certain limited circumstances, extensions on a
Receivable may be granted. See the related prospectus supplement for a
description of the terms and conditions in accordance with which the
Receivables in a particular Trust may be modified. Any such deferrals or
extensions may increase the weighted average life of the related Securities.
If an Obligor with respect to any Simple Interest Receivable, in addition
to making his or her regularly scheduled payment, makes one or more additional
scheduled payments in any Collection Period (for example, because such Obligor
intends to be on vacation the following month), the additional scheduled
payments made in such Collection Period will be treated as a principal
prepayment and applied to reduce the principal balance of the related
Receivable in such Collection Period and, unless otherwise requested by the
Obligor, the Obligor will not be required to make any scheduled payment in
respect of such Receivable (a "PAID-AHEAD SIMPLE INTEREST RECEIVABLE") for the
number of due dates corresponding to the number of such additional scheduled
payments (the "PAID-AHEAD PERIOD"). During the Paid-Ahead Period, interest will
continue to accrue on the then outstanding principal balance of such Paid-Ahead
Simple Interest Receivable. The Obligor's
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Paid-Ahead Simple Interest Receivable will not be considered delinquent during
the Paid-Ahead Period. The related prospectus supplement will set forth any
Advances required to be made by the Servicer with respect to Paid-Ahead Simple
Interest Receivables.
When the Obligor resumes his or her required payments following the
Paid-Ahead Period, the payments so paid may be insufficient to cover the
interest that has accrued since the last payment by the Obligor.
Notwithstanding such insufficiency, the Obligor's Paid-Ahead Simple Interest
Receivable would be considered current. This situation will continue until the
regularly scheduled payments are once again sufficient to cover all accrued
interest and to reduce the principal balance of the Paid-Ahead Simple Interest
Receivable. Depending on the principal balance and Contract Rate of the related
Receivable, and on the number of payments that were prepaid, there may be
extended periods of time during which Receivables that are current are not
amortizing.
Paid-Ahead Simple Interest Receivables in any Trust will affect the
weighted average life of the related Securities. The distribution of the
paid-ahead amount on the Distribution Date following the Collection Period in
which such amount was received will generally shorten the weighted average life
of such Securities. In addition, to the extent the Servicer makes Advances with
respect to a Paid-Ahead Simple Interest Receivable which subsequently goes into
default, because liquidation proceeds with respect to such Receivable will be
applied first to reimburse the Servicer for such Advances, the loss with
respect to such Receivable may be larger than would have been the case had such
Advances not been made.
The Chase Auto Finance Portfolio has historically included Motor Vehicle
Loans which have been prepaid by one or more scheduled monthly payments. There
can be no assurance as to the number of Receivables which may become Paid-Ahead
Simple Interest Receivables or the number or the principal amount of the
scheduled payments which may be paid-ahead.
If an Obligor with respect to any Actuarial Receivable, in addition to
making his or her regularly scheduled payment, makes one or more additional
scheduled payments in any Collection Period for similar reasons (such
Receivable being a "PAID-AHEAD ACTUARIAL RECEIVABLE" ), the additional
scheduled payments made in such Collection Period may be deposited into the
Paid-Ahead Account, if any, for the related Trust and applied on subsequent
Deposit Dates as described in the related prospectus supplement. See
"Description of the Transfer and Servicing Agreements--Accounts." To the extent
paid-ahead amounts on Paid-Ahead Actuarial Receivables are deposited into the
Paid-Ahead Account, no shortfalls in payment of interest or principal will
result therefrom.
POOL FACTORS AND TRADING INFORMATION
The "NOTE POOL FACTOR" for each class of Notes, if any, will be an
eight-digit decimal which the Servicer will compute prior to each distribution
with respect to such class of Notes expressing the remaining outstanding
principal balance of such class of Notes, as of the applicable 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, if any, will be
an eight-digit decimal which the Servicer will compute prior to each
distribution with respect to such class of Certificates expressing the
remaining Certificate Balance of such class of Certificates, as of the
applicable Distribution Date or Payment Date (after giving effect to
distributions to be made on such Distribution Date or Payment Date), as a
fraction of the initial stated certificate balance (the "CERTIFICATE BALANCE")
of such class of Certificates. Each Note Pool Factor and each Certificate Pool
Factor will be 1.00000000 as of the related Cutoff Date for such series of
Securities 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 Certificate
holder's portion of the aggregate outstanding Certificate Balance for the
related class of Certificates is the product of (a) the original denomination
of such Certificate holder's Certificate and (b) the applicable Certificate
Pool Factor.
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Securityholders will receive monthly reports concerning payments received
on the Receivables, the aggregate principal balance of the Receivables as of
the last day of the preceding Collection Period (calculated as described in the
related prospectus supplement, the "POOL BALANCE"), each Certificate Pool
Factor or Note Pool Factor, as applicable, in each case related to such Trust,
and various other items of information specified in the related prospectus
supplement. 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" in this prospectus.
USE OF PROCEEDS
Unless the related prospectus supplement provides for other applications,
the net proceeds from the sale of the Securities of a given series (after
making the initial deposit into the related Reserve Account, Yield Supplement
Account or Cash Collateral Account, if any, or the deposit of the Pre-Funding
Amount into the related Pre-Funding Account, if any) will be added to the
Seller's general funds.
CHASE USA
Chase USA, a wholly-owned subsidiary of The Chase Manhattan Corporation
("CMC"), was formed in 1982 and is headquartered in Wilmington, Delaware. Chase
USA is currently chartered as a national bank and as such is regulated
primarily by the United States Comptroller of the Currency. Chase USA's
activities are predominantly related to credit card lending and other forms of
consumer lending.
The principal executive office of Chase USA is located at 802 Delaware
Avenue, Wilmington, Delaware 19801, telephone number (302) 575-5000.
CMC is a bank holding company, the principal subsidiary of which is Chase,
a New York state bank.
CMC and J.P. Morgan & Co. Incorporated announced on September 13, 2000
that they have agreed to merge. The merged firm will be named J.P. Morgan Chase
& Co.
The merger agreement, which has been approved by the boards of directors
of both companies, provides that 3.7 shares of CMC common stock will be
exchanged for each share of J.P. Morgan common stock. Each series of preferred
stock of J.P. Morgan will be exchanged for a similar series of preferred stock
of CMC, the surviving corporation of the merger. The transaction is expected to
be accounted for as a pooling of interests and to be tax-free to J.P. Morgan
and CMC stockholders. The transaction is expected to close in the first quarter
of 2001 and is subject to approval by shareholders of both companies, as well
as by U.S. and foreign regulatory authorities.
The wholesale business of the new company will be known globally as J.P.
Morgan and will encompass investment banking (including strategic advisory,
equity and debt capital raising, credit and global trading and market-making
activities), operating services, wealth management, institutional asset
management and private equity operating services. The retail business will be
known as Chase, consisting of credit cards, regional consumer banking, mortgage
banking, diversified consumer lending, insurance and middle-market banking.
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DESCRIPTION OF THE NOTES
GENERAL
A series of Securities may include one or more classes of Notes which will
be issued pursuant to the terms of an indenture (each an "INDENTURE") between
the Trust and the indenture trustee identified in the related prospectus
supplement (each an "INDENTURE TRUSTEE"). The form of Indenture has been filed
as an exhibit to the Registration Statement of which this prospectus forms a
part. The following, as well as other pertinent information included elsewhere
in this prospectus and in the related prospectus supplement, describes the
material terms of the Notes of any series, but does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, the
provisions of such Notes and the related Indenture.
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 a nominee of DTC (together with any successor
depository selected by the Trust (the "DEPOSITORY"), except as set forth below.
PRINCIPAL AND INTEREST ON THE NOTES
The timing and priority of payment, seniority, interest rate (the
"INTEREST RATE") and amount of or method of determining payments of principal
and interest on each class of Notes of a given series will be described in the
related prospectus supplement. The right of holders of any class of Notes 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 Notes entitled to principal payments with disproportionate, nominal
or no interest payments or interest payments with disproportionate, nominal or
no principal payments ("STRIP NOTES"). 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 given series or the method for determining such
Interest Rate. See also "Certain Information Regarding the Securities--Fixed
Rate Securities" and "--Floating Rate Securities" in this prospectus. One or
more classes of Notes of a series may be subject to prepayment or redemption in
whole or in part under the circumstances specified in the related prospectus
supplement, including at the end of any applicable Funding Period or as a
result of the Servicer's exercise of its option to purchase the related
Receivables Pool.
To the extent specified in the related prospectus supplement, one or more
classes of a series of Notes may have fixed principal payment schedules.
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.
Unless the related prospectus supplement specifies that Notes of different
classes within a series will have different priorities, payments to Noteholders
of all classes within a series in respect of interest will have the same
priority. Under certain circumstances, the amount available for such payments
could be less than the amount of interest payable on the Notes on any of the
dates specified for payments in the related prospectus supplement (each, a
"PAYMENT DATE") in which case each class of Noteholders will receive its
ratable share (based upon the aggregate amount of interest due to each such
class of Noteholders) of the aggregate amount available to be distributed in
respect of interest on the Notes of such series. See "Description of the
Transfer and Servicing Agreements--Distributions" and "--Credit and Cash Flow
Enhancement" in this prospectus.
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 of each such class, and any schedule or
25
formula or other provisions applicable to the determination thereof, 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.
To the extent specified in the related prospectus supplement, one or more
classes of a series of Notes may be entitled to receive principal payments
prior to the receipt of principal payments by other classes of the series. If
so provided in the related prospectus supplement, such class or classes of
Notes may have a final scheduled Payment Date of less than 397 days from the
date of the related prospectus supplement and such class or classes may have
received a short-term rating by a Rating Agency that is in one of the two
highest short-term rating categories. The failure to pay such a class of Notes
on or prior to the related final Payment Date would constitute an Event of
Default under the related Indenture.
To the extent specified in the related prospectus supplement, one or more
classes of a series of Notes may be designed to receive principal payments
using a predetermined principal balance schedule (a "planned balance") derived
by assuming two constant prepayment rates for the related Receivables Pool. The
related prospectus supplement will set forth a schedule of the planned balance
of such a class of Notes for each Payment Date. Holders of such a class of
Notes will be entitled to receive principal payments in respect of a Payment
Date only to the extent necessary to reduce the principal balance of such Notes
to the amount set forth as the planned balance for such Payment Date.
To the extent specified in the related prospectus supplement, one or more
classes of a series of Notes may be designed to receive principal payments
using a predetermined principal balance schedule (a "targeted balance") derived
by assuming one constant prepayment rate for the related Receivables Pool. The
related prospectus supplement will set forth a schedule of the targeted balance
of such a class of Notes for each Payment Date. Holders of such a class of
Notes will be entitled to receive principal payments in respect of a Payment
Date only to the extent necessary to reduce the principal balance of such Notes
to the amount set forth as the targeted balance for such Payment Date.
To the extent specified in the related prospectus supplement, one or more
classes of a series of Notes may be designed to receive principal payments on a
Payment Date only if principal payments have been made on a specified planned
amortization class of Notes or targeted amortization class of Notes, and to
receive any excess payments over the amount required to reduce the principal
amount of the planned amortization class or targeted amortization class to the
planned or targeted balance for such Payment Date.
If the Servicer exercises its option to purchase the Receivables of a
Trust in the manner and on the respective terms and conditions described under
"Description of the Transfer and Servicing Agreements--Termination" in this
prospectus, the related outstanding Notes will be prepaid as set forth in the
related prospectus supplement. In addition, if the related prospectus
supplement provides that the property of a Trust will include a Pre-Funding
Account, the related outstanding Notes may be subject to partial prepayment on
or immediately following the end of the related Funding Period in an amount and
manner specified in the related prospectus supplement. In the event of such
partial prepayment, the Noteholders of the related series may be entitled to
receive a prepayment premium, in the amount and to the extent provided in the
related prospectus supplement.
THE INDENTURE
Modification of Indenture. With respect to each Trust that has issued
Notes pursuant to an Indenture, such Trust and the related 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.
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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, no supplemental indenture will:
o change the date of payment of any installment of principal of or
interest on any such Note or reduce the principal amount thereof, the
Interest Rate specified thereon or the redemption price with respect
thereto or change any place of payment where, or the coin or currency
in which, any such Note or any interest thereon is payable,
o impair the right to institute suit for the enforcement of certain
provisions of the related Indenture regarding payment,
o 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 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,
o modify or alter the provisions of the related Indenture regarding the
voting of Notes held by the related Trust, any other obligor on such
Notes, the Seller or an affiliate of any of them,
o reduce the percentage of the aggregate outstanding amount of such
Notes required to direct the related Indenture Trustee to sell or
liquidate the Receivables, the consent of the holders of which is
required if the proceeds of such sale or liquidation would be
insufficient to pay the principal amount and accrued but unpaid
interest on the outstanding Notes of such series,
o decrease the percentage of the aggregate principal amount of such
Notes required to amend the sections of the related Indenture that
specify the applicable percentage of aggregate principal amount of the
Notes of such series necessary to amend such Indenture or certain
other related agreements,
o modify any provisions of the Indenture in such a manner as to affect
the calculation of the amount of any payment of interest or principal
due on any Note on any Payment Date (including the calculation of any
of the individual components of such calculation), or
o 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
collateral for 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 related prospectus supplement, the
related Trust and the related 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 given series, unless otherwise specified in the related prospectus
supplement, "EVENTS OF DEFAULT" under the related Indenture will consist of:
o a default in the payment of any interest on any such Note due and
payable on any Payment Date for a period of five days,
o 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,
o a default in the observance or performance of any covenant or
agreement of the related Trust made in the related Indenture which
default materially and adversely affects the rights of the related
Noteholders, and which default continues for a period of 30 days after
written notice thereof is given to such Trust by the related Indenture
Trustee or to such Trust and such
27
Indenture Trustee by the holders of at least 25% in principal amount of
such Notes then outstanding (or for such longer period, not in excess of
90 days, as may be reasonably necessary to remedy such default; provided
that such default is capable of remedy within 90 days or less) or
o certain events of bankruptcy, insolvency, receivership or liquidation
of the related Trust.
However, 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 related Note Distribution Account (absent
acceleration of the Notes). Therefore, unless otherwise specified in the
related prospectus supplement, the failure to pay principal on a class of Notes
on any Payment Date generally will not result in the occurrence of an Event of
Default until the final scheduled Payment Date for such class of Notes.
If an Event of Default should occur and be continuing with respect to the
Notes of any series, unless otherwise specified in the related prospectus
supplement, 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 declared to be due and payable following an
Event of Default with respect thereto, the related Indenture Trustee may
o institute proceedings to collect amounts due or foreclose on the
related Trust property,
o exercise remedies as a secured party,
o sell the related Receivables or
o elect to have the related 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, the
related Indenture Trustee is prohibited from selling the related Receivables
following an Event of Default, unless
o the holders of all such outstanding Notes consent to such sale,
o the proceeds of such sale are sufficient to pay in full the principal
and the accrued interest on such outstanding Notes at the date of such
sale, or
o there has been an Event of Default arising from a failure to make a
required payment of principal or interest on any such Notes, and such
Indenture Trustee determines that the proceeds of 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 sixty-six and two-thirds percent of the
aggregate outstanding principal amount of such Notes.
If an Event of Default occurs and is continuing with respect to a series
of Notes, the related Indenture Trustee will be under no obligation to exercise
any of the rights or powers under the related 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 given series will have the right to direct
the time, method and place of conducting any proceeding or any remedy available
to the related Indenture Trustee, and the holders of a majority in principal
amount of such Notes then outstanding may, in certain cases, waive any default
with respect thereto, except a default in the payment of principal or interest
or a default in respect of a covenant or provision of such Indenture that
cannot be modified without the waiver or consent of all the holders of such
outstanding Notes.
28
Unless and to the extent the related prospectus supplement specifies other
circumstances in which a holder of a Note of a series will have the right to
institute the proceedings described below, no holder of such a Note will have
the right to institute any proceeding with respect to the related Indenture
unless
o such holder has previously given written notice to the related
Indenture Trustee of a continuing Event of Default,
o 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,
o such holder or holders have offered such Indenture Trustee indemnity
reasonably satisfactory to it against the costs, expenses and
liabilities to be incurred in complying with such request,
o such Indenture Trustee has for 60 days after receipt of such notice,
request and offer of indemnity failed to institute such proceeding,
and
o 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 related Noteholders, by
accepting the related Notes, will covenant that they will not at any time
institute against the related Trust any bankruptcy, reorganization or other
proceeding under any federal or state bankruptcy or similar law.
With respect to any Trust issuing Notes, 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 the related Notes or for the agreements of such Trust contained in
the related Indenture.
CERTAIN COVENANTS
Each Indenture will provide that the related Trust may not consolidate
with or merge into any other entity, unless
o 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,
o such entity expressly assumes such Trust's obligation to make due and
punctual payments of principal and interest on the Notes of the
related series and the performance or observance of every agreement
and covenant of such Trust under the Indenture,
o no Event of Default with respect to such series shall have occurred
and be continuing immediately after such merger or consolidation,
o such Trust has been advised that the rating of the Notes or the
Certificates of such series, if any, then in effect would not be
downgraded or withdrawn by the related Rating Agencies as a result of
such merger or consolidation,
o such action as was necessary to maintain the lien and security
interest created by such Indenture shall have been taken, and
o such Trust has received an opinion of counsel to the effect that such
consolidation or merger would have no material adverse tax consequence
to such Trust or to any related Noteholder or Certificateholder.
29
Each Trust will not, among other things,
o except as expressly permitted by the related Indenture, Transfer and
Servicing Agreements or certain related documents with respect to such
Trust (collectively, the "RELATED DOCUMENTS"), sell, transfer,
exchange or otherwise dispose of any of the properties or assets of
such Trust,
o claim any credit on or make any deduction from the principal or
interest payable in respect of the Notes of the related 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,
o 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,
o permit any lien, charge, excise, claim, security interest, mortgage or
other encumbrance to be created on or extend to or otherwise arise
upon or burden the assets of such Trust or any party thereof, or any
interest therein or the proceeds thereof, or
o permit any lien of such Indenture not to constitute a valid first
priority security interest in such Trust (other than with respect to
any such tax, mechanics' or other lien).
No Trust may engage in any activity other than as specified in the related
prospectus supplement. No Trust will incur, assume or guarantee any
indebtedness other than indebtedness incurred pursuant to the related Notes and
the related Indenture, 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 Trust
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 related
Indenture, the amount, interest rate and maturity date of certain indebtedness
owing by such Trust to the related 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 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 Administrator of the related Trust will be
obligated to appoint a successor indenture trustee for such series. The
Administrator of the related Trust 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 Administrator of the related Trust will be obligated to
appoint a successor trustee for the related series of Notes. If an Event of
Default occurs under an Indenture and the related prospectus supplement
provides that a given class of Notes of the related series is subordinated to
one or more other classes of Notes of such series, pursuant to the Trust
Indenture Act of 1939, as amended, the related Indenture Trustee may be deemed
to have a conflict of interest and be required to resign as trustee for one or
more of such classes of Notes. In any such case, the related Indenture will
provide for a successor trustee to be appointed for one or more of such classes
of Notes and may provide for rights of senior Noteholders to consent to or
direct actions by the related Indenture Trustee which are different from those
of subordinated Noteholders.
30
Any resignation or removal of the Indenture Trustee and appointment of a
successor indenture trustee for any series of Notes will not become effective
until acceptance of the appointment by the successor indenture trustee for such
series.
DESCRIPTION OF THE CERTIFICATES
GENERAL
With respect to each Trust, one or more classes of Certificates of the
related series may 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, as well as other pertinent information included elsewhere in
this prospectus and in the related prospectus supplement, describes the
material terms of the Certificates of any series, but does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
the provisions of such Certificates and the related Trust Agreement or Pooling
and Servicing Agreement, as applicable.
The related prospectus supplement will specify whether each class of
Certificates of the related series will initially be represented by one or more
Certificates, in each case registered in the name of the Depository or its
nominee (except as set forth below) or will be issued in fully registered,
certificated form.
DISTRIBUTIONS OF PRINCIPAL AND INTEREST
The timing and priority of distributions, seniority, allocations of
losses, rate at which interest will accrue (the "PASS THROUGH RATE") and amount
of or method of determining distributions with respect to principal and
interest of each class of Certificates with respect to any series 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 Certificates entitled to distributions in respect of principal with
disproportionate, nominal or no interest distributions, or interest
distributions with disproportionate, nominal or no distributions in respect of
principal ("STRIP CERTIFICATES"). 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 given series
or the method for determining such Pass Through Rate. See also "Certain
Information Regarding the Securities--Fixed Rate Securities" and "--Floating
Rate Securities" in this prospectus. Unless otherwise provided in the related
prospectus supplement, distributions in respect of the Certificates of a given
series that are issued with Notes will be subordinate to payments in respect of
such Notes 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 that includes two or more classes
of Certificates, the timing, sequential order, priority of payment or amount of
distributions in respect of interest and principal on each such class, and any
schedule or formula or other provisions applicable to the determination
thereof, shall be as set forth in the related prospectus supplement.
If the Servicer exercises its option to purchase the Receivables of a
Trust in the manner and on the respective terms and conditions described under
"Description of the Transfer and Servicing Agreements--Termination" in this
prospectus, related Certificateholders will receive as prepayment an amount in
respect of such Certificates specified in the related prospectus supplement. In
addition, if the related prospectus supplement provides that the property of a
Trust will include a Pre-Funding Account, related Certificateholders 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
31
supplement. In the event of such partial prepayment, the Certificateholders may
be entitled to receive a prepayment premium, in the amount and to the extent
provided in the related 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. The
Trustee under each Trust Agreement or Pooling and Servicing Agreement, as
applicable, will perform administrative functions, including, if specified in
the related prospectus supplement, making distributions from the related
Certificate Distribution Account. A Trustee may resign at any time by giving
written notice thereof to the Servicer under the related Pooling and Servicing
Agreement or the Administrator under the related Trust Agreement, in which
event the Servicer or the Administrator, as the case may be, or its successor,
will be obligated to appoint a successor trustee. The Servicer or the
Administrator may also remove the Trustee if such Trustee ceases to be eligible
to continue as Trustee under the related Pooling and Servicing Agreement or
Trust Agreement, as applicable, becomes legally unable to act or if such
Trustee becomes insolvent. In such circumstances, the Servicer or the
Administrator 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
Administrator or the Servicer, as the case may be, will be obligated to
indemnify the Trustee. If the Administrator or Servicer does not provide such
indemnification to the Trustee, the Trustee may be indemnified from the related
Trust, provided, that no indemnification shall be paid on any Distribution Date
or Payment Date, as applicable, until the Securityholders and the Servicer have
been paid all amounts otherwise due on such date and the amount on deposit in
any enhancement account shall equal its required amount.
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 related 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 related prospectus supplement. Unless otherwise set forth in
the related 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" in
this prospectus.
FLOATING RATE SECURITIES
Each class of Floating Rate Securities will bear interest for each related
Interest Reset Period (as such term will be defined in the related prospectus
supplement with respect to a class of Floating Rate Securities, an "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 equals
one one-hundredth of a percentage point) that may be specified in the related
prospectus supplement as being applicable to such class, and the "SPREAD
MULTIPLIER" is the percentage that may be specified in the related prospectus
supplement as being applicable to such class.
The related prospectus supplement will designate a Base Rate for a given
Floating Rate Security based on the London interbank offered rate ("LIBOR"),
commercial paper rates, Federal funds rates, U.S. Government treasury
securities rates, negotiable certificates of deposit rates or another rate as
set forth in such prospectus supplement.
32
As specified in the related 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 related 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
Trustee or any 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
related 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.
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 related 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"); (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 Securities, "STOCK INDEXED
SECURITIES"); or (iv) such other objective price or economic measures as are
described in the related 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 related 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 related prospectus supplement), then
such Index shall be calculated for purposes of such Indexed Security by an
independent calculation agent named in the related 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 related 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 related prospectus supplement, interest
on an Indexed Security will be payable based on the amount designated in the
related prospectus supplement as the "FACE AMOUNT" of such Indexed Security.
The related prospectus supplement will describe whether principal amount of the
related Indexed Security, if any, that would be payable upon redemption or
repayment
33
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
Any class of Securities of a series may be represented by one or more
certificates ("BOOK-ENTRY SECURITIES") registered in the name of Cede & Co.
("CEDE"), the nominee of The Depository Trust Company ("DTC"), and available
only in the form of book-entries on the records of DTC, participating members
thereof (the "PARTICIPANTS") and other entities, such as banks, brokers,
dealers and trust companies, that clear through or maintain custodial
relationships with a Participant, either directly or indirectly ("INDIRECT
PARTICIPANTS").
Securityholders may hold their Securities through DTC (in the United
States) or Cedel Bank, societe anonyme ("CEDEL") or Clearstream Banking,
societe anonyme ("CLEARSTREAM") (in Europe), which in turn hold through DTC, if
they are participants of such systems, or indirectly through organizations that
are participants in such systems.
The 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 any
Book-Entry Securities of any class or series. Unless and until Definitive
Securities are issued under the limited circumstances described in this
prospectus or in the related prospectus supplement, no Securityholder will be
entitled to receive a physical certificate representing its interest in such
Security. All references in this prospectus and in the related prospectus
supplement to actions by Securityholders refer to actions taken by DTC upon
instructions from its Participants and all references in this prospectus and in
the related prospectus supplement to distributions, notices, reports and
statements to Securityholders of Book-Entry Securities refer to distributions,
notices, reports and statements to DTC or its nominee, as the registered holder
of the applicable Securities for distribution to Securityholders in accordance
with DTC's procedures with respect thereto. See "--Definitive Securities" in
this prospectus.
Clearstream and Euroclear will hold omnibus positions on behalf of the
Clearstream Customers and the Euroclear Participants, respectively, through
customers' securities accounts in Clearstream's and Euroclear's names on the
books of their respective depositaries (collectively, the "DEPOSITARIES") which
in turn will hold such positions in customers' securities accounts in the
Depositaries' names on the books of DTC.
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a `clearing
corporation' within the meaning of the New York Uniform Commercial Code and a
`clearing agency' registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC was created to hold securities for its Participants and
facilitate the clearance and settlement of securities transactions between
Participants through electronic book-entry changes in accounts of its
Participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers (who may
include an underwriter with respect to any series), banks, trust companies and
clearing corporations and may include certain other organizations, including
Clearstream and Euroclear. Indirect access to the DTC system also is available
to Indirect Participants such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Participant,
either directly or indirectly.
Transfers between Participants will occur in accordance with DTC rules.
Transfers between Clearstream Customers and Euroclear Participants will occur
in the ordinary way in accordance with their applicable rules and operating
procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC in the United States, on the one hand, and directly or indirectly
through Clearstream Customers 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
34
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. Clearstream Customers and
Euroclear Participants may not deliver instructions directly to the
Depositaries.
Because of time-zone differences, credits or securities in the Clearstream
or Euroclear system 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
Clearstream Customer or Euroclear Participant on such business day. Cash
received in the Clearstream or Euroclear system as a result of sales of
securities by or through a Clearstream Customer or Euroclear Participant to a
Participant will be received with value on the DTC settlement date but will be
available in the relevant Clearstream or Euroclear cash account only as of the
business day following settlement in DTC.
A "SECURITYHOLDER," as used in this prospectus, shall mean a holder of a
beneficial interest in a Book-Entry Security. Unless otherwise provided 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 interest in, Securities may do so only through
Participants and Indirect Participants. In addition, Securityholders will
receive all distributions of principal of and interest on Securities from the
related Trustee or Indenture Trustee, as applicable (the "APPLICABLE TRUSTEE"),
through the Participants, who in turn will receive them from DTC. 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
Cede, as nominee for DTC. DTC will forward such payments to its Participants
which thereafter will forward them to Indirect Participants or Securityholders.
It is anticipated that the only "Noteholder" and "Certificateholder" will be
Cede, as nominee of DTC. Securityholders will not be recognized by the
Applicable Trustee as Noteholders ("NOTEHOLDERS") or Certificateholders
("CERTIFICATEHOLDERS"), as such term is used in the related Pooling and
Servicing Agreement or Trust Agreement and Indenture, as applicable, and
Securityholders will only be permitted to exercise the rights of
Securityholders indirectly through DTC, Clearstream or Euroclear and their
respective participants or organizations.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "RULES"), DTC is required to make book-entry transfers of
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 physically 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 physical certificates 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, as applicable,
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.
35
Clearstream is incorporated under the laws of Luxembourg. Clearstream
holds securities for its customers ("CLEARSTREAM CUSTOMERS") and facilitates
the clearance and settlement of securities transactions between Clearstream
Customers through electronic book entry changes in accounts of Clearstream
Customers thereby eliminating the need for physical movement of certificates.
Transactions may be settled through Clearstream in any of 36 currencies,
including United States dollars. Clearstream provides to its Clearstream
Customers, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. Clearstream also deals with domestic securities markets
in over 30 countries through established depository and custodial
relationships. Clearstream is registered as a bank in Luxembourg, and as such
is subject to regulation by the Commission de Surveillance du Secteur
Financier, which supervises Luxembourg banks. Clearstream Customers are
world-wide financial institutions including underwriters, securities brokers
and dealers, banks, trust companies, clearing corporations and certain other
organizations and may include the underwriters of any series of Securities.
Clearstream Customers in the U.S. are limited to securities brokers and dealers
and banks. Currently, Clearstream has approximately 2,000 customers located in
over 80 counties, including all major European countries, Canada and the United
States. Indirect access to Clearstream is also available to other institutions
that clear through or maintain a custodial relationship with an account holder
of Clearstream. Clearstream has established an electronic bridge with Morgan
Guaranty Trust Company of New York as the operator of the Euroclear system in
Brussels to facilitate settlement of trades between Clearstream and Euroclear.
The Euroclear System ("EUROCLEAR") was created in 1968 to hold securities
for participants of Euroclear ("EUROCLEAR PARTICIPANTS") and to clear and
settle transactions between Euroclear Participants through simultaneous
electronic book-entry delivery against payment, thereby eliminating the need
for physical movement of certificates and any risk from lack of simultaneous
transfers of securities and cash. Transactions may now be settled in any of 27
currencies, including United States dollars. Euroclear includes various other
services, including securities lending and borrowing and interfaces with
domestic markets in several countries generally similar to the arrangement for
cross-market transfers with DTC described above. Euroclear is operated by
Morgan Guaranty Trust Company of New York, Brussels, Belgium office (the
"EUROCLEAR OPERATOR"), under contract with Euroclear Clearance System, S.C., a
Belgian cooperative corporation (the "COOPERATIVE"). All operations are
conducted by the Euroclear Operator, and all Euroclear securities clearance
accounts and Euroclear cash accounts are accounts with the Euroclear Operator,
not the Cooperative. The Cooperative establishes policy for Euroclear on behalf
of Euroclear Participants. Euroclear Participants include banks (including
central banks), securities brokers and dealers and other professional financial
intermediaries and may include an underwriter of any series. Indirect access to
Euroclear is also available to other firms that clear through or maintain a
custodial relationship with a Euroclear Participant, either directly or
indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of Euroclear
and the related Operating Procedures of Euroclear and applicable Belgian law
(collectively, the "TERMS AND CONDITIONS"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawal of securities and
cash from Euroclear, and receipts of payments with respect to securities in
Euroclear. All securities in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
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 Clearstream or
Euroclear will be credited to the cash accounts of Clearstream Customers or
Euroclear Participants in accordance with the relevant
36
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. Clearstream or the Euroclear Operator,
as the case may be, will take any other action permitted to be taken by a
Securityholder under the related Indenture (if any), Trust Agreement or Pooling
and Servicing Agreement, as applicable, on behalf of a Clearstream Customer or
a Euroclear Participant only in accordance with its relevant rules and
procedures and subject to its Depositary's ability to effect such actions on
its behalf through DTC.
Although DTC, Clearstream and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Securities among participants of
DTC, Clearstream and Euroclear, they are under no obligation to perform or
continue to perform such procedures, and such procedures may be discontinued at
any time.
Except as required by law, no Trustee or Indenture Trustee 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,
Clearstream or Euroclear or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
DEFINITIVE SECURITIES
Unless otherwise specified in the related prospectus supplement, any Notes
or Certificates of a given series issued in book-entry form will be issued in
fully registered, certificated form ("DEFINITIVE NOTES" or "DEFINITIVE
CERTIFICATES," as the case may be, and collectively referred to in this
prospectus as "DEFINITIVE SECURITIES") to Noteholders or Certificateholders or
their respective nominees rather than to the Depository or its nominee, only if
o the Servicer advises the Applicable Trustee in writing that the
Depository is no longer willing or able to discharge properly its
responsibilities as depository with respect to such Securities and
such Applicable Trustee is unable to locate a qualified successor
depository,
o the Servicer at its option, elects to terminate the book-entry system
through the Depository or
o after the occurrence of an Event of Default or an Event of Servicing
Termination with respect to such Securities, holders representing at
least a majority of the outstanding principal amount of the related
Notes or the Certificates, as applicable, of such series advise the
Depository through Participants in writing (with instructions to
notify the Applicable Trustee in writing) that the continuation of a
book-entry system through the Depository (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 Depository will be required to notify all applicable
Securityholders of a given series through Participants of the availability of
Definitive Securities. Upon surrender by the Depository 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 with respect to, and interest on, such
Definitive Securities will thereafter be made in accordance with the procedures
set forth in the related Indenture, 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 (whether a Definitive
Security or the Securities registered in the name of Cede representing the
Securities), 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.
37
Definitive Securities will be transferable and exchangeable at the offices
of the related transfer agent and registrar for such series, which, unless
otherwise specified in the related prospectus supplement, shall initially be
Chase (in such capacity, the "TRANSFER AGENT AND REGISTRAR"). 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
Three or more holders of the Notes of any series (each of whom has owned a
Note for at least six months) may, by written request to the related Indenture
Trustee, obtain access to the list of all Noteholders of such series maintained
by such Indenture Trustee for the purpose of communicating with other
Noteholders of such series with respect to their rights under such Indenture or
such Notes. Such Indenture Trustee may elect not to afford the requesting
Noteholders access to the list of such Noteholders if it agrees to mail the
desired communication or proxy, on behalf and at the expense of the requesting
Noteholders, to all Noteholders of record. Unless Definitive Notes have been
issued, the only "Noteholder" appearing on the list maintained by the related
Indenture Trustee will be Cede, as nominee for DTC. In such circumstances, any
beneficial owner of a Note wishing to communicate with other beneficial owners
of Notes will not be able to identify those beneficial owners through the
Indenture Trustee and instead will have to attempt to identify them through DTC
and its Participants or such other means as such beneficial owner may find
available.
Three or more Certificateholders of any series or one or more
Certificateholders evidencing not less than 25% of the Certificate Balance of
such series may, by written request to the related Trustee, obtain access to
the list of all Certificateholders of such series for the purpose of
communicating with such Certificateholders with respect to their rights under
the related Trust Agreement or Pooling and Servicing Agreement, as applicable,
or under such Certificates. Unless Definitive Certificates have been issued,
the only "Certificateholder" appearing on the list maintained by the related
Trustee will be Cede, as nominee for DTC. In such circumstances, any beneficial
owner of a Certificate wishing to communicate with other beneficial owners of
Certificates will not be able to identify those beneficial owners through the
related Trustee and instead will have to attempt to identify them through DTC
and its Participants or such other means as such beneficial owner may find
available.
REPORTS TO SECURITYHOLDERS
With respect to each series of Securities, on each Payment Date or
Distribution Date, as applicable, the Paying Agent will include with each
distribution to each Noteholder (if any) and/or Certificateholder (if any) a
statement prepared by the Servicer. With respect to each series of Securities,
each such statement to be delivered to Noteholders will include (to the extent
applicable), among other things, 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 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:
o the amount of the distribution allocable to principal with respect to
each class of such Notes and to the Certificate Balance of each class
of such Certificates and the derivation of such amounts;
o the amount of the distribution allocable to interest on or with
respect to each class of Notes and each class of Certificates of such
series;
o the amount of the Servicing Fee paid to the Servicer in respect of the
related Collection Period;
o the amount of the Administration Fee paid to the Administrator in
respect of the related Collection Period;
38
o the aggregate unreimbursed Advances as of the last day of the
preceding Collection Period and the change in such amount from the
previous Collection Period;
o the aggregate principal balance of the Receivables as of the close of
business on the last day of the preceding Collection Period;
o 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, in each
case after giving effect to all payments reported under the first
bullet above on such date;
o the Interest Rate or Pass Through Rate for the next period with
respect to any class of Notes or any class of Certificates of such
series with variable or adjustable rates;
o the amount of the aggregate realized losses, if any, for the preceding
Collection Period;
o the amount of any shortfalls in payment of principal of or interest on
any class of Notes or Certificates on earlier Payment Dates or
Distribution Dates, as applicable, and the change in any such amounts
from the preceding statement;
o the aggregate Repurchase Amounts with respect to the Receivables, if
any, that were repurchased by the Seller or purchased by the Servicer
in such Collection Period;
o the balance of the Reserve Account (if any) or any other enhancement
account, as of such date, after giving effect to changes therein on
such date, the amount required to be on deposit in the Reserve Account
or any such other enhancement account on such date and the components
of calculating any such required balance;
o the balance of the Cash Collateral Account, if any, and the amount
required to be on deposit in the Cash Collateral Account;
o for each such date during the Funding Period, if any, the remaining
Pre-Funding Amount;
o for the first such date that is on or immediately following the end of
the Funding Period, if any, the amount of any remaining Pre-Funding
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; and
o the balance in the Paid-Ahead Account, if any.
Each amount set forth in the first four bullets 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.
Unless otherwise specified in the related prospectus supplement, the
statements for each Collection Period will be delivered to DTC for further
distribution to Securityholders in accordance with DTC procedures. See "Certain
Information Regarding the Securities--Book-Entry Registration" in this
prospectus. The Servicer, on behalf of each Trust, will file with the SEC such
periodic reports with respect to each Trust as required under the Exchange Act
and the rules and regulations of the SEC thereunder.
Within the prescribed period of time for tax reporting purposes after the
end of each calendar year during the term of each Trust, the Applicable Trustee
or the Paying Agent will furnish to each person who at any time during such
calendar year has been a Noteholder or Certificateholder 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" in the
related prospectus supplement.
39
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of
o each Sale and Servicing Agreement (or in the case of a Trust not
issuing Notes, each Pooling and Servicing Agreement) pursuant to which
each Trust will acquire Receivables from the Seller and the Servicer
will agree to service such Receivables,
o each Trust Agreement (or, in the case of a Trust not issuing Notes,
each Pooling and Servicing Agreement) pursuant to which each Trust
will be created and
o each Administration Agreement pursuant to which Chase will undertake
certain administrative duties with respect to each Trust that issues
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. The following summary, as well
as other pertinent information included elsewhere in this prospectus and in the
related prospectus supplement, describes the material terms of the Transfer and
Servicing Agreements related to any series. This summary does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
the provisions of such Transfer and Servicing Agreements.
SALE AND ASSIGNMENT OF RECEIVABLES
On or before the closing date specified with respect to any given Trust in
the related prospectus supplement (the "CLOSING DATE"), the Seller will
transfer and assign in consideration of the receipt of the related Securities,
without recourse, to the related Trust pursuant to a Sale and Servicing
Agreement or to the related Trustee pursuant to a Pooling and Servicing
Agreement, as applicable, its entire interest in the Initial Receivables, if
any, certain related property and the proceeds thereof of the related
Receivables Pool, including, among other things, its security interests in the
related Financed Vehicles. Each such Receivable will be identified in a
schedule appearing as an exhibit to such Sale and Servicing Agreement or
Pooling and Servicing Agreement (a "SCHEDULE OF RECEIVABLES"). The Seller will
sell the related Securities offered hereby to the respective underwriters set
forth in the prospectus supplement. See "Plan of Distribution" in this
prospectus. To the extent specified in the related prospectus supplement, a
portion of the net proceeds received from the sale of the Securities of a given
series will be applied to the deposit of the Pre-Funding Amount into the
Pre-Funding Account and/or to the initial deposit into a Reserve Account, a
Cash Collateral Account or a Yield Supplement Account, if any. The related
prospectus supplement for each Trust will specify whether, and the terms,
conditions and manner under which, Subsequent Receivables will be sold by the
Seller to the related Trust from time to time during any Funding Period on each
date specified as a transfer date in the related prospectus supplement (each, a
"SUBSEQUENT TRANSFER DATE").
Each Sale and Servicing Agreement or Pooling and Servicing Agreement, as
applicable, will set forth criteria that must be satisfied by each Receivable.
Unless the related prospectus supplement specifies that certain of the criteria
set forth below are not required to be satisfied, the criteria will include,
among others, the following:
o each Receivable
o in the case of a Receivable originated with the involvement of a
Dealer, has been originated in the form of a credit sales
transaction by a Dealer or a purchase money loan or other note
through a Dealer located in one of the States of the United
States (including the District of Columbia) for the retail
financing of a Financed Vehicle or
o in the case of a Receivable originated without the involvement of
a Dealer, has been originated by the Originating Bank in the form
of a secured loan for the retail financing of a Financed Vehicle,
and
in each case, has been fully and properly executed by the parties thereto;
40
o in the case of a Receivable originated with the involvement of a
Dealer, if a retail installment sales contract, has been
purchased by the Seller from the originating Dealer or an
affiliate of the Seller, and has been validly assigned by such
Dealer or affiliate of the Seller to the Seller in accordance
with its terms or
o in the case of a Receivable originated by the Originating Bank
other than the Seller without the involvement of a Dealer, has
been purchased by the Seller from the Originating Bank, and has
been validly assigned by the Originating Bank to the Seller;
o contains customary and enforceable provisions such that the
rights and remedies of the holder thereof shall be adequate for
realization against the collateral or the benefits of the
security;
o other than a Final Payment Receivable, provides for fully
amortizing level scheduled monthly payments (provided that the
last payment may be different from the level scheduled payment)
and for accrual of interest at a fixed rate according to the
simple interest or actuarial method;
o each Receivable and each sale of the related Financed Vehicle complied
at the time it was originated or made, and complied on and after the
related Cutoff Date in all material respects with all requirements of
applicable federal, state and local laws and regulations thereunder,
including usury laws, the Federal Truth-in-Lending Act, the Equal
Credit Opportunity Act, the Fair Credit Reporting Act, the Federal
Trade Commission Act, the Magnuson-Moss Warranty Act, Federal Reserve
Board Regulations B and Z, state adaptations of the National Consumer
Act and of the Uniform Consumer Credit Code and any other consumer
credit, equal opportunity and disclosure laws applicable to such
Receivable and the sale thereof;
o each Receivable constitutes the legal, valid and binding payment
obligation in writing of the Obligor, enforceable by the holder
thereof in all material respects in accordance with its terms,
subject, as to enforcement, to applicable bankruptcy, insolvency,
reorganization, liquidation and other similar laws and equitable
principles relating to or affecting the enforcement of creditors'
rights;
o subject to certain limited exceptions specified in the Sale and
Servicing Agreement or Pooling and Servicing Agreement, as applicable,
immediately prior to the sale and assignment thereof to the Trustee,
each Receivable was secured by a validly perfected first priority
security interest in the related Financed Vehicle in favor of the
Originating Bank as secured party, which security interest is
assignable and has been so assigned by the Seller to the related
Trust;
o as of the related Cutoff Date, the Seller had no knowledge either of
any facts which would give rise to any right of rescission, setoff,
counterclaim, or defense, or of the same being asserted or threatened,
with respect to any Receivable;
o as of the related Cutoff Date, the Seller had no knowledge of any
liens or claims that have been filed, including liens for work, labor,
materials or unpaid taxes relating to a Financed Vehicle, that would
be liens prior to, or equal or coordinate with, the lien granted by
the Receivable;
o except for payment defaults continuing for a period of not more than
30 days as of the related Cutoff Date,
o the Seller has no knowledge that a default, breach, violation, or
event permitting acceleration under the terms of any Receivable
exists,
o the Seller has no knowledge that a continuing condition that with
notice or lapse of time would constitute a default, breach,
violation or event permitting acceleration under the terms of any
Receivable exists and
o the Seller has not waived any of the foregoing;
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o each Receivable requires that the Obligor thereunder obtain
comprehensive, liability, theft and physical damage insurance covering
the related Financed Vehicle; and
o each Receivable satisfies the other criteria specified above under
"The Receivables Pool" and each other criterion set forth in the
related prospectus supplement.
Unless otherwise provided in the related prospectus supplement, as of the
last day of the month following the date (or, if the Seller elects, the last
day of the month including such date) on which the Seller discovers or receives
written notice from the related Trustee or any Indenture Trustee that a
Receivable does not meet any of the criteria set forth in the related Sale and
Servicing Agreement or Pooling and Servicing Agreement, as applicable, and such
failure materially and adversely affects the interests of the related
Securityholders in such Receivable, the Seller, unless it has cured the failed
criterion, will repurchase such Receivable from the related Trust at a price
equal to the unpaid principal balance owed by the Obligor thereof plus interest
thereon at the respective contract rate of interest through the last day of the
month of repurchase (the "REPURCHASE AMOUNT"). The repurchase obligation will
constitute the sole remedy available to the Certificateholders or the Trustee
and any Noteholders or Indenture Trustee in respect of such Trust for the
failure of a Receivable to meet any of the criteria set forth in the related
Sale and Servicing Agreement or Pooling and Servicing Agreement, as applicable.
Pursuant to each Sale and Servicing Agreement or Pooling and Servicing
Agreement, as applicable, to assure uniform quality in servicing the
Receivables and to reduce administrative costs, the related Trustee or any
Indenture Trustee will appoint the Servicer as initial custodian. Receivables
will not be stamped or otherwise marked to reflect the transfer of the
Receivables to a Trust and will not be segregated from the other Motor Vehicle
Loans owned or serviced by the Servicer. The Obligors under the Receivables
will not be notified of the transfer of the Receivables to a Trust, but the
Seller's accounting records and computer systems will reflect the sale and
assignment of the Receivables to such Trust. See "Certain Legal Aspects of the
Receivables" in this prospectus.
ACCOUNTS
Each Trust that issues Notes will establish and maintain one or more
accounts, in the name of the Indenture Trustee on behalf of the related
Noteholders and any Certificateholders, into which all payments made on or with
respect to the related Receivables 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, to the extent and in the manner described in the
related prospectus supplement, amounts released from the Collection Account and
any Pre-Funding Account, Cash Collateral Account, Yield Supplement Account,
Reserve Account or other credit or cash flow enhancement for payment to such
Noteholders will be deposited and from which all distributions to such
Noteholders will be made (the "NOTE DISTRIBUTION ACCOUNT"). With respect to
each Trust that issues certificates, the Trustee or 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, Cash Collateral Account, Yield
Supplement Account, Reserve Account or other credit or cash flow enhancement
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.
If so provided in the related prospectus supplement, the Trust or the
Servicer may establish and maintain for the related Trust an additional account
(the "PAID-AHEAD ACCOUNT"), in the name of the related Indenture Trustee or
Trustee, into which, to the extent required by the related Sale and Servicing
Agreement or Pooling and Servicing Agreement, as applicable, early payments by
or on behalf of Obligors on Actuarial Receivables which do not constitute
scheduled payments, full prepayments, nor certain partial prepayments that
result in a reduction of the Obligor's periodic payment below the scheduled
payment as of the applicable Cutoff Date ("PAID-AHEADS") will be
42
deposited until such time as the Paid-Ahead falls due. Until such time as
Paid-Aheads are transferred from the Paid-Ahead Account to the Collection
Account, they will not be included in collections on the Receivables and will
not be available for distribution to the related Securityholders. The
Paid-Ahead Account, if any, will initially be maintained with the related
Indenture Trustee or Trustee. So long as the Seller is the Servicer and
provided that (i) there exists no Event of Servicing Termination and (ii) each
other condition to holding Paid-Aheads as may be required by the related Sale
and Servicing Agreement or Pooling and Servicing Agreement, as applicable, is
satisfied, Paid-Aheads may be retained by the Servicer until the applicable
Payment Date or Distribution Date.
Any other accounts to be established with respect to a Trust, including
any Pre-Funding Account, Cash Collateral Account, Yield Supplement Account or
Reserve Account will be described in the related prospectus supplement.
For any series of Securities, the Collection Account and any Note
Distribution Account, Certificate Distribution Account, Pre-Funding Account,
Cash Collateral Account, Reserve Account, Yield Supplement Account, Paid-Ahead
Account and other accounts identified as such in the related prospectus
supplement are collectively referred to in this prospectus as the "TRUST
ACCOUNTS".
The Trust Accounts will be maintained as Eligible Deposit Accounts. An
"ELIGIBLE DEPOSIT ACCOUNT" for any series shall be either
o a separately identifiable deposit account established in the deposit
taking department of a Qualified Institution or
o a segregated identifiable trust account established in the trust
department of a Qualified Trust Institution.
A "QUALIFIED INSTITUTION" shall be a depository institution (including Chase
USA or Chase) organized under the laws of the United States or any state
thereof or incorporated under the laws of a foreign jurisdiction with a branch
or agency located in the United States or any state thereof and subject to
supervision and examination by federal or state banking authorities, having a
short-term certificate of deposit rating and a long-term unsecured debt rating
confirmed by each Rating Agency as being consistent with the ratings of the
related Securities and, in the case of any such institution (including Chase
USA or Chase) organized under the laws of the United States, the deposits of
which are insured by the FDIC. A "QUALIFIED TRUST INSTITUTION" shall be an
institution organized under the laws of the United States or any state thereof
or incorporated under the laws of a foreign jurisdiction with a branch or
agency located in the United States and subject to supervision and examination
by federal or state banking authorities with the authority to act under such
laws as a trustee or in any other fiduciary capacity, having not less than $1
billion in assets under fiduciary management and a long-term deposit rating
confirmed by each Rating Agency as being consistent with the ratings of the
related Securities. Unless the related prospectus supplement specifies that a
Trust Account will be established with another institution, each Trust Account
will be established initially with the trust department of Chase. Should Chase
or any depositary of a Trust Account cease to be a Qualified Institution or
Qualified Trust Institution, such Trust Account shall be moved to a Qualified
Institution or Qualified Trust Institution, provided that such Trust Account
may remain at such depositary if the Applicable Trustee receives written
confirmation from each related Rating Agency to the effect that the ratings of
the related Securities will not be adversely affected.
If so provided in the related prospectus supplement, funds in the Trust
Accounts will be invested as provided in the related Sale and Servicing
Agreement or Pooling and Servicing Agreement, as applicable, in Permitted
Investments. "PERMITTED INVESTMENTS" are generally limited to investments
confirmed by the related Rating Agencies as being consistent with the rating of
the related Securities. Permitted Investments may include Securities issued by
the Seller or its affiliates or trusts originated by the Seller or its
affiliates, and may also include certain money market mutual funds for which
Chase or any of its affiliates serves as an investment advisor, administrator,
shareholder servicing agent and/or custodian or subcustodian (for which it
collects fees and expenses). Except as described below or in the related
prospectus supplement, Permitted Investments are limited to obligations or
securities
43
that mature on or before the "BUSINESS DAY" (as defined in the related
prospectus supplement) preceding the next Distribution Date or Payment Date for
such series (each such preceding day, a "DEPOSIT DATE"). However, to the extent
set forth in the related prospectus supplement and consistent with the ratings
of the related Securities, funds in any Cash Collateral Account, Reserve
Account or Yield Supplement Account may be invested in securities that will not
mature prior to the next Deposit Date with respect to such Certificates or
Notes and will not be sold to meet any shortfalls. Thus, the amount of cash in
any Cash Collateral Account, Reserve Account or Yield Supplement Account at any
time, for example, may be less than the balance of the Cash Collateral Account,
Reserve Account or Yield Supplement Account. If the amount required to be
withdrawn from any Cash Collateral Account, Reserve Account or Yield Supplement
Account to cover shortfalls in collections on the related Receivables (as
provided in the related prospectus supplement) exceeds the amount of cash in
such Cash Collateral Account, Reserve Account or Yield Supplement Account, a
temporary shortfall in the amounts distributed to the related Securityholders
could result, which could, in turn, increase the average life of the Securities
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 paid to the Servicer as additional servicing compensation.
Chase, in its capacity as the initial paying agent (the "PAYING AGENT")
under each related Sale and Servicing Agreement and Indenture or Pooling and
Servicing Agreement, as applicable, will have the revocable right to withdraw
funds from a Trust Account for the purpose of making distributions to
Securityholders in the manner provided therein.
SERVICING PROCEDURES
The Servicer will service the Receivables in each Receivables Pool and
will make reasonable efforts to collect all payments due with respect to such
Receivables and, in a manner consistent with the related Sale and Servicing
Agreement or Pooling and Servicing Agreement, as applicable, and with the terms
of the Receivables, will follow such collection and servicing procedures as it
follows with respect to comparable new or used automobile receivables that it
services for itself and that are consistent with prudent industry standards.
The related prospectus supplement, Pooling and Servicing Agreement and Sale and
Servicing Agreement, as applicable, will set forth the terms and conditions in
accordance with which any Receivable may be modified, which terms will be set
forth in the related prospectus supplement. Some of such arrangements may
result in the Servicer's purchasing the Receivable for the Repurchase Amount,
while others may result in the Servicer's making Advances. Any such required
purchase or extension will constitute the sole remedy available to the
Securityholders or any related Applicable Trustee for any such uncured breach.
Each Sale and Servicing Agreement and Pooling and Servicing Agreement, as
applicable, will provide that the Servicer, on behalf of the related Trust,
shall use reasonable efforts, consistent with its customary servicing
procedures, to repossess or otherwise take possession of the Financed Vehicle
securing any Receivable with respect to which the Servicer shall have
determined, during any Collection Period, that eventual payment in full of the
amount financed (including accrued interest thereon) is unlikely (each such
Receivable, a "DEFAULTED RECEIVABLE"); provided that no Receivable will become
a Defaulted Receivable any later than the calendar month in which more than 10%
of a scheduled payment of the Motor Vehicle Loan becomes 240 days delinquent.
See "The Receivables Pools--Insurance and Collection Procedures" in this
prospectus. The Servicer shall follow such customary and usual practices and
procedures as it shall deem necessary or advisable in its servicing of new or
used automobile receivables, which may include reasonable efforts to realize
upon any recourse to Dealers, consigning the Financed Vehicle to a Dealer for
resale and selling the Financed Vehicle at public or private sale. See "Certain
Legal Aspects of the Receivables" in this prospectus. The proceeds of any such
realization will be deposited in the related Collection Account.
COLLECTIONS
With respect to each Trust, the Servicer will deposit all payments on the
related Receivables (from whatever source) and all proceeds of such Receivables
collected during each collection period
44
specified in the related prospectus supplement (each, a "COLLECTION PERIOD")
into the related Collection Account on a daily basis within forty-eight hours
of receipt. However, at any time that and for so long as (i) the Seller is also
the Servicer, and (ii) each other condition to making deposits less frequently
than daily as may be confirmed by the related Rating Agencies or any
enhancement provider or as 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 Deposit Date preceding the related
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 letters 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 Repurchase
Amount with respect to Receivables purchased by the Servicer.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Unless otherwise specified in the related prospectus supplement with
respect to any Trust, the Servicer will be entitled to receive the Servicing
Fee for each Collection Period payable on the related Distribution Date in an
amount equal to the sum of (i) the product of one-twelfth of the specified
percentage per annum (as set forth in the related prospectus supplement, the
"SERVICING FEE RATE") and the aggregate principal balance of the Receivables as
of the close of business on the last day of the second Collection Period
immediately preceding the Collection Period in which such Distribution Date
occurs and (ii) unless otherwise specified in the related prospectus supplement
with respect to any Trust, any Late Fees collected during the related
Collection Period (collectively, the "SERVICING FEE"). The Servicing Fee will
also include Investment Earnings to the extent set forth in the related
prospectus supplement. The Servicing Fee (together with any portion of the
Servicing Fee that remains unpaid from prior Distribution Dates or Payments
Dates) will be paid solely to the extent of amounts allocable thereto as
specified in the related prospectus supplement. The Servicer will be entitled
to reimbursement from each Trust for certain liabilities.
"LATE FEES" shall mean, collectively, any late charges, credit-related
extension fees, non-credit related extension fees or other administrative fees
or similar charges allowed by applicable law with respect to the related
Receivables.
The Servicing Fee will compensate the Servicer for performing the
functions of a third-party servicer of motor vehicle receivables as an agent
for the Securityholders, including collecting and posting all payments and
responding to inquiries of Obligors, investigating delinquencies, reporting tax
information to Obligors, advancing costs of disposition of defaults. The
Servicing Fee also will compensate the Servicer for administering the
particular Receivables Pool, accounting for collections and furnishing monthly
and annual statements to the related Applicable Trustee with respect to
distributions. The Servicing Fee will also compensate the Servicer for certain
taxes, accounting fees, outside auditor fees, the fees of the Paying Agent, the
Transfer Agent and Registrar, the related Trustee and the Indenture Trustee, if
any, and its counsel, data processing costs and other costs incurred in
connection with administering the applicable Receivables Pool.
ADVANCES
The prospectus supplement may provide that the Servicer may, in its sole
discretion, make a payment (an "ADVANCE") with respect to each delinquent
Receivable in the related Receivables Pool in an amount described in such
prospectus supplement. The Servicer may elect not to make any Advance with
respect to a Receivable under the circumstances described in the related
prospectus supplement. The Servicer will be entitled to be reimbursed for
outstanding Advances in the manner described in the related prospectus
supplement. The Servicer will deposit all Advances with respect to any Payment
Date or Distribution Date, as applicable, on the related Deposit Date.
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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 related Applicable Trustee or Paying Agent to the
Noteholders and the Certificateholders of such series. The timing, calculation,
allocation, order, source, priorities of and requirements for all payments to
any class of Noteholders of such series and all distributions to any class of
Certificateholders of such series will be set forth in the related prospectus
supplement.
With respect to each Trust, on each Payment Date and Distribution Date, as
applicable, collections on the related Receivables will be transferred from the
Collection Account directly to the Note Distribution Account, if any, and the
Certificate Distribution Account, if any, for distribution to Noteholders and
Certificateholders to the extent provided in the related prospectus supplement.
Credit enhancement, such as a Cash Collateral Account, Reserve Account or Yield
Supplement 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
respect of one or more classes of Securities of such series may be subordinate
to payments in respect of one or more other classes of Securities of such
series.
CREDIT AND CASH FLOW ENHANCEMENT
The amounts and types of credit and cash flow enhancement arrangements, if
any, and the provider thereof, if applicable, with respect to each class of
Securities of a given series 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, a Cash Collateral Guaranty supported by a Cash
Collateral Account, a Reserve Account, a Yield Supplement Agreement, a Yield
Supplement Account, over-collateralization, letters of credit, credit or
liquidity facilities, surety bonds, guaranteed investment contracts, swaps or
other interest rate protection agreements, repurchase obligations, 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 related prospectus supplement, credit or cash flow enhancement for a class
of Securities may cover one or more other classes of Securities of the same
series, and credit or cash flow enhancement for a series of Securities may
cover one or more other series of Securities.
The presence of a Cash Collateral Guaranty, a Yield Supplement Agreement,
a Reserve Account, a Yield Supplement 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 that exceed the amount
covered by any credit enhancement or that are not covered by any form of 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.
The Seller may replace or reduce the credit enhancement for any class of
Securities with another form of credit enhancement without the consent of the
related Securityholders, provided the related Rating Agencies confirm in
writing that such substitution or reduction will not result in the reduction,
qualification or withdrawal of the rating of such class of Securities or any
class of Securities of the related Series.
46
Reserve Account. If provided in the related prospectus supplement,
pursuant to the related Sale and Servicing Agreement, the Trust 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 in the
name of the related Indenture Trustee. Unless otherwise provided in the related
prospectus supplement, the Reserve Account will be included in the property of
the related Trust. The Reserve Account will be funded by an initial deposit on
the Closing Date, and if the related Series has a Funding Period, will also be
funded on each Subsequent Transfer Date. The related prospectus supplement will
specify whether the Reserve Account will be funded solely from the proceeds of
a loan or loans to be made by a third party pursuant to a loan agreement (each
a "LOAN AGREEMENT"), from a deposit or deposits by the Trust, or by a
combination thereof. As described in the related prospectus supplement, the
amount on deposit in the Reserve Account will be increased on each Payment Date
or Distribution Date, as applicable, up to the amount required to be on deposit
therein as described in the related prospectus supplement by the deposit
therein of the amount of collections on the related Receivables remaining on
each such Payment Date or Distribution Date, as applicable, after the payment
of all other required payments and distributions on such date. Amounts in the
Reserve Fund will be available to cover shortfalls in amounts due to the
holders of those classes of Securities specified in the related prospectus
supplement in the manner and under the circumstances specified therein. The
related prospectus supplement will describe the circumstances and manner under
which distributions may be made out of the related Reserve Account, either to
holders of the Securities covered thereby, to the Seller or to a third-party
specified therein.
Cash Collateral Guaranty. If provided in the related prospectus supplement
with respect to a Trust classified as a grantor trust, the related Trustee will
have the right to demand payments under a Cash Collateral Guaranty under the
circumstances described therein. Each Cash Collateral Guaranty will be secured
by an account (each, a "CASH COLLATERAL ACCOUNT"), which will be held in the
name of a cash collateral trustee (the "CASH COLLATERAL TRUSTEE"), as specified
in the related prospectus supplement. The related prospectus supplement will
specify whether the Cash Collateral Account will be funded on the date of the
issuance of the related series of Securities from the proceeds of a loan to be
made by a third party (a "CASH COLLATERAL DEPOSITOR") pursuant to a Loan
Agreement, from a deposit by the Seller or by a combination thereof. To the
extent specified in the related prospectus supplement, funds in the related
Cash Collateral Account will thereafter be supplemented by the deposit of
amounts remaining on any Distribution Date after making all other distributions
required on such date. Each Cash Collateral Guaranty will not be a recourse
obligation of the related Cash Collateral Depositor, any Cash Collateral
Trustee, any related Trustee or Chase USA, as Seller or as Servicer, and will
be secured solely with amounts, if any, on deposit in the related Cash
Collateral Account. Unless otherwise specified in the related prospectus
supplement, such Cash Collateral Account and any amounts therein will not be
the property of any Trust, but will be held in accordance with the related Cash
Collateral Trust Agreement as further described therein. The related prospectus
supplement will describe the circumstances and manner under which distributions
may be made out of any Cash Collateral Account, either to the holders of the
Securities covered thereby, to the Seller, to the Cash Collateral Depositor or
to a third party specified therein.
Yield Supplement Account; Yield Supplement Agreement. If so provided in
the related prospectus supplement, the Seller or a third party will enter into
a Yield Supplement Agreement and/or establish a Yield Supplement Account with
the related Indenture Trustee or related Trustee for the benefit of the holders
of the related Securities. A Yield Supplement Agreement or a Yield Supplement
Account will be designed to provide payments to the Securityholders in respect
of Receivables the Contract Rate of which is less than the minimum required
rate described in the related prospectus supplement. A Yield Supplement Account
may be an asset of the obligor under the Yield Supplement Agreement holding
funds to secure the obligation of such obligor to make payments under such
Yield Supplement Agreement or, in the case of a Trust that is not classified as
a grantor trust, may be an asset of the Trust from which cash may periodically
be withdrawn to provide payments to the Securityholders.
NET DEPOSITS
As an administrative convenience, the Seller, so long as it is Servicer
and is permitted to make deposits to the Collection Account on a monthly basis,
will be permitted to deposit the collections,
47
aggregate Advances and Repurchase Amounts for any Trust for or with respect to
the related Collection Period net of distributions to be made to the Servicer
or the Seller for such Trust with respect to such Collection Period (remitting
amounts to the Seller directly). 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 Payment Date or Distribution Date, as applicable, with
respect to each series of Securities, the Servicer will provide to the related
Trustee and any Indenture Trustee a statement setting forth substantially the
same information for such date and the related Collection Period as is required
to be provided in the periodic reports provided to Securityholders of such
series described in this prospectus under "Certain Information Regarding the
Securities--Reports to Securityholders."
EVIDENCE AS TO COMPLIANCE
Each Sale and Servicing Agreement or Pooling and Servicing Agreement, as
applicable, will provide that a firm of independent public accountants will
annually furnish to the related Trustee and any Indenture Trustee a statement
as to compliance by the Servicer during the preceding twelve months (or, in the
case of the first such certificate, from the applicable Closing Date) with
certain standards relating to the servicing of the applicable Receivables, or
as to the effectiveness of its processing and reporting procedures and certain
other matters.
Each Sale and Servicing Agreement or Pooling and Servicing Agreement, as
applicable, will also provide for delivery to the related firm of independent
public accountants referred to in the immediately preceding paragraph,
substantially simultaneously with the delivery or such accountants' statement
referred to above, of a certificate signed by an officer of the Servicer
stating that the Servicer has fulfilled its obligations in all material
respects under such 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.
Copies of such statements and certificates may be obtained by
Securityholders by a request in writing addressed to the Servicer.
CERTAIN MATTERS REGARDING THE SERVICER
Each Sale and Servicing Agreement or Pooling and Servicing Agreement, as
applicable, will provide that the Servicer may not resign from its obligations
and duties as Servicer thereunder, except
o upon determination that the Servicer's performance of such duties is
no longer permissible under applicable law or
o in the event of the appointment of a successor servicer, upon
notification by each Rating Agency then rating any of the related
Securities that the rating then assigned to any such Securities will
not be reduced or withdrawn.
Such resignation will not become effective until the related Trustee (which
shall not be obligated to act as successor servicer if the Servicer has
resigned for a reason other than that the performance of its duties are no
longer permissible under applicable laws), Indenture Trustee (if any) or a
successor servicer has assumed the Servicer's servicing responsibilities and
obligations under such Sale and Servicing Agreement or Pooling and Servicing
Agreement, as applicable.
Each Sale and Servicing Agreement or Pooling and Servicing Agreement, as
applicable, will also provide that, except in connection with a merger or
consolidation, neither the Seller nor the Servicer may transfer or assign all,
or a portion of, its rights, obligations and duties under any Sale and
Servicing Agreement or Pooling and Servicing Agreement, unless
48
o such transfer or assignment will not result in a reduction or
withdrawal by each Rating Agency then rating any of the related
Securities of the rating then assigned to any such Securities and the
Indenture Trustee (if any) and the related Trustee have consented to
such transfer or assignment or
o the Indenture Trustee (if any), the related Trustee and holders of
Securities evidencing not less than 51% of the voting interests
thereof consent thereto.
Any transfer or assignment with respect to the Servicer of all of its rights,
obligations and duties will not become effective until a successor servicer has
assumed the Servicer's rights, obligations and duties under the related Sale
and Servicing Agreement or Pooling and Servicing Agreement, as applicable.
Each Sale and Servicing Agreement or Pooling and Servicing Agreement, as
applicable, will also provide that so long as Chase USA (or its successor or
assign) or the Trustee is the Servicer, in the ordinary course of its business,
the Servicer will have the right to delegate any of its duties under the
related Sale and Servicing Agreement or Pooling and Servicing Agreement, as
applicable, to a third party. Any compensation payable to such third party will
be paid by the Servicer from its own funds, and none of the related Trust,
Trustee (if not the Servicer), Indenture Trustee (if any) or Securityholders
will be liable for such compensation. Notwithstanding any delegation of duties
by the Servicer, the Servicer will not be relieved of its liability and
responsibility with respect to such duties.
Each Sale and Servicing Agreement or Pooling and Servicing Agreement, as
applicable, will further provide that neither the Servicer nor any of its
directors, officers, employees, and agents shall be under any liability to the
related Trust, Trustee, Indenture Trustee (if any) or Securityholders for
taking any action or for refraining from taking any action pursuant to the
related Sale and Servicing Agreement or Pooling and Servicing Agreement, as
applicable; provided, however, 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 gross negligence in the performance
of duties or by reason of reckless disregard of obligations and duties
thereunder.
Each Sale and Servicing Agreement or Pooling and Servicing Agreement, as
applicable, will further provide that the Servicer, and its directors,
officers, employees and agents are entitled to indemnification by the related
Trust for, and will be held harmless against, any loss, liability or expense
incurred in connection with any legal action relating to their performance of
servicing duties under the related Sale and Servicing Agreement or Pooling and
Servicing Agreement, as applicable, that is not otherwise indemnified, other
than
o any loss or liability otherwise reimbursable thereunder and
o any loss, liability, or expense incurred by reason of willful
misconduct, negligence or bad faith in performance of their duties
thereunder or by reason of their reckless disregard of obligations and
duties thereunder;
provided, however, that such indemnification will be paid on a Payment Date or
Distribution Date only from amounts in excess of the amount required to be
maintained on deposit in the related enhancement account, or if there is no
such enhancement account, only after all payments or deposits required under
the related Sale and Servicing Agreement or Pooling and Servicing Agreement, as
applicable, for the benefit of Securityholders and the Servicer have been made.
In addition, each Sale and Servicing Agreement or Pooling and Servicing
Agreement, as applicable, 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 the related Sale and Servicing
Agreement or Pooling and Servicing Agreement, as applicable, and that, in its
opinion, may cause it to incur any expense or liability. The Servicer may,
however, undertake any reasonable action that it may deem necessary or
desirable in respect of such Sale and Servicing Agreement or Pooling and
Servicing Agreement, as applicable, and the rights and duties of the parties
thereto and the interests of the related Securityholders thereunder. In such
event, the legal expenses and costs of such action and any liability resulting
therefrom will be expenses, costs and liabilities of the related Trust
49
and the Servicer will be entitled to be reimbursed therefor out of the related
enhancement account; provided, however, that such reimbursement will be paid on
a Payment Date or Distribution Date only from amounts in excess of the amount
required to be maintained on deposit in the related enhancement account, or if
there is no such enhancement account, only after all payments required under
the related Sale and Servicing Agreement or Pooling and Servicing Agreement, as
applicable, for the benefit of Securityholders or the Servicer have been made.
EVENTS OF SERVICING TERMINATION
Except as otherwise provided in the related prospectus supplement, "EVENTS
OF SERVICING TERMINATION" under each Sale and Servicing Agreement or Pooling
and Servicing Agreement, as applicable, will consist of
o any failure by the Servicer to deliver to the related Trustee or any
Indenture Trustee the Servicer's certificate for the related
Collection Period or any failure by the Servicer to deliver to the
related Trustee or any Indenture Trustee for deposit in any Trust
Account any proceeds or payments required to be delivered under the
terms of such Securities or the related Sale and Servicing Agreement
or Pooling and Servicing Agreement (or, in the case of a payment or
deposit to be made not later than the Deposit Date, the failure to
make such payment or deposit on such Deposit Date), which failure
continues unremedied for five Business Days after discovery by the
Servicer or upon receipt of written notice to the Servicer by the
related Trustee or Indenture Trustee or to the related Trustee or
Indenture Trustee and the Servicer by holders of the related Notes
evidencing not less than 25% of the principal amount of such Notes
then outstanding (or, if no Notes are outstanding, Certificates of the
related series evidencing not less than 25% of the Certificate Balance
then outstanding);
o any failure by the Servicer to duly observe or perform in any material
respect any other covenant or agreement of the Servicer set forth in
the related Sale and Servicing Agreement or Pooling and Servicing
Agreement or Indenture, which failure materially and adversely affects
the rights of the related Trust or the Securityholders (which
determination shall be made without regard to whether funds are
available to the Securityholders pursuant to any related enhancement)
and which continues unremedied for 60 days after the date of written
notice of such failure to the Servicer by the related Trustee or any
Indenture Trustee or to the related Trustee or any Indenture Trustee
and the Servicer by holders of the related Notes (so long as Notes are
outstanding) evidencing not less than 25% of the principal amount of
such Notes then outstanding (or, if no Notes are outstanding,
Certificates of the related series evidencing not less than 25% of the
Certificate Balance then outstanding);
o the entry of a decree or order by a court or agency or supervisory
authority having jurisdiction in the premises for the appointment of a
conservator, receiver or liquidator for the Servicer in any
insolvency, readjustment of debt, marshalling of assets and
liabilities, or similar proceedings, or for the winding up or
liquidation of its affairs, and the continuance of any such decree or
order is unstayed and effective for 60 consecutive days; or
o the consent by the Servicer to the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities, or similar proceedings of or
relating to the Servicer or of or relating to substantially all of its
property, or the Servicer admits in writing its inability to pay its
debts generally as they become due, files a petition to take advantage
of any applicable insolvency or reorganization statute, makes an
assignment for the benefit of its creditors, or voluntarily suspends
payment of its obligations.
RIGHTS UPON EVENT OF SERVICING TERMINATION
In the case of any Trust that has issued Notes, unless otherwise provided
in the related prospectus supplement, as long as an Event of Servicing
Termination under a Sale and Servicing Agreement remains unremedied, the
related Indenture Trustee or holders of Notes of the related series evidencing
not less than a majority of the principal amount of such Notes then outstanding
(or, if the
50
Notes have been paid in full and the Indenture has been discharged in
accordance with its terms, by the related Trustee or holders of Certificates
evidencing not less than a majority of the Certificate Balance 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 an Event of Servicing
Termination under the related Sale and Servicing Agreement or Pooling and
Servicing Agreement, as applicable, remains unremedied, the related Trustee or
holders of Certificates of the related series evidencing not less than a
majority of the Certificate Balance then outstanding, by notice given in
writing to the Servicer (and to the related Trustee if given by
Certificateholders), may terminate all the rights and obligations of the
Servicer under such Sale and Servicing Agreement or Pooling and Servicing
Agreement, whereupon such Trustee or a successor servicer appointed by such
Trustee will succeed to all the rights, duties and liabilities of the Servicer
under such Sale and Servicing Agreement or Pooling and Servicing Agreement and
will be entitled to similar compensation arrangements. 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 Servicer to act as successor to the outgoing Servicer. Such Indenture
Trustee or Trustee may make such arrangements for compensation to be paid,
which in no event may be greater than the Servicing Fee paid to the Servicer
under 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 evidencing
at least a majority in principal amount of the then outstanding Notes of the
related series (or, the holders of any Certificates of such series evidencing
not less than a majority of the Certificate Balance then outstanding, in the
case of any Event of Servicing Termination that 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 an Event of Servicing Termination in making any
required deposits to or payments from any of the Trust Accounts in accordance
with such Sale and Servicing Agreement. Therefore, the Noteholders of a series
have the ability, as limited above, to waive defaults by the Servicer which
could materially and adversely affect the related Securityholders. With respect
to each Trust that has not issued Notes, holders of Certificates of such series
evidencing not less than a majority of the Certificate Balance then outstanding
may, on behalf of all such Certificateholders, with the consent of the provider
of any enhancement, waive any default by the Servicer in the performance of its
obligations under the related Sale and Servicing Agreement or Pooling and
Servicing Agreement, as applicable, except an Event of Servicing Termination in
making any required deposits to or payments from the related Trust Accounts in
accordance with such Sale and Servicing Agreement or Pooling and Servicing
Agreement as applicable. No such waiver will impair such Securityholders'
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 prior notice to the related Securityholders but with prior consent of
the related Applicable Trustee and prior notice to any related Rating Agencies
o to cure any ambiguity, to correct or supplement any provision therein
or in the related Securities which may be inconsistent with any other
provision therein,
o to evidence a succession to the Servicer or the Seller pursuant to the
related Transfer and Servicing Agreement,
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o to add any other provisions with respect to matters or questions
arising under such Transfer and Servicing Agreement that are not
inconsistent with the provisions of such Transfer and Servicing
Agreement; provided, that such action will not, on the basis of an
officer's certificate and/or opinion of counsel reasonably acceptable
to the related Trustee and any Indenture Trustee, materially and
adversely affect the interests of the related Trust or any related
Securityholders or
o to effect a transfer or assignment of the Trust's or the Servicer's
rights, obligations and duties under such Transfer and Servicing
Agreement.
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, if any, of the related series evidencing at least a
majority of the Certificate Balance 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 Securityholders; provided, however, that no such
amendment may
o 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
Securityholders, or
o reduce the aforesaid percentage of the Notes or Certificates of such
series which are required to consent to any such amendment,
in each case, without the consent of the holders of all the outstanding Notes
or Certificates, as the case may be, of such series.
PAYMENT OF NOTES
Upon the payment in full of all outstanding Notes of a given series and
the satisfaction and discharge of the related Indenture, the related Trustee
will succeed to all the rights of the Indenture Trustee, and any
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.
TERMINATION
With respect to each Trust, the obligations of the Servicer, the Seller,
the related Trustee and any related Indenture Trustee, if any, pursuant to the
Transfer and Servicing Agreements will terminate upon the earlier of
o the Distribution Date or Payment Date next succeeding the month that
is six months after the maturity or other liquidation of the last
related Receivable and the disposition of any amounts received upon
liquidation of any property remaining in the related Trust and
o the payment to Securityholders of the related series of all amounts
required to be paid to them pursuant to the Transfer and Servicing
Agreements.
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 last day of any applicable
Collection Period, if the then outstanding aggregate principal balance of the
Receivables held by such Trust is the percentage specified in the prospectus
supplement or less of the initial aggregate principal balance of the
Receivables held by the Trust (the "ORIGINAL POOL BALANCE"), all the remaining
related Receivables at a price equal to the aggregate of the Repurchase Amounts
thereof as of the end of such Collection Period.
As more fully described in the related prospectus supplement, any
outstanding Notes of the related series will be prepaid in full concurrently
with the purchase event specified above and the
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subsequent distribution to any 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.
The related Trustee and any related Indenture Trustee will give written
notice of termination to each Securityholder of the related series of record,
which notice will specify the Distribution Date and/or Payment Date upon which
such Securityholders may surrender their Securities to the related Trustee or
the Transfer Agent and Registrar, as the case may be, for final payment. The
final distribution to any Securityholder will be made only upon surrender and
cancellation of such holder's Security (whether a Definitive Security or the
Securities registered in the name of Cede representing the Securities) at the
office or agency of the related Trustee or the Transfer Agent and Registrar, as
the case may be, specified in the notice of termination.
With respect to any Trust issuing Notes, subject to applicable law and
after the Indenture Trustee has taken certain measures to notify Noteholders,
any money held by the Indenture Trustee or any Paying Agent in trust for
payment on the Notes which remain unclaimed for two years shall, upon request
of such Trust, be paid to such Trust. Following any such payment, the Indenture
Trustee and any Paying Agent shall no longer be liable to any Noteholder with
respect to such unclaimed amount, and any claim with respect to such amount
shall be an unsecured claim against such Trust. If, within 18 months after the
first notice of final payment on any Certificates, there remain Certificates
which have not been surrendered for cancellation, the related Trustee may take
appropriate steps to notify the applicable Certificateholders (the cost thereof
paid out of the unclaimed amounts). Subject to applicable law, any funds that
then remain shall be paid to the Seller.
Any amounts remaining in a Trust not issuing Notes, after the related
Trustee has taken certain measures to locate a Certificateholder and such
measures have failed, will, under certain circumstances, be distributed to the
United Way or a similar charitable organization located or operating in the New
York metropolitan area as specified by the Servicer; provided, however, that
such funds will, under certain circumstances, be distributed by the Paying
Agent to the United Way no later than three years after the final Distribution
Date specified in such Trustee's written notice of termination to the
Certificateholders.
ADMINISTRATION AGREEMENT
With respect to any Trust that issues Notes, Chase, in its capacity as
administrator (the "ADMINISTRATOR"), will enter into an agreement (as amended
and supplemented from time to time, the "ADMINISTRATION AGREEMENT") with each
Trust 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 on behalf of the related Trust certain other
administrative obligations required by the related Indenture. As compensation
for the performance of the Administrator's obligations under the Administration
Agreement and as reimbursement for its expenses related thereto, the
Administrator will be entitled to a monthly administration fee in an amount to
be set forth in the related prospectus supplement (the "ADMINISTRATION FEE").
To the extent and on the terms set forth in the related Administration
Agreement and described in the related prospectus supplement, the Administrator
may act directly or through its agents and attorneys.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
GENERAL
The Receivables are "chattel paper" as defined in the Uniform Commercial
Code in effect in the State of New York (the "UCC"). Pursuant to the UCC, the
sale of chattel paper is treated in a manner similar to a security interest in
chattel paper. In order to protect each Trust's ownership or security interest
in its Receivables, the Seller will file UCC-1 financing statements with the
appropriate governmental authorities in the State of Delaware to give notice of
such Trust's and any related Indenture Trustee's ownership of and security
interest in the Receivables and their proceeds. Under
53
each Sale and Servicing Agreement and Pooling and Servicing Agreement, the
Seller will be obligated to maintain the perfection of each Trust's and any
related Indenture Trustee's interest in the Receivables. It should be noted,
however, that a purchaser of chattel paper who gives new value and takes
possession of it in the ordinary course of such purchaser's business has
priority over a security interest, including an ownership interest, in the
chattel paper that is perfected by filing UCC-1 financing statements, and not
by possession of such chattel paper by the original secured party, if such
purchaser acts in good faith without knowledge that the related chattel paper
is subject to a security interest, including an ownership interest. Any such
purchaser would not be deemed to have such knowledge because there are UCC
filings and would not learn of the sale of or security interest in the
Receivables from a review of the Receivables since they would not be marked to
show such sale, although Chase Auto Finance's master computer records will
indicate such sale.
SECURITY INTERESTS IN THE FINANCED VEHICLES
Security interests in vehicles registered in most states may be perfected
by a notation of the secured party's lien on, or possession of, the certificate
of title for such vehicle, depending on state law. In certain states, such as
California and Virginia these liens are noted electronically rather than on
paper certificates. Chase Auto Finance's practice is to obtain a representation
and warranty from each Dealer or the related Obligor (in the case of
Receivables originated without involvement of Dealers under the Dealer
Agreements) to the effect that the Originating Bank has been designated as the
sole lien holder on the certificate of title. In the event the Dealer or
related Obligor fails, due to clerical errors or for any other reason, to
effect such notation of the Originating Bank's interest in a Financed Vehicle,
the Originating Bank would not have a perfected first priority security
interest in such Financed Vehicle. In this event the only recourse of the
Originating Bank, the Seller or the Servicer vis-a-vis third parties would be
against the Obligor on an unsecured basis or against the Dealer.
Pursuant to the terms of each Sale and Servicing Agreement or Pooling and
Servicing Agreement, as applicable, the Seller will assign its security
interest in the individual Financed Vehicles to each Trust, and if applicable,
such Trust will assign each such security interest to the related Indenture
Trustee. However, because of the administrative burden and expense, neither the
Seller nor the related Trustee will amend the certificates of title to identify
the related Trust or any related Indenture Trustee as the new secured party
and, accordingly, the Originating Bank will continue to be named as the secured
party on the certificates of title relating to the Financed Vehicles. In a
majority of states, assignment of a Receivable together with the related
security interest is an effective conveyance of such security interest without
amendment of any lien noted on the related certificates of title and the new
secured party succeeds to the Originating Bank's rights as the secured party as
against creditors of the Obligor. In certain states, in the absence of such
amendment and delivery, the Seller, the related Trust and/or any related
Indenture Trustee may not have a perfected security interest in the Financed
Vehicle. In such event or in the event that the Trust does not have a perfected
first priority security interest in the Financed Vehicle, the only recourse of
such Trust vis-a-vis third parties would be against an Obligor on an unsecured
basis or (if the Originating Bank did not have a perfected security interest in
such Financed Vehicle) against the Seller pursuant to its repurchase
obligation. See "Description of the Transfer and Servicing Agreements--Sale and
Assignment of Receivables" in this prospectus.
Except as described above, in the absence of fraud or forgery by a vehicle
owner or administrative error by state recording officials, the notation of the
lien of the Originating Bank on the certificate of title will be sufficient to
protect each Trust against the rights of subsequent purchasers of a Financed
Vehicle or subsequent lenders who take a security interest in the Financed
Vehicle. If there is any Financed Vehicles as to which the Originating Bank has
failed to perfect the security interest assigned to a Trust, such security
interest would be subordinate to, among others, holders of perfected security
interests, and subsequent purchasers of such Financed Vehicles would take
possession free and clear of such security interest. There also exists a risk
in not identifying each Trust or any related Indenture Trustee as the new
secured party on the certificate of title that, through fraud or negligence,
the security interest of such Trust or Indenture Trustee could be released.
54
In the event that the owner of a Financed Vehicle moves to a state other
than the state in which such Financed Vehicle initially is registered, under
the laws of most states the perfected security interest in the Financed Vehicle
will continue for four months after such relocation and thereafter until the
owner re-registers the Financed Vehicle in such state. A majority of states
generally require surrender of a certificate of title to re-register a vehicle.
Accordingly, Chase Auto Finance must surrender possession if it holds the
certificate of title to such Financed Vehicle or, in the case of Financed
Vehicles originally registered in a state which provides for notation of lien
but not possession of the certificate of title by the holder of the security
interest in the related motor vehicle, Chase Auto Finance would receive notice
of surrender if the security interest in the Financed Vehicle is noted on the
certificate of title. Accordingly, Chase Auto Finance would have the
opportunity to re-perfect the security interest in the Financed 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 its portfolio of Motor Vehicle Loans, Chase
Auto Finance takes steps to effect such re-perfection upon receipt of notice of
re-registration or information from the Obligor as to relocation. Similarly,
when an Obligor under a Receivable sells a Financed Vehicle, Chase Auto Finance
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 such steps, at the Servicer's expense, as are
necessary to maintain perfection of security interests in the Financed
Vehicles.
Under the laws of many states, certain possessory liens for repairs
performed on a motor vehicle and storage, as well as certain rights in favor of
Federal and state governmental authorities arising from the use of a motor
vehicle in connection with illegal activities, may take priority even over a
perfected security interest. Certain U.S. federal tax liens may have priority
over the lien of a secured party. The Seller will represent in each Sale and
Servicing Agreement and Pooling and Servicing Agreement that it has no
knowledge of any such liens with respect to any Financed Vehicle. However, such
liens could arise at any time during the term of a Receivable. No notice will
be given to the Trustee in the event such a lien arises.
ENFORCEMENT OF SECURITY INTERESTS IN VEHICLES
The Servicer on behalf of each Trust and any Indenture Trustee may take
action to enforce its security interest by repossession and resale of the
Financed Vehicles securing the Receivables. The actual repossession may be
contracted out to third party contractors. Under the UCC and laws applicable in
most states, a creditor can repossess a motor vehicle securing a loan by
voluntary surrender, "self-help" repossession that is "peaceful" (i.e., without
breach of the peace) and, in the absence of voluntary surrender and the ability
to repossess without breach of the peace, by judicial process. The UCC and
consumer protection laws in most states place restrictions on repossession
sales, including requiring prior notice to the debtor and commercial
reasonableness in effecting such a sale. In the event of such repossession and
resale of a Financed Vehicle, the Trust would be entitled to be paid out of the
sale proceeds before such proceeds could be applied to the payment of the
claims of unsecured creditors or the holders of subsequently perfected security
interests or, thereafter, to the debtor.
Under the UCC and laws applicable in most states, a creditor is entitled
to obtain a deficiency judgment from a debtor for any deficiency on
repossession and resale of the motor vehicle securing such debtor's loan.
However, some states impose prohibitions or limitations on deficiency
judgments. In general, a defaulting Obligor may not have sufficient assets to
make the pursuit of a deficiency worthwhile.
Certain other statutory provisions, including federal and state bankruptcy
and insolvency laws, and general equitable principles may limit or delay the
ability of a lender to repossess and resell collateral or enforce a deficiency
judgment.
55
OTHER MATTERS
Chase USA is chartered as a national banking association and is subject to
regulation and supervision by the Comptroller of the Currency. If Chase USA
becomes insolvent, is in an unsound condition, engages in certain violations of
laws or regulations, or if other similar circumstances occur, the Comptroller
is authorized to appoint the FDIC as conservator or receiver. Under such
circumstances the FDIC could:
o require the Applicable Trustee to go through an administrative claims
procedure to establish its right to payments collected on the
Receivables,
o request a stay of proceedings with respect to the Trust's claims
against Chase USA, or
o repudiate without compensation Chase USA's ongoing obligations under
the Sale and Servicing Agreement or Pooling and Servicing Agreement,
as applicable, such as the duty to collect payments or otherwise
service the Receivables.
If the FDIC were to take any of those actions, payments of principal and
interest on the Securities could be delayed or reduced.
By statute, the FDIC as conservator or receiver is authorized to repudiate
any "contract" of Chase USA upon payment of "actual direct compensatory
damages." This authority may be interpreted by the FDIC to permit it to
repudiate the transfer of Receivables to a Trust. Under a recently enacted FDIC
regulation, however, the FDIC as conservator or receiver will not reclaim,
recover, or recharacterize a bank's transfer of financial assets if certain
conditions are met, including that the transfer qualifies for sale accounting
treatment, was made for adequate consideration, and was not made fraudulently,
in contemplation of insolvency, or with the intent to hinder, delay, or defraud
the bank or its creditors. Chase USA believes the new FDIC regulation will
apply to the transfer of Receivables under a Sale and Servicing Agreement or
Pooling and Servicing Agreement, as applicable, and intends on satisfying the
conditions of the regulation.
If a condition required under the FDIC regulation, or other statutory or
regulatory requirement applicable to the transaction, were found not to have
been satisfied, the FDIC as conservator or receiver might refuse to recognize
Chase USA's transfer of the Receivables to the Trust. In that event the Trust
could be limited to seeking recovery based upon its security interest in the
Receivables. The FDIC's statutory authority has been interpreted by the FDIC
and at least one court to permit the repudiation of a security interest upon
payment of actual direct compensatory damages measured as of the date of
conservatorship or receivership. Such damages do not include damages for lost
profits or opportunity, and no damages would be paid for the period between the
date of conservatorship or receivership and the date of repudiation. The FDIC
could delay its decision whether to recognize Chase USA's transfer of the
Receivables for a reasonable period following its appointment as conservator or
receiver for the bank. If the FDIC were to refuse to recognize Chase USA's
transfer of the Receivables, payments of principal and interest on the
Securities could be delayed or reduced.
In the event that the FDIC refused to recognize the transfer of
Receivables and repudiated a Trust's security interest in the Receivables, the
amount of compensation that the FDIC would be required to pay would be limited
to "actual direct compensatory damages" determined as of the date of the FDIC's
appointment as receiver. There is no statutory definition of "actual direct
compensatory damages." The staff of the FDIC takes the position that upon
repudiation or disaffirmation these damages would not include interest accrued
to the date of actual repudiation or disaffirmation. Under the FDIC
interpretation, Securityholders would receive interest only through the date of
the appointment of the receiver. Since the FDIC may delay actual repudiation or
disaffirmation for up to 180 days following its appointment as receiver,
Securityholders may not receive the full amount of interest owing to them under
the Securities. There is one reported federal district court decision that
construes the term "actual direct compensatory damages." This 1993 court case
construed the term, in the context of the repudiation of zero coupon bonds, to
mean the fair market value of those bonds as of the date of repudiation. Under
neither interpretation, however, would Securityholders be compensated for the
period between the appointment of the receiver and the date of repudiation.
56
Numerous federal and state consumer protection laws may impose
requirements applicable to the origination and lending pursuant to the
contracts, including the Truth in Lending Act, the Fair Credit Reporting Act,
the Equal Credit Opportunity Act, the Magnuson-Moss Warranty Act and the
Federal Trade Commission Act.
The so-called "Holder-in-Due-Course" Rule of the Federal Trade Commission
(the "FTC RULE"), other state statutes or the common law in certain states have
the effect of subjecting a seller (and certain related lenders and their
assignees) in a consumer credit transaction and any assignee of the seller
(which would include each Trust) to all claims and defenses that the obligor in
the transaction could assert against the seller of the goods. Liability of a
subsequent holder under the FTC Rule is limited to the amounts paid by the
obligor under the contract, and a subsequent holder of the contract may also be
unable to collect any balance remaining due thereunder from the obligor. The
Uniform Consumer Credit Code applicable in certain states contains provisions
which generally duplicate this rule.
Each Sale and Servicing Agreement and Pooling and Servicing Agreement will
set forth criteria that must be satisfied by each Receivable, and such criteria
will provide, among other things, that each Receivable complies with all
requirements of law in all material respects. Accordingly, if an Obligor has a
claim against a Trust for violation of any law and such claim materially and
adversely affects the related Securityholders' interest in a Receivable, such
violation would result in the failure to satisfy a criterion in the related
Sale and Servicing Agreement or Pooling and Servicing Agreement and would
create an obligation of the Seller to repurchase the Receivable unless such
failure is cured.
ERISA CONSIDERATIONS
Before investing in the Securities, fiduciaries of employee benefit plans
that are subject to the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), plans, individual retirement accounts and other arrangements
that are subject to Section 4975 of the Internal Revenue Code of 1986, as
amended (the "CODE"), or provisions under applicable federal, state, local,
non-U.S. or other laws or regulations that are similar to such provisions of
ERISA or the Code ("SIMILAR LAWS"), and entities whose underlying assets are
considered to include "plan assets" of such plans, accounts and arrangements
(each, a "PLAN") should consider, among other matters, (a) ERISA's fiduciary
standards or similar standards under Similar Laws, (b) whether such investment
in the Securities by the Plan satisfies the prudence and diversification
requirements of ERISA or applicable standards under Similar Laws, taking into
account the overall investment policy of the Plan, the composition of the
Plan's portfolio and any limitations on the marketability of the Securities,
(c) whether such fiduciaries have authority to make such investment in the
Securities, under the applicable Plan investment policies and governing
instruments and (d) rules under ERISA and the Code or similar standards under
Similar Laws, that prohibit plan fiduciaries from causing a Plan to engage in
certain "prohibited transactions."
Under regulations (the "PLAN ASSETS REGULATION") issued by the U.S.
Department of Labor ("DOL"), if a Plan subject to ERISA invests in an "equity
interest" of an entity that is neither a publicly-offered security nor a
security issued by an investment company registered under the Investment
Company Act of 1940, the Plan's assets will include both the equity interest
and an undivided interest in each of the entity's underlying assets, unless it
is established that the entity is an operating company or that equity
participation in the entity by benefit plan investors is not significant. An
"equity interest" is an interest in an entity other than an instrument that is
treated as indebtedness under applicable local law and which has no substantial
equity features. The prospectus supplement relating to a particular series of
Securities will indicate the expected treatment of those Securities under the
Plan Assets Regulation. If the underlying assets of the Seller were to be
deemed to be "plan assets" of Plans under ERISA, this would result, among other
things, in (i) the application of the prudence and other fiduciary
responsibility standards of ERISA to activities engaged in by the Seller and
(ii) the possibility that certain transactions in which the Seller might seek
to engage could constitute "prohibited transactions" under ERISA and the Code.
If a prohibited transaction occurs for which no exemption is available, the
Seller, the Trustee and any other fiduciary that has engaged in
57
the prohibited transaction could be required (i) to restore to the Plan any
profit realized on the transaction and (ii) to reimburse the Plan for any
losses suffered by the Plan as a result of the investment. In addition, each
disqualified person (within the meaning of Section 4975 of the Code) involved
could be subject to an excise tax equal to 15% of the amount involved in the
prohibited transaction for each year the transaction continues and, unless the
transaction is corrected within statutorily required periods, to an additional
tax of 100%. Plan fiduciaries who decide to invest in the Securities could,
under certain circumstances, be liable for prohibited transactions or other
violations as a result of their investment or as co-fiduciaries for actions
taken by or on behalf of the Seller or the Trust. With respect to an individual
retirement account ("IRA") that invests in the Securities, the occurrence of a
prohibited transaction involving the individual who established the IRA, or his
or her beneficiaries, would cause the IRA to lose its tax-exempt status.
Section 406 of ERISA and Section 4975 of the Code prohibit Plans subject
to Title I of ERISA or Section 4975 of the Code from engaging in specified
transactions involving plan assets with persons or entities who are "parties in
interest," within the meaning of ERISA, or "disqualified persons," within the
meaning of Section 4975 of the Code. The acquisition and/or ownership of the
Securities by a Plan with respect to which the Trust or the holder of the
Certificates issued by the Trust is considered a party in interest or a
disqualified person may constitute or result in a prohibited transaction under
Section 406 of ERISA or Section 4975 of the Code, unless those Securities are
acquired and are held in accordance with an applicable statutory, regulatory,
class or individual prohibited transaction exemption. In this regard, the DOL
has issued prohibited transaction class exemptions, which are called "PTCEs,"
that may apply to the acquisition and holding of the Securities. These class
exemptions include, among others, PTCE 84-14 respecting transactions effected
by independent qualified professional asset managers, PTCE 90-1 respecting
insurance company pooled separate accounts, PTCE 91-38 respecting bank
collective investment funds, PTCE 95-60 respecting insurance company general
accounts and PTCE 96-23 respecting transactions effected by in-house asset
managers. However, these exemptions may not apply to all transactions arising
in connection with an investment by Plans in the Securities, particularly if,
as described above, the assets of the related Trust are considered to be "plan
assets."
Similar Laws governing the investment and management of the assets of
governmental and non-U.S. plans may contain fiduciary and prohibited
transaction requirements similar to those under ERISA and the Code discussed
above. Accordingly, fiduciaries of such governmental plans and non-U.S. plans,
in consultation with their advisors, should consider the impact of any
applicable Similar Laws on investments in the Securities and the considerations
described above, if applicable.
PLAN OF DISTRIBUTION
The Securities of each series may be sold to or through underwriters (the
"UNDERWRITERS") by a negotiated firm commitment underwriting and public
reoffering by the Underwriters or such other underwriting arrangement as may be
specified in the related prospectus supplement or may be placed either directly
or through agents. The Seller intends that the Securities will be offered
through such various methods from time to time and that offerings may be made
concurrently through more than one of such methods or that an offering of a
particular series of Securities may be made through a combination of such
methods.
Each prospectus supplement will either
o set forth the price at which each class of Securities 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
Securities, or
o specify that the related Securities 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 Securities, such public offering
prices and such concessions may be changed.
58
Each Underwriting Agreement (as defined in the related prospectus
supplement) 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 funds in its Trust Accounts in
Eligible Investments acquired from such Underwriters or from the Seller or any
of its Affiliates.
Underwriters may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids with respect to
the Securities in accordance with Regulation M under the Exchange Act.
Over-allotment transactions involve syndicate sales in excess of the offering
size, which creates a syndicate short position. Stabilizing transactions permit
bids to purchase the Security so long as the stabilizing bids do not exceed a
specified maximum. Syndicate covering transactions involve purchases of the
Securities in the open market after the distribution has been completed in
order to cover syndicate short positions. Penalty bids permit such Underwriters
to reclaim a selling concession from a syndicate member when the Securities
originally sold by such syndicate member are purchased in a syndicate covering
transaction. Such over-allotment transactions, stabilizing transactions,
syndicate covering transactions and penalty bids may cause the prices of the
Securities to be higher than they would otherwise be in the absence of such
transactions. Neither the Trust nor any of the Underwriters represent that they
will engage in any such transactions or that such transactions, once commenced,
will not be discontinued without notice.
Pursuant to each of the Underwriting Agreements 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 of any series in respect
of which this prospectus is delivered will be set forth in the related
prospectus supplement.
RATINGS
Each class of Securities of a series offered pursuant to this prospectus
and a related prospectus supplement will be rated at its initial issuance in
one of the four highest categories by at least one nationally recognized
statistical rating organization (each, a "RATING AGENCY").
A securities rating addresses the likelihood of the receipt by the
Securityholders of scheduled interest and principal payments. The rating takes
into consideration the characteristics of the Receivables and the structural,
legal and tax aspects associated with the Securities. The ratings on the
Securities do not, however, constitute statements regarding the likelihood or
frequency of prepayments on the Receivables or the possibility that the
Securityholders might realize a lower than anticipated yield or that if there
is a rapid rate of principal payments, including prepayments, on the
Receivables, investors in Strip Notes or Strip Certificates could fail to
recover their initial investments.
A security rating is not a recommendation to buy, sell or hold Securities
and may be subject to revision or withdrawal at any time by the assigning
Rating Agency. No person is obligated to maintain the rating on any Security,
and, accordingly, there can be no assurance that the ratings assigned to a
Security upon initial issuance will not be lowered or withdrawn by a Rating
Agency at any time thereafter.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Securities of any
series will be passed upon for the Seller by Simpson Thacher & Bartlett, New
York, New York, and such other counsel specified in the related prospectus
supplement. Certain legal matters will be passed upon for the Underwriters by
Brown & Wood LLP, New York, New York. From time to time Simpson Thacher &
Bartlett and Brown & Wood LLP provide legal services to the Seller and its
affiliates.
59
INDEX OF PRINCIPAL TERMS
PAGE
----
Actuarial Receivables ..................................................... 15
Administration Agreement .................................................. 53
Administration Fee ........................................................ 53
Administrator ............................................................. 53
Advance ................................................................... 45
Applicable Trustee ........................................................ 35
Assignments ............................................................... 17
Base Rate ................................................................. 32
Book-Entry Securities ..................................................... 34
Business Day .............................................................. 44
Calculation Agent ......................................................... 33
Cash Collateral Account ................................................... 47
Cash Collateral Depositor ................................................. 47
Cash Collateral Guaranty .................................................. 13
Cash Collateral Trustee ................................................... 47
Cede ...................................................................... 34
Cedel ..................................................................... 34
Certificate Balance ....................................................... 23
Certificate Distribution Account .......................................... 42
Certificate Pool Factor ................................................... 23
Certificateholders ........................................................ 35
Certificates .............................................................. 13
Chase ..................................................................... 14
Chase Auto Finance ........................................................ 5
Chase Auto Finance Portfolio .............................................. 16
Chase Connecticut Bank .................................................... 16
Chase Connecticut Loans ................................................... 16
Chase Florida Bank ........................................................ 16
Chase Florida Loans ....................................................... 16
Chase Lincoln Bank ........................................................ 16
Chase Lincoln Loans ....................................................... 16
Chase Maryland Loans ...................................................... 17
Chase N.A ................................................................. 16
Clearstream ............................................................... 34
Clearstream Customers ..................................................... 36
Closing Date .............................................................. 40
CMC ....................................................................... 24
Code ...................................................................... 57
Collection Account ........................................................ 42
Collection Period ......................................................... 45
Commodity Indexed Securities .............................................. 33
Contract Rate ............................................................. 14
Cooperative ............................................................... 36
Currency Indexed Securities ............................................... 33
Cutoff Date ............................................................... 13
Dealer Agreements ......................................................... 17
Dealers ................................................................... 17
Defaulted Receivable ...................................................... 44
Definitive Certificates ................................................... 37
Definitive Notes .......................................................... 37
Definitive Securities ..................................................... 37
60
PAGE
----
Deposit Date .............................................................. 44
Depositaries .............................................................. 34
Depository ................................................................ 25
Direct Receivables ........................................................ 17
Distribution Date ......................................................... 31
DOL ....................................................................... 57
DSCs ...................................................................... 18
DTC ....................................................................... 34
Due Date .................................................................. 14
Eligible Deposit Account .................................................. 43
ERISA ..................................................................... 57
Euroclear ................................................................. 36
Euroclear Operator ........................................................ 36
Euroclear Participants .................................................... 36
Events of Default ......................................................... 27
Events of Servicing Termination ........................................... 50
Exchange Act .............................................................. 16
Face Amount ............................................................... 33
Final Payment Receivables ................................................. 15
Financed Vehicles ......................................................... 13
Fixed Rate Securities ..................................................... 32
Floating Rate Securities .................................................. 32
FTC Rule .................................................................. 57
Funding Period ............................................................ 13
Indenture ................................................................. 25
Indenture Trustee ......................................................... 25
Index ..................................................................... 33
Indexed Commodity ......................................................... 33
Indexed Currency .......................................................... 33
Indexed Principal Amount .................................................. 33
Indexed Securities ........................................................ 33
Indirect Participants ..................................................... 34
Initial Receivables ....................................................... 13
Interest Rate ............................................................. 25
Interest Reset Period ..................................................... 32
Investment Earnings ....................................................... 44
IRA ....................................................................... 58
Late Fees ................................................................. 45
LIBOR ..................................................................... 32
Loan Agreement ............................................................ 47
Motor Vehicle Loans ....................................................... 13
Note Distribution Account ................................................. 42
Note Pool Factor .......................................................... 23
Noteholders ............................................................... 35
Notes ..................................................................... 13
Obligors .................................................................. 13
Original Pool Balance ..................................................... 52
Originating Bank .......................................................... 14
Paid-Ahead Account ........................................................ 42
Paid-Ahead Actuarial Receivable ........................................... 23
Paid-Ahead Period ......................................................... 22
Paid-Ahead Simple Interest Receivable ..................................... 22
Paid-Aheads ............................................................... 42
61
PAGE
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Participants .............................................................. 34
Pass Through Rate ......................................................... 31
Paying Agent .............................................................. 44
Payment Date .............................................................. 25
Permitted Investments ..................................................... 43
Plan ...................................................................... 57
Plan Assets Regulation .................................................... 57
Pool Balance .............................................................. 24
Pooling and Servicing Agreement ........................................... 13
Portfolio Experience ...................................................... 16
Pre-Funding Account ....................................................... 13
Pre-Funding Amount ........................................................ 14
Qualified Institution ..................................................... 43
Qualified Trust Institution ............................................... 43
Rating Agency ............................................................. 59
Receivables ............................................................... 13
Receivables Pool .......................................................... 13
Related Documents ......................................................... 30
Repurchase Amount ......................................................... 42
Reserve Account ........................................................... 47
Rules ..................................................................... 35
Sale and Servicing Agreement .............................................. 13
Schedule of Receivables ................................................... 40
SEC ....................................................................... 3
Securities ................................................................ 13
Securityholder ............................................................ 35
Seller .................................................................... 13
Servicer .................................................................. 13
Servicing Fee ............................................................. 45
Servicing Fee Rate ........................................................ 45
Similar Laws .............................................................. 57
Simple Interest Receivables ............................................... 14
Spread .................................................................... 32
Spread Multiplier ......................................................... 32
Stock Index ............................................................... 33
Stock Indexed Securities .................................................. 33
Strip Certificates ........................................................ 31
Strip Notes ............................................................... 25
Subsequent Receivables .................................................... 13
Subsequent Transfer Date .................................................. 40
Terms and Conditions ...................................................... 36
Transfer Agent and Registrar .............................................. 38
Transfer and Servicing Agreements ......................................... 40
Trust ..................................................................... 13
Trust Accounts ............................................................ 43
Trust Agreement ........................................................... 13
Trustee ................................................................... 14
UCC ....................................................................... 53
Underwriters .............................................................. 58
Yield Supplement Account .................................................. 13
Yield Supplement Agreement ................................................ 13
62
PROSPECTUS SUPPLEMENT
$1,280,466,538.08
Chase Manhattan Auto Owner Trust 2000-A
$1,242,000,000.00 ASSET BACKED NOTES
$38,466,538.08 ASSET BACKED CERTIFICATES
Chase Manhattan Bank USA, National Association
SELLER AND SERVICER
UNDERWRITERS OF THE NOTES
CHASE SECURITIES INC.
J.P. MORGAN & CO.
BANC OF AMERICA SECURITIES LLC
BEAR, STEARNS & CO. INC.
THE WILLIAMS CAPITAL GROUP
UNDERWRITERS OF THE CERTIFICATES
CHASE SECURITIES INC.
J.P. MORGAN & CO.
YOU SHOULD RELY ONLY ON THE INFORMATION PROVIDED IN THE PROSPECTUS AND THIS
PROSPECTUS SUPPLEMENT. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH OTHER
OR DIFFERENT INFORMATION. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THE
PROSPECTUS OR THIS PROSPECTUS SUPPLEMENT IS ACCURATE ON ANY DATE OTHER THAN THE
DATES STATED ON THE RESPECTIVE COVERS.
WE ARE NOT OFFERING THE NOTES OR THE CERTIFICATES IN ANY STATE WHERE THE OFFER
IS NOT PERMITTED.
DEALERS WILL DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS
UNDERWRITERS OF THE NOTES AND THE CERTIFICATES AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS. IN ADDITION, ALL DEALERS SELLING THE NOTES OR THE
CERTIFICATES WILL DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS UNTIL MARCH
, 2001 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT).